{"id":43490,"date":"2015-09-17T11:25:58","date_gmt":"2015-09-17T16:25:58","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-legal\/contracts\/uncategorized\/plan-and-agreement-of-merger-healthsouth-corp-and-horizon-cms.html"},"modified":"2015-09-17T11:25:58","modified_gmt":"2015-09-17T16:25:58","slug":"plan-and-agreement-of-merger-healthsouth-corp-and-horizon-cms","status":"publish","type":"corporate_contracts","link":"https:\/\/corporate.findlaw.com\/contracts\/planning\/plan-and-agreement-of-merger-healthsouth-corp-and-horizon-cms.html","title":{"rendered":"Plan and Agreement of Merger &#8211; HealthSouth Corp. and Horizon\/CMS Healthcare Corp."},"content":{"rendered":"<pre>\n                          PLAN AND AGREEMENT OF MERGER\n\n\n         PLAN AND AGREEMENT OF MERGER (this \"Plan of Merger\"),  made and entered\ninto as of the 17th day of February, 1997, by and among HEALTHSOUTH Corporation,\na Delaware corporation (\"HEALTHSOUTH\"), REID ACQUISITION CORPORATION, a Delaware\ncorporation  (the  \"Subsidiary\"),  and  HORIZON\/CMS  HEALTHCARE  CORPORATION,  a\nDelaware  corporation  (\"Horizon\/CMS\")  (the  Subsidiary and  Horizon\/CMS  being\nsometimes collectively referred to herein as the \"Constituent Corporations\").\n\n                              W I T N E S S E T H:\n\n\n         WHEREAS,  the  respective  Boards  of  Directors  of  HEALTHSOUTH,  the\nSubsidiary and  Horizon\/CMS  have approved the merger of the Subsidiary with and\ninto  Horizon\/CMS  (the \"Merger\"),  upon the terms and subject to the conditions\nset forth in this Plan of Merger,  whereby each share of Common Stock, par value\n$.001 per share, of Horizon\/CMS  (the  \"Horizon\/CMS  Common  Stock\"),  not owned\ndirectly or  indirectly  by  Horizon\/CMS,  will be  converted  into the right to\nreceive the Merger Consideration (as hereinafter defined);\n\n         WHEREAS, each of HEALTHSOUTH, the Subsidiary and Horizon\/CMS desires to\nmake certain representations, warranties, covenants and agreements in connection\nwith the Merger and also to prescribe various conditions to the Merger; and\n\n         WHEREAS,  for federal  income tax  purposes,  it is  intended  that the\nMerger shall qualify as a reorganization  under the provisions of Section 368 of\nthe Internal Revenue Code of 1986, as amended.\n\n         NOW,  THEREFORE,  in  consideration  of the  premises,  and the  mutual\ncovenants and agreements contained herein, the parties hereto do hereby agree as\nfollows:\n\n\nSection 1.                 The Merger.\n\n         1.1 The Merger. Upon the terms and conditions set forth in this Plan of\nMerger,  and in  accordance  with  the  Delaware  General  Corporation  Law (the\n\"DGCL\"),  the  Subsidiary  shall be  merged  with and  into  Horizon\/CMS  at the\nEffective Time (as defined in Section 1.3). At the Effective  Time, the separate\ncorporate existence of the Subsidiary shall cease and Horizon\/CMS shall continue\nas the  surviving  corporation  (the  \"Surviving  Corporation\")  under  the name\n\"Horizon\/CMS  Healthcare  Corporation\"  and shall  succeed to and assume all the\nrights and  obligations of the Subsidiary and Horizon\/CMS in accordance with the\nDGCL.\n\n         1.2 The Closing.  The closing of the Merger (the  \"Closing\")  will take\nplace at 10:00 a.m.  Central  Time on a date to be specified by the parties (the\n\"Closing Date\"),  which (subject to satisfaction or waiver of the conditions set\nforth in Sections  9.2 and 9.3) shall be no later than the second  business  day\nafter  satisfaction or waiver of the conditions set forth in Section 9.1, at the\noffices  of Haskell  Slaughter  &amp; Young,  L.L.C.,  Birmingham,  Alabama,  unless\nanother date or place is agreed to in writing by the parties hereto.\n\n                                       91\n\n\n         1.3 Effective  Time.  Subject to the provisions of this Plan of Merger,\nthe parties shall file a  certificate  of merger (the  \"Certificate  of Merger\")\nexecuted in accordance  with the relevant  provisions of the DGCL and shall make\nall other filings or recordings  required  under the DGCL as soon as practicable\non or after the Closing Date. The Merger shall become  effective at such time as\nthe Certificate of Merger is duly filed with the Delaware Secretary of State, or\nat such other time as the  Subsidiary  and  Horizon\/CMS  shall  agree  should be\nspecified in the Certificate of Merger (the \"Effective Time\").\n\n         1.4 Effect of the Merger.  The Merger  shall have the effects set forth\nin Section 259 of the DGCL.\n\n\nSection 2.   EFFECT OF THE MERGER ON THE CAPITAL  STOCK OF THE  CONSTITUENT\n             CORPORATIONS; EXCHANGE OF CERTIFICATES.\n\n\n         2.1 Effect on Capital Stock. As of the Effective Time, by virtue of the\nMerger and without any action on the part of any holder of shares of Horizon\/CMS\nCommon Stock or any shares of capital stock of the Subsidiary:\n\n         (a)  Subsidiary  Common  Stock.  Each  share  of  capital  stock of the\nSubsidiary issued and outstanding  immediately prior to the Effective Time shall\nbe converted into one fully paid and nonassessable  share of common stock of the\nSurviving Corporation.\n\n         (b)  Cancellation of Treasury Stock.  Each share of Horizon\/CMS  Common\nStock  that  is  owned  by  Horizon\/CMS  or by any  wholly-owned  subsidiary  of\nHorizon\/CMS  shall  automatically  be  canceled  and  retired and shall cease to\nexist,   and  no  Common  Stock,  par  value  $.01  per  share,  of  HEALTHSOUTH\n(\"HEALTHSOUTH Common Stock\"),  cash or other consideration shall be delivered in\nexchange therefor.\n\n         (c) Conversion of Horizon\/CMS  Shares.  Subject to Section 2.2(e), each\nissued and outstanding  share of Horizon\/CMS  Common Stock (other than shares to\nbe canceled in accordance  with Section 2.1(b))  (collectively,  the \"Exchanging\nHorizon\/CMS Shares\") shall be converted into 0.42169 (the \"Exchange Ratio\") of a\nshare of  HEALTHSOUTH  Common  Stock,  as may be adjusted as provided in Section\n2.1(e) below (the \"Merger  Consideration\").  All Exchanging  Horizon\/CMS  Shares\nshall,  upon conversion  thereof into shares of HEALTHSOUTH  Common Stock at the\nEffective Time, cease to be outstanding and shall automatically be cancelled and\nretired,  and each  certificate  previously  evidencing  Exchanging  Horizon\/CMS\nShares  outstanding  immediately  prior to the Effective  Time  (\"Certificates\")\nshall thereafter be deemed, for all purposes other than the payment of dividends\nor distributions, to represent that number of shares of HEALTHSOUTH Common Stock\ndetermined  pursuant  to the  Exchange  Ratio and, if  applicable,  the right to\nreceive cash  pursuant to Section 2.2.  The holders of  certificates  previously\nevidencing  Exchanging  Horizon\/CMS  Shares  shall cease to have any rights with\nrespect to such  Exchanging  Horizon\/CMS  Shares  except as  otherwise  provided\nherein or by law.\n\n         (d)  Stock  Options,   Warrants  and  Convertible  Securities.  At  the\nEffective Time, all rights with respect to Horizon\/CMS  \n\n                                      - 92 -\n\n\nCommon Stock pursuant to any Horizon\/CMS stock options,  stock purchase warrants\nor convertible  securities  which are  outstanding at the Effective Time (which,\nfor purposes of this Section 2.1(d), includes any rights to purchase Horizon\/CMS\nCommon Stock  pursuant to  Horizon\/CMS's  1996 Employee  Stock  Purchase  Plan),\nwhether or not then exercisable,  shall be converted into and become rights with\nrespect  to  HEALTHSOUTH   Common  Stock,  and  HEALTHSOUTH  shall  assume  each\nHorizon\/CMS stock option,  stock purchase warrant and convertible  security,  in\naccordance with the terms of any stock option plan under which it was issued and\nany stock option agreement,  warrant agreement or convertible  security by which\nit  is  evidenced.   It  is  intended  that,  unless  otherwise  agreed  between\nHEALTHSOUTH  and a  particular  optionee,  the  foregoing  provisions  shall  be\nundertaken in a manner that will not constitute a \"modification\",  as defined in\nSection 424 of the Code,  as to any stock  option which is an  \"incentive  stock\noption\".  Each Horizon\/CMS  stock option,  stock purchase warrant or convertible\nsecurity so assumed shall be exercisable for or convertible  into that number of\nshares of  HEALTHSOUTH  Common Stock equal to the number of  Horizon\/CMS  shares\nsubject  thereto  multiplied by the Exchange  Ratio,  and shall have an exercise\nprice per share or conversion price per share equal to the Horizon\/CMS  exercise\nprice divided by the Exchange Ratio.\n\n         (e) Anti-Dilution Provisions. If after the date hereof and prior to the\nEffective  Time  HEALTHSOUTH  shall have  declared a stock  split  (including  a\nreverse split) of HEALTHSOUTH Common Stock,  including the proposed  two-for-one\nsplit  of the  HEALTHSOUTH  Common  Stock  scheduled  for  consideration  by the\nstockholders of HEALTHSOUTH at a meeting  thereof  scheduled to be held on March\n12,  1997,  or a dividend  payable in  HEALTHSOUTH  Common  Stock,  or any other\ndistribution  of  securities  or dividend (in cash or  otherwise)  to holders of\nHEALTHSOUTH Common Stock with respect to their HEALTHSOUTH Common Stock or other\nchange or  reclassification  of the HEALTHSOUTH  Common Stock (including without\nlimitation such a distribution,  dividend or other change or reclassification of\nthe  HEALTHSOUTH  Common  Stock  made  in  connection  with a  recapitalization,\nreclassification,  merger,  consolidation,   reorganization,   reclassification,\nmerger,  consolidation,  reorganization  or  similar  transaction)  then (i) the\nExchange  Ratio shall be  appropriately  adjusted to reflect such stock split or\ndividend  or other  distribution  of  securities  and (ii) if such stock  split,\ndividend or distribution has a record date prior to the Effective Time, then the\nnumber of shares of HEALTHSOUTH  Common Stock to be issued upon  conversion of a\nshare  of  Horizon\/CMS   Common  Stock  pursuant  to  Section  2.1(c)  shall  be\nappropriately   adjusted  to  reflect  such  stock  split,   dividend  or  other\ndistribution of securities.\n\n         2.2  Exchange  of  Certificates.  (a)  Exchange  Agent.  Prior  to  the\nEffective  Time,  HEALTHSOUTH  shall enter into an  agreement  with such bank or\ntrust company as may be designated by HEALTHSOUTH  (the \"Exchange  Agent\") which\nshall provide that HEALTH- SOUTH shall deposit with the Exchange Agent as of the\nEffective Time, for the benefit of the holders of Exchanging Horizon\/CMS Shares,\nfor exchange in  accordance  with this  Section 2,  through the Exchange  Agent,\ncertificates representing the shares of HEALTHSOUTH Common Stock (such shares of\nHEALTHSOUTH  Common Stock,  together with any  dividends or  distributions  with\nrespect  thereto  with a record  date  after  the  Effective  Time and any other\nproperty issuable pursuant to Section 2.1(e),  being hereinafter  referred to as\nthe \"Exchange Fund\") issuable pursuant to Section 2.1.\n\n         (b) Exchange  Procedures.  As soon as reasonably  practicable after the\nEffective Time, the Surviving Corporation shall cause the Exchange Agent to mail\nto each  holder of  record  of a  Certificate  or  Certificates  (i) a letter of\ntransmittal  (which shall specify that delivery  shall be effected,  and risk of\nloss  and  title  to  the  Certificates   shall  pass,  only  upon  delivery  of\nCertificates to the Exchange Agent and shall be in such form and have such other\nprovisions as HEALTHSOUTH may reasonably  specify) and (ii) instructions for use\nin effecting the surrender of\n\n                                      - 93 -\n\n\nCertificates  in exchange for  certificates  representing  shares of HEALTHSOUTH\nCommon Stock.  Upon surrender of a Certificate for  cancellation to the Exchange\nAgent or to such  other  agent or agents  as may be  appointed  by  HEALTHSOUTH,\ntogether  with  such  letter  of  transmittal,  duly  executed,  and such  other\ndocuments as may  reasonably  be required by the Exchange  Agent,  the holder of\nsuch Certificate shall be entitled to receive in exchange therefor a certificate\nrepresenting that number of whole shares of HEALTHSOUTH  Common Stock which such\nholder has the right to receive  pursuant to the  provisions  of this Section 2,\nand the Certificate so surrendered shall forthwith be canceled.  In the event of\na transfer  of  ownership  of shares of  Horizon\/CMS  Common  Stock which is not\nregistered in the transfer  records of Horizon\/CMS,  a certificate  representing\nthe  proper  number  of shares of  HEALTHSOUTH  Common  Stock may be issued to a\nperson other than the person in whose name the  Certificate  so  surrendered  is\nregistered,  if such Certificate  shall be properly  endorsed or otherwise be in\nproper form for transfer and the person  requesting  such payment  shall pay any\ntransfer  or other  taxes  required  by  reason  of the  issuance  of  shares of\nHEALTHSOUTH  Common Stock to a person other than the  registered  holder of such\nCertificate or establish to the  satisfaction  of HEALTHSOUTH  that such tax has\nbeen paid or is not applicable.\n\n         (c) Distributions  with Respect to Unexchanged  Shares. No dividends or\nother  distributions with respect to HEALTHSOUTH Common Stock with a record date\nafter  the  Effective  Time of the  Merger  shall be paid to the  holder  of any\nunsurrendered Certificate with respect to the shares of HEALTHSOUTH Common Stock\nrepresented  thereby and no cash payment in lieu of  fractional  shares shall be\npaid to any such holder pursuant to Section 2.2(e) until, in each such case, the\nsurrender of such  Certificate in accordance with this Section 2. Subject to the\neffect of applicable laws,  following  surrender of any such Certificate,  there\nshall be paid to the  holder of the  certificate  representing  whole  shares of\nHEALTH- SOUTH Common Stock issued in exchange therefor, without interest, (i) at\nthe  time of  such  surrender,  the  amount  of any  cash  payable  in lieu of a\nfractional  share of  HEALTHSOUTH  Common Stock to which such holder is entitled\npursuant to Section  2.2(e) and the amount of dividends  or other  distributions\nwith a record date after the  Effective  Time  theretofore  paid with respect to\nsuch whole  shares of  HEALTHSOUTH  Common  Stock,  and (ii) at the  appropriate\npayment date, the amount of dividends or other  distributions with a record date\nafter the  Effective  Time but prior to such  surrender  and with a payment date\nsubsequent  to such  surrender  payable  with  respect to such  whole  shares of\nHEALTHSOUTH Common Stock.\n\n         (d) No Further Ownership Rights in Exchanging  Horizon\/CMS  Shares. All\nshares of  HEALTHSOUTH  Common Stock issued upon the  conversion of  Horizon\/CMS\nCommon Stock in accordance  with the terms of this Section 2 (including any cash\npaid  pursuant to Section  2.2(c) or 2.2(e)) shall be deemed to have been issued\n(and paid) in full  satisfaction  of all  rights  pertaining  to the  Exchanging\nHorizon\/CMS Shares. If, after the Effective Time,  Certificates are presented to\nthe Surviving  Corporation or the Exchange  Agent for any reason,  they shall be\ncanceled  and  exchanged  as  provided in this  Section 2,  except as  otherwise\nprovided by law.\n\n         (e)  No  Fractional  Shares.  No  certificates  or  scrip  representing\nfractional shares of HEALTHSOUTH Common Stock shall be issued upon the surrender\nfor exchange of  Certificates,  and such  fractional  share  interests  will not\nentitle  the  owner  thereof  to  vote  or to any  rights  of a  stockholder  of\nHEALTHSOUTH.  Notwithstanding  any other provision of this Plan of Merger,  each\nholder of Exchanging  Horizon\/CMS  Shares who would otherwise have been entitled\nto receive a fraction of a share of HEALTHSOUTH  Common Stock (after taking into\naccount all  Exchanging  Horizon\/CMS  Shares  delivered  by such  holder)  shall\nreceive,  in lieu thereof,  cash  (without  interest) in an amount equal to such\nfractional part of a share of HEALTHSOUTH\n\n\n                                      - 4 -\n\n\nCommon  Stock  multiplied  by the  closing  sale price per share of  HEALTHSOUTH\nCommon Stock on the date on which the Effective Time occurs,  as reported on the\nNew York Stock Exchange Composite Transactions Tape; provided, however, that, if\nthere is no sale of  HEALTHSOUTH  Common Stock on the New York Stock Exchange on\nsuch date,  then the closing sale price per share on the next preceding  trading\nday on which such a sale occurred.\n\n         (f)  Termination  of Exchange  Fund.  Any portion of the Exchange  Fund\nwhich remains  undistributed  to the holders of the  Certificates for six months\nafter the Effective Time shall be delivered to HEALTHSOUTH, upon demand, and any\nholders of the Certificates who have not theretofore  complied with this Section\n2 shall  thereafter look only to HEALTHSOUTH  for payment of HEALTHSOUTH  Common\nStock, any cash in lieu of fractional shares of HEALTHSOUTH Common Stock and any\ndividends or distributions with respect to HEALTHSOUTH Common Stock.\n\n         (g) No Liability. None of HEALTHSOUTH,  the Subsidiary,  Horizon\/CMS or\nthe  Exchange  Agent  shall be liable to any  person in respect of any shares of\nHEALTHSOUTH Common Stock (or dividends or distributions with respect thereto) or\ncash from the  Exchange  Fund  delivered  to a public  official  pursuant to any\napplicable abandoned property, escheat or similar law. If any Certificates shall\nnot have been  surrendered  prior to seven  years after the  Effective  Time (or\nimmediately  prior to such  earlier  date on which any shares of  HEALTH-  SOUTH\nCommon Stock, any cash in lieu of fractional shares of HEALTHSOUTH  Common Stock\nor any dividends or  distributions  with respect to HEALTHSOUTH  Common Stock in\nrespect of such  Certificates  would otherwise escheat to or become the property\nof any governmental  entity),  any such shares, cash, dividends or distributions\nin respect of such  Certificates  shall,  to the extent  permitted by applicable\nlaw,  become the property of the  Surviving  Corporation,  free and clear of all\nclaims or interest of any person previously entitled thereto.\n\n         (h) Investment of Exchange Fund. The Exchange Agent may invest any cash\nincluded in the Exchange  Fund in deposit  accounts or  short-term  money market\ninstruments,  as directed by  HEALTHSOUTH,  on a daily  basis.  Any interest and\nother  income  resulting  from such  investments  shall be paid to  HEALTHSOUTH.\nHEALTHSOUTH  shall deposit with the Exchange  Agent as part of the Exchange Fund\ncash in an amount equal to any loss of principal resulting from such investments\npromptly after the incurrence of such a loss.\n\n         2.3  Certificate  of  Incorporation  of  Surviving   Corporation.   The\nCertificate of Merger shall include such lawful  amendments  and  restatement of\nthe Certificate of Incorporation of Horizon\/CMS as HEALTHSOUTH may desire,  such\namendments  and  restatement  to become  effective at the  Effective  Time.  The\nCertificate of Incorporation of Horizon\/CMS,  as so amended and restated,  shall\nbecome the Certificate of  Incorporation  of the Surviving  Corporation from and\nafter the Effective Time and until thereafter amended as provided by law.\n\n         2.4 Bylaws of the Surviving  Corporation.  The Bylaws of the Subsidiary\nshall be the Bylaws of the  Surviving  Corporation  from and after the Effective\nTime and until  thereafter  altered,  amended or repealed in accordance with the\nlaws of the State of Delaware, the Certificate of Incorporation of the Surviving\nCorporation and the said Bylaws.\n\n         2.5  Directors  of the  Surviving  Corporation.  The  Directors  of the\nSubsidiary immediately prior to the Effective Time shall be the Directors of the\nSurviving Corporation, each to hold office in accordance with the Certificate of\nIncorporation and Bylaws of the Surviving Corporation.\n\n\n                                      - 5 -\n\n\n\n         2.6 Assets, Liabilities,  Reserves and Accounts. At the Effective Time,\nthe assets,  liabilities,  reserves and accounts of each of the  Subsidiary  and\nHorizon\/CMS  shall be taken up on the books of the Surviving  Corporation at the\namounts  at which  they  respectively  shall  be  carried  on the  books of said\ncorporations  immediately  prior to the Effective Time,  except as otherwise set\nforth in the Plan of Merger and subject to such  adjustments,  or elimination of\nintercompany  items,  as may be  appropriate  in giving  effect to the Merger in\naccordance with generally accepted accounting principles.\n\n         2.7  Corporate  Acts of the  Subsidiary.  