{"id":43491,"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-surgical.html"},"modified":"2015-09-17T11:25:58","modified_gmt":"2015-09-17T16:25:58","slug":"plan-and-agreement-of-merger-healthsouth-corp-and-surgical","status":"publish","type":"corporate_contracts","link":"https:\/\/corporate.findlaw.com\/contracts\/planning\/plan-and-agreement-of-merger-healthsouth-corp-and-surgical.html","title":{"rendered":"Plan and Agreement of Merger &#8211; HealthSouth Corp. and Surgical Health Corp."},"content":{"rendered":"<pre>\n              AMENDED AND RESTATED PLAN AND AGREEMENT OF MERGER\n\n     AMENDED AND RESTATED  PLAN AND  AGREEMENT OF MERGER (the \"Plan of Merger\"),\nmade  and  entered  into as of the  22nd  day of  January,  1995,  by and  among\nHEALTHSOUTH  Corporation,  a Delaware corporation  (\"HEALTHSOUTH\"),  ASC ATLANTA\nACQUISITION  COMPANY,  INC.,  a Delaware  corporation  (the  \"Subsidiary\"),  and\nSURGICAL HEALTH CORPORATION,  a Delaware corporation (\"SHC\") (the Subsidiary and\nSHC  being  sometimes  collectively  referred  to  herein  as  the  \"Constituent\nCorporations\").\n\n                              W I T N E S S E T H:\n\n     WHEREAS,  the  Board  of  Directors  of  each  of  HEALTHSOUTH  and SHC has\ndetermined  that a business  combination  between  HEALTHSOUTH and SHC is in the\nbest interests of their  respective  companies and  stockholders and presents as\nopportunity for their respective  companies to achieve  long-term  strategic and\nfinancial benefits;\n\n     WHEREAS, on January 22, 1995, HEALTHSOUTH,  the Subsidiary and SHC executed\nand  delivered  a Plan and  Agreement  of Merger,  which  their duly  authorized\nofficers have determined to amend and restate in its entirety as provided herein\nto be effective for all purposes as of and from and after January 22, 1995;\n\n     WHEREAS, the respective Boards of Directors of HEALTHSOUTH,  the Subsidiary\nand SHC  have  approved  the  merger  of the  Subsidiary  with and into SHC (the\n\"Merger\"),  upon the terms  and  conditions  set  forth in this Plan of  Merger,\nwhereby (i) each share of Common Stock,  par value $.0025 per share, of SHC (the\n\"SHC Common Stock\"),  not owned directly or indirectly by SHC, except Dissenting\nShares  (as  hereinafter  defined),  (ii)  each  share of  Series A  Convertible\nPreferred  Stock,  par value $.01 per  share,  of SHC (the  \"Series A  Preferred\nStock\"),  not owned  directly or indirectly by SHC,  except  Dissenting  Shares,\n(iii) each share of Series B  Convertible  Preferred  Stock,  par value $.01 per\nshare, of SHC (the \"Series B Preferred Stock\"), not owned directly or indirectly\nby SHC, except  Dissenting  Shares,  and (iv) each share of Series C Convertible\nPreferred  Stock,  par value $.01 per  share,  of SHC (the  \"Series C  Preferred\nStock\"), not owned directly or indirectly by SHC, except Dissenting Shares, will\nbe converted into the right to receive the Merger  Consideration (as hereinafter\ndefined) (the Series A Preferred  Stock,  Series B Preferred  Stock and Series C\nPreferred  Stock may be hereinafter  collectively  referred to as the \"Preferred\nStock\", and, together with the SHC Common Stock, may be hereinafter collectively\nreferred to as the \"SHC Shares\");\n\n     WHEREAS, each of HEALTHSOUTH, the Subsidiary and SHC desire to make certain\nrepresentations,  warranties,  covenants and  agreements in connection  with the\nMerger and also to prescribe various conditions to the Merger;\n\n     WHEREAS,  for federal  income tax purposes,  it is intended that the Merger\n(as defined  herein) shall qualify as a  reorganization  under the provisions of\nSection 368 of the Internal Revenue Code of 1986, as amended; and\n\n     WHEREAS, for accounting  purposes,  it is intended that the Merger shall be\naccounted for as a \"pooling of interests\".\n\n     NOW, THEREFORE,  in consideration of the premises, and the mutual covenants\nand agreements contained herein, the parties hereto do hereby agree as follows:\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 SHC at the Effective Time\nof the Merger (as defined in Section 1.3). Following the Effective Time\n\n\nof the Merger,  the separate  corporate  existence of the Subsidiary shall cease\nand  SHC  shall   continue  as  the  surviving   corporation   (the   \"Surviving\nCorporation\")  under the name \"Surgical Health Corporation\" and shall succeed to\nand  assume  all  the  rights  and  obligations  of the  Subsidiary  and  SHC in\naccordance with the DGCL.\n\n     1.2 The Closing.  The closing of the Merger (the \"Closing\") will take place\nat  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  of the  conditions  set forth in Section  9.1  (other  than\nSection  9.1(a)),  at  the  offices  of  Haskell  Slaughter  Young  &amp; Johnston,\nProfessional Association,  Birmingham,  Alabama, unless another date or place is\nagreed to in writing by the parties hereto.\n\n     1.3 Effective Time.  Subject to the provisions of this Plan of Merger,  the\nparties  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 Subsidiary  and SHC shall agree should be specified in the\nCertificate of Merger (the \"Effective Time\").\n\n     1.4 Effect of the  Merger.  The Merger  shall have the effects set forth in\nSection 259 of the DGCL.\n\nSection 2.  Effect of the Merger on the  Capital  Stock of the  Constituent\n            Corporations; Exchange of Certificates.\n\n     2.1 Effect on Capital  Stock.  As of the Effective  Time of the Merger,  by\nvirtue of the  Merger  and  without  any action on the part of any holder of SHC\nShares or any shares of capital stock of the Subsidiary:\n\n     (a) Subsidiary  Common Stock. Each share of capital stock of the Subsidiary\nissued and  outstanding  immediately  prior to the Effective  Time of the Merger\nshall be  converted  into one fully paid and  nonassessable  share of SHC Common\nStock.\n\n     (b) Cancellation of Treasury Stock.  Each share of SHC Common Stock that is\nowned by SHC or by any  subsidiary  of SHC shall  automatically  be canceled and\nretired and shall cease to exist,  and none of the Common Stock,  par value $.01\nper  share,  of  HEALTHSOUTH   (\"HEALTHSOUTH  Common  Stock\"),   cash  or  other\nconsideration shall be delivered in exchange therefor.\n\n     (c) Conversion of SHC Shares.  