All  corporate  acts,  plans,\npolicies,  approvals and authorizations of the Subsidiary, its sole stockholder,\nits  Board  of  Directors,  committees  elected  or  appointed  by the  Board of\nDirectors, and all officers and agents, valid immediately prior to the Effective\nTime, shall be those of the Surviving  Corporation and shall be as effective and\nbinding thereon as they were with respect to the Subsidiary. \n\n\nSection 3.    REPRESENTATIONS AND WARRANTIES OF HORIZON\/CMS.\n\n         Horizon\/CMS  hereby  represents  and  warrants to  HEALTHSOUTH  and the\nSubsidiary as follows:\n\n         3.1  Organization,  Existence  and  Good  Standing.  Horizon\/CMS  is  a\ncorporation duly organized, validly existing and in good standing under the laws\nof the State of Delaware.  Horizon\/CMS has all necessary  corporate power to own\nits properties and assets and to carry on its business as presently conducted.\n\n         3.2  Horizon\/CMS  Capital  Stock.   Horizon\/CMS's   authorized  capital\nconsists of 150,000,000  shares of Horizon\/CMS Common Stock, par value $.001 per\nshare, of which 52,157,806  shares were issued and outstanding as of January 31,\n1997,  and 641,413 shares were issued and held as treasury  shares,  and 500,000\nshares of Preferred Stock,  par value $.001 per share,  none of which shares are\nissued  and  outstanding  or held  as  treasury  stock.  All of the  issued  and\noutstanding  shares of  Horizon\/CMS  Common  Stock are duly and validly  issued,\nfully  paid  and  nonassessable.  Except  as set  forth  on  Exhibit  3.2 to the\nDisclosure Schedule delivered by Horizon\/CMS to HEALTHSOUTH  simultaneously with\nthe  execution  and delivery  hereof (the  \"Disclosure  Schedule\")  or otherwise\ndisclosed  in the  Horizon\/CMS  Annual  Report on Form 10-K for the fiscal  year\nended May 31, 1996 (the \"Horizon\/CMS 10- K\") or the Horizon\/CMS Quarterly Report\non Form 10-Q for the three months ended November 30, 1996, there are no options,\nwarrants, or similar rights granted by Horizon\/CMS,  securities convertible into\nor exchangeable  for Horizon\/CMS  Common Stock, or any other agreements to which\nHorizon\/CMS  is a  party  providing  for  the  issuance  or  sale  by it of  any\nadditional  securities  which would remain in effect after the  Effective  Time.\nThere is no liability  for  dividends  declared or  accumulated  but unpaid with\nrespect to any of the shares of Horizon\/CMS Common Stock.\n\n         3.3 Horizon\/CMS  Subsidiaries and Horizon\/CMS Other Entities. (a) There\nis included in the Disclosure  Schedule,  as Exhibit 3.3(a),  a true and correct\nlist  of  all   Subsidiaries  of  Horizon\/CMS   (individually,   a  \"Horizon\/CMS\nSubsidiary\", and collectively,  the \"Horizon\/CMS Subsidiaries\") and their states\nof  incorporation.  Except as set forth on Exhibit 3.3(a),  Horizon\/CMS does not\nown  stock  in  and  does  not  control,  directly  or  indirectly,   any  other\ncorporation,  association or business  organization  other than the  Horizon\/CMS\nOther Entities (as defined below).\n\n                                      - 6 -\n\n\n         (b) There is included in the Disclosure Schedule,  as Exhibit 3.3(b), a\ntrue and correct list of all general or limited  partnerships in which a general\npartner is Horizon\/CMS,  a Horizon\/CMS Subsidiary, a Horizon\/CMS LLC (as defined\nbelow)  or  another  Horizon\/CMS  Partnership   (individually,   a  \"Horizon\/CMS\nPartnership\" and collectively, the \"Horizon\/CMS Partnerships\"),  and all limited\nliability  companies in which  Horizon\/CMS,  a Horizon\/CMS  Subsidiary,  another\nHorizon\/CMS  LLC or a  Horizon\/CMS  Partnership  is a  member  (individually,  a\n\"Horizon\/CMS  LLC\" and  collectively,  the \"Horizon\/CMS  LLCs\") (the Horizon\/CMS\nPartnerships and the Horizon\/CMS LLCs being collectively called the \"Horizon\/CMS\nOther  Entities\"),  and  their  states of  organization.  Except as set forth on\nExhibit  3.3(b),  neither  Horizon\/CMS  nor any  Horizon\/CMS  Subsidiary owns an\nequity  interest in, nor does such entity control,  directly or indirectly,  any\nother joint venture, limited liability company or partnership.\n\n         3.4   Organization,   Existence  and  Good   Standing  of   Horizon\/CMS\nSubsidiaries and Horizon\/CMS Other Entities.  (a) Each Horizon\/CMS Subsidiary is\na corporation  duly organized,  validly  existing and in good standing under the\nlaws of its respective state of incorporation.  Each Horizon\/CMS  Subsidiary has\nall necessary  corporate  power to own its properties and assets and to carry on\nits business as presently conducted.\n\n         (b) Each  Horizon\/CMS  Partnership  that is a  limited  partnership  is\nvalidly formed,  each Horizon\/CMS  Partnership that is a general partnership has\nbeen duly organized,  and each Horizon\/CMS Partnership is in good standing under\nthe laws of its respective state of organization.  Each Horizon\/CMS  Partnership\nhas all necessary  partnership power to own its property and assets and to carry\non its business as presently conducted.\n\n         (c) Each Horizon\/CMS LLC is a limited  liability company validly formed\nand in good standing  under the laws of its  respective  state of  organization.\nEach  Horizon\/CMS  LLC  has  all  necessary  organizational  power  to  own  its\nproperties and assets to carry on its business as presently conducted.\n\n         3.5 Foreign  Qualifications.  Horizon\/CMS,  each Horizon\/CMS Subsidiary\nand each Horizon\/CMS Other Entity that is not a general partnership is qualified\nto do business as a foreign corporation,  foreign limited partnership or foreign\nlimited liability  company,  as the case may be, and is in good standing in each\njurisdiction in which the nature or character of the property  owned,  leased or\noperated  by it or the  nature  of the  business  transacted  by it  makes  such\nqualification necessary, except where the failure to so qualify would not have a\nmaterial adverse effect on Horizon\/CMS.\n\n         3.6 Power and Authority.  Subject to the satisfaction of the conditions\nprecedent set forth  herein,  Horizon\/CMS  has the  corporate  power to execute,\ndeliver and perform this Plan of Merger and all agreements  and other  documents\nexecuted and  delivered  or to be executed and  delivered by it pursuant to this\nPlan of Merger, and, subject to the satisfaction of the conditions precedent set\nforth herein, has taken all action required by its Certificate of Incorporation,\nBylaws or otherwise,  to authorize the  execution,  delivery and  performance of\nthis Plan of Merger and such related  documents.  The  execution and delivery of\nthis Plan of Merger does not and, subject to the receipt of required stockholder\nand  regulatory  approvals  and  any  other  required  third-party  consents  or\napprovals,  the  consummation of the Merger will not,  violate any provisions of\nany statute or other law, any rule or regulation of any  governmental  agency or\nauthority, the Certificate of Incorporation of Horizon\/CMS or any provisions of,\nor result in the  acceleration  of any  obligation  under,  any mortgage,  lien,\nlease, agreement,  instrument,  order, arbitration award, judgment or decree, to\nwhich Horizon\/CMS or any Horizon\/CMS Subsidiary\n\n                                      - 7 -\n\n\n\nor Horizon\/CMS  Other Entity is a party, or by which it is bound, or violate any\nrestrictions  of  any  kind  to  which  it is  subject  which,  if  violated  or\naccelerated,  would have a material adverse effect on Horizon\/CMS. The execution\nand delivery of this Plan of Merger has been  approved by the Board of Directors\nof  Horizon\/CMS.  This Plan of Merger has been duly  executed  and  delivered by\nHorizon\/CMS  and,  assuming this Plan of Merger  constitutes a valid and binding\nobligation of each of HEALTHSOUTH  and the  Subsidiary,  constitutes a valid and\nbinding obligation of Horizon\/CMS, enforceable against Horizon\/CMS in accordance\nwith its terms.\n\n         3.7  Horizon\/CMS  Public  Information;   Undisclosed  Liabilities.  (a)\nHorizon\/CMS has heretofore  furnished  HEALTHSOUTH with a true and complete copy\nof each report, schedule,  registration statement and definitive proxy statement\nfiled by it with the Securities and Exchange Commission (the \"SEC\") (as any such\ndocuments  have  since  the time of their  original  filing  been  amended,  the\n\"Horizon\/CMS  Documents\")  since  January 1, 1995,  which are all the  documents\n(other than preliminary material) that it was required to file with the SEC from\nsuch  date  through  the date of this  Plan of  Merger.  Except  as set forth in\nExhibit 3.7(a) to the Disclosure  Schedule,  as of their  respective  dates, the\nHorizon\/CMS Documents did not contain any untrue statements of material facts or\nomit to state  material facts required to be stated therein or necessary to make\nthe  statements  therein,  in light of the  circumstances  under which they were\nmade, not misleading.  As of their respective  dates, the Horizon\/CMS  Documents\ncomplied  in all  material  respects  with the  applicable  requirements  of the\nSecurities Act of 1933, as amended,  and the Securities Exchange Act of 1934, as\namended,  and the rules and  regulations  promulgated  under such statutes.  The\nfinancial statements contained in the Horizon\/CMS  Documents,  together with the\nnotes  thereto,  have  been  prepared  in  accordance  with  generally  accepted\naccounting  principles  consistently  followed  throughout the periods indicated\n(except  as may be  indicated  in the  notes  thereto,  or,  in the  case of the\nunaudited financial statements,  as permitted by Form 10-Q), except as set forth\nin Exhibit 3.7(a) to the Disclosure  Schedule,  reflect all known liabilities of\nHorizon\/CMS  required to be stated therein,  including all such known contingent\nliabilities as of the end of each period reflected  therein,  and present fairly\nthe  financial  condition  of  Horizon\/CMS  at said  dates and the  consolidated\nresults of operations and cash flows of Horizon\/CMS  for the periods then ended.\nThe  consolidated  balance sheet of Horizon\/CMS at November 30, 1996 included in\nthe Horizon\/CMS  Documents is herein  sometimes  referred to as the \"Horizon\/CMS\nBalance Sheet\".\n\n         (b) Except as disclosed in the Horizon\/CMS Documents or as set forth in\nExhibit  3.7(b) to the  Disclosure  Schedule  and  except  for  liabilities  and\nobligations  incurred in the ordinary  course of business  consistent  with past\npractices,  since the date of the Horizon\/CMS Balance Sheet, neither Horizon\/CMS\nnor any of the Horizon\/CMS  Subsidiaries or the Horizon\/CMS  Other Entities have\nincurred any  liabilities or obligations of any nature,  whether or not accrued,\ncontingent  or otherwise,  that have,  or would be reasonably  likely to have, a\nmaterial  adverse effect on Horizon\/CMS.  Except as disclosed in the Horizon\/CMS\nDocuments  or as set forth in  Exhibit  3.7(b) to the  Disclosure  Schedule  and\nexcept for  liabilities  and  obligations  incurred  in the  ordinary  course of\nbusiness  consistent  with past  practices,  since  the date of the  Horizon\/CMS\nBalance Sheet,  neither  Horizon\/CMS nor any of the Horizon\/CMS  Subsidiaries or\nthe  Horizon\/CMS  Other Entities have incurred any liabilities or obligations of\nany nature,  whether or not  accrued,  contingent  or  otherwise,  that would be\nrequired to be reflected or reserved against on a consolidated  balance sheet of\nHorizon\/CMS  (including the notes thereto) prepared in accordance with generally\naccepted  accounting  principles as applied in preparing the Horizon\/CMS Balance\nSheet.\n\n                                      - 8 -\n\n\n         3.8  Supporting  Information.  All  consolidated  historical  financial\ninformation   provided  by  Horizon\/CMS   to  HEALTHSOUTH  in  connection   with\nHEALTHSOUTH's  due  diligence  investigation  prior to the date of this  Plan of\nMerger, and all such information provided to HEALTHSOUTH on or after the date of\nthis Plan of Merger,  is  supported by detailed  information  at the facility or\noperating  unit  level  and  is in  all  respects  consistent  with  and  fairly\nreflective of such detailed information.\n\n         3.9 Legal Proceedings. Except as disclosed in the Horizon\/CMS Documents\nor  on  Exhibit  3.9  to  the  Disclosure  Schedule,  there  is  no  litigation,\ngovernmental investigation or other proceeding pending or, so far as is known to\nHorizon\/CMS,  threatened  against or relating to Horizon\/CMS or the  Horizon\/CMS\nSubsidiaries or the Horizon\/CMS Other Entities,  their respective  properties or\nbusinesses,  or the transactions contemplated by this Plan of Merger, except for\nlitigation,  governmental  investigations  or other  proceedings that would not,\nindividually or in the aggregate, have a material adverse effect on Horizon\/CMS.\n\n         3.10 Contracts,  etc. (a) Except as set forth on Exhibit 3.10(a) to the\nDisclosure Schedule, all material contracts, leases, agreements and arrangements\nto which Horizon\/CMS or any of the Horizon\/CMS Subsidiaries or Horizon\/CMS Other\nEntities is a party are legally valid and binding in accordance with their terms\nand in full force and effect, and, to the knowledge of Horizon\/CMS,  no party is\nin default  thereunder,  and no event has occurred which, but for the passage of\ntime or the giving of notice or both,  would  constitute  a default  thereunder,\nexcept,  in each case,  where the  invalidity or  unenforceablity  of the lease,\ncontract,  agreement  or  arrangement  or the  default or breach  thereunder  or\nthereof would not,  individually  or in the aggregate,  have a material  adverse\neffect on Horizon\/CMS.\n\n         (b) Except as set forth on Exhibit 3.10(b) to the Disclosure  Schedule,\nno contract or agreement to which  Horizon\/CMS or any Horizon\/CMS  Subsidiary or\nHorizon\/CMS Other Entity is a party will, by its terms, terminate as a result of\nthe  transactions  contemplated  hereby or require any consent  from any obligor\nthereto  in order to  remain  in full  force and  effect  immediately  after the\nEffective  Time,  except for contracts or agreements  which, if terminated or if\ntheir  enforceability  were  otherwise  adversely  affected,  would  not  have a\nmaterial adverse effect on Horizon\/CMS.\n\n         (c) Except as set forth on Exhibit 3.10(c) to the Disclosure  Schedule,\nnone of Horizon\/CMS,  any Horizon\/CMS Subsidiary or any Horizon\/CMS Other Entity\nhas  granted any right of first  refusal or similar  right in favor of any third\nparty  with  respect to any  material  portion  of its  properties  or assets or\nentered into any non-competition  agreement or similar agreement  restricting in\nany  material  manner its  ability  to engage in any  material  business  in any\nlocation.\n\n         3.11 Subsequent Events.  Except as (a) set forth on Exhibit 3.11 to the\nDisclosure Schedule, (b) disclosed in the Horizon\/CMS Documents (c) contemplated\nby this Plan of Merger or (d) otherwise  consented to in writing by HEALTHSOUTH,\nnone of Horizon\/CMS, any Horizon\/CMS Subsidiary nor any Horizon\/CMS Other Entity\nhas, since the date of the Horizon\/CMS Balance Sheet:\n\n                  (i) Incurred any material adverse change;\n\n                                      - 9 -\n\n\n                  (ii)  except as  required  hereby,  amended  its  Articles  or\n         Certificate of Incorporation or Bylaws, if any;\n\n                  (iii)  extended  credit to anyone or guaranteed the obligation\n         of any  person,  firm or  corporation  (other than  Horizon\/CMS  or any\n         Horizon\/CMS  Subsidiary or Horizon\/CMS Other Entity) in an amount that,\n         in either  case,  is material  to  Horizon\/CMS  except in the  ordinary\n         course of business consistent with prior practice;\n\n                  (iv) discharged or satisfied any material lien or encumbrance,\n         or paid or satisfied any material  obligation  or liability  (absolute,\n         accrued,  contingent or otherwise) other than (a) liabilities  shown or\n         reflected on the Horizon\/CMS Balance Sheet or (b) liabilities  incurred\n         since the date of the Horizon\/CMS  Balance Sheet in the ordinary course\n         of  business,  which  discharge or  satisfaction  would have a material\n         adverse effect on Horizon\/CMS;\n\n                  (v)  increased  or  established  any  reserve for taxes or any\n         other liability on its books or otherwise provided therefor which would\n         have a material adverse effect on Horizon\/CMS, except as relates to the\n         consolidated results of operations of Horizon\/CMS since the date of the\n         Horizon\/CMS Balance Sheet;\n\n                  (vi) sold or transferred any of its material assets,  tangible\n         or  intangible,  cancelled  any material  debts or claims held by it or\n         waived any of its material  rights,  except in the  ordinary  course of\n         business;\n\n                  (vii) mortgaged, pledged or subjected to any security interest\n         any of its  material  assets,  tangible  or  intangible,  other than as\n         required under the existing provisions of Horizon\/CMS's  primary credit\n         facility;\n\n                  (viii)  entered  into  any  employment  contract  which is not\n         terminable upon notice of 30 days or less, at will, and without penalty\n         to  Horizon\/CMS  except as  provided  herein or granted  any general or\n         uniform  increase  in the  rates of pay of  employees  or  granted  any\n         increase in salary  payable or to become  payable by Horizon\/CMS to any\n         officer  of  Horizon\/CMS  or,  by means of any bonus or  pension  plan,\n         contract or other commitment, increased the compensation of any officer\n         of   Horizon\/CMS   or  entered  into  any   agreements   providing  for\n         compensation to any officer or employee of Horizon\/CMS, any Horizon\/CMS\n         Subsidiary  or any  Horizon\/CMS  Other  Entity  based  upon a change in\n         control of Horizon\/CMS;\n\n                  (ix) made any  contribution,  payment or  distribution  to the\n         trustee under any Horizon\/CMS  Plan (as such term is defined in Section\n         3.15 herein), other than any such contribution, payment or distribution\n         that is in accordance with Horizon\/CMS's past practice,  or established\n         or terminated any Horizon\/CMS Plan;\n\n                  (x) issued any capital stock or other equity securities, other\n         than  stock  options  granted  to  officers,  employees,  directors  or\n         consultants  of  Horizon\/CMS  or\n\n                                     - 10 -\n\n\n         warrants  granted to third  parties  and shares of  Horizon\/CMS  Common\n         Stock  issuable  upon the exercise  thereof,  all of which  options and\n         warrants  are  disclosed on Exhibit 3.2 to the  Disclosure  Schedule or\n         reflected in the Horizon\/CMS Documents; or\n\n                  (xi)  except for this Plan of Merger  and any other  agreement\n         executed and  delivered  pursuant to this Plan of Merger,  entered into\n         any material  transaction other than in the ordinary course of business\n         or permitted  under other Sections  hereof or entered into any contract\n         or  agreement  in the  ordinary  course of business (i) which cannot be\n         performed  within  three  months  or less or (ii)  which  involves  the\n         expenditure by Horizon\/CMS of over $250,000.\n\n         3.12 Accounts  Receivable.  (a) Since the date of the Horizon\/CMS 10-K,\nHorizon\/CMS  has not changed any material  principle or practice with respect to\nthe recordation of accounts  receivable or the calculation of reserves therefor,\nor  any  material  collection,   discount  or  write-off  policy  or  procedure.\nHorizon\/CMS  (including  the  Horizon\/CMS  Subsidiaries  and  Horizon\/CMS  Other\nEntities) is in  compliance  with the terms and  conditions  of all  third-party\npayor  arrangements  relating to its accounts  receivable,  except to the extent\nthat such noncompliance would not have a material adverse effect on Horizon\/CMS.\n\n         (b)  Without  limiting  the  generality  of  the  foregoing,   each  of\nHorizon\/CMS and the Horizon\/CMS  Subsidiaries and the Horizon\/CMS Other Entities\nis in compliance with all Medicare and Medicaid provider  agreements to which it\nis a party,  except  to the  extent  that  such  noncompliance  would not have a\nmaterial adverse effect on Horizon\/CMS.\n\n         3.13 Tax Returns.  