Subject to Section  2.2(e),  each issued and\noutstanding  SHC Share  (other than shares to be  canceled  in  accordance  with\nSection  2.1(b) and  Dissenting  Shares)  shall be  converted  into the right to\nreceive  that  fraction  of a share of  HEALTHSOUTH  Common  Stock  obtained  by\ndividing  $4.60 by the Base Period Trading Price (as may be adjusted as provided\nbelow) (the \"Merger  Consideration\");  provided,  however,  that for purposes of\nsuch  calculation,  the Base Period  Trading  Price shall be deemed to equal (i)\n$37.00 in the event that the Base Period  Trading  Price is greater than $37.00,\nor (ii)  $33.00 in the event the Base Period  Trading  Price is less than $33.00\n(collectively,  $37.00  and $33.00 are  referred  to herein as the \"Base  Period\nTrading Price Limitations\"). For purposes of this Plan of Merger, the term \"Base\nPeriod Trading Price\" shall mean the average daily closing prices for the shares\nof HEALTHSOUTH  Common Stock for the 20  consecutive  trading days on which such\nshares are actually traded (as reported on the New York Stock Exchange Composite\nTransaction Tape as reported in The Wall Street Journal,  Eastern Edition, or if\nnot reported  thereby,  any other  authoritative  source) ending at the close of\ntrading on the third trading day  immediately  preceding the Closing Date. As of\nthe  Effective  Time of the  Merger,  all such SHC  Shares  shall no  longer  be\noutstanding and shall  automatically  be canceled and retired and shall cease to\nexist, and each holder of a certificate  representing any SHC Shares shall cease\nto have any rights with respect thereto,  except the right to receive the Merger\nConsideration  and any cash in lieu of fractional  shares of HEALTHSOUTH  Common\nStock to be issued or paid in  consideration  therefor  upon  surrender  of such\ncertificate in accordance with Section 2.2, without interest.\n\n     (d) Dissenting Shares.  Notwithstanding  anything in this Plan of Merger to\nthe contrary, SHC Shares outstanding  immediately prior to the Effective Time of\nthe Merger held by a holder (if any) who is entitled to demand, and who properly\ndemands,  appraisal for such shares in  accordance  with Section 262 of the DGCL\n\n(\"Dissenting  Shares\") shall not be converted into a right to receive the Merger\nConsideration  and any cash in lieu of fractional  shares of HEALTHSOUTH  Common\nStock unless such holder fails to perfect or otherwise loses such holder's right\nto appraisal,  if any. If, after the Effective  Time of the Merger,  such holder\nfails to perfect  or loses any such right to  appraisal,  such  shares  shall be\ntreated as if they had been  converted  as of the  Effective  Time of the Merger\ninto the right to receive the Merger  Consideration  pursuant to Section  2.1(c)\nand the cash in lieu of fractional shares of HEALTHSOUTH  Common Stock specified\nin Section 2.2.\n\n     (e) Stock Options and  Warrants.  At the  Effective  Time,  all rights with\nrespect to SHC Common  Stock  pursuant to any SHC stock  options or SHC warrants\nwhich are  outstanding at the Effective Time,  whether or not then  exercisable,\nshall be converted  into and become  rights with respect to  HEALTHSOUTH  Common\nStock and  HEALTHSOUTH  shall assume each SHC stock  option or SHC  warrant,  in\naccordance with the terms of the stock option plan under which it was issued and\nthe stock option agreement or warrant agreement, as the case may be, by which it\nis evidenced.  It is intended that the foregoing  provisions shall be undertaken\nin a manner that will not constitute a \"modification\"  as defined in Section 425\nof the Code, as to any stock option which is an \"incentive stock option.\"\n\n     (f)  Anti-Dilution  Provisions.  In the event that HEALTHSOUTH  changes the\nnumber of shares of HEALTHSOUTH Common Stock issued and outstanding prior to the\nEffective  Time as a  result  of a  stock  split,  stock  dividend,  or  similar\nrecapitalization  with respect to such stock and the record date thereof (in the\ncase of a stock  dividend) or the effective date thereof (in the case of a stock\nsplit or similar  recapitalization  for which a record date is not  established)\nshall  be  prior to the  Effective  Time,  (i) the  Base  Period  Trading  Price\nLimitations  shall be adjusted  to  appropriately  adjust the ratio  pursuant to\nwhich SHC Shares will be  converted  into  shares of  HEALTHSOUTH  Common  Stock\npursuant to this Section 2.1, and (ii) if necessary,  the anticipated  Effective\nTime shall be  postponed  for an  appropriate  period of time agreed upon by the\nparties in order for the Base Period  Trading Price to reflect the market effect\nof such stock split, stock dividend, or similar recapitalization.\n\n     2.2 Exchange of  Certificates.  (a) Exchange Agent.  Prior to the Effective\nTime of the Merger,  HEALTHSOUTH shall enter into an agreement with such bank or\ntrust company as may be designated by HEALTHSOUTH  (the \"Exchange  Agent\") which\nprovides  that  HEALTHSOUTH  shall  deposit  with the  Exchange  Agent as of the\nEffective Time of the Merger,  for the benefit of the holders of SHC Shares, for\nexchange  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 of the Merger, being\nhereinafter referred to as the \"Exchange Fund\") issuable pursuant to Section 2.1\nin exchange for outstanding SHC Shares.\n\n     (b)  Exchange  Procedures.  As soon as  reasonably  practicable  after  the\nEffective  Time of the Merger,  the Exchange  Agent shall mail to each holder of\nrecord of a certificate or certificates which immediately prior to the Effective\nTime of the Merger represented outstanding SHC Shares (the \"Certificates\") whose\nshares  were  converted  into the  right to  receive  the  Merger  Consideration\npursuant to Section 2.1, (i) a letter of  transmittal  (which shall specify that\ndelivery shall be effected, and risk of loss and title to the Certificates shall\npass, only upon delivery of the  Certificates to the Exchange Agent and shall be\nin such  form and have such  other  provisions  as  HEALTHSOUTH  may  reasonably\nspecify)  and  (ii)  instructions  for use in  effecting  the  surrender  of the\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 SHC Shares  which is not  registered  in the transfer\nrecords  of SHC,  a  certificate  representing  the  proper  number of shares of\nHEALTHSOUTH  Common  Stock may be issued to a person  other  than the  person in\nwhose name the  Certificate so surrendered  is registered,  if such  Certificate\nshall be properly endorsed or otherwise be in proper form for transfer and the\n\nperson requesting such payment shall pay any transfer or other taxes required by\nreason of the issuance of shares of  HEALTHSOUTH  Common Stock to a person other\nthan the registered  holder of such Certificate or establish to the satisfaction\nof  HEALTHSOUTH  that  such  tax  has  been  paid  or is not  applicable.  Until\nsurrendered  as  contemplated  by this Section 2.2,  each  Certificate  shall be\ndeemed at any time after the Effective  Time of the Merger to represent only the\nright to receive upon such  surrender  the  certificate  representing  shares of\nHEALTHSOUTH  Common  Stock  and  cash  in  lieu  of  any  fractional  shares  of\nHEALTHSOUTH  Common Stock as  contemplated by this Section 2.2. No interest will\nbe paid or will accrue on any cash payable in lieu of any  fractional  shares of\nHEALTHSOUTH Common Stock. To the extent permitted by law, former stockholders of\nrecord of SHC shall be entitled to vote after the  Effective  Time of the Merger\nat any  meeting  of  HEALTHSOUTH  stockholders  the  number  of whole  shares of\nHEALTHSOUTH  Common Stock into which their  respective SHC Shares are converted,\nregardless  of whether  such  holders  have  exchanged  their  Certificates  for\ncertificates  representing  HEALTHSOUTH  Common  Stock in  accordance  with this\nSection 2.2.\n\n     (c) Distributions with Respect to Unexchanged Shares. No dividends or other\ndistributions  with respect to HEALTHSOUTH Common Stock with a record date after\nthe  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 the surrender of such\nCertificate  in  accordance  with  this  Section  2.  Subject  to the  effect of\napplicable laws,  following  surrender of any such  Certificate,  there shall be\npaid to the holder of the certificate  representing  whole shares of HEALTHSOUTH\nCommon Stock issued in exchange therefor,  without interest,  (i) at the time of\nsuch surrender,  the amount of any cash payable in lieu of a fractional share of\nHEALTHSOUTH  Common  Stock to which such holder is entitled  pursuant to Section\n2.2(e) and the amount of  dividends  or other  distributions  with a record date\nafter the  Effective  Time of the Merger  theretofore  paid with respect to such\nwhole shares of HEALTHSOUTH  Common Stock,  and (ii) at the appropriate  payment\ndate,  the amount of dividends or other  distributions  with a record date after\nthe Effective  Time of the Merger but prior to such surrender and with a payment\ndate  subsequent to such surrender  payable with respect to such whole shares of\nHEALTHSOUTH Common Stock.\n\n     (d) No Further  Ownership  Rights in SHC Shares.  All shares of HEALTHSOUTH\nCommon  Stock  issued  upon  the  surrender  for  exchange  of  Certificates  in\naccordance with the terms of this Section 2 (including any cash paid pursuant to\nSection  2.2(c) or 2.2(e) ) shall be deemed to have been  issued  (and  paid) in\nfull  satisfaction  of all  rights  pertaining  to the  SHC  Shares  theretofore\nrepresented  by such  Certificates.  If, after the Effective Time of the Merger,\nCertificates  are presented to the Surviving  Corporation  or the Exchange Agent\nfor any reason, they shall be canceled and exchanged as provided in this Section\n2, except as otherwise provided by law.\n\n     (e) No Fractional Shares. No certificates or scrip representing  fractional\nshares of  HEALTHSOUTH  Common  Stock  shall be issued  upon the  surrender  for\nexchange of  Certificates,  and such fractional share interests will not entitle\nthe owner  thereof to vote or to any  rights of a  stockholder  of  HEALTHSOUTH.\nNotwithstanding  any other provision of this Plan of Merger,  each holder of SHC\nShares  exchanged  pursuant to the Merger who would otherwise have been entitled\nto receive a fraction of a share of HEALTHSOUTH  Common Stock (after taking into\naccount all  Certificates  delivered  by such  holder)  shall  receive,  in lieu\nthereof, cash (without interest) in an amount equal to such fractional part of a\nshare of HEALTHSOUTH Common Stock multiplied by the Base Period Trading Price.\n\n     (f)  Termination  of Exchange  Fund. Any portion of the Exchange Fund which\nremains  undistributed  to the holders of the  Certificates for six months after\nthe Effective Time of the Merger shall be delivered to HEALTHSOUTH, upon demand,\nand any holders of the Certificates who have not theretofore  complied with this\nSection 2 shall  thereafter  look only to HEALTHSOUTH for payment of HEALTHSOUTH\nCommon Stock, any cash in lieu of fractional shares of HEALTHSOUTH  Common Stock\nand any dividends or distributions with respect to HEALTHSOUTH Common Stock.\n\n     (g) No Liability. None of HEALTHSOUTH,  the Subsidiary, SHC or the Exchange\nAgent  shall be liable to any person in  respect  of any  shares of  HEALTHSOUTH\nCommon Stock (or dividends or  distributions  with respect thereto) or cash from\nthe Exchange Fund delivered to a public official pursuant to any applicable\n\nabandoned  property,  escheat or similar law. If any Certificates shall not have\nbeen surrendered prior to seven years after the Effective Time of the Merger (or\nimmediately prior to such earlier date on which any shares of HEALTHSOUTH Common\nStock, any cash in lieu of fractional shares of HEALTHSOUTH  Common Stock or any\ndividends or distributions  with respect to HEALTHSOUTH  Common Stock in respect\nof such  Certificates  would otherwise  escheat to or become the property of any\ngovernmental  entity),  any such shares,  cash,  dividends or  distributions  in\nrespect of such  Certificates  shall, to the extent permitted by applicable law,\nbecome the property of the Surviving  Corporation,  free and clear of all claims\nor interest of any person previously entitled thereto.\n\n     (h)  Investment of Exchange  Fund. The Exchange Agent shall invest any cash\nincluded in the Exchange Fund, as directed by HEALTHSOUTH, on a daily basis. Any\ninterest  and other  income  resulting  from such  investments  shall be paid to\nHEALTHSOUTH.\n\n     (i) The Merger will not be treated as a liquidation, dissolution or winding\nup  of  SHC  under  the   liquidation   provisions  of  SHC's   Certificate   of\nIncorporation.\n\n     2.3 Certificate of Incorporation of Surviving Corporation.  The Certificate\nof  Incorporation  of SHC  shall  be  amended  and  restated,  effective  at the\nEffective  Time, in a manner  satisfactory  to  HEALTHSOUTH.  The Certificate of\nIncorporation  of SHC, as so amended and restated,  shall become the Certificate\nof Incorporation of the Surviving  Corporation from and after the Effective Time\nand until thereafter amended as provided by law.