Horizon\/CMS and each of the Horizon\/CMS Subsidiaries\nand the  Horizon\/CMS  Other  Entities  has filed all tax returns  required to be\nfiled by it or requests for extensions to file such returns or reports have been\ntimely  filed and granted and have not  expired,  except to the extent that such\nfailures  to file,  taken  together,  do not have a material  adverse  effect on\nHorizon\/CMS. Horizon\/CMS or the applicable entity has made all payments shown as\ndue on such  returns.  Except as set  forth on  Exhibit  3.13 to the  Disclosure\nSchedule,  neither  Horizon\/CMS  nor any  Horizon\/CMS  Subsidiary or Horizon\/CMS\nOther  Entity  has been  notified  that any tax  returns of  Horizon\/CMS  or any\nHorizon\/CMS  Subsidiary or Horizon\/CMS Other Entity are currently under audit by\nthe Internal  Revenue  Service or any state or local tax agency.  No  agreements\nhave been made by  Horizon\/CMS  for the  extension  of time or the waiver of the\nstatute of limitations  for the  assessment or payment of any federal,  state or\nlocal taxes.\n\n         3.14  Commissions  and Fees.  Except for fees payable to Merrill Lynch,\nPierce,  Fenner &amp; Smith  Incorporated  (\"Merrill Lynch\") as indicated in Exhibit\n3.14 to the  Disclosure  Schedule,  there  are no  valid  claims  for  brokerage\ncommissions  or finder's or similar  fees in  connection  with the  transactions\ncontemplated  by this Plan of  Merger  which  may be now or  hereafter  asserted\nagainst  HEALTHSOUTH  resulting  from any  action  taken by  Horizon\/CMS  or its\nofficers or Directors, or any of them.\n\n         3.15 Employee  Benefit  Plans;  Employment  Matters.  (a) Except as set\nforth  in  Exhibit  3.15  to the  Disclosure  Schedule  or as  described  in the\nHorizon\/CMS Documents,  Horizon\/CMS has\n\n                                     - 11 -\n\n\nneither  established nor maintains nor is obligated to make  contributions to or\nunder or  otherwise  participate  in (a) any  bonus or other  type of  incentive\ncompensation  plan,  program,   agreement,   policy,  commitment,   contract  or\narrangement  (whether or not set forth in a written document),  (b) any pension,\nprofit-sharing,  retirement or other plan,  program or  arrangement,  or (c) any\nother employee  benefit plan,  fund or program,  including,  but not limited to,\nthose described in Section 3(3) of ERISA. Except as set forth in Exhibit 3.15 to\nthe Disclosure Schedule, all such plans (individually,  a \"Horizon\/CMS Plan\" and\ncollectively,  the  \"Horizon\/CMS  Plans\") have been operated and administered in\naccordance  with, as applicable,  ERISA,  the Internal  Revenue Code of 1986, as\namended,  Title VII of the Civil Rights Act of 1964,  as amended,  the Equal Pay\nAct of 1967, as amended,  the Age  Discrimination  in Employment Act of 1967, as\namended, and the related rules and regulations adopted by those federal agencies\nresponsible  for the  administration  of such laws.  No act or failure to act by\nHorizon\/CMS  has resulted in a  \"prohibited  transaction\"  (as defined in ERISA)\nwith  respect to the  Horizon\/CMS  Plans that is not subject to a  statutory  or\nregulatory  exception.  Except as set forth in  Exhibit  3.15 to the  Disclosure\nSchedule,  no \"reportable event\" (as defined in ERISA) has occurred with respect\nto any of the Horizon\/CMS Plans which is subject to Title IV of ERISA. Except as\nset  forth in  Exhibit  3.15 to the  Disclosure  Schedule,  Horizon\/CMS  has not\npreviously  made,  is not currently  making,  and is not obligated in any way to\nmake, any  contributions  to any  multi-employer  plan within the meaning of the\nMulti-Employer Pension Plan Amendments Act of 1980.\n\n         (b) Except as set forth in Exhibit 3.15 to the  Disclosure  Schedule or\ndescribed in the Horizon\/CMS  Documents,  Horizon\/CMS is not a party to any oral\nor written (i) union, guild or collective  bargaining  agreement which agreement\ncovers  employees in the United States (nor is it aware of any union  organizing\nactivity  currently being  conducted in respect to any of its  employees),  (ii)\nagreement with any executive officer or other key employee the benefits of which\nare  contingent,  or the terms of which are altered,  upon the  occurrence  of a\ntransaction of the nature contemplated by this Plan of Merger and which provides\nfor the payment of in excess of $50,000,  or (iii) agreement or plan,  including\nany stock option plan, stock appreciation rights plan,  restricted stock plan or\nstock  purchase  plan,  any of the benefits of which will be  increased,  or the\nvesting the benefits of which will be  accelerated,  by the occurrence of any of\nthe transactions  contemplated by this Plan of Merger or the value of any of the\nbenefits  of which will be  calculated  on the basis of any of the  transactions\ncontemplated by this Plan of Merger.\n\n         3.16  Compliance  with Laws in General.  Except as set forth on Exhibit\n3.16 to the  Disclosure  Schedule or  disclosed  in the  Horizon\/CMS  Documents,\nHorizon\/CMS has not received any notices of violations of any federal, state and\nlocal laws,  regulations and ordinances relating to its business and operations,\nincluding,  without  limitation,  the  Occupational  Safety and Health Act,  the\nAmericans with  Disabilities  Act, the Medicare or applicable  Medicaid statutes\nand regulations and any  Environmental  Laws, which  violation,  if established,\nwould have a material effect on Horizon\/CMS.\n\n         3.17  Licenses,  Accreditation  and  Regulatory  Approvals.  Except  as\ndisclosed  in  the  Horizon\/CMS  Documents,   Horizon\/CMS  and  the  Horizon\/CMS\nSubsidiaries  and  Horizon\/CMS  Other  Entities  hold  all  licenses,   permits,\ncertificates  of need and other  regulatory  approvals which are required by law\nwith  respect  to  their  businesses,  operations  and  facilities  as they  are\ncurrently  or\n\n\n                                     - 12 -\n\npresently  conducted  or  operated,  except  where the  failure to possess  such\nlicenses would not have a material adverse effect on Horizon\/CMS  (collectively,\nthe \"Horizon\/CMS  Licenses\").  Except with respect to those Horizon\/CMS Licenses\nfor which renewal  applications have been filed by Horizon\/CMS,  the Horizon\/CMS\nSubisidiaries or the Horizon\/CMS Other Entities and which are being processed by\nthe applicable regulatory authorities, all such Horizon\/CMS Licenses are in full\nforce  and  effect,  and  Horizon\/CMS  is in  substantial  compliance  with  all\nconditions and  requirements of the Horizon\/CMS  Licenses and with all rules and\nregulations relating thereto.  Horizon\/CMS, the Horizon\/CMS Subsidiaries and the\nHorizon\/CMS  Other Entities are, to the extent  applicable to their  operations,\n(i)  eligible  to  receive  payment  under  Titles  XVIII and XIX of the  Social\nSecurity  Act,  (ii)  providers  under  existing  provider  agreements  with the\nMedicare program through the applicable  intermediaries and (iii) in substantial\ncompliance with the conditions of  participation  in the Medicare program except\nfor such  matters as would not have a material  adverse  effect on  Horizon\/CMS.\nExcept to the extent that the failure to timely make such filings would not have\na  material  adverse  effect on  Horizon\/CMS,  and  except as  disclosed  in the\nHorizon\/CMS  Documents,   Horizon\/CMS,  the  Horizon\/CMS  Subsidiaries  and  the\nHorizon\/CMS  Other  Entities  have timely filed all  requisite  claims and other\nreports required to be filed in connection with the Medicare, Medicaid and other\ngovernmental  health  programs  due on or before the date  hereof,  all of which\nwere, when filed,  complete and correct in all material respects.  Except as set\nforth on Exhibit 3.17 to the Disclosure  Schedule,  there are no current claims,\nactions  or  appeals  pending,  and  neither  Horizon\/CMS  nor  the  Horizon\/CMS\nSubsidiaries nor the Horizon\/CMS Other Entities have filed any claims or reports\nwhich would result in such claims,  actions or appeals,  before any  commission,\nboard or agency, including, without limitation, any intermediary or carrier, the\nProvider  Reimbursement  Review  Board or the  Administrator  of the Health Care\nFinancing   Administration   with  respect  to  any  Medicare  claims,   or  any\ndisallowances  in  connection  with any  audit of  claims,  which  would  have a\nmaterial  adverse effect on Horizon\/CMS.  The amounts  established as provisions\nfor adjustments by Medicare,  Medicaid and other third-party payors set forth in\nthe  Horizon\/CMS  Balance  Sheet are  sufficient  to pay any  amounts  for which\nHorizon\/CMS believes it will be liable. To the knowledge of Horizon\/CMS,  except\nto the extent that alleged  violations  have been  disclosed in the  Horizon\/CMS\nDocuments,   neither  Horizon\/CMS  nor  the  Horizon\/CMS  Subsidiaries  nor  the\nHorizon\/CMS  Other  Entities nor their  respective  employees  have  committed a\nviolation of the Medicare and Medicaid fraud and abuse  provisions of the Social\nSecurity  Act or any  similar  provisions  of any  federal,  state or local  law\nrelating to  referrals  or billings  for  healthcare  services.  Except for such\nlitigation as would not, if resolved adversely to Horizon\/CMS or any Horizon\/CMS\nSubsidiary  or  Horizon\/CMS  Other  Entity,  have a material  adverse  effect on\nHorizon\/CMS,  any and all past litigation  concerning such Horizon\/CMS Licenses,\nand  all  claims  and  causes  of  action  raised  therein,  have  been  finally\nadjudicated  or settled.  Except as indicated in Exhibit 3.17 to the  Disclosure\nSchedule,  no such  License  has been  revoked,  conditioned  (except  as may be\ncustomary) or restricted,  and no action (equitable,  legal or  administrative),\narbitration  or other process is pending,  or to the  knowledge of  Horizon\/CMS,\nthreatened,  which in any way  challenges  the  validity of, or seeks to revoke,\ncondition or restrict any such License.  Subject to compliance  with  applicable\nsecurities laws, the Hart  Scott-Rodino  Antitrust  Improvements Act of 1976, as\namended  (the \"HSR  Act\"),  and state or local  statutes,  rules or  regulations\nrequiring notice,  approval,  or other action upon the occurrence of a change in\ncontrol of  Horizon\/CMS  or any of the  Horizon\/CMS  Subsidiaries  or any of the\nHorizon\/CMS Other Entities,  the consummation of the Merger will not violate any\nlaw or regulation\n\n                                     - 13 -\n\n\nto which  Horizon\/CMS  is  subject  which,  if  violated,  would have a material\nadverse effect on Horizon\/CMS.\n\n         3.18 Vote Required.  The affirmative  vote of the holders of a majority\nof the  outstanding  shares of the  Horizon\/CMS  Common  Stock  entitled to vote\nthereon is the only vote of the  holders  of any class or series of  Horizon\/CMS\ncapital  stock  necessary  to approve  this Plan of  Merger,  the Merger and the\ntransactions contemplated hereby.\n\n         3.19  Opinion  of  Financial   Advisor.   The  Board  of  Directors  of\nHorizon\/CMS  has received the oral opinion of Merrill  Lynch to the effect that,\nas of the date of this Plan of Merger, the Exchange Ratio is fair to the holders\nof  Horizon\/CMS  Common Stock from a financial  point of view, a written copy of\nwhich opinion will be delivered by Horizon\/CMS to HEALTHSOUTH  prior to the date\non which the definitive  proxy  materials for the Proxy Statement (as defined in\nSection 7.4(a)) are filed with the SEC.\n\n\nSection 4.   REPRESENTATIONS AND WARRANTIES OF THE SUBSIDIARY AND HEALTHSOUTH.\n\n         The Subsidiary and HEALTHSOUTH, jointly and severally, hereby represent\nand warrant to Horizon\/CMS as follows:\n\n         4.1  Organization,  Existence and Capital  Stock.  The  Subsidiary is a\ncorporation  duly  organized and validly  existing and is in good standing under\nthe laws of the State of Delaware. The Subsidiary's  authorized capital consists\nof 1,000 shares of Common Stock,  par value $.01 per share,  all of which shares\nare issued and  registered in the name of  HEALTHSOUTH.  The Subsidiary has not,\nwithin  the two years  immediately  preceding  the date of this Plan of  Merger,\nowned, directly or indirectly, any shares of Horizon\/CMS Common Stock.\n\n         4.2 Power and Authority. The Subsidiary has corporate power to execute,\ndeliver and perform this Plan of Merger and all agreements  and other  documents\nexecuted and delivered,  or to be executed and delivered, by it pursuant to this\nPlan of Merger, and, subject to the satisfaction of the conditions precedent set\nforth  herein,  has  taken all  actions  required  by law,  its  Certificate  of\nIncorporation,  its Bylaws or otherwise, to authorize the execution and delivery\nof this Plan of Merger and such related documents. The execution and delivery of\nthis Plan of Merger does not and, subject to the receipt of required stockholder\nand  regulatory  approvals  and  any  other  required  third-party  consents  or\napprovals,  the consummation of the Merger contemplated hereby will not, violate\nany  provisions  of, any  statute or other law,  any rule or  regulation  of any\ngovernmental agency or authority,  the Certificate of Incorporation or Bylaws of\nthe  Subsidiary,  or  mortgage,  lien,  lease,  agreement,   instrument,  order,\narbitration  award,  judgment or decree to which the Subsidiary is a party or by\nwhich it is bound,  violate any restrictions of any kind to which the Subsidiary\nis subject,  or result in the creation of any lien,  charge or encumbrance  upon\nany of the property or assets of the  Subsidiary.  The execution and delivery of\nthis  Plan of  Merger  has  been  approved  by the  Board  of  Directors  of the\nSubsidiary.\n\n                                     - 14 -\n\n\n         4.3 No  Subsidiaries.  The Subsidiary  does not own any equity interest\nin,  and does  not  control  directly  or  indirectly,  any  other  corporation,\nassociation or business organization. The Subsidiary is not a party to any joint\nventure or partnership.\n\n         4.4 Legal  Proceedings.  There  are no  actions,  suits or  proceedings\npending or threatened against the Subsidiary,  at law or in equity,  relating to\nor affecting the Subsidiary,  including the Merger. The Subsidiary does not know\nor have any reasonable grounds to know of any justification for any such action,\nsuit or proceeding.\n\n         4.5 No Contracts or  Liabilities.  Other than the  obligations  created\nunder this Plan of Merger,  the Subsidiary is not obligated under any contracts,\nclaims, leases, liabilities (contingent or otherwise), loans or otherwise.\n\nSection 5.        REPRESENTATIONS AND WARRANTIES OF HEALTHSOUTH.\n\n         HEALTHSOUTH hereby represents and warrants to Horizon\/CMS as follows:\n\n         5.1  Organization,  Existence  and  Good  Standing.  HEALTHSOUTH  is  a\ncorporation  duly  organized and validly  existing and is in good standing under\nthe laws of the State of Delaware. HEALTHSOUTH has all necessary corporate power\nto own its  properties  and assets  and to carry on its  business  as  presently\nconducted.  HEALTHSOUTH is duly qualified to do business and is in good standing\nin all  jurisdictions  in which the character of the property  owned,  leased or\noperated  or the nature of the  business  transacted  by it makes  qualification\nnecessary.\n\n         5.2 Power and Authority.  HEALTHSOUTH  has corporate  power to execute,\ndeliver and perform this Plan of Merger and all agreements  and other  documents\nexecuted and delivered,  or to be executed and delivered, by it pursuant to this\nPlan of Merger, and, subject to the satisfaction of the conditions precedent set\nforth  herein  has  taken  all  actions  required  by law,  its  Certificate  of\nIncorporation,  its Bylaws or otherwise, to authorize the execution and delivery\nof this Plan of Merger and such related documents. The execution and delivery of\nthis Plan of Merger does not and, subject to the receipt of required stockholder\nand  regulatory  approvals  and  any  other  required  third-party  consents  or\napprovals,  the consummation of the Merger contemplated hereby will not, violate\nany  provisions  of, any  statute or other law,  any rule or  regulation  of any\ngovernmental agency or authority,  the Certificate of Incorporation or Bylaws of\nHEALTHSOUTH,  or  any  provision  of,  or  result  in  the  acceleration  of any\nobligation  under, any mortgage,  lien,  lease,  agreement,  instrument,  order,\narbitration  award,  judgment or decree to which  HEALTHSOUTH or any HEALTHSOUTH\nSubsidiary  or  HEALTHSOUTH  Other  Entity (as such terms are defined in Section\n5.6(b)) is a party or by which it is bound,  or violate any  restrictions of any\nkind to which HEALTHSOUTH is subject. The execution and delivery of this Plan of\nMerger  has been  approved  by the Board of  Directors  of  HEALTHSOUTH,  and no\napproval  by the holders of  HEALTHSOUTH  Common  Stock is required by law,  the\nCertificate of Incorporation or Bylaws of HEALTHSOUTH, the rules of the New York\nStock Exchange, Inc. (the \"Exchange\") or otherwise. This Plan of Merger has been\nduly executed and delivered by HEALTHSOUTH and the Subsidiary and, assuming this\nPlan of  Merger  constitutes  a valid and  binding  obligation  of  Horizon\/CMS,\nconstitutes a valid and binding  obligation of \n\n\n                                     - 15 -\n\n\nHEALTHSOUTH  and  the  Subsidiary,   enforceable  against  HEALTHSOUTH  and  the\nSubsidiary in accordance with its terms.\n\n         5.3  HEALTHSOUTH  Common Stock. On the Closing Date,  HEALTHSOUTH  will\nhave a sufficient  number of authorized but unissued  and\/or  treasury shares of\nits Common Stock  available  for issuance to the holders of  Horizon\/CMS  Common\nStock in accordance with the provisions of this Plan of Merger.  The HEALTHSOUTH\nCommon  Stock  to be  issued  pursuant  to this  Plan of  Merger  will,  when so\ndelivered,  be (i) duly and validly issued,  fully paid and nonassessable,  (ii)\nissued pursuant to an effective  registration statement under the Securities Act\nof 1933,  as amended,  and (iii)  authorized  for listing on the  Exchange  upon\nofficial notice of issuance.\n\n         5.4 Capitalization.  HEALTHSOUTH's authorized capital stock consists of\n1,500,000  shares of  Preferred  Stock,  par value $.10 per  share,  of which no\nshares are  issued and  outstanding,  and no shares  are held in  treasury,  and\n250,000,000  shares  of  Common  Stock,  par  value  $.01  per  share,  of which\n156,114,869  shares are issued and  outstanding,  and 93,000  shares are held in\ntreasury. HEALTHSOUTH has called a special meeting of its stockholders for March\n12,  1997,  to approve an  amendment  to its  Certificate  of  Incorporation  to\nincrease  its  authorized  number  of  shares  of  HEALTHSOUTH  Common  Stock to\n500,000,000.  All of the issued and  outstanding  shares of  HEALTHSOUTH  Common\nStock have been duly and validly  issued and are fully paid and  non-assessable.\nExcept as disclosed in the HEALTHSOUTH Annual Report on Form 10-K for the fiscal\nyear ended December 31, 1995, as amended (the  \"HEALTHSOUTH  10-K\"),  and except\nfor shares of HEALTHSOUTH  Common Stock reserved for issuance in connection with\n(i) its  pending  acquisition  of  Health  Images,  Inc.  and (ii) its  proposed\ntwo-for-one  stock  split to be  effected  March 13,  1997 in the form of a 100%\nstock  dividend  (subject  to the  approval  of the  proposed  amendment  to its\nCertificate of Incorporation  described above), there are no options,  warrants,\nconvertible  debentures or similar  rights  granted by  HEALTHSOUTH or any other\nagreements to which HEALTHSOUTH is a party providing for the issuance or sale by\nit of any  additional  securities,  other  than  stock  options  granted  in the\nordinary course since such date. There is no liability for dividends declared or\naccumulated but unpaid with respect to any shares of HEALTHSOUTH Common Stock.\n\n         5.5 Subsidiary  Common Stock.  HEALTHSOUTH  owns,  beneficially  and of\nrecord,  all of the issued and  outstanding  shares of Subsidiary  Common Stock,\nwhich are validly issued and outstanding, fully paid and nonassessable, free and\nclear of all liens and  encumbrances.  HEALTHSOUTH  has the  corporate  power to\nendorse and surrender such Subsidiary  Shares for cancellation  pursuant to this\nPlan of Merger. HEALTHSOUTH has taken all such actions as may be required in its\ncapacity as the sole stockholder of the Subsidiary to approve the Merger.\n\n         5.6 HEALTHSOUTH  Documents.  (a)  HEALTHSOUTH has heretofore  furnished\nHorizon\/CMS with a true and complete copy of each report, schedule, registration\nstatement and definitive  proxy  statement filed by it with the SEC (as any such\ndocuments  have  since  the time of their  original  filing  been  amended,  the\n\"HEALTHSOUTH  Documents\")  since  January 1, 1995,  which are all the  documents\n(other  than  preliminary  material)  that it was  required to file with the SEC\nsince such date. As of their respective dates, the HEALTHSOUTH Documents did not\ncontain any untrue  statements of material facts or omit to state material facts\nrequired to be stated\n\n\n                                     - 16 -\n\n\ntherein  or  necessary  to  make  the  statements   therein,  in  light  of  the\ncircumstances under which they were made, not misleading. As of their respective\ndates,  the  HEALTHSOUTH  Documents  complied in all material  respects with the\napplicable  requirements  of the  Securities  Act of 1933,  as amended,  and the\nSecurities  Exchange  Act of 1934,  as  amended,  and the rules and  regulations\npromulgated  under such  statutes.  The  financial  statements  contained in the\nHEALTHSOUTH  Documents,  together with the notes thereto,  have been prepared in\naccordance with generally accepted accounting  principles  consistently followed\nthroughout  the  periods  indicated  (except  as may be  indicated  in the notes\nthereto, or, in the case of the unaudited financial statements,  as permitted by\nForm 10-Q),  reflect all known liabilities of HEALTHSOUTH  required to be stated\ntherein, including all known contingent liabilities as of the end of each period\nreflected therein,  and present fairly the financial condition of HEALTHSOUTH at\nsaid  dates  and the  consolidated  results  of  operations  and  cash  flows of\nHEALTHSOUTH  for the  periods  then ended.  The  consolidated  balance  sheet of\nHEALTHSOUTH at December 31, 1996 included in the HEALTHSOUTH Documents is herein\nsometimes referred to as the \"HEALTHSOUTH Balance Sheet\".\n\n         (b) Except as disclosed  in the  HEALTHSOUTH  Documents  and except for\nliabilities  and  obligations  incurred  in  the  ordinary  course  of  business\nconsistent with past practices, since the date of the HEALTHSOUTH Balance Sheet,\nneither  HEALTHSOUTH nor any of the HEALTHSOUTH  Subsidiaries or the HEALTHSOUTH\nOther  Entities  have incurred any  liabilities  or  obligations  of any nature,\nwhether  or not  accrued,  contingent  or  otherwise,  that  have,  or  would be\nreasonably  likely to have, a material adverse effect on HEALTHSOUTH or would be\nrequired to be reflected or reserved against on a consolidated  balance sheet of\nHEALTHSOUTH  (including the notes thereto) prepared in accordance with generally\naccepted  accounting  principles as applied in preparing the HEALTHSOUTH Balance\nSheet. As used in this Plan of Merger, the term \"HEALTHSOUTH Subsidiaries\" means\nSubsidiaries of HEALTHSOUTH, and the term \"HEALTHSOUTH Other Entities\" means any\ngeneral or limited partnerships in which HEALTHSOUTH,  a HEALTHSOUTH Subsidiary,\nor any other  HEALTHSOUTH  Other  Entity is a general  partner  and any  limited\nliability companies in which HEALTHSOUTH,  a HEALTHSOUTH Subsidiary or any other\nHEALTHSOUTH Other Entity is a member.\n\n         5.7  Supporting  Information.  All  consolidated  historical  financial\ninformation   provided  by  HEALTHSOUTH   to  Horizon\/CMS  in  connection   with\nHorizon\/CMS's  due  diligence  investigation  prior to the date of this  Plan of\nMerger, and all such information provided to Horizon\/CMS on or after the date of\nthis Plan of Merger,  is  supported by detailed  information  at the facility or\noperating  unit  level  and  is in  all  respects  consistent  with  and  fairly\nreflective of such detailed information.\n\n         5.8  Investment   Intent.   HEALTHSOUTH  is  acquiring  the  shares  of\nHorizon\/CMS  Common Stock  hereunder  for its own account and not with a view to\nthe  distribution  or  sale  thereof,  and  HEALTHSOUTH  has  no  understanding,\nagreement or arrangement to sell, distribute, partition or otherwise transfer or\nassign all or any part of the shares of  Horizon\/CMS  Common  Stock to any other\nperson, firm or corporation.\n\n         5.9  Legal   Proceedings.   Except  as  disclosed  in  the  HEALTHSOUTH\nDocuments, there is no material litigation,  governmental investigation or other\nproceeding pending or, so far as is known to HEALTHSOUTH,  threatened against or\nrelating to HEALTHSOUTH,  the \n\n                                     - 17 -\n\n\nHEALTHSOUTH  Subsidiaries or the HEALTHSOUTH  Other Entities,  their  respective\nproperties  or  businesses,  or the  transactions  contemplated  by this Plan of\nMerger, except for litigation,  governmental investigations or other proceedings\nthat would not, individually or in the aggregate, have a material adverse effect\non HEALTHSOUTH.\n\n         5.10  Subsequent  Events.   Except  as  disclosed  in  the  HEALTHSOUTH\nDocuments,  none of HEALTHSOUTH,  any HEALTHSOUTH Subsidiary nor any HEALTHSOUTH\nOther Entity has, since the date of the HEALTHSOUTH Balance Sheet:\n\n                  (i)      Incurred any material adverse change;\n\n                  (ii)  subject  to  the  proposed  amendment  to  HEALTHSOUTH's\n         Certificate of  Incorporation  described in Section 5.4 above,  amended\n         its Articles or Certificate of Incorporation or Bylaws, if any;\n\n                  (iii)  extended  credit to anyone or guaranteed the obligation\n         of any person,  firm or  corporation in an amount that, in either case,\n         is material to  HEALTHSOUTH  except in the ordinary  course of business\n         consistent with prior practice;\n\n                  (iv) discharged or satisfied any material lien or encumbrance,\n         or paid or satisfied any material  obligation  or liability  (absolute,\n         accrued,  contingent or otherwise) other than (a) liabilities  shown or\n         reflected on the HEALTHSOUTH Balance Sheet or (b) liabilities  incurred\n         since the date of the HEALTHSOUTH  Balance Sheet in the ordinary course\n         of  business,  which  discharge or  satisfaction  would have a material\n         adverse effect on HEALTHSOUTH;\n\n                  (v)  increased  or  established  any  reserve for taxes or any\n         other liability on its books or otherwise  provided therefor that would\n         have a material adverse effect on HEALTHSOUTH, except as relates to the\n         consolidated results of operations of HEALTHSOUTH since the date of the\n         HEALTHSOUTH Balance Sheet;\n\n                  (vi) sold or transferred any of its material assets,  tangible\n         or  intangible,  cancelled  any material  debts or claims held by it or\n         waived any of its material  rights,  except in the  ordinary  course of\n         business;\n\n                  (vii) mortgaged, pledged or subjected to any security interest\n         any of its material assets, tangible or intangible;\n\n                  (viii)  issued or agreed to issue any  capital  stock or other\n         equity  securities with respect to any merger,  consolidation  or other\n         business  combination  with  any  corporation  or other  entity  or the\n         acquisition  of all or any  significant  part of the  assets or capital\n         stock or other equity  interests of any  corporation  or other  entity,\n         which merger,  consolidation,  business  combination  or acquisition is\n         material to HEALTHSOUTH; or\n\n\n                                     - 18 -\n\n\n                  (ix)  except for this Plan of Merger  and any other  agreement\n         executed and  delivered  pursuant to this Plan of Merger,  entered into\n         any material  transaction other than in the ordinary course of business\n         or permitted under other Sections hereof.\n\n         5.11 Tax Returns.  HEALTHSOUTH and each of the HEALTHSOUTH Subsidiaries\nand HEALTHSOUTH Other Entities has filed all tax returns required to be filed by\nit or requests for  extensions  to file such returns or reports have been timely\nfiled and granted and have not expired,  except to the extent that such failures\nto file,  taken together,  do not have a material adverse effect on HEALTHSOUTH.\nHEALTHSOUTH or the applicable  entity has made all payments shown as due on such\nreturns.  Except for audits of  HEALTHSOUTH's  1992 and 1993 federal  income tax\nreturns and  certain  state and local tax audits not  material  to  HEALTHSOUTH,\nneither  HEALTHSOUTH nor any HEALTHSOUTH  Subsidiary or HEALTHSOUTH Other Entity\nhas been  notified  that  any tax  returns  of  HEALTHSOUTH  or any  HEALTHSOUTH\nSubsidiary or HEALTHSOUTH Other Entity are currently under audit by the Internal\nRevenue  Service or any state or local tax agency.  No agreements have been made\nby  HEALTHSOUTH  for the  extension  of time or the  waiver  of the  statute  of\nlimitations for the assessment or payment of any federal, state or local taxes.\n\n         5.12 Accounts  Receivable.  (a) Since the date of the HEALTHSOUTH 10-K,\nHEALTHSOUTH  has not changed any material  principle or practice with respect to\nthe recordation of accounts  receivable or the calculation of reserves therefor,\nor  any  material  collection,   discount  or  write-off  policy  or  procedure.\nHEALTHSOUTH  (including  the  HEALTHSOUTH  Subsidiaries  and  HEALTHSOUTH  Other\nEntities) is in  compliance  with the terms and  conditions  of all  third-party\npayor  arrangements  relating to its accounts  receivable,  except to the extent\nthat such noncompliance would not have a material adverse effect on HEALTHSOUTH.\n\n         (b)  Without  limiting  the  generality  of  the  foregoing,   each  of\nHEALTHSOUTH and the HEALTHSOUTH  Subsidiaries and the HEALTHSOUTH Other Entities\nis in compliance with all Medicare and Medicaid provider  agreements to which it\nis a party,  except  to the  extent  that  such  noncompliance  would not have a\nmaterial adverse effect on HEALTHSOUTH.\n\n         5.13  Employee  Benefit  Plans;   Employment  Matters.  (a)  Except  as\ndescribed in the HEALTHSOUTH Documents,  HEALTHSOUTH has neither established nor\nmaintains  nor is  obligated  to make  contributions  to or under  or  otherwise\nparticipate  in (a) any  bonus or other  type of  incentive  compensation  plan,\nprogram, agreement, policy, commitment,  contract or arrangement (whether or not\nset forth in a written document), (b) any pension, profit-sharing, retirement or\nother plan, program or arrangement, or (c) any other employee benefit plan, fund\nor program,  including,  but not limited to, those  described in Section 3(3) of\nERISA. All such plans (individually,  a \"HEALTHSOUTH Plan\" and collectively, the\n\"HEALTHSOUTH  Plans\") have been operated and administered in accordance with, as\napplicable,  ERISA, the Internal Revenue Code of 1986, as amended,  Title VII of\nthe Civil Rights Act of 1964, as amended, the Equal Pay Act of 1967, as amended,\nthe Age  Discrimination  in Employment Act of 1967, as amended,  and the related\nrules and  regulations  adopted by those federal  agencies  responsible  for the\nadministration  of  such  laws.  No act or  failure  to act by  HEALTHSOUTH  has\nresulted in a \"prohibited transaction\" (as defined in ERISA) with respect to the\nHEALTHSOUTH Plans that is not subject to a statutory or regulatory exception. \n\n                                     - 19 -\n\n\nNo \"reportable  event\" (as defined in ERISA) has occurred with respect to any of\nthe HEALTHSOUTH Plans which is subject to Title IV of ERISA. Except with respect\nto  certain  employees  at  its  Toms  River,  New  Jersey  inpatient  facility,\nHEALTHSOUTH  has  not  previously  made,  is not  currently  making,  and is not\nobligated  in any way to make,  any  contributions  to any  multi-employer  plan\nwithin the meaning of the Multi-Employer Pension Plan Amendments Act of 1980.\n\n         (b) Except as described in the  HEALTHSOUTH  Documents,  HEALTHSOUTH is\nnot a party  to any  oral or  written  union,  guild  or  collective  bargaining\nagreement which agreement covers employees in the United States (nor is it aware\nof any union organizing  activity currently being conducted in respect to any of\nits employees), other than a collective bargaining agreement covering certain of\nits employees at its Toms River, New Jersey inpatient facility.\n\n         5.14  Compliance  with  Laws in  General.  Except as  disclosed  in the\nHEALTHSOUTH Documents, HEALTHSOUTH has not received any notices of violations of\nany federal,  state and local laws,  regulations and ordinances  relating to its\nbusiness and operations,  including, without limitation, the Occupational Safety\nand Health Act, the Americans with  Disabilities Act, the Medicare or applicable\nMedicaid statutes and regulations and any  Environmental  Laws, which violation,\nif established, would have a material effect on HEALTHSOUTH.\n\n         5.15  Licenses,  Accreditation  and  Regulatory  Approvals.  Except  as\ndisclosed  in  the  HEALTHSOUTH  Documents,   HEALTHSOUTH  and  the  HEALTHSOUTH\nSubsidiaries  and  HEALTHSOUTH  Other  Entities  hold  all  licenses,   permits,\ncertificates  of need and other  regulatory  approvals which are required by law\nwith  respect  to  their  businesses,  operations  and  facilities  as they  are\ncurrently  or  presently  conducted  or  operated,  except  where the failure to\npossess such licenses  would not have a material  adverse  effect on HEALTHSOUTH\n(collectively,  the  \"HEALTHSOUTH  Licenses\").  Except  with  respect  to  those\nHEALTHSOUTH   Licenses  for  which  renewal  applications  have  been  filed  by\nHEALTHSOUTH, the HEALTHSOUTH Subisidiaries or the HEALTHSOUTH Other Entities and\nwhich are being  processed by the applicable  regulatory  authorities,  all such\nHEALTHSOUTH  Licenses  are in full  force  and  effect,  and  HEALTHSOUTH  is in\nsubstantial  compliance with all conditions and  requirements of the HEALTHSOUTH\nLicenses and with all rules and regulations relating thereto.  HEALTHSOUTH,  the\nHEALTHSOUTH  Subsidiaries and the HEALTHSOUTH  Other Entities are, to the extent\napplicable  to their  operations,  (i) eligible to receive  payment under Titles\nXVIII and XIX of the Social Security Act, (ii) providers under existing provider\nagreements with the Medicare program through the applicable  intermediaries  and\n(iii) in  substantial  compliance  with the conditions of  participation  in the\nMedicare  program  except for such matters as would not have a material  adverse\neffect on HEALTHSOUTH. Except to the extent that the failure to timely make such\nfilings would not have a material  adverse effect on  HEALTHSOUTH,  HEALTHSOUTH,\nthe  HEALTHSOUTH  Subsidiaries  and the  HEALTHSOUTH  Other Entities have timely\nfiled all requisite  claims and other reports required to be filed in connection\nwith the Medicare,  Medicaid and other  governmental  health  programs due on or\nbefore the date hereof,  all of which were, when filed,  complete and correct in\nall material respects.  There are no current claims, actions or appeals pending,\nand neither  HEALTHSOUTH  nor the HEALTHSOUTH  Subsidiaries  nor the HEALTHSOUTH\nOther  Entities  have  filed any claims or reports  which  would  result in such\nclaims, actions or appeals, before any commission,  board or agency,  including,\nwithout  limitation,  any  \n\n                                     - 20 -\n\n\nintermediary  or  carrier,  the  Provider  Reimbursement  Review  Board  or  the\nAdministrator  of the Health Care Financing  Administration  with respect to any\nMedicare  claims,  or any  disallowances in connection with any audit of claims,\nwhich  would  have  a  material  adverse  effect  on  HEALTHSOUTH.  The  amounts\nestablished  as  provisions  for  adjustments  by  Medicare,  Medicaid and other\nthird-party payors set forth in the HEALTHSOUTH  Balance Sheet are sufficient to\npay any  amounts  for  which  HEALTHSOUTH  believes  it will be  liable.  To the\nknowledge of HEALTHSOUTH,  neither HEALTHSOUTH nor the HEALTHSOUTH  Subsidiaries\nnor the HEALTHSOUTH Other Entities nor their respective employees have committed\na violation  of the  Medicare and  Medicaid  fraud and abuse  provisions  of the\nSocial Security Act or any similar provisions of any federal, state or local law\nrelating to  referrals  or billings  for  healthcare  services.  Except for such\nlitigation as would not, if resolved adversely to HEALTHSOUTH or any HEALTHSOUTH\nSubsidiary  or  HEALTHSOUTH  Other  Entity,  have a material  adverse  effect on\nHEALTHSOUTH,  any and all past litigation  concerning such HEALTHSOUTH Licenses,\nand  all  claims  and  causes  of  action  raised  therein,  have  been  finally\nadjudicated or settled. No such License has been revoked, conditioned (except as\nmay  be  customary)  or  restricted,   and  no  action   (equitable,   legal  or\nadministrative), arbitration or other process is pending, or to the knowledge of\nHEALTHSOUTH,  threatened,  which in any way challenges the validity of, or seeks\nto revoke,  condition or restrict any such License.  Subject to compliance  with\napplicable  securities laws, the HSR Act, and state or local statutes,  rules or\nregulations requiring notice, approval, or other action upon the occurrence of a\nchange in control of Horizon\/CMS or any of the  Horizon\/CMS  Subsidiaries or any\nof the  Horizon\/CMS  Other  Entities,  the  consummation  of the Merger will not\nviolate  any law or  regulation  to  which  HEALTHSOUTH  is  subject  which,  if\nviolated, would have a material adverse effect on HEALTHSOUTH.\n\n\nSection 6.        ACCESS TO INFORMATION AND DOCUMENTS.\n\n         6.1 Access to  Information.  Between  the date  hereof and the  Closing\nDate, each of Horizon\/CMS  and HEALTHSOUTH  will give to the other party and its\ncounsel, accountants and other representatives full access to all the personnel,\nproperties,  documents,  contracts,  personnel  files and other  records of such\nparty and shall  furnish the other party with copies of such  documents and with\nsuch  information  with  respect to the affairs of such party as the other party\nmay from time to time  reasonably  request.  Each party will  disclose  and make\navailable  to the other  party and its  representatives  all  books,  contracts,\naccounts, personnel records, letters of intent, papers, records,  communications\nwith regulatory  authorities  and other  documents  relating to the business and\noperations  of such party.  In  addition,  Horizon\/CMS  shall make  available to\nHEALTHSOUTH all such banking,  investment and financial  information as shall be\nnecessary  to  allow  for the  efficient  integration  of  Horizon\/CMS  banking,\ninvestment and financial arrangements with those of HEALTHSOUTH at the Effective\nTime.\n\n         6.2 Return of Records. If the transactions  contemplated hereby are not\nconsummated  and this Plan of Merger  terminates,  each party agrees to promptly\nreturn all  documents,  contracts,  records or properties of the other party and\nall copies  thereof  furnished  pursuant  to this  Section 6 or  otherwise.  All\ninformation  disclosed by any party or any  affiliate or  representative  of any\nparty shall \n\n                                     - 21 -\n\n\nbe   deemed   to  be   \"Confidential   Information\"   under  the  terms  of  the\nConfidentiality  Agreement  dated  January 27,  1997,  between  Horizon\/CMS  and\nHEALTHSOUTH, (the \"Confidentiality Agreement\").\n\n         6.3 Effect of Access.  (a) Nothing contained in this Section 6 shall be\ndeemed  to create  any duty or  responsibility  on the part of  either  party to\ninvestigate or evaluate the value,  validity or  enforceability of any contract,\nlease or other asset included in the assets of the other party.\n\n         (b) With  respect  to  matters  as to which any party has made  express\nrepresentations  or  warranties  herein,  the other  party or  parties  shall be\nentitled to rely upon such express  representations and warranties  irrespective\nof any investigations  made by such party or parties,  except to the extent that\nsuch  investigations  result in actual knowledge by such party or parties of the\ninaccuracy or falsehood of particular representations and warranties.\n\n\nSection 7.        COVENANTS.\n\n         7.1  Preservation of Business.  Horizon\/CMS  will use its  commercially\nreasonable efforts to preserve the business  organization of Horizon\/CMS intact,\nto keep available to HEALTHSOUTH  and the Surviving  Corporation the services of\nthe present key employees of  Horizon\/CMS,  and to preserve for  HEALTHSOUTH and\nthe Surviving  Corporation  the goodwill of the suppliers,  customers and others\nhaving business relations with Horizon\/CMS.\n\n         7.2 Material  Transactions.  