\n\n     2.4 Bylaws of the Surviving Corporation. The Bylaws of the Subsidiary shall\nbe the Bylaws of the Surviving  Corporation from and after the Effective Time of\nthe Merger and until thereafter altered,  amended or repealed in accordance with\nthe laws of the State of Delaware,  the Certificate of  Incorporation of SHC and\nthe said Bylaws.\n\n     2.5 Directors and Officers of the Surviving Corporation.  The Directors and\nofficers of the Subsidiary  immediately prior to the Effective Time shall be the\nDirectors  and  officers of the  Surviving  Corporation,  each to hold office in\naccordance  with the  Certificate of  Incorporation  and Bylaws of the Surviving\nCorporation.\n\n     2.6 Assets, Liabilities,  Reserves and Accounts. At the Effective Time, the\nassets,  liabilities,  reserves and accounts of each of Subsidiary and SHC shall\nbe taken up on the books of the  Surviving  Corporation  at the amounts at which\nthey respectively shall be carried on the books of said corporations immediately\nprior to the Effective Time, except as otherwise set forth in the Plan of Merger\nand subject to such adjustments, or elimination of intercompany items, as may be\nappropriate in giving effect to the Merger in accordance with generally accepted\naccounting principles.\n\n     2.7 Corporate Acts of the Subsidiary.  All corporate acts, plans, policies,\napprovals and authorizations of the Subsidiary, its sole stockholder,  its Board\nof Directors, committees elected or appointed by the Board of Directors, and all\nofficers  and  agents,  valid  immediately  prior to the  Effective  Time of the\nMerger,  shall be those of the Surviving  Corporation  and shall be as effective\nand binding thereon as they were with respect to the  Subsidiary.  The employees\nand  agents of the  Subsidiary  shall  become  the  employees  and agents of the\nSurviving  Corporation  and  continue  to be  entitled  to the same  rights  and\nbenefits which they enjoyed as employees and agents of the Subsidiary.\n\nSection 3. Representations and Warranties of SHC.\n\n   SHC hereby  represents  and warrants to  HEALTHSOUTH  and the  Subsidiary  as\nfollows:\n\n     3.1  Organization,  Existence and Good Standing.  SHC is a corporation duly\norganized,  validly existing and in good standing under the laws of the State of\nDelaware. SHC has all necessary corporate power to own its properties and assets\nand to carry on its  business as  presently  conducted.  SHC is not, and has not\nbeen within the two years immediately preceding the date of this Plan of Merger,\na subsidiary  or division of another  corporation,  nor has SHC within such time\nowned,  directly  or  indirectly,  any  shares of  HEALTHSOUTH  Common  Stock or\nSubsidiary Common Stock,  except to the extent that shares of HEALTHSOUTH Common\nStock are  beneficially  owned by Richard M. Scrushy and Charles W. Newhall III,\nDirectors of SHC.\n\n     3.2 SHC Capital Stock.  SHC's authorized capital consists of (i) 60,000,000\nshares  of SHC  Common  Stock,  of  which  21,951,901  shares  were  issued  and\noutstanding,  as of January 16,  1995,  and none of which  shares are issued and\nheld as treasury shares,  (ii) 5,450,624 shares of Series A Preferred Stock, par\nvalue $.01 per share, 1,911,902 of which shares are issued and outstanding as of\nthe  date of this  Plan of  Merger  and  none of which  are  issued  and held as\ntreasury  shares;  (iii) 6,000,000 shares of Series B Preferred Stock, par value\n$.01 per share,  3,961,413 of which shares are issued and  outstanding as of the\ndate of this Plan of Merger  and none of which  shares  are  issued  and held as\ntreasury shares;  (iv) 3,571,429  shares of Series C Preferred  Stock,  $.01 per\nshare,  3,439,692 of which shares are issued and  outstanding  as of the date of\nthis Plan of Merger and none of which are issued  and held as  treasury  shares;\n(v) 10,000,000 shares of undesignated preferred stock, par value $.01 per share,\nnone of which shares are issued and  outstanding  as of the date of this Plan of\nMerger  and none of which  are  issued  and held as  treasury  shares;  and (vi)\n700,000  shares of  Non-Voting  Common Stock,  par value  $.0025,  none of which\nshares are issued and  outstanding  and none of which shares are issued and held\nas treasury  shares.  All of the issued and  outstanding SHC Shares are duly and\nvalidly issued, fully paid and nonassessable. Except as set forth on Exhibit 3.2\nattached  hereto  or  otherwise  disclosed  in the  SHC  Documents  (hereinafter\ndefined),  there are no options,  warrants,  or similar rights granted by SHC or\nany other  agreements to which SHC is a party providing for the issuance or sale\nby it of any  additional  securities  which  would  remain in  effect  after the\nEffective Time. There is no liability for dividends  declared or accumulated but\nunpaid with respect to any of the SHC Shares. SHC has not made any distributions\nto any  holders of SHC  Shares or  participated  in or  effected  any  issuance,\nexchange or retirement of SHC Shares,  or otherwise changed the equity interests\nof holders of SHC Shares,  in  contemplation  of effecting the Merger within the\ntwo years immediately  preceding the date of this Plan of Merger. Any SHC Shares\nthat SHC has re-acquired during the two years immediately  preceding the date of\nthis Plan of Merger  have  been so  re-acquired  only for  purposes  other  than\n\"business combinations\",  as such term is defined in Accounting Principles Board\nOpinion No. 16, as amended (\"Business Combinations\").\n\n     3.3  Subsidiaries  and  Affiliated  Partnerships.  (a)  Attached  hereto as\nExhibit  3.3 is a list  of  all  subsidiaries  of  SHC  (individually,  an  \"SHC\nSubsidiary\",  and  collectively,  the \"SHC  Subsidiaries\")  and their  states of\nincorporation. Except as set forth on Exhibit 3.3, SHC does not own stock in and\ndoes not control, directly or indirectly, any other corporation,  association or\nbusiness organization other than the SHC Partnerships (as defined below).\n\n     (b) Also  disclosed  on  Exhibit  3.3 is a list of all  general  or limited\npartnerships  in  which  the  general  partner  is  SHC  or  an  SHC  Subsidiary\n(individually,  an \"SHC Partnership\" and collectively,  the \"SHC  Partnerships\")\nand their states of  organization.  Except as set forth on Exhibit 3.3,  neither\nSHC nor any SHC  Subsidiary  owns an equity  interest  in, nor does such  entity\ncontrol, directly or indirectly, any other joint venture or partnership.\n\n     3.4 Organization,  Existence and Good Standing of SHC Subsidiary and\/or SHC\nPartnerships.  (a) Each SHC Subsidiary is a corporation duly organized,  validly\nexisting  and in good  standing  under  the  laws  of its  respective  state  of\nincorporation.  Each SHC Subsidiary has all necessary corporate power to own its\nproperties and assets and to carry on its business as presently conducted.\n\n     (b) Each SHC  Partnership  is a limited  partnership  validly formed and in\ngood standing under the laws of its respective state of  organization.  Each SHC\nPartnership  has all necessary power to own its property and assets and to carry\non its business as presently conducted.\n\n     3.5  Foreign  Qualifications.   SHC,  each  SHC  Subsidiary  and  each  SHC\nPartnership  is  qualified  to do business as a foreign  corporation  or foreign\ngeneral or limited  partnership,  as the case may be, and is in good standing in\neach jurisdiction where 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 SHC.\n\n     3.6 Power and  Authority.  Subject to the  satisfaction  of the  conditions\nprecedent set forth herein, SHC has the corporate power to execute,  deliver and\nperform the Plan of Merger and all agreements and other  documents  executed and\ndelivered or to be executed and  delivered by it pursuant to the Plan of Merger,\nand,  subject to the  satisfaction of the conditions  precedent set forth herein\nhas taken all action required by its Certificate of Incorporation, Bylaws or\n\notherwise,  to authorize the execution,  delivery and performance of the Plan of\nMerger  and such  related  documents.  Except as set forth on Exhibit  3.6,  the\nexecution  and  delivery  of the Plan of  Merger  does not and,  subject  to the\nreceipt of required  stockholder and regulatory approvals and any other required\nthird-party  consents or  approvals,  the  consummation  of the Merger will not,\nviolate  any  provisions  of  the  Certificate  of  Incorporation  of SHC or any\nprovisions  of, or result  in the  acceleration  of any  obligation  under,  any\nmortgage, lien, lease, agreement, instrument, order, arbitration award, judgment\nor decree,  to which SHC or any SHC Subsidiary or SHC Partnership is a party, or\nby which it is bound,  or violate  any  restrictions  of any kind to which it is\nsubject which, if violated or accelerated  would have a material  adverse effect\non SHC. The  execution  and delivery of this  Agreement has been approved by the\nBoard  of  Directors  of SHC  (or by a  committee  appointed  by such  Board  of\nDirectors for the purpose of approving such execution and delivery).\n\n     3.7 SHC Public Information.  SHC has heretofore furnished  HEALTHSOUTH with\nthe following documents:\n\n     (i) its  Registration  Statement on Form S-1  (Registration  No.  33-77042)\n   relating to the offer and sale of $75,000,000  aggregate  principal amount of\n   11-1\/2% Senior Subordinated Notes due 2004 of SHC;\n\n     (ii) its 1993 Annual Report on Form 10-K; and\n\n     (iii) its  Quarterly  Reports  on Form 10-Q for the fiscal  quarters  ended\n   September 30, 1993, June 30, 1994 and September 30, 1994\n\n(documents  (i)--(iii) above being  collectively  referred to herein as the \"SHC\nDocuments\"). As of their respective dates, the SHC Documents did not contain any\nuntrue  statements of material facts or omit to state material facts required to\nbe stated therein 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 descriptions of the business,  operations and financial  condition of\nSHC  contained in the SHC 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  regulations  promulgated\nunder such statutes.  The financial  statements  contained in the SHC Documents,\ntogether with the notes thereto, have been prepared in accordance with generally\naccepted  accounting  principles  consistently  followed  throughout the periods\nindicated,  reflect all known liabilities of SHC, including all known contingent\nliabilities as of the end of each period reflected  therein,  and present fairly\nthe  financial  condition of SHC at said dates and the  consolidated  results of\noperations  and cash flows of SHC for the periods then ended.  The  consolidated\nbalance  sheet of SHC at  September  30, 1994  included in the SHC  Documents is\nherein sometimes referred to as the \"SHC Balance Sheet\".\n\n     3.8  Properties  and  Assets.  SHC  (including,  as  applicable,   the  SHC\nSubsidiaries  and  the SHC  Partnerships)  owns  all of the  real  and  personal\nproperty included in the SHC Balance Sheet (except assets recorded under capital\nlease  obligations and such property as has been disposed of during the ordinary\ncourse of SHC's  business  since the date of the SHC  Balance  Sheet),  free and\nclear of any liens,  claims,  charges,  exceptions or  encumbrances,  except for\nthose  (i) if any,  which in the  aggregate  are not  material  and which do not\nmaterially affect continued use of such property, or (ii) which are disclosed in\nthe SHC Documents or set forth in Exhibit 3.8.\n\n     3.9 Legal  Proceedings.  Except as listed on Exhibit  3.9  attached to this\nPlan of Merger or  described in the SHC  Documents,  SHC has no knowledge of any\npending or threatened litigation,  governmental  investigation,  condemnation or\nother  proceeding  against or relating to or affecting  SHC or the  transactions\ncontemplated  by this Plan of Merger  for which SHC is  uninsured  or which,  if\nresolved  adversely to SHC, would have a material  adverse effect on SHC and, to\nthe knowledge of SHC, no basis for any such action exists.\n\n     3.10 Contracts,  etc. (a) SHC has made available to HEALTHSOUTH true copies\nof  all  written,  and  has  disclosed  to  HEALTHSOUTH  all  oral,  outstanding\ncontracts,  obligations and  commitments of SHC (including the SHC  Subsidiaries\nand SHC  Partnerships)  entered  into in  connection  with  and  related  to the\n\nbusiness  and  operations  of  SHC  (including  the  SHC  Subsidiaries  and  SHC\nPartnerships)  or  has  otherwise  disclosed  such  contracts,   commitments  or\nobligations in an Exhibit  hereto or to the SHC Documents  which are material to\nthe operations of SHC, the SHC Subsidiaries and the SHC Partnerships, taken as a\nwhole.  