From the date hereof  until the  Effective\nTime, Horizon\/CMS will not (other than as required pursuant to the terms of this\nPlan of Merger and the  related  documents,  and other than with  respect to (i)\ntransactions  for which binding  commitments have been entered into prior to the\ndate hereof which are  described on Exhibit 7.2 to the  Disclosure  Schedule and\n(ii) such  other  matters as are  described  on  Exhibit  7.2 to the  Disclosure\nSchedule), without first obtaining the written consent of HEALTHSOUTH,  take any\naction of a character described in Sections 3.11(ii) to 3.11(xi), inclusive.\n\n         7.3  Meeting of  Horizon\/CMS  Stockholders.  Horizon\/CMS  will take all\nsteps necessary in accordance with its Certificate of  Incorporation  and Bylaws\nto call,  give notice of,  convene and hold a meeting of its  stockholders  (the\n\"Special  Meeting\")  as soon  as  practicable  after  the  effectiveness  of the\nRegistration  Statement  (as defined in Section 7.4 hereof),  for the purpose of\nconsidering  the  approval  of this Plan of Merger  and the  Merger and for such\nother  purposes as may be necessary.  Unless this Plan of Merger shall have been\nvalidly  terminated as provided  herein,  the Board of Directors of  Horizon\/CMS\n(subject to the  provisions  of Section  8.1(d)  hereof)  will (i)  recommend to\nHorizon\/CMS  stockholders the approval of this Plan of Merger,  the transactions\ncontemplated hereby and any other matters to be submitted to the stockholders in\nconnection therewith, to the extent that such approval is required by applicable\nlaw in order to  consummate  the  Merger,  and (ii) use  reasonable,  good faith\nefforts to obtain the  approval  by  Horizon\/CMS'  stockholders  of this Plan of\nMerger and the transactions contemplated hereby.\n\n         7.4 Registration Statement. (a) HEALTHSOUTH shall prepare and file with\nthe  SEC and any  other  applicable  regulatory  bodies,  as soon as  reasonably\npracticable,  a Registration\n\n                                     - 22 -\n\n\nStatement on Form S-4 with respect to the shares of HEALTHSOUTH  Common Stock to\nbe issued in the  Merger  (the  \"Registration  Statement\"),  and will  otherwise\nproceed  promptly to satisfy the requirements of the Securities Act of 1933 (the\n\"Securities Act\"),  including Rule 145 thereunder.  Such Registration  Statement\nshall  contain  a  proxy  statement  of  Horizon\/CMS  (the  \"Proxy   Statement\")\ncontaining the information  required by the Securities Exchange Act of 1934 (the\n\"Exchange  Act\").  HEALTHSOUTH  shall  take all  reasonable  steps to cause  the\nRegistration   Statement  to  be  declared   effective   and  to  maintain  such\neffectiveness  until all of the shares  covered  thereby have been  distributed.\nHEALTHSOUTH shall promptly amend or supplement the Registration Statement to the\nextent  necessary in order to make the  statements  therein not misleading or to\ncorrect any misstatements  which have become false or misleading.  HEALTH- SOUTH\nshall  provide  Horizon\/CMS  with  copies of all filings  made  pursuant to this\nSection 7.4 and shall consult with Horizon\/CMS on responses to any comments made\nby the Staff of the SEC with respect thereto.\n\n         (b) The  information  specifically  designated  as  being  supplied  by\nHorizon\/CMS for inclusion in the  Registration  Statement shall not, at the time\nthe Registration  Statement is declared effective,  contain any untrue statement\nof a material  fact or omit to state any  material  fact  required  to be stated\ntherein or necessary in order to make the statements therein not misleading. The\ninformation  specifically  designated  as  being  supplied  by  Horizon\/CMS  for\ninclusion in the Proxy  Statement shall not, at the date the Proxy Statement (or\nany  amendment  thereof or  supplement  thereto)  is first  mailed to holders of\nHorizon\/CMS  Common  Stock,  contain any untrue  statement of a material fact or\nomit to state any material  fact  required to be stated  therein or necessary in\norder to make the statements  therein,  in the light of the circumstances  under\nwhich they are made, not misleading.  If at any time prior to the Effective Time\nany event or circumstance relating to Horizon\/CMS, or its officers or directors,\nshould be  discovered  by  Horizon\/CMS  that is required,  under the  applicable\nprovisions of the Securities Act or Exchange Act or the rules and regulations of\nthe SEC thereunder to be set forth in an amendment to the Registration Statement\nor a supplement to the Proxy  Statement,  Horizon\/CMS  shall  promptly so inform\nHEALTHSOUTH.  All documents,  if any, that Horizon\/CMS is responsible for filing\nwith the SEC in connection with the transactions contemplated herein will comply\nas  to  form  and  substance  in  all  material  respects  with  the  applicable\nrequirements of the Securities Act and the rules and regulations  thereunder and\nthe Exchange Act and the rules and regulations thereunder.\n\n         (c) The  information  specifically  designated  as  being  supplied  by\nHEALTHSOUTH for inclusion in the  Registration  Statement shall not, at the time\nthe Registration  Statement is declared effective,  contain any untrue statement\nof a material  fact or omit to state any  material  fact  required  to be stated\ntherein or necessary in order to make the statements therein not misleading. The\ninformation  specifically  designated  as  being  supplied  by  HEALTHSOUTH  for\ninclusion in the Proxy Statement to be sent to the holders of Horizon\/CMS Common\nStock in  connection  with the Special  Meeting shall not, at the date the Proxy\nStatement  (or any amendment  thereof or supplement  thereto) is first mailed to\nholders of Horizon\/CMS Common Stock,  contain any untrue statement of a material\nfact or omit to state  any  material  fact  required  to be  stated  therein  or\nnecessary  in  order  to  make  the  statements  therein,  in the  light  of the\ncircumstances under which they are made, not misleading. If at any time prior to\nthe Effective  Time any event or  circumstance  relating to  HEALTHSOUTH  or its\nofficers or directors,  should be discovered  by  HEALTHSOUTH  that is required,\nunder the  applicable  provisions of the  Securities  Act or Exchange Act or the\nrules and regulations of the SEC\n\n                                     - 23 -\n\n\nthereunder  to be set forth in an amendment to the  Registration  Statement or a\nsupplement to the Proxy Statement, HEALTHSOUTH shall promptly inform Horizon\/CMS\nand shall  promptly  file such  amendment  to the  Registration  Statement.  All\ndocuments that  HEALTHSOUTH is responsible for filing with the SEC in connection\nwith the transactions  contemplated  herein will comply as to form and substance\nin all material respects with the applicable  requirements of the Securities Act\nand the rules and regulations  thereunder and the Exchange Act and the rules and\nregulations thereunder.\n\n         (d) Prior to the Closing Date,  HEALTHSOUTH  shall use its  reasonable,\ngood faith efforts to cause the shares of HEALTHSOUTH  Common Stock to be issued\npursuant  to the  Merger to be  registered  or  qualified  under all  applicable\nsecurities or Blue Sky laws of each of the states and  territories of the United\nStates,  and to take any other  actions  which may be  necessary  to enable  the\nCommon Stock to be issued  pursuant to the Merger to be distributed in each such\njurisdiction.\n\n         (e) Prior to the Closing  Date,  HEALTHSOUTH  shall file an  additional\nlisting  application (the \"Listing  Application\")  with the Exchange relating to\nthe  shares of  HEALTHSOUTH  Common  Stock to be issued in  connection  with the\nMerger, and shall use its reasonable, good faith efforts to cause such shares of\nHEALTHSOUTH  Common  Stock to be  approved  for  listing on the  Exchange,  upon\nofficial notice of issuance, prior to the Closing Date.\n\n         (f)  Horizon\/CMS  shall furnish all  information  to  HEALTHSOUTH  with\nrespect to Horizon\/CMS and the Horizon\/CMS  Subsidiaries  and Horizon\/CMS  Other\nEntities as HEALTHSOUTH may reasonably request for inclusion in the Registration\nStatement, the Proxy Statement and the Listing Application,  and shall otherwise\ncooperate with HEALTHSOUTH in the preparation and filing of such documents.\n\n         7.5 Exemption from State Takeover Laws; Horizon\/CMS Rights. Horizon\/CMS\nshall take all  reasonable  steps  necessary  to (a) exempt the Merger  from the\nrequirements  of any state  takeover  statute or other  similar  state law which\nwould  prevent  or impede  the  consummation  of the  transactions  contemplated\nhereby, by action of Horizon\/CMS's  Board of Directors or otherwise,  and (b) to\nredeem the outstanding preferred share purchase rights (\"Rights\") of Horizon\/CMS\nor  otherwise  cause the Merger to be a  transaction  which does not trigger the\ndetachment and  distribution of the Rights  (otherwise than by issuing shares of\nHorizon\/CMS Common Stock or preferred stock in exchange for the Rights).\n\n         7.6 HSR Act Compliance. HEALTHSOUTH and Horizon\/CMS shall promptly make\ntheir respective filings, and shall thereafter use their reasonable,  good faith\nefforts  to  promptly  make any  required  submissions,  under  the HSR Act with\nrespect to the Merger and the transactions contemplated hereby.  HEALTHSOUTH and\nHorizon\/CMS will use their respective  reasonable,  good faith efforts to obtain\nall other permits, authorizations, consents and approvals from third parties and\ngovernmental authorities necessary to consummate the Merger and the transactions\ncontemplated hereby.\n\n         7.7 Public  Disclosures.  HEALTHSOUTH and Horizon\/CMS will consult with\neach other  before  issuing  any press  release or  otherwise  making any public\nstatement with respect to the transactions  contemplated by this Plan of Merger,\nand shall not issue any such press release or make\n\n                                     - 24 -\n\n\nany such public statement prior to such  consultation  except as may be required\nby applicable  law or  requirements  of the Exchange.  The parties shall issue a\njoint press release or simultaneous separate press releases, mutually acceptable\nto  HEALTHSOUTH  and  Horizon\/CMS,  promptly upon execution and delivery of this\nPlan of Merger.\n\n         7.8  Resignation of Horizon\/CMS  Directors.  On or prior to the Closing\nDate,   Horizon\/CMS  shall  deliver  to  HEALTHSOUTH  evidence  satisfactory  to\nHEALTHSOUTH  of  the   resignation  of  the  Directors  of   Horizon\/CMS,   such\nresignations to be effective on the Closing Date. At the Effective Time, Neal M.\nElliott shall be added to the HEALTHSOUTH Board of Directors.\n\n         7.9 Notice of  Subsequent  Events.  Each party  hereto shall notify the\nother parties of any changes, additions or events which would cause any material\nchange  in or  material  addition  to any  Exhibit  to the  Disclosure  Schedule\ndelivered by the notifying  party under this Plan of Merger,  promptly after the\noccurrence  of the  same.  If the  effect  of such  change  or  addition  would,\nindividually  or in the  aggregate  with the  effect  of  changes  or  additions\npreviously disclosed pursuant to this Section 7.9, constitute a material adverse\neffect on the notifying  party,  the  non-notifying  party may,  within ten days\nafter  receipt of such notice,  elect to terminate  this Plan of Merger.  If the\nnon-notifying party does not give written notice of such termination within such\n10-day period, the non-notifying party shall be deemed to have consented to such\nchange or addition and shall not be entitled to terminate this Plan of Merger by\nreason thereof.\n\n         7.10 No Solicitations. (a) Subject to the provisions of Section 7.10(b)\nbelow,  Horizon\/CMS  shall  not,  and shall not  suffer  any of the  Horizon\/CMS\nSubsidiaries  or the  Horizon\/CMS  Other  Entities  or any of  their  respective\ndirectors,  officers,  employees,  agents or  representatives  to,  directly  or\nindirectly (i) solicit or initiate (including by way of furnishing or publishing\nnonpublic  information) any inquiries or the making of any proposal with respect\nto any merger, consolidation or other business combination involving Horizon\/CMS\nor any Horizon\/CMS  Subsidiary or Horizon\/CMS Other Entity or the acquisition of\nall or any  significant  part of the  assets or  capital  stock or other  equity\ninterests of Horizon\/CMS  or any  Horizon\/CMS  Subsidiary or  Horizon\/CMS  Other\nEntity  or  any  similar  transaction  (an  \"Acquisition   Transaction\"),   (ii)\nnegotiate,  explore or otherwise  engage in discussions  with any persons (other\nthan  HEALTHSOUTH  and its  representatives)  with  respect  to any  Acquisition\nTransaction  or which may  reasonably  be expected to lead to a proposal  for an\nAcquisition  Transaction  or (iii)  enter  into any  agreement,  arrangement  or\nunderstanding  with respect to any such  Acquisition  Transaction or which would\nrequire  Horizon\/CMS  to abandon,  terminate or fail to consummate the Merger or\nany other transaction contemplated by this Agreement.  Except as may be required\nby the fiduciary  duties of  Horizon\/CMS's  Board of Directors under  applicable\nlaw,  Horizon\/CMS  agrees  that,  as of the  date  hereof,  Horizon\/CMS  and the\nHorizon\/CMS Subsidiaries and the Horizon\/CMS Other Entities and their respective\ndirectors,  officers,  employees,  agents and representatives  shall immediately\ncease  and  cause to be  terminated  any  existing  activities,  discussions  or\nnegotiations conducted heretofore with respect to any Acquisition Transaction.\n\n         (b)   Notwithstanding   the   provisions  of  Section   7.10(a)  above,\nHorizon\/CMS may (i), directly or indirectly,  furnish information and access, in\nresponse to an  unsolicited  written  proposal  for a Superior  Transaction  (as\ndefined below), to the same extent permitted by Section 6.1, to any\n\n                                     - 25 -\n\n\ncorporation,  partnership,  person or other  entity or group  (in each  case,  a\n\"person\"),   pursuant  to  appropriate   confidentiality   agreements,  and  may\nparticipate in discussions  and negotiate  with such  corporation,  partnership,\nperson  or  other  entity  or  group  concerning  any  proposal  for a  Superior\nTransaction,  if the Board of Directors of  Horizon\/CMS  determines  in its good\nfaith judgment in the exercise of its fiduciary duties,  after consultation with\nlegal counsel and its financial  advisors,  that such action is  appropriate  in\nfurtherance of the best interest of its  stockholders  and (ii) comply with Rule\n14e-2  promulgated  under  the  Exchange  Act  with  regard  to  an  Acquisition\nTransaction.  Horizon\/CMS shall promptly advise  HEALTHSOUTH of the existence of\nany inquiries or proposals  received by, any requests for such information from,\nor any negotiations or discussions  initiated or continued with,  Horizon\/CMS or\nany of the Horizon\/CMS  Subsidiaries or the Horizon\/CMS Other Entities or any of\ntheir respective directors,  officers, employees, agents or representatives,  in\neach case from or by a person (other than  HEALTHSOUTH and its  representatives)\nwith respect to an Acquisition  Transaction and the identity of such person and,\nexcept  as may  otherwise  be  required  pursuant  to the  fiduciary  duties  of\nHorizon\/CMS's  Board of Directors under  applicable law, the terms, the proposed\nform of  consideration  and the general  terms of any financing  arrangement  or\ncommitment in connection with such Acquisition Transaction.  As used herein, the\nterm \"Superior Proposal\" means a bona fide, written and unsolicited  proposal or\noffer made by any person (other than HEALTHSOUTH) with respect to an Acquisition\nTransaction on terms which the Board of Directors of  Horizon\/CMS  determines in\ngood faith, and in the exercise of reasonable judgment (based upon the advice of\nindependent  financial  advisors  and legal  counsel),  to be more  favorable to\nHorizon\/CMS and its stockholders  than the Merger (including taking into account\nthe consideration to be provided and any financing thereof).\n\n         7.11 Other  Actions.  Subject to the provisions of Section 7.10 hereof,\nnone  of  Horizon\/CMS,   HEALTHSOUTH  and  the  Subsidiary  shall  knowingly  or\nintentionally  take any action,  or omit to take any  action,  if such action or\nomission  would,  or  reasonably  might be  expected  to,  result  in any of its\nrepresentations  and warranties set forth herein being or becoming untrue in any\nmaterial  respect,  or in any of the  conditions to the Merger set forth in this\nPlan of Merger  not being  satisfied,  or (unless  such  action is  required  by\napplicable  law)  which  would  materially   adversely  affect  the  ability  of\nHorizon\/CMS or HEALTHSOUTH to obtain any consents or approvals  required for the\nconsummation  of the Merger  without  imposition  of a condition or  restriction\nwhich would have a material adverse effect on the Surviving Corporation or which\nwould otherwise  materially  impair the ability of Horizon\/CMS or HEALTHSOUTH to\nconsummate  the  Merger in  accordance  with the terms of this Plan of Merger or\nmaterially delay such consummation.\n\n         7.12 Accounting  Methods.  Neither  HEALTHSOUTH  nor Horizon\/CMS  shall\nchange, in any material respect, its methods of accounting in effect at its most\nrecent  fiscal year end,  except as required  by changes in  generally  accepted\naccounting principles as concurred in such parties' independent accountants.\n\n         7.13  Tax-Free  Reorganization   Treatment.   Neither  HEALTHSOUTH  nor\nHorizon\/CMS shall take or cause to be taken any action, whether on or before the\nEffective Time, which would disqualify the Merger as a  \"reorganization\"  within\nthe meaning of Section 368(a) of the Internal  Revenue Code of 1986, as amended,\nwhich  action is taken  with the  intention  of  disqualifying  the  Merger as a\nreorganization.\n\n\n                                     - 26 -\n\n\n         7.14 Affiliate  Agreements.  Horizon\/CMS will use its reasonable,  good\nfaith efforts to cause each of its Directors and executive  officers and each of\nits  \"affiliates\"  (within the meaning of Rule 145 under the  Securities  Act of\n1933, as amended) to execute and deliver to  HEALTHSOUTH  as soon as practicable\nan  agreement  in the form  attached  hereto as  Exhibit  7.14  relating  to the\ndisposition  of shares of  Horizon\/CMS  Common  Stock and shares of  HEALTHSOUTH\nCommon  Stock held by such  person and the shares of  HEALTHSOUTH  Common  Stock\nissuable pursuant to this Plan of Merger.\n\n         7.15 Cooperation.  (a) HEALTHSOUTH and Horizon\/CMS  shall together,  or\npursuant  to an  allocation  of  responsibility  agreed  to  between  them,  (i)\ncooperate with one another in determining whether any filings are required to be\nmade or consents  are required to be obtained in any  jurisdiction  prior to the\nEffective  Time  in  connection  with  the   consummation  of  the  transactions\ncontemplated  hereby and in making any such  filings  promptly and in seeking to\nobtain timely any such consents, (ii) use all commercially reasonable efforts to\ncause to be lifted any injunction  prohibiting the Merger,  or any part thereof,\nor the other transactions  contemplated hereby, and (iii) furnish to one another\nand to one another's  counsel all such  information as may be required to effect\nthe foregoing actions.\n\n         (b) Subject to the terms and  conditions  herein  provided,  and unless\nthis Plan of Merger shall have been validly terminated as provided herein,  each\nof HEALTHSOUTH and Horizon\/CMS shall use all commercially reasonable efforts (i)\nto take, or cause to be taken, all actions necessary to comply promptly with all\nlegal  requirements  which may be imposed on such party (or any  subsidiaries or\naffiliates  of such party) with respect to this Plan of Merger and to consummate\nthe  transactions  contemplated  hereby,  subject  to the vote of  Horizon\/CMS's\nstockholders  described  above,  and (ii) to obtain (and to  cooperate  with the\nother party to obtain) any consent, authorization,  order or approval of, or any\nexemption by, any governmental entity or any other public or private third party\nwhich is required to be  obtained  by such party or any of its  subsidiaries  or\naffiliates  in  connection  with  this  Plan  of  Merger  and  the  transactions\ncontemplated hereby. Each of HEALTHSOUTH and Horizon\/CMS will promptly cooperate\nwith and furnish  information  to the other in  connection  with any such burden\nsuffered  by,  or  requirement  imposed  upon,  either  of them or any of  their\nsubsidiaries or affiliates in connection with the foregoing.\n\n         7.16 Horizon\/CMS  Stock Options,  Warrants and Convertible  Securities.\n(a) As soon as reasonably  practicable  after the Effective  Time of the Merger,\nHEALTHSOUTH  shall deliver to the holders of Horizon\/CMS  stock options  (which,\nfor purposes of this Section 7.16,  includes any rights to purchase  Horizon\/CMS\nCommon Stock  pursuant to  Horizon\/CMS's  1996 Employee  Stock  Purchase  Plan),\nwarrants and  convertible  securities  appropriate  notices  setting  forth such\nholders' rights pursuant to any stock option plans under which such  Horizon\/CMS\nstock options were issued,  any stock option  agreements  or warrant  agreements\nevidencing  such  options  or  warrants  and  any  instruments   governing  such\nconvertible  securities,  which  shall  continue in full force and effect on the\nsame terms and  conditions  (subject  to the  adjustments  required  by Sections\n2.1(d) or this Section 7.16 after giving effect to the Merger and the assumption\nof such options, warrants and convertible securities by HEALTHSOUTH as set forth\nherein) as in effect immediately prior to the Effective Time.  HEALTHSOUTH shall\ncomply with the terms of the stock option  plans,  the stock option  agreements,\nthe warrant agreements and the instruments governing such convertible securities\nas so\n\n                                     - 27 -\n\n\nadjusted,  and shall use its  reasonable,  good faith efforts to ensure,  to the\nextent  required by, and subject to the provisions of, such plans or agreements,\nthat the  Horizon\/CMS  stock options which  qualified as incentive stock options\nprior to the Effective Time shall continue to qualify as incentive stock options\nafter the Effective Time.\n\n         (b) HEALTHSOUTH  shall take all corporate  action  necessary to reserve\nfor  issuance a  sufficient  number of shares of  HEALTHSOUTH  Common  Stock for\ndelivery  upon  exercise  of the  Horizon\/CMS  stock  options and  warrants  and\nconversion of convertible  securities  assumed by HEALTHSOUTH in accordance with\nSection 2.1(d).  As soon as practicable  after the Effective  Time,  HEALTHSOUTH\nshall file with the SEC a  registration  statement  on Form S-8 with  respect to\nshares of HEALTHSOUTH Common Stock subject to such Horizon\/CMS stock options and\nshall use its best efforts to maintain the  effectiveness  of such  registration\nstatement  (and to maintain the current  status of the  prospectus or prospectus\ncontained  therein) for so long as such  Horizon\/CMS  stock options and warrants\nremain  outstanding.  HEALTHSOUTH shall administer the plans assumed pursuant to\nSection  2.1(d)  hereof in a manner that  complies  with Rule 16b-3  promulgated\nunder the Exchange Act to the extent the applicable plan complied with such rule\nprior to the Merger.\n\n         (c)  Except  to the  extent  otherwise  agreed to by the  parties,  all\nrestrictions  or limitations on transfer with respect to the  Horizon\/CMS  stock\noptions awarded under any plan, program, or arrangement of Horizon\/CMS or any of\nits subsidiaries,  to the extent that such restrictions or limitations shall not\nhave already lapsed,  shall remain in full force and effect with respect to such\noptions after giving effect to the Merger and the  assumption by  HEALTHSOUTH as\nset forth above.\n\n         7.17 Certain  Operations of Horizon\/CMS.  HEALTHSOUTH  hereby covenants\nand agrees  that,  from and for a period of at least one year after the  Closing\nDate,  the  following  existing  operating  divisions  of  Horizon\/CMS  shall be\noperated and managed by the Surviving  Corporation  at or through  Horizon\/CMS's\nexisting  corporate  offices and,  subject to the  provisions of any  applicable\nemployment  agreements and to such  standards of performance as are  customarily\nimposed by  HEALTHSOUTH  on its  managerial  employees,  existing  management in\nAlbuquerque,  New  Mexico  and their  current  divisional  operating  locations,\nsubject  to  reasonable  restraints  on  managerial  overhead:   Long-Term  Care\nDivision,  Specialty Hospital Division, Meridian Healthcare Management Division,\nContract  Rehab  Therapy   Division,   Horizon  Medical   Management   Division,\nInstitutional Pharmacy Division, Diagnostic Group\/Clinical Lab Division, Medical\nSpecialty Services Division,  Medical Innovations  Division,  Physician Services\nDivision,   Horizon  Facilities   Management   Division  and  the  Cimarron  HMO\ninvestment.  Moreover, HEALTHSOUTH covenants and agrees that, from and after the\nClosing  Date,  (i) it shall cause the  Surviving  Corporation  to complete  the\ndevelopment and  construction of  Horizon\/CMS's  corporate  headquarters  office\nbuilding  project  currently under  development and construction in Albuquerque,\nNew Mexico (the \"Alameda Project\"), and to take occupancy of the Alameda Project\nat such time as it is  available  for  occupancy  and (ii) the  operation of the\naircraft   currently  under  contract  with  Horizon\/CMS  shall  be  managed  by\nHorizon\/CMS's existing management in Albuquerque, New Mexico.\n\n         7.18 Horizon\/CMS  Employees.  HEALTHSOUTH shall retain all employees of\nHorizon\/CMS who are employed at the Effective Time as employees-at-will  (except\nto the extent that\n\n                                     - 28 -\n\n\nsuch employees are parties to contracts providing for other employment terms, in\nwhich case such employees shall be retained in accordance with the terms of such\ncontracts) and shall provide such  employees  with the same  customary  employee\nbenefits as HEALTHSOUTH provides its existing employees, except as may otherwise\nbe agreed between HEALTHSOUTH and Horizon\/CMS.\n\n         7.19 Certain Information.  For as long as any affiliate (as defined for\npurposes  of Rule 145 under the  Securities  Act of 1933) of  Horizon\/CMS  holds\nshares of HEALTHSOUTH Common Stock issued in the Merger (but not for a period in\nexcess of two years from the date of  consummation  of the Merger),  HEALTHSOUTH\nshall  file with the  Securities  and  Exchange  Commission  or  otherwise  make\npublicly  available all information about HEALTHSOUTH  required pursuant to Rule\n144(c) under the  Securities Act of 1933 to enable such affiliate to resell such\nshares under the provisions of Rule 145(d) under the Securities Act of 1933.\n\n         7.20  Indemnification.  (a) Horizon\/CMS  shall,  and from and after the\nEffective  Time  HEALTHSOUTH  and the Surviving  Corporation  shall,  indemnify,\ndefend and hold  harmless  each person who is now, or has been at any time prior\nto the date of this Plan of Merger or who becomes prior to the  Effective  Time,\nan officer,  director or employee of Horizon\/CMS or any of its subsidiaries (the\n\"Indemnified Parties\") against (i) all losses, claims, damages, costs, expenses,\nliabilities  or  judgments,  or  amounts  that are paid in  settlement  with the\napproval of the  indemnifying  party (which  approval shall not be  unreasonably\nwithheld) of, or in connection  with,  any claim,  action,  suit,  proceeding or\ninvestigation based in whole or in part on or arising in whole or in part out of\nthe  fact  that  such  person  is or was a  director,  officer  or  employee  of\nHorizon\/CMS  or  any of  its  subsidiaries,  whether  pertaining  to any  matter\nexisting  or  occurring  at or prior  to,  or at or after,  the  Effective  Time\n(\"Indemnified  Liabilities\") and (ii) all Indemnified Liabilities based in whole\nor in part on, or arising in whole or in part out of, or pertaining to this Plan\nof Merger, the Merger or any other transactions  contemplated hereby or thereby,\nin each case to the full extent a  corporation  is  permitted  under the DGCL to\nindemnify its own  directors,  officers and  employees,  as the case may be (and\nHEALTHSOUTH and the Surviving Corporation, as the case may be, will pay expenses\nin advance of the final  disposition  of any such action or  proceeding  to each\nIndemnified  Party to the full  extent  permitted  by law  upon  receipt  of any\nundertaking  contemplated by Section 145(e) of the DGCL).  Without  limiting the\nforegoing,   in  the  event  any  such  claim,  action,   suit,   proceeding  or\ninvestigation  is brought against any Indemnified  Party (whether arising before\nor after the Effective  Time),  (i) the  Indemnified  Parties may retain counsel\nsatisfactory  to them and Horizon\/CMS (or them and HEALTHSOUTH and the Surviving\nCorporation after the Effective Time), (ii) Horizon\/CMS (or after the Effective\nTime,  HEALTHSOUTH and the Surviving  Corporation) shall pay all reasonable fees\nand expenses of such counsel for the Indemnified  Parties promptly as statements\ntherefor  are  received  and (iii)  Horizon\/CMS  (or after the  Effective  Time,\nHEALTHSOUTH and the Surviving  Corporation)  will use all reasonable  efforts to\nassist  in the  vigorous  defense  of any such  matter,  provided  that  none of\nHorizon\/CMS,  HEALTHSOUTH or the Surviving  Corporation  shall be liable for any\nsettlement of any claim  effected  without its written  consent,  which consent,\nhowever,  shall not be unreasonably  withheld.  Any Indemnified Party wishing to\nclaim  indemnification under this Section 10.4, upon learning of any such claim,\naction, suit, proceeding or investigation, shall notify Horizon\/CMS, HEALTHSOUTH\nor the Surviving Corporation (but the failure so to notify an Indemnifying Party\nshall not  relieve it from any  liability  which it may have under this  Section\n10.4 except to the extent such failure prejudices such party), and shall deliver\nto  Horizon\/CMS  (or after \n\n                                     - 29 -\n\n\nthe Effective Time,  HEALTHSOUTH and the Surviving  Corporation) the undertaking\ncontemplated by Section 145(e) of the DGCL. The  Indemnified  Parties as a group\nmay retain  only one law firm to  represent  them with  respect  to such  matter\nunless there is, under applicable standards of professional  conduct, a conflict\non any  significant  issue between the positions of any two or more  Indemnified\nParties.\n\n         (b) HEALTHSOUTH  shall cause to be maintained in effect until six years\nfrom the  Effective  Time the  current  policies  of  directors'  and  officers'\nliability insurance  maintained by Horizon\/CMS (or substitute policies providing\nat least the same coverage and limits and conaining  terms and  conditions  that\nare not materially less  advantageous) with respect to claims arising from facts\nor events which occurred before the Effective Time; provided,  however,  that in\nno event shall  HEALTHSOUTH  or the Surviving  Corporation be required to expend\nmore than 200 percent of the current  annual  premiums paid by  Horizon\/CMS  for\nsuch  insurance;  provided,  further,  that,  if  HEALTHSOUTH  or the  Surviving\nCorporation is unable to obtain  insurance for any period for 200 percent of the\ncurrent annual  premiums,  then the obligation of HEALTHSOUTH  and the Surviving\nCorporation  pursuant  hereto  shall be to obtain the best  coverage  reasonably\navailable  under the  circumstances  subject  to the  foregoing  limitations  on\npremiums.\n\n         (c) The  provisions  of this  Section  7.20 are  intended to be for the\nbenefit of, and shall be enforceable by, each  Indemnified  Party and his or her\nheirs and representatives.\n\n         7.21 Certain Change in Control  Agreements.  HEALTHSOUTH  hereby agrees\nthat,  at the Closing,  it will  deliver to each of the officers of  Horizon\/CMS\nlisted in Exhibit 7.21 to the Disclosure Schedule a written acknowledgment that,\nat the Effective  Time,  both of the conditions set forth in the sections of the\nChange of Control  Agreements of such officers  specified in Exhibit 7.21 to the\nDisclosure  Schedule  shall  have been  fulfilled  and that,  if such  officer's\nemployment by the Surviving  Corporation  is  terminated by  HEALTHSOUTH  or the\nSurviving  Corporation or the officer within 18 months after the Effective Time,\nthe amounts  specified in the Change of Control  Agreements shall be paid by the\nSurviving Corporation to the officer in accordance with the terms thereof.\n\n         7.22 Assumption of Employment  Agreement.  At the Closing,  HEALTHSOUTH\nshall assume the  obligations of Horizon\/CMS  under that certain  Employment and\nChange of Control Agreement dated as of January 1, 1997, between Horizon\/CMS and\nNeal M. Elliott.\n\n\nSection 8.        TERMINATION, AMENDMENT AND WAIVER.\n\n         8.1  Termination.  This Plan of Merger  may be  terminated  at any time\nprior to the  Effective  Time,  whether  before  or after  approval  of  matters\npresented in connection  with the Merger by the holders of shares of Horizon\/CMS\nCommon Stock:\n\n                  (a)  by mutual written consent of HEALTHSOUTH and Horizon\/CMS;\n\n                  (b)  by either HEALTHSOUTH or Horizon\/CMS:\n\n\n                                     - 30 -\n\n\n                  (i) if, upon a vote at a duly held meeting of  stockholders or\n         any adjournment  thereof,  any required approval of this Plan of Merger\n         and the Merger by the  holders of shares of  Horizon\/CMS  Common  Stock\n         shall not have been obtained;\n\n                  (ii) if the  Merger  shall  not have  been  consummated  on or\n         before  December 31, 1997,  unless the failure to consummate the Merger\n         is the result of a willful and  material  breach of this Plan of Merger\n         by the  party  seeking  to  terminate  this Plan of  Merger;  provided,\n         however,  that the passage of such period  shall be tolled for any part\n         thereof (but not exceeding 60 days in the  aggregate)  during which any\n         party shall be subject to a nonfinal order, decree, ruling or action of\n         any court of competent  jurisdiction  or other  governmental  agency or\n         authority   restraining,   enjoining  or  otherwise   prohibiting   the\n         consummation  of the  Merger or the  calling or holding of a meeting of\n         stockholders;\n\n                  (iii)  if  any  court  of  competent   jurisdiction  or  other\n         governmental  agency or authority shall have issued an order, decree or\n         ruling or taken any other action permanently enjoining,  restraining or\n         otherwise  prohibiting  the Merger and such  order,  decree,  ruling or\n         other action shall have become final and nonappealable;\n\n                  (iv) in the  event  of a  breach  by the  other  party  of any\n         representation, warranty, covenant or other agreement contained in this\n         Plan of Merger  which (A) would give rise to the failure of a condition\n         set  forth in  Section  9.2(a)  or (b) or  Section  9.3(a)  or (b),  as\n         applicable,  and (B)  cannot  be or has not been  cured  within 30 days\n         after the  giving of  written  notice  to the  breaching  party of such\n         breach (a \"Material  Breach\")  (provided that the terminating  party is\n         not then in Material Breach of any representation,  warranty,  covenant\n         or other agreement contained in this Plan of Merger); or\n\n                  (v)      if either HEALTHSOUTH or Horizon\/CMS gives notice\n         of termination as a non-notifying party pursuant to Section 7.9;\n\n                  (c)  By  either  HEALTHSOUTH  or  Horizon\/CMS  if  any  of the\n         conditions  to the  obligation  of such  party to effect the Merger set\n         forth in  Section  9.1,  Section  9.2 (in the case of  HEALTHSOUTH)  or\n         Section  9.3 (in the  case of  Horizon\/CMS)  is not  capable  of  being\n         satisfied  prior  to the  end  of the  period  referred  to in  Section\n         8.1(b)(ii); or\n\n                  (d) By Horizon\/CMS,  if Horizon\/CMS's Board of Directors shall\n         have (i)  determined,  in the  exercise of its  fiduciary  duties under\n         applicable  law,  not  to  recommend  the  Merger  to  the  holders  of\n         Horizon\/CMS Common Stock or shall have withdrawn such recommendation or\n         (ii) approved,  recommended or endorsed any\n\n                                     - 31 -\n\n\n         Acquisition  Transaction  (as defined in Section  7.10) other than this\n         Plan of Merger or (iii) resolved to do any of the foregoing.\n\n         8.2 Effect of Termination.  In the event of termination of this Plan of\nMerger as provided in Section 8.1,  this Plan of Merger shall  forthwith  become\nvoid and have no effect,  without any liability or obligation on the part of any\nparty, other than the provisions of Sections 6.2, 8.2 and 8.6, and except to the\nextent that such  termination  results from the willful and material breach by a\nparty of any of its representations,  warranties,  covenants or other agreements\nset forth in this Plan of Merger.\n\n         8.3 Amendment. This Plan of Merger may be amended by the parties at any\ntime before or after any required  approval of matters  presented in  connection\nwith the Merger by the holders of shares of Horizon\/CMS Common Stock;  provided,\nhowever,  that,  after any such approval,  if any amendment  pursuant to Section\n251(d) of the DGCL requires  further approval by such  stockholders,  the Merger\nshall not be consummated without the further approval of such stockholders. This\nPlan of Merger may not be amended  except by an instrument in writing  signed on\nbehalf of each of the parties.\n\n         8.4 Extension;  Waiver.  At any time prior to the Effective Time of the\nMerger,  the parties may (a) extend the time for the  performance  of any of the\nobligations or other acts of the other parties,  (b) waive any  inaccuracies  in\nthe  representations  and warranties  contained in this Plan of Merger or in any\ndocument  delivered  pursuant  to this  Plan of Merger  or (c),  subject  to the\nproviso of Section 8.3, and except for the provisions of subsections (a) through\n(f) of Section 9.1,  waive  compliance  with any of the agreements or conditions\ncontained  in this Plan of Merger.  Any  agreement on the part of a party to any\nsuch  extension or waiver shall be valid only if set forth in an  instrument  in\nwriting signed on behalf of such party. The failure of any party to this Plan of\nMerger to assert any of its rights under this Plan of Merger or otherwise  shall\nnot constitute a waiver of such rights,  except as otherwise provided in Section\n7.9.\n\n         8.5  Procedure  for  Termination,  Amendment,  Extension  or Waiver.  A\ntermination of this Plan of Merger pursuant to Section 8.1, an amendment of this\nPlan of Merger  pursuant to Section 8.3, or an  extension or waiver  pursuant to\nSection 8.4 shall, in order to be effective, require in the case of HEALTHSOUTH,\nthe  Subsidiary  or  Horizon\/CMS,  action by its Board of  Directors or the duly\nauthorized designee of the Board of Directors.\n\n         8.6 Expenses;  Break-up  Fees.  (a) All costs and expenses  incurred in\nconnection  with this Plan of Merger and the  transactions  contemplated  hereby\nshall be paid by the party  incurring such expense,  except that expenses (other\nthan legal,  accounting and investment banking costs, which shall be paid by the\nparty  incurring such expenses,  subject to the provisions of Section  8.6(b)(i)\nbelow) incurred in connection with preparing,  filing,  printing and mailing the\nProxy  Statement  and the  Registration  Statement  shall be shared  equally  by\nHorizon\/CMS and HEALTHSOUTH.\n\n         (b) (i) If this Plan of Merger is terminated by Horizon\/CMS pursuant to\nSection 8.1(d), and within one year after the effective date of such termination\nHorizon\/CMS  is the subject of a Third Party  Acquisition  Event with any Person\n(as defined in Sections  3(a)(9) and 13(d)(3) of the Exchange\n\n\n                                     - 32 -\n\n\nAct) (other than a party  hereto),  then at the time of  consummation  of such a\nThird Party Acquisition  Event,  Horizon\/CMS shall pay to HEALTHSOUTH a break-up\nfee of  $35,000,000  in immediately  available  funds,  which fee represents the\nparties' best estimates of the  out-of-pocket  costs incurred by HEALTHSOUTH and\nthe value of management time, overhead,  opportunity costs and other unallocated\ncosts of HEALTHSOUTH  incurred by or on behalf of HEALTHSOUTH in connection with\nthis Plan of Merger,  and shall  further  pay,  or  reimburse  HEALTHSOUTH  for,\nExpenses (as defined below),  actually incurred by HEALTHSOUTH up to $5,000,000.\nHorizon\/CMS  shall not enter into any agreement  with respect to any Third Party\nAcquisition  Event which does not, as a condition  precedent to the consummation\nof such Third Party Acquisition Event, require such break-up fee and Expenses to\nbe paid to HEALTHSOUTH upon such consummation.\n\n                  (ii) As used herein,  the term \"Third Party Acquisition Event\"\nshall mean either of the following:\n\n                  (A)  Horizon\/CMS  shall  enter  into  any  agreement  for,  or\n         otherwise be the subject of, any Acquisition Transaction (as defined in\n         Section  7.10)  which  is  consummated   (regardless  of  whether  such\n         consummation  occurs  within the one-year  period  described in Section\n         8.6(b)(i)); or\n\n                  (B) any Person  (other than a party hereto or its  affiliates)\n         shall have  acquired  beneficial  ownership (as such term is defined in\n         Rule 13d-3 under the Exchange  Act) or the right to acquire  beneficial\n         ownership of, or a new group has been formed which beneficially owns or\n         has the right to acquire  beneficial  ownership  of, 30% or more of the\n         outstanding Horizon\/CMS Common Stock.\n\n                  (iii) As used herein,  the term  \"Expenses\"  shall include all\nreasonable out- of-pocket expenses  (including without limitation all reasonable\nfees and  expenses  of counsel,  accountants,  investment  bankers,  experts and\nconsultants)  incurred  by or on behalf of  HEALTHSOUTH  in  connection  with or\nrelated  to  the   authorization,   preparation,   negotiation,   execution  and\nperformance  of this Plan of  Merger,  the  preparation,  printing,  filing  and\nmailing of the  Registration  Statement and the Proxy  Statement,  and all other\nmatters related to the consummation of the transactions contemplated hereby.\n\n\n         (c)  Horizon\/CMS  acknowledges  that the  provisions for the payment of\nbreak-up fees and Expenses contained in this Section 8.6 are an integral part of\nthe  transactions  contemplated  by this Plan of Merger and that,  without these\nprovisions,  HEALTHSOUTH  would  not have  entered  into  this  Plan of  Merger.\nAccordingly,  if a break-up  fee and  Expenses  shall  become due and payable by\nHorizon\/CMS,  and Horizon\/CMS shall fail to pay such amount when due pursuant to\nthis  Section,  and, in order to obtain such  payment,  suit is commenced  which\nresults  in a  judgment  against  Horizon\/CMS  therefor,  Horizon\/CMS  shall pay\nHEALTHSOUTH reasonable costs and expenses (including reasonable attorneys' fees)\nin connection  with such suit,  together  with interest  computed on any amounts\ndetermined to be due pursuant to this Section (computed from the date upon which\nsuch  amounts  were due and  payable  pursuant to this  Section)  and such costs\n(computed from the date  incurred) at the prime rate of interest  announced from\ntime to time by NationsBank,  N.A. (South).\n\n                                     - 33 -\n\n\nThe  obligations  of  Horizon\/CMS  under  this  Section  8.6 shall  survive  any\ntermination of this Plan of Merger.\n\nSection 9.  CONDITIONS TO CLOSING.\n\n         9.1 Mutual  Conditions.  The  respective  obligations  of each party to\neffect the  Merger  shall be  subject  to the  satisfaction,  at or prior to the\nClosing Date of the following  conditions (any of which may be waived in writing\nby HEALTHSOUTH and Horizon\/CMS):\n\n                  (a) None of HEALTHSOUTH, the Subsidiary or Horizon\/CMS nor any\n         of their respective  subsidiaries shall be subject to any order, decree\n         or  injunction  by a court of competent  jurisdiction  or  governmental\n         agency or  authority  which  (i)  prevents  or  materially  delays  the\n         consummation of the Merger or (ii) would impose any material limitation\n         on the ability of  HEALTHSOUTH  effectively  to exercise full rights of\n         ownership  of the  Common  Stock of the  Surviving  Corporation  or any\n         material  portion  of  the  assets  or  business  of  Horizon\/CMS,  the\n         Horizon\/CMS Subsidiaries and the Horizon\/CMS Other Entities, taken as a\n         whole.\n\n                  (b) No statute,  rule or regulation shall have been enacted by\n         the government (or any governmental agency) of the United States or any\n         state,  municipality or other political  subdivision thereof that makes\n         the consummation of the Merger and any other  transaction  contemplated\n         hereby illegal.\n\n                  (c) Any waiting period (and any extension thereof)  applicable\n         to the  consummation of the Merger under the HSR Act shall have expired\n         or been terminated.\n\n                  (d)  The  Registration  Statement  shall  have  been  declared\n         effective and no stop order with respect to the Registration  Statement\n         shall be in effect.\n\n                  (e)  The  holders  of  Horizon\/CMS  Common  Stock  shall  have\n         approved  the  adoption  of this Plan of Merger  and any other  matters\n         submitted  to them in  accordance  with the  provisions  of Section 7.3\n         hereof.\n\n                  (f) The  shares of  HEALTHSOUTH  Common  Stock to be issued in\n         connection  with the Merger shall have been approved for listing on the\n         Exchange.\n\n                  (g)  HEALTHSOUTH  and the Subsidiary  shall have obtained,  or\n         obtained the transfer of, any Licenses necessary to allow the Surviving\n         Corporation to operate the Horizon\/CMS  facilities,  unless the failure\n         to obtain such transfer or approval  would not have a material  adverse\n         effect on the Surviving Corporation.\n\n                  (h)  HEALTHSOUTH  and the  Subsidiary  shall have received all\n         consents, approvals and authorizations of third parties with respect to\n         all material leases and management  agreements to which the Horizon\/CMS\n         Subsidiaries  and the \n\n\n                                     - 34 -\n\n\n\n         Horizon\/CMS Other Entities are parties,  which consents,  approvals and\n         authorizations are required of such third parties by such documents, in\n         form and substance acceptable to HEALTHSOUTH,  except where the failure\n         to obtain  such  consent,  approval or  authorization  would not have a\n         material effect on the business of the Surviving Corporation.\n\n         9.2 Conditions to Obligations of HEALTHSOUTH  and the  Subsidiary.  The\nobligations of  HEALTHSOUTH  and the Subsidiary to consummate the Merger and the\nother transactions contemplated hereby shall be subject to the satisfaction,  at\nor prior to the Closing Date, of the following  conditions  (any of which may be\nwaived by HEALTHSOUTH and the Subsidiary):\n\n                  (a) Each of the  agreements of  Horizon\/CMS to be performed at\n         or prior to the Closing  Date  pursuant to the terms  hereof shall have\n         been duly performed in all material respects.\n\n                  (b) The  representations  and  warranties of  Horizon\/CMS  set\n         forth in Section  3.11(a)  shall be true and  correct as of the date of\n         this  Plan  of  Merger  and  as  of  the  Closing   Date.   Each  other\n         representation  and warranty of  Horizon\/CMS  set forth in this Plan of\n         Merger that is qualified as to  materiality  shall be true and correct,\n         and each  representation and warranty that is not so qualified shall be\n         true and correct in all material respects,  as of the date of this Plan\n         of Merger and as of the  Closing as though made at and as of such time,\n         except  to  the  extent  that  any  such  representation  and  warranty\n         expressly   relates  to  an  earlier  date  (in  which  case  any  such\n         representation  and warranty that is qualified as to materiality  shall\n         be true and correct,  and any such  representation and warranty that is\n         not so qualified shall be true and correct in all material respects, as\n         of such earlier date); provided, however, that Horizon\/CMS shall not be\n         deemed to be in breach of any such  representations  or  warranties  by\n         taking any action permitted (or approved by HEALTHSOUTH)  under Section\n         7.2. For purposes of the foregoing sentence only, each sentence in this\n         Plan of Merger that is a  representation  and  warranty of  Horizon\/CMS\n         shall  be  deemed  to  be  a  separate   representation  and  warranty.\n         HEALTHSOUTH  and  the  Subsidiary  shall  have  been  furnished  with a\n         certificate,  executed  by a duly  authorized  officer of  Horizon\/CMS,\n         dated the Closing Date,  certifying in such detail as  HEALTHSOUTH  and\n         the  Subsidiary  may  reasonably  request as to the  fulfillment of the\n         foregoing conditions.\n\n                  (c)  HEALTHSOUTH  shall have  received an opinion from Haskell\n         Slaughter  &amp; Young,  L.L.C.,  to  the  effect  that  the  merger  will\n         constitute a reorganization within the meaning of Section 368(a) of the\n         Internal  Revenue Code of 1986, as amended,  which opinion may be based\n         upon  reasonable  representations  of  fact  provided  by  officers  of\n         HEALTHSOUTH, Horizon\/CMS and the Subsidiary.\n\n                  (d)  HEALTHSOUTH  shall have received an opinion from Vinson &amp; Elkins L.L.P.,  substantially to the effect set forth in Exhibit 9.2(d)\n         hereto.\n\n                                     - 35 -\n\n\n         9.3  Conditions to  Obligations  of  Horizon\/CMS.  The  obligations  of\nHorizon\/CMS  to consummate  the Merger and the other  transactions  contemplated\nhereby shall be subject to the satisfaction, at or prior to the Closing Date, of\nthe following conditions (any of which may be waived by Horizon\/CMS):\n\n                  (a) Each of the agreements of  HEALTHSOUTH  and the Subsidiary\n         to be performed  at or prior to the Closing Date  pursuant to the terms\n         hereof shall have been duly performed in all material respects.\n\n                  (b) The  representations  and  warranties of  HEALTHSOUTH  set\n         forth in Section  5.10(a)  shall be true and  correct as of the date of\n         this  Plan  of  Merger  and  as  of  the  Closing   Date.   Each  other\n         representation  and warranty of HEALTHSOUTH or the Subsidiary set forth\n         in this Plan of Merger that is  qualified  as to  materiality  shall be\n         true and correct,  and each  representation and warranty that is not so\n         qualified shall be true and correct in all material respects, as of the\n         date of this Plan of Merger and as of the Closing as though made at and\n         as of such time, except to the extent that any such  representation and\n         warranty  expressly  relates to an earlier date (in which case any such\n         representation  and warranty that is qualified as to materiality  shall\n         be true and correct,  and any such  representation and warranty that is\n         not so qualified shall be true and correct in all material respects, as\n         of such earlier  date).  For purposes of the foregoing  sentence  only,\n         each  sentence  in this Plan of  Merger  that is a  representation  and\n         warranty  of  HEALTHSOUTH  or the  Subsidiary  shall be  deemed to be a\n         separate  representation  and warranty.  HEALTHSOUTH and the Subsidiary\n         shall  have  been  furnished  with a  certificate,  executed  by a duly\n         authorized officer of Horizon\/CMS,  dated the Closing Date,  certifying\n         in such detail as HEALTHSOUTH and the Subsidiary may reasonably request\n         as to the fulfillment of the foregoing conditions.\n\n                  (c)  Horizon\/CMS  shall have received an opinion from Vinson &amp; Elkins  L.L.P.  to  the  effect  that  the  Merger  will  constitute  a\n         reorganization  with the  meaning  of  Section  368(a) of the  Internal\n         Revenue  Code of 1986,  as  amended,  which  opinion  may be based upon\n\n         reasonable representations of fact provided by officers of HEALTHSOUTH,\n         Horizon\/CMS and the Subsidiary.\n\n                  (d)  Horizon\/CMS  shall have  received an opinion from Haskell\n         Slaughter  &amp; Young,  L.L.C.,  substantially  to the effect set forth in\n         Exhibit 9.3(d) hereto.\n\n\nSection 10.        MISCELLANEOUS.\n\n         10.1  Nonsurvival  of  Representations  and  Warranties.  None  of  the\nrepresentations  and  warranties  in this Plan of  Merger  or in any  instrument\ndelivered pursuant to this Plan of Merger shall survive the Effective Time.\n\n         10.2  Notices.  Any  communications  required  or  desired  to be given\nhereunder  shall be deemed to have been properly  given if sent by hand delivery\nor by facsimile  and  overnight  courier to\n\n                                     - 36 -\n\n\nthe  parties  hereto at the  following  addresses,  or at such other  address as\neither party may advise the other in writing from time to time:\n\n                  If to HEALTHSOUTH:\n\n                           HEALTHSOUTH Corporation\n                           One HealthSouth Parkway\n                           Birmingham, Alabama  35243\n                           Attention:  Michael D. Martin\n                           Facsimile:  (205) 969-4719\n\n                  with a copy to:\n\n                           William W. Horton\n                           HEALTHSOUTH Corporation\n                           One HealthSouth Parkway\n                           Birmingham, Alabama 35243\n                           Facsimile:  (205) 969-4732\n\n                  If to Horizon\/CMS:\n\n                           Horizon\/CMS Healthcare Corporation\n                           6001 Indian School Road, N.E.\n                           Suite 530\n                           Albuquerque, New Mexico  87110\n                           Attention:\n                           Facsimile:\n\n                  with a copy to:\n\n                           William E. Joor III, Esq.\n                           Vinson &amp; Elkins L.L.P.\n                           3600 First City Tower\n                           1001 Fannin\n                           Houston, Texas  77002-6760\n                           Facsimile:\n\n\nAll such  communications  shall be deemed to have been  delivered on the date of\nhand  delivery  or on the  next  business  day  following  the  deposit  of such\ncommunications with the overnight courier.\n\n         10.3  Further  Assurances.  Each party  hereby  agrees to  perform  any\nfurther acts and to execute and deliver any  documents  which may be  reasonably\nnecessary to carry out the provisions of this Plan of Merger.\n\n\n                                     - 37 -\n\n\n         10.4 Governing Law. This Plan of Merger shall be interpreted, construed\nand  enforced  in  accordance  with the laws of the State of  Delaware,  applied\nwithout giving effect to any conflicts-of-law principles.\n\n         10.5  \"Including\".  The word  \"including\",  when  following any general\nstatement,  term or matter, shall not be construed to limit such statement, term\nor matter to the specific terms or matters as provided immediately following the\nword  \"including\"  or to similar items or matters,  whether or not  non-limiting\nlanguage  (such as  \"without  limitation\",  \"but not  limited  to\",  or words of\nsimilar  import) is used with  reference to the word  \"including\" or the similar\nitems or  matters,  but  rather  shall be deemed to refer to all other  items or\nmatters that could  reasonably  fall within the broadest  possible  scope of the\ngeneral statement, term or matter.\n\n         10.6  \"Knowledge\".   \"To  the  knowledge\",   \"to  the  best  knowledge,\ninformation  and belief\",  or any similar phrase shall be deemed to refer to the\nknowledge of the Chairman of the Board, Chief Executive Officer, Chief Operating\nOfficer or Chief Financial  Officer of a party and to include the assurance that\nsuch  knowledge  is based  upon a  reasonable  investigation,  unless  otherwise\nexpressly provided.\n\n         10.7  \"Material\",   \"material  adverse  change\"  or  \"material  adverse\neffect\".  \"Material\"  means,  when used in connection with one or more entities,\nmaterial to the business, prospects, assets, properties,  operations, results of\noperations or condition  (financial or other) of such entity or entities and all\nother entities with which such entity or entities are consolidated for financial\naccounting  purposes,  taken as a whole.  \"Material adverse change\" or \"material\nadverse effect\" means,  when used in connection  with one or more entities,  any\nchange,  effect,  event,  circumstance  or occurrence that has, or is reasonably\nlikely to have,  individually or in the aggregate,  a material adverse impact on\nthe business, prospects, assets, properties,  operations,  results of operations\nor  condition  (financial  or other) of such  entity or  entities  and all other\nentities  with which such  entity or entities  are  consolidated  for  financial\naccounting purposes, taken as a whole; provided, however, that \"material adverse\nchange\" and \"material  adverse  effect\" shall be deemed to exclude the impact of\n(i)  changes  in  generally  accepted  accounting  principles,  (ii) the  public\nannouncement  of the Merger and  compliance  with the provisions of this Plan of\nMerger,  and (iii) any changes resulting from any restructuring or other similar\ncharges  or  write-offs  taken  by  Horizon\/CMS  in its  consolidated  financial\nstatements with the consent of HEALTHSOUTH.\n\n         10.8 \"Hazardous  Materials\".  The term \"Hazardous  Materials\" means any\nmaterial which has been determined by any applicable  governmental  authority to\nbe  harmful  to the  health or safety  of human or  animal  life or  vegetation,\nregardless  of whether  such  material  is found on or below the  surface of the\nground, in any surface or underground  water,  airborne in ambient air or in the\nair  inside any  structure  built or  located  upon or below the  surface of the\nground or in building materials or in improvements of any structures,  or in any\npersonal  property  located or used in any such  structure,  including,  but not\nlimited to, all hazardous substances, imminently hazardous substances, hazardous\nwastes,  toxic substances,  infectious wastes,  pollutants and contaminants from\ntime to time defined, listed, identified, designated or classified as such under\nany  Environmental  Laws (as defined in Section 10.9) regardless of the quantity\nof any such material.\n\n\n                                     - 38 -\n\n\n         10.9  \"Environmental  Laws\".  The term  \"Environmental  Laws\" means any\nfederal, state or local statute, regulation, rule or ordinance, and any judicial\nor  administrative  interpretation  thereof,  regulating  the  use,  generation,\nhandling,  storage,  transportation,  discharge,  emission,  spillage  or  other\nrelease of Hazardous Materials or relating to the protection of the environment.\n\n         10.10  \"Taxes\".  For  purposes  of this  Agreement,  the term  \"tax\" or\n\"taxes\"  shall  mean  all  taxes,  charges,  fees,  levies,  penalties  or other\nassessment imposed by any United States federal,  state, local or foreign taxing\nauthority,  including,  but not limited to,  income,  excise,  property,  sales,\ntransfer,  franchise,  payroll,  withholding,  Social  Security or other  taxes,\nincluding  any  interest,  penalties  or  additions  attributable  thereto.  For\npurposes of this Agreement, the term \"tax return\" shall mean any return, report,\ninformation  return or other  document  (including  any  related  or  supporting\ninformation) with respect to taxes.\n\n         10.11   \"Subsidiary\".   For  purposes  of  this  Agreement,   the  term\n\"Subsidiary\"  shall  mean a  corporation  of which  50% or more of the  class of\ncapital  stock  having  voting  power in the  election  of  directors  is owned,\ndirectly or indirectly, by Horizon\/CMS or HEALTHSOUTH.\n\n         10.12  Captions.  The  captions  or headings in this Plan of Merger are\nmade for  convenience  and general  reference only and shall not be construed to\ndescribe,  define or limit the scope or intent of the provisions of this Plan of\nMerger.\n\n         10.13  Integration of Exhibits.  All Exhibits  attached to this Plan of\nMerger are integral  parts of this Plan of Merger as if fully set forth  herein,\nand all statements  appearing therein shall be deemed disclosed for all purposes\nand not only in connection  with the specific  representation  in which they are\nexplicitly referenced.\n\n         10.14  Entire  Agreement.  This  instrument,   including  all  Exhibits\nattached  hereto,  together  with the  Confidentiality  Agreement,  contains the\nentire   agreement  of  the  parties  and   supersedes  any  and  all  prior  or\ncontemporaneous agreements between the parties, written or oral, with respect to\nthe  transactions  contemplated  hereby.  It may not be  changed  or  terminated\norally,  but may only be changed by an agreement in writing  signed by the party\nor  parties  against  whom  enforcement  of any  waiver,  change,  modification,\nextension, discharge or termination is sought.\n\n         10.15  Counterparts.  This Plan of Merger  may be  executed  in several\ncounterparts,  each of  which,  when  so  executed,  shall  be  deemed  to be an\noriginal, and such counterparts shall,  together,  constitute and be one and the\nsame instrument.\n\n         10.16  Binding  Effect.  This Plan of Merger  shall be binding  on, and\nshall  inure to the  benefit  of,  the  parties  hereto,  and  their  respective\nsuccessors  and assigns,  and,  except as provided in Sections 7.16 and 7.20, no\nother person shall  acquire or have any right under or by virtue of this Plan of\nMerger. No party may assign any right or obligation  hereunder without the prior\nwritten consent of the other parties.\n\n         10.17 No Rule of Construction.  The parties  acknowledge that this Plan\nof Merger was initially prepared by HEALTHSOUTH,  and that all parties have read\nand negotiated the language\n\n                                     - 39 -\n\n\nused in this Plan of  Merger.  The  parties  agree  that,  because  all  parties\nparticipated  in  negotiating  and  drafting  this  Plan of  Merger,  no rule of\nconstruction  shall  apply to this  Plan of  Merger  which  construes  ambiguous\nlanguage  in favor of or  against  any party by reason of that  party's  role in\ndrafting this Plan of Merger.\n\n\n                                     - 40 -\n\n\n         IN WITNESS  WHEREOF,  HEALTHSOUTH,  the Subsidiary and Horizon\/CMS have\ncaused this Plan and Agreement of Merger to be executed by their respective duly\nauthorized  officers,  and have caused their  respective  corporate  seals to be\nhereunto affixed, all as of the day and year first above written.\n\n                                          HORIZON\/CMS HEALTHCARE\n                                          CORPORATION\n\n\n                                          By  \/s\/ Neal M. Elliott\n                                            ------------------------------------\n\n                                            Its  Chairman, President and CEO\n                                               ---------------------------------\n\nATTEST:\n\n \/s\/ Scot Sauder\n-------------------------------------------\n               Secretary\n\n\n[ CORPORATE SEAL ]\n\n\n                                          HEALTHSOUTH Corporation\n\n\n                                          By  \/s\/ Michael D. Martin\n                                            ------------------------------------\n\n                                            Its  Executive Vice President \n                                                 and Treasurer\n                                               ---------------------------------\n\nATTEST:\n\n\/s\/ William W. Horton\n--------------------------------------------\n          William W. Horton\n         Assistant Secretary\n\n\n[ CORPORATE SEAL ]\n\n                                     - 41 -\n\n\n\n\n\n\n                                                    REID ACQUISITION CORPORATION\n\n\n                                                     By  \/s\/ Michael D. Martin\n                                                       -------------------------\n\n                                                       Its Vice President\n                                                          ----------------------\n\nATTEST:\n\n\/s\/ William W. Horton\n--------------------------------------------\n          William W. Horton\n         Assistant Secretary\n\n\n[ CORPORATE SEAL ]\n\n\n                                     - 42 -\n\n\n                                                                    EXHIBIT 7.14\n\n  \nGentlemen:\n\n         I have been advised that I might be considered to be an  \"affiliate\" of\nHorizon\/CMS  Healthcare  Corporation  (\"Horizon\/CMS\")  for  purposes of Rule 145\nunder the Securities Exchange Act of 1933, as amended (the \"1933 Act\").\n\n         HEALTHSOUTH Corporation  (\"HEALTHSOUTH\"),  Reid Acquisition Corporation\nand Horizon\/CMS have entered into a Plan and Agreement of Merger dated as of the\n17th day of February,  1997 (the \"Plan of  Merger\").  Upon  consummation  of the\ntransactions  contemplated by the Plan of Merger (the \"Merger\"),  I will receive\nshares of capital stock of HEALTHSOUTH for all of the shares of capital stock of\nHorizon\/CMS owned by me or as to which I may be deemed a beneficial owner. I own\n_______ shares of common stock of Horizon\/CMS.  Such shares will be converted in\nthe Merger into shares of common stock of  HEALTHSOUTH  as described in the Plan\nof Merger. The shares of Horizon\/CMS capital stock and HEALTHSOUTH capital stock\nowned by me or as to which I may deemed to be a  beneficial  owner  prior to the\nMerger are hereinafter  collectively  referred to as the \"Pre-Merger  Stock\" and\nthe  shares of  HEALTHSOUTH  capital  stock  received  by me in the  Merger  are\nhereinafter  collectively referred to as the \"Exchange Stock\". This agreement is\nhereinafter referred to as the \"Letter Agreement\".\n\n         I represent  and warrant to, and agree with,  HEALTHSOUTH,  Horizon\/CMS\nand the Subsidiary that:\n\n         A. I have read this  Letter  Agreement  and the Plan of Merger and have\ndiscussed their requirements and other applicable limitations upon my ability to\nsell,  transfer or otherwise dispose of the Pre-Merger Stock and Exchange Stock,\nto the extent I felt necessary, with my counsel or counsel for Horizon\/CMS.\n\n         B. The shares of common stock of  HEALTHSOUTH  that I shall  receive in\nexchange for my shares of common stock of Horizon\/CMS  are not being acquired by\nme with a view to their  distribution  except to the  extent  and in the  manner\nprovided for in paragraph (d) of Rule 145 under the 1933 Act.\n\n         C. I agree with you not to dispose of any such  shares of common  stock\nof  HEALTHSOUTH  in any manner that would violate Rule 145. I further agree with\nyou that the  certificate  or  certificates  representing  such shares of common\nstock  of  HEALTHSOUTH  may  bear a  legend  referring  to the  restrictions  on\ndisposition thereof in accordance with the provisions of the foregoing paragraph\nand that stop  transfer  instructions  may be filed with  respect to such shares\nwith the transfer agent for such shares.\n\n\n\n\n\n\n\n         D. I  understand  that  stop  transfer  instructions  will be  given to\nHEALTHSOUTH,  Horizon\/CMS and their respective  transfer agents, as the case may\nbe, with respect to the shares of  Pre-Merger  Stock and the  Exchange  Stock in\nconnection with the restrictions set forth herein.\n\n         It is understood and agreed that this Letter  Agreement shall terminate\nand be of no  further  force and  effect  if the Plan of  Merger  is  terminated\npursuant to the terms thereof.\n\n         The  agreements  made  by me in  the  foregoing  paragraphs  are on the\nunderstanding  and condition that you agree, in the event that any shares may be\ndisposed  of in  accordance  with the  provisions  of Rule 145,  to  deliver  in\nexchange for the  certificate  or  certificates  representing  such shares a new\ncertificate or certificates  representing such shares not bearing the legend and\nnot subject to the stop transfer  instruction  referred to in paragraph D above,\nand so long as I hold shares of stock subject to the provisions of the foregoing\nparagraph  (but  not for a  period  in  excess  of two  years  from  the date of\nconsummation of the Merger) to file with the Securities and Exchange  Commission\nor otherwise make publicly available all information about  HEALTHSOUTH,  to the\nextent  available to you without  unreasonable  effort or expense,  necessary to\nenable me to resell shares under the provisions of paragraph (d) of Rule 145.\n\n         This   Letter   Agreement   shall  be  binding   on  my  heirs,   legal\nrepresentatives and successors.\n\n                                                     Very truly yours,\n\n\n\n                                                     [Name of Stockholder]\n\n\n\n                                                                  EXHIBIT 9.2(d)\n\n\n[DATE]\n\n\n\n\nHEALTHSOUTH Corporation\nOne HealthSouth Parkway\nBirmingham, Alabama  35243\n\n         Re:      Plan and Agreement of Merger Among HEALTHSOUTH\n                     Corporation, Reid Acquisition Corporation\n                      and Horizon\/CMS Healthcare Corporation\n\nGentlemen:\n\n         We have acted as legal counsel for Horizon\/CMS Healthcare  Corporation,\na Delaware  corporation  (\"Horizon\/CMS\"),  in connection  with the  transactions\ncontemplated  by that  certain  Agreement  and  Plan of  Merger  (the  \"Plan  of\nMerger\"), dated as of February 17, 1997, by and among HEALTHSOUTH Corporation, a\nDelaware corporation,  Reid Acquisition Corporation, a Delaware corporation, and\nHorizon\/CMS.  The Plan of Merger,  along with the other documents evidencing the\ntransactions contemplated by the Plan of Merger, are referred to collectively as\nthe \"Merger Documents\".\n\n         This opinion is being delivered pursuant to the Plan of Merger.  Unless\notherwise defined herein,  capitalized terms used herein shall have the meanings\nset forth in the Plan of Merger.\n\n         In connection  with the  preparation of this opinion,  we have examined\nexecuted originals of the following documents:\n\n                  (a) the Merger Documents; and\n\n                  (b) the charter  documents and bylaws of Horizon\/CMS in effect\n         as of the date hereof.\n\n         We have also  examined  such other  documents,  certificates  of public\nofficials  and  officers of  Horizon\/CMS,  records and matters of law as we have\ndeemed  necessary  as a basis for the  opinions  hereinafter  expressed.  In our\nexamination, we have assumed the genuineness of all signatures, the authenticity\nof all  documents  submitted  to us as  originals,  the  conformity  to original\ndocuments of all documents  submitted to us as certified or photostatic  copies,\nand the  authenticity of the originals of such latter  documents.  Further,  our\nreview  of  matters  of law has been  limited  to the  laws of the  State of New\nMexico,  the laws of the State of  Delaware  referred  to herein and the Federal\nlaws of the United States in effect as of the date hereof.\n\n\n\n\n         Based upon the foregoing,  and subject to the  limitations  hereinafter\nset forth, we are of the opinion that:\n\n         1. Horizon\/CMS has been duly  incorporated and is validly existing as a\ncorporation in good standing under the General  Corporation  Law of the State of\nDelaware (the \"DGCL\").\n\n         2. Horizon\/CMS has full corporate power to execute and deliver the Plan\nof Merger and to consummate the transactions contemplated thereby.\n\n         3.  The Plan of  Merger  has  been  duly  authorized  and  executed  by\nHorizon\/CMS, and the Plan of Merger constitutes the valid and binding obligation\nof Horizon\/CMS,  enforceable  against  Horizon\/CMS in accordance with its terms,\nexcept as limited by bankruptcy, insolvency, reorganization, moratorium or other\nsimilar laws affecting enforcement of creditors' rights generally and subject to\ngeneral principles of equity (regardless of whether enforcement is considered in\na proceeding at law or in equity).\n\n         4. The execution and delivery of the Plan of Merger by Horizon\/CMS  did\nnot,  and  the  consummation  of  the  transactions   therein   contemplated  by\nHorizon\/CMS  does not,  constitute a breach or violation of, or a default under,\nany federal law,  rule or  regulation of the United States or under the DGCL or,\nto our knowledge,  any court order,  judgment or decree of any  governmental  or\nregulatory  body of the United  States or of  Delaware,  in each case,  to which\nHorizon\/CMS is subject or by which any of its material  properties or assets are\nbound or  affected,  or require any consent or approval of any other party under\nany federal  law,  rule or  regulation  of the United  States or under the DGCL,\nexcept for required approvals under the federal securities laws, under the state\nsecurities  or  blue  sky  laws,  and  under  the  Hart-Scott-Rodino   Antitrust\nImprovements  Act of  1976,  as  amended,  and  except  under  laws,  rules  and\nregulations relating to the operation, regulation,  licensing, and accreditation\nof health  care  facilities,  as to which we express no opinion,  which  breach,\nviolation or default would have a material adverse effect on Horizon\/CMS and the\nHorizon\/CMS Subsidiaries and the Horizon\/CMS Other Entities, taken as a whole.\n\n         This  opinion is  furnished  to you by this Firm as legal  counsel  for\nHorizon\/CMS,  solely  for your  benefit  in  connection  with  the  transactions\ncontemplated  by the  Plan of  Merger,  upon the  understanding  that we are not\nhereby assuming any professional  responsibility  to any other person whatsoever\nand that this opinion may not be used for any other purpose whatsoever.\n\n                                                     Very truly yours,\n\n                                                     VINSON &amp; ELKINS L.L.P.\n\n\n\n                                                     By\n\n\n\n\n\n                                                                  EXHIBIT 9.3(d)\n\n[DATE]\n\n\nHorizon\/CMS Healthcare Corporation\n6001 Indian School Road, N.E.\nSuite 530\nAlbuquerque, New Mexico  87110\n\n\n                   Re:  Plan and Agreement of Merger Among\n                        HEALTHSOUTH Corporation, Reid Acquisition Corporation\n                        and Horizon\/CMS Healthcare Corporation\n\nGentlemen:\n\n         We have acted as legal counsel for HEALTHSOUTH Corporation,  a Delaware\ncorporation  (\"HEALTHSOUTH\"),  and  Reid  Acquisition  Corporation,  a  Delaware\ncorporation (the \"Subsidiary\"), in connection with the transactions contemplated\nby that certain Plan and Agreement of Merger (the \"Plan of Merger\"), dated as of\nFebruary 17, 1997, by and among  HEALTHSOUTH,  the  Subsidiary  and  Horizon\/CMS\nHealthcare Corporation,  a Delaware corporation.  The Plan of Merger, along with\nthe other  documents  evidencing the  transactions  contemplated  by the Plan of\nMerger, are referred to collectively as the \"Merger Documents\".\n\n         This opinion is being delivered pursuant to the Plan of Merger.  Unless\notherwise defined herein,  capitalized terms used herein shall have the meanings\nset forth in the Plan of Merger.\n\n         In connection  with the  preparation of this opinion,  we have examined\nexecuted originals (or copies thereof) of the following documents:\n\n                  (a) the Merger Documents;\n\n                  (b) the charter  documents and bylaws of HEALTHSOUTH in effect\n         as of the date hereof; and\n\n                  (c) the  charter  documents  and bylaws of the  Subsidiary  in\n         effect as of the date hereof.\n\n         We have also  examined  such other  documents,  certificates  of public\nofficials and officers of HEALTHSOUTH and the Subsidiary, records and matters of\nlaw as we have deemed  necessary or appropriate in connection  with the opinions\nhereinafter  expressed.  In our examination,  we have assumed the genuineness of\nall signatures,  the authenticity of all documents submitted to us as originals,\nthe  conformity  to  original  documents  of all  documents  submitted  to us as\ncertified or photostatic  copies,  and the authenticity of the originals of such\nlatter documents. Further, our\n\n\n\nreview of matters of law has been  limited to the laws of the State of  Alabama,\nthe laws of the State of Delaware referred to herein and the Federal laws of the\nUnited States in effect as of the date hereof.\n\n         Based upon the foregoing,  and subject to the  limitations  hereinafter\nset forth, we are of the opinion that:\n\n         1. Each of HEALTHSOUTH  and the  Subsidiary has been duly  incorporated\nand is validly  existing as a  corporation  in good  standing  under the General\nCorporation Law of the State of Delaware (the \"DGCL\").\n\n         2. Each of HEALTHSOUTH  and the  Subsidiary has the corporate  power to\nexecute  and  deliver  the Plan of Merger  and to  consummate  the  transactions\ncontemplated thereby.\n\n         3.  The Plan of  Merger  has  been  duly  authorized  and  executed  by\nHEALTHSOUTH  and  the  Subsidiary,  and  the  Plan  of  Merger  (except  for the\nprovisions  thereof  respecting  indemnification,  as to  which  we  express  no\nopinion)  constitutes  the valid and binding  obligation of HEALTHSOUTH  and the\nSubsidiary,  enforceable  against  HEALTHSOUTH  and the Subsidiary in accordance\nwith  its  terms,   except  as  may  be  limited  by   bankruptcy,   insolvency,\nreorganization,  moratorium  or other  similar  laws  affecting  enforcement  of\ncreditors'  rights  generally  and  subject  to  general  principles  of  equity\n(regardless  of whether  enforcement  is considered in a proceeding at law or in\nequity).\n\n         4. The execution and delivery of the Plan of Merger by HEALTHSOUTH  and\nthe  Subsidiary  did  not,  and the  consummation  of the  transactions  therein\ncontemplated by HEALTH- SOUTH and the Subsidiary, if performed today, would not,\nconstitute a breach or violation of any federal law,  rule or  regulation of the\nUnited  States or any law,  rule or regulation of Alabama or the DGCL or, to our\nknowledge, any court order, judgment or decree of any governmental or regulatory\nbody of the United  States or of  Delaware or  Alabama,  in each case,  to which\nHEALTHSOUTH  or the  Subsidiary  is  subject  or by which any of their  material\nproperties or assets are bound or affected,  which breach,  violation or default\nwould have a material  adverse effect on HEALTHSOUTH  and its  subsidiaries  and\naffiliated partnerships, taken as a whole, or require any consent or approval of\nany other party under any federal law,  rule or  regulation of the United States\nor any law,  rule or regulation of Alabama or Delaware to which HEALTH- SOUTH or\nthe Subsidiary is subject  (except for required  consents or approvals under the\nfederal   securities   laws,  the  state   securities  or  blue  sky  laws,  the\nHart-Scott-Rodino  Antitrust  Improvements Act of 1976, as amended, or any laws,\nrules and  regulations  relating to the  operation,  regulation,  licensing  and\naccreditation  of  health  care  facilities,  as to all of which we  express  no\nopinion).\n\n         5. The shares of  HEALTHSOUTH  Common Stock to be issued under the Plan\nof  Merger  will be,  when  issued in  accordance  with the terms of the Plan of\nMerger, validly issued, fully paid and nonassessable.\n\n\n\n\n\n\n         This  opinion is  furnished  to you by this Firm as legal  counsel  for\nHEALTHSOUTH and the  Subsidiary,  solely for your benefit in connection with the\ntransactions  contemplated by the Plan of Merger, upon the understanding that we\nare not hereby  assuming  any  professional  responsibility  to any other person\nwhatsoever  and  that  this  opinion  may not be  used  for  any  other  purpose\nwhatsoever.\n\n                                               Very truly yours,\n\n                                               HASKELL SLAUGHTER &amp; YOUNG, L.L.C.\n\n\n                                               By\n\n<\/pre>\n","protected":false},"template":"","meta":{"_acf_changed":false,"_stopmodifiedupdate":true,"_modified_date":"","_cloudinary_featured_overwrite":false},"corporate_contracts_companies":[7751],"corporate_contracts_industries":[9438],"corporate_contracts_types":[9622,9626],"class_list":["post-43490","corporate_contracts","type-corporate_contracts","status-publish","hentry","corporate_contracts_companies-healthsouth-corp","corporate_contracts_industries-health__misc","corporate_contracts_types-planning","corporate_contracts_types-planning__merger"],"acf":[],"_links":{"self":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts\/43490","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=43490"}],"wp:term":[{"taxonomy":"corporate_contracts_companies","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_companies?post=43490"},{"taxonomy":"corporate_contracts_industries","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_industries?post=43490"},{"taxonomy":"corporate_contracts_types","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_types?post=43490"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}