Except as otherwise  indicated on Exhibit 3.10,  all of such  contracts,\nobligations  and  commitments  are valid,  binding and enforceable in accordance\nwith their terms  (assuming the other parties thereto are bound) and are in full\nforce and effect,  except where such  invalidity or  unenforceability  would not\nhave a material  adverse effect on SHC.  Except as set forth or  incorporated by\nreference on such Exhibit,  no default or alleged  default by SHC (including the\nSHC Subsidiaries and SHC Partnerships) exists thereunder, except for defaults or\nalleged defaults which would not have a material adverse effect on SHC.\n\n     (b) Except as set forth on Exhibit  3.10, no contract or agreement to which\nSHC or any SHC  Subsidiary  or SHC  Partnership  is a party will,  by its terms,\nterminate  as a result of the  transactions  contemplated  hereby or require any\nconsent  from any  obligor  thereto  in order to remain in full force and effect\nimmediately  after the Effective Time, except for contracts or agreements which,\nif terminated, would not have a material adverse effect on SHC.\n\n     (c) Except as set forth on Exhibit 3.10, none of SHC, any SHC Subsidiary or\nany SHC  Partnership  has granted any right of first refusal or similar right in\nfavor of any third party with respect to any material  portion of its properties\nor assets  (excluding  liens  described  in  Section  3.8) or  entered  into any\nnon-competition agreement or similar agreement restricting its ability to engage\nin any business in any location.\n\n     3.11  Subsequent  Events.  Except as set forth on Exhibit 3.11  attached to\nthis Plan of Merger or disclosed in the SHC  Documents,  SHC has not,  since the\ndate of the SHC Balance Sheet:\n\n     (a) Incurred any material adverse change.\n\n     (b)  Discharged or satisfied any material lien or  encumbrance,  or paid or\nsatisfied any material obligation or liability (absolute, accrued, contingent or\notherwise)  other than (i)  liabilities  shown or  reflected  on the SHC Balance\nSheet or (ii)  liabilities  incurred  since the date of the SHC Balance Sheet in\nthe ordinary course of business,  which  discharge or satisfaction  would have a\nmaterial adverse effect on SHC.\n\n     (c) Increased or established  any reserve for taxes or any other  liability\non its books or otherwise  provided therefor which would have a material adverse\neffect on SHC,  except as may have been  required due to income or operations of\nSHC since the date of the SHC Balance Sheet.\n\n     (d)  Mortgaged,   pledged  or  subjected  to  any  lien,  charge  or  other\nencumbrance any of the assets, tangible or intangible, which assets are material\nto the consolidated business or financial condition of SHC.\n\n     (e) Sold or  transferred  any of the assets  material  to the  consolidated\nbusiness of SHC,  cancelled any material  debts or claims or waived any material\nrights, except in the ordinary course of business.\n\n     (f)  Granted  any  general  or  uniform  increase  in the  rates  of pay of\nemployees or any material increase in salary payable or to become payable by SHC\nto any  officer or  employee,  consultant  or agent  (other  than  normal  merit\nincreases),  or by  means  of any  bonus  or  pension  plan,  contract  or other\ncommitment,  increased in a material  respect the  compensation  of any officer,\nemployee, consultant or agent.\n\n     (g)  Except for this Plan of Merger and any other  agreement  executed  and\ndelivered pursuant to this Plan of Merger, entered into any material transaction\nother than in the ordinary  course of business or permitted under other Sections\nhereof.\n\n     (h) Issued any stock,  bonds or other securities,  other than stock options\ngranted to employees or consultants of SHC or warrants granted to third parties,\nall of which are disclosed on Exhibit 3.2.\n\n     3.12 Accounts Receivable.  (a) Since the date of the SHC Balance Sheet, SHC\nhas not changed any  principle or practice  with respect to the  recordation  of\naccounts  receivable or the  calculation of reserves  therefor,  or any material\ncollection,  discount or write-off policy or procedure.  Accounts receivable are\nrecorded on the SHC Balance Sheet (and the other consolidated  balance sheets of\nSHC included in the SHC Documents) in amounts estimated to be net of contractual\nallowances  related to third-party  payor  arrangements.  SHC (including the SHC\nSubsidiaries  and  SHC  Partnerships)  is  in  compliance  with  the  terms  and\nconditions  of all  third-party  payor  arrangements  relating  to its  accounts\nreceivable,  except  to the  extent  that  such  noncompliance  would not have a\nmaterial adverse effect on SHC.\n\n     (b) Without  limiting the  generality  of the  foregoing,  SHC and each SHC\nSubsidiary or SHC  Partnership  is in compliance  with all Medicare and Medicaid\nprovider  agreements  to which it is a party,  except  to the  extent  that such\nnoncompliance would not have a material adverse effect on SHC.\n\n     3.13 Tax Returns.  SHC has filed all tax returns required to be filed by it\nor 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 SHC. Except as\ndisclosed  on  Exhibit  3.13,  SHC has  made all  payments  shown as due on such\nreturns. Except as disclosed on Exhibit 3.13, SHC has not been notified that any\ntax returns of SHC are currently under audit by the Internal  Revenue Service or\nany  state or local  tax  agency.  No  agreements  have been made by SHC for the\nextension of time or the waiver of the statute of limitations for the assessment\nor payment of any federal, state or local taxes.\n\n     3.14  Commissions and Fees.  Except for fees payable to Alex.  Brown &amp; Sons\nIncorporated  (\"Alex.   Brown\"),   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 SHC or its shareholders,\nofficers or Directors, or any of them.\n\n     3.15 Employee Benefit Plans; Employment Matters. (a) Except as set forth on\nExhibit 3.15(a) attached to this Plan of Merger, SHC has neither established nor\nmaintains  nor is  obligated  to make  contributions  to or under  or  otherwise\nparticipate  in (i) 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), (ii) any pension,  profit-sharing,  retirement\nor other plan, program or arrangement, or (iii) any other employee benefit plan,\nfund or program,  including, but not limited to, those described in Section 3(3)\nof ERISA.  Except as  disclosed  on Exhibit  3.15(a),  all such plans  listed on\nExhibit 3.15(a) (individually, a \"Plan\" and collectively, the \"Plans\") have been\noperated  and  administered  in all material  respects 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.  Except as disclosed on Exhibit 3.15(a),  no act or\nfailure to act by SHC has resulted in a \"prohibited  transaction\" (as defined in\nERISA)  with  respect  to the  Plans  that  is not  subject  to a  statutory  or\nregulatory  exception.  No \"reportable event\" (as defined in ERISA) has occurred\nwith respect to any of the Plans which is subject to Title IV of ERISA.  SHC has\nnot previously 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 on Exhibit 3.15(b),  SHC 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  materially  altered,  upon  the\noccurrence of a transaction  of the nature  contemplated  by this Plan of Merger\nand which provides for the payment of in excess of $100,000,  or (iii) agreement\nor plan,  including  any stock  option  plan,  stock  appreciation  rights plan,\nrestricted  stock plan or stock purchase plan, any of the benefits of which will\nbe increased, or the vesting, the benefits of which will be accelerated,  by the\noccurrence of any of the transactions contemplated by this Plan of Merger or the\nvalue of any of the benefits of which will be  calculated on the basis of any of\nthe transactions contemplated by this Plan of Merger.\n\n     3.16 Compliance  with Laws in General.  Except as set forth on Exhibit 3.16\nor disclosed in the SHC Documents,  SHC has not received any notices of material\nviolations  of any federal,  state and local laws,  regulations  and  ordinances\nrelating to its business and  operations,  including,  without  limitation,  the\nFederal  Environmental  Protection Act, the Occupational  Safety and Health Act,\nthe  Americans  with  Disabilities  Act,  the  Medicare or  applicable  Medicaid\nstatutes  and  regulations  and any  Environmental  Laws,  and no  notice of any\npending  inspection  or violation of any such law,  regulation  or ordinance has\nbeen received by SHC which, if it were determined that a violation had occurred,\nwould have a material adverse effect on SHC.\n\n     3.17 Regulatory Approvals. SHC and each SHC Subsidiary and SHC Partnership,\nas applicable,  holds all licenses,  certificates  of need and other  regulatory\napprovals required or necessary to be applied for or obtained in connection with\nits business as presently conducted or as proposed to be conducted, except where\nthe failure to obtain such license,  certificate of need or regulatory  approval\nwould not have a material adverse effect on SHC. All such licenses, certificates\nof need and other regulatory approvals relating to the business,  operations and\nfacilities of SHC and each  Subsidiary and SHC Partnership are in full force and\neffect,  except  where  any  failure  of such  license,  certificate  of need or\nregulatory  approval  to be in full force and  effect  would not have a material\nadverse  effect on SHC.  Except as disclosed in the SHC  Documents,  any and all\npast litigation  concerning  such licenses,  certificates of need and regulatory\napprovals,  and all claims and causes of action raised therein, has been finally\nadjudicated.  No such license,  certificate  of need or regulatory  approval has\nbeen  revoked,  conditioned  (except as may be customary)  or  restricted,  and,\nexcept  as  disclosed  in the SHC  Documents,  no  action  (equitable,  legal or\nadministrative),  arbitration  or  other  process  is  pending,  or to the  best\nknowledge of SHC,  threatened,  which in any way  challenges the validity of, or\nseeks to revoke, condition or restrict any such license, certificate of need, or\nregulatory approval.  Subject to compliance with applicable  securities laws and\nthe Hart  Scott-Rodino  Antitrust  Improvements  Act of 1976,  as amended  (\"HSR\nAct\"), the consummation of the Merger will not violate any law or restriction to\nwhich SHC is subject which, if violated, would have a material adverse effect on\nSHC.\n\n     3.18 Retirement or Re-Acquisition of HEALTHSOUTH Common Stock. SHC is not a\nparty to any  agreement  the  effect of which  would be to  require  HEALTHSOUTH\ndirectly  or  indirectly  to retire or  re-acquire  all or part of the shares of\nHEALTHSOUTH Common Stock issued pursuant to Section 2.1 hereof.\n\n     3.19 Disposition of Assets of Surviving Corporation.  Except as provided in\nExhibit 3.11 with the consent of HEALTHSOUTH,  SHC is not a party to any plan to\ndispose of a significant part of the assets of the Surviving  Corporation within\ntwo years after the Closing Date, other than dispositions in the ordinary course\nof business of the Surviving  Corporation and dispositions intended to eliminate\nduplicate facilities or excess capacity.\n\n     3.20 Vote Required.  The  affirmative  vote of the holders of a majority of\neach class of the  outstanding  Preferred  Stock  entitled to vote thereon and a\nmajority of the outstanding SHC Shares entitled to vote thereon is the only vote\nof the holders of any class or series of SHC capital stock  necessary to approve\nthis Plan of Merger, the Merger and the transactions contemplated hereby.\n\n     3.21  Opinion of  Financial  Advisor.  SHC has received the oral opinion of\nAlex. Brown to the effect that, as of the date hereof, the Merger  Consideration\nis fair to the holders of SHC Shares from a financial  point of view,  a written\ncopy of which opinion will be delivered by SHC 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 Securities and Exchange Commission.\n\n     3.22 No Untrue  Representations.  No  representation  or warranty by SHC in\nthis Plan of Merger,  and no Exhibit or certificate  issued by SHC and furnished\nor to be furnished to HEALTHSOUTH  pursuant  hereto,  or in connection  with the\ntransactions  contemplated hereby, contains or will contain any untrue statement\nof a material  fact in response to the  disclosure  requested,  or omits or will\nomit to  state a  material  fact  necessary  to make  the  statements  or  facts\ncontained  therein in response to the  disclosure  requested  not  misleading in\nlight of all of the circumstances then prevailing.\n\nSection 4. Representations and Warranties of the Subsidiary and HEALTHSOUTH.\n\n   The Subsidiary and HEALTHSOUTH,  jointly and severally,  hereby represent and\nwarrant to SHC 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 SHC Common Stock.\n\n     4.2 Power and Authority.  The  Subsidiary  has corporate  power to execute,\ndeliver and perform the Plan of Merger and all  agreements  and other  documents\nexecuted and delivered,  or to be executed and delivered,  by it pursuant to the\nPlan of Merger, and, subject to the satisfaction of the conditions precedent set\nforth herein  subject to  stockholder  approval as required by Delaware law, has\ntaken all actions required by law, its Certificate of Incorporation,  its Bylaws\nor otherwise,  to authorize the execution and delivery of the Plan of Merger and\nsuch related  documents.  The  execution and delivery of the Plan of Merger does\nnot and, subject to the receipt of required stockholder and regulatory approvals\nand any other required  third-party  consents or approvals,  the consummation of\nthe  Merger  contemplated  hereby  will  not,  violate  any  provisions  of  the\nCertificate  of  Incorporation  or Bylaws of the  Subsidiary,  or any agreement,\ninstrument,  order,  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.\n\n     4.3 Commissions and Fees.  Except for fees owed to Smith Barney Inc., there\nare no claims for brokerage  commissions,  investment  bankers' fees or finder's\nfees in  connection  with the  transaction  contemplated  by the Plan of  Merger\nresulting  from any  action  taken  by the  Subsidiary  or any of its  officers,\nDirectors or agents.\n\n     4.4 No  Subsidiaries.  The  Subsidiary  does not own stock in, and does not\ncontrol directly or indirectly,  any other corporation,  association or business\norganization. The Subsidiary is not a party to any joint venture or partnership.\n\n     4.5 Legal Proceedings.  There are no actions,  suits or proceedings pending\nor  threatened  against  the  Subsidiary,  at law or in equity,  relating  to or\naffecting the Subsidiary,  including the Merger. The Subsidiary does not know or\nhave any reasonable  grounds to know of any  justification  for any such action,\nsuit or proceeding.\n\n     4.6 No Contracts or Liabilities.  Other than the obligations  created under\nthe Plan of Merger, the Subsidiary is not obligated under any contracts, claims,\nleases, liabilities (contingent or otherwise), loans or otherwise.\n\nSection 5. Representations and Warranties of HEALTHSOUTH.\n\n   HEALTHSOUTH hereby represents and warrants to SHC as follows:\n\n     5.1 Organization, Existence and Good Standing. HEALTHSOUTH is a corporation\nduly  organized and validly  existing and is in good standing  under the laws of\nthe State of Delaware.  HEALTHSOUTH has all necessary corporate power to own its\nproperties  and  assets and to carry on its  business  as  presently  conducted.\nHEALTHSOUTH  is duly  qualified  to do business  and is in good  standing in all\njurisdictions  in which the character of the property owned,  leased or operated\nor the nature of the business  transacted by it makes  qualification  necessary.\nHEALTHSOUTH is not, and has not been within the two years immediately  preceding\nthe  date  of  this  Plan  of  Merger,  a  subsidiary  or  division  of  another\ncorporation, nor has HEALTHSOUTH within such time owned, directly or indirectly,\nany shares of SHC Common Stock.\n\n     5.2  Power and  Authority.  HEALTHSOUTH  has  corporate  power to  execute,\ndeliver and perform the Plan of Merger and all  agreements  and other  documents\nexecuted and delivered,  or to be executed and delivered,  by it pursuant to the\nPlan of Merger,  and, subject to the satisfaction of the conditions recedent set\n\nforth  herein  has  taken  all  actions  required  by law,  its  Certificate  of\nIncorporation,  its Bylaws or otherwise, to authorize the execution and delivery\nof the Plan of Merger and such related documents.  The execution and delivery of\nthe 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 the Certificate of Incorporation or Bylaws of HEALTHSOUTH,  or\nany provision of, or result in the  acceleration  of any obligation  under,  any\nmortgage, lien, lease, agreement, instrument, order, arbitration award, judgment\nor decree to which  HEALTHSOUTH  is a party or by which it is bound,  or violate\nany restrictions of any kind to which HEALTHSOUTH is subject.  The execution and\ndelivery  of this  Agreement  has been  approved  by the Board of  Directors  of\nHEALTHSOUTH.\n\n     5.3 HEALTHSOUTH Common Stock. On the Closing Date,  HEALTHSOUTH will have a\nsufficient  number of  authorized  but unissued  and\/or  treasury  shares of its\nCommon Stock  available  for issuance to the holders of SHC Shares in accordance\nwith the provisions of the Plan of Merger.  The  HEALTHSOUTH  Common Stock to be\nissued pursuant to the Plan of Merger will,  when so delivered,  be (i) duly and\nvalidly  issued,  fully  paid and  nonassessable,  (ii)  issued  pursuant  to an\neffective  registration  statement under the Securities Act of 1933, as amended,\nand (iii)  authorized  for  listing on the New York Stock  Exchange,  Inc.  (the\n\"Exchange\") upon official notice of issuance.\n\n     5.4  Capitalization.   HEALTHSOUTH  has  an  authorized  capitalization  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\n100,000,000  shares  of  Common  Stock,  par  value  $.01  per  share,  of which\n35,533,661  shares  are issued and  outstanding,  and 91,000  shares are held in\ntreasury.  All of the issued and outstanding  shares of HEALTHSOUTH Common Stock\nhave been duly and validly issued and are fully paid and non-assessable.  Except\nas disclosed in the HEALTHSOUTH Documents (as hereinafter  defined),  and except\nas described on Exhibit 5.4,  there are no options,  warrants or similar  rights\ngranted by HEALTHSOUTH or any other  agreements to which  HEALTHSOUTH is a party\nproviding for the issuance or sale by it of any additional securities.  There is\nno liability for dividends  declared or  accumulated  but unpaid with respect to\nany  shares  of  HEALTHSOUTH   Common  Stock.   HEALTHSOUTH  has  not  made  any\ndistributions  to any holder of HEALTHSOUTH  Common Stock or  participated in or\neffected any issuance,  exchange or retirement of HEALTHSOUTH  Common Stock,  or\notherwise  changed the equity interests of holders of HEALTHSOUTH  Common Stock,\nin  contemplation  of  effecting  the Merger  within  the two years  immediately\npreceding  the date of this Plan of  Merger.  Any shares of  HEALTHSOUTH  Common\nStock  that  HEALTHSOUTH  has  re-acquired  during  the  two  years  immediately\npreceding  the date of this Plan of Merger  have  been so  re-acquired  only for\npurposes other than Business Combinations.\n\n     5.5 Subsidiary Common Stock.  HEALTHSOUTH owns, beneficially and of record,\nall of the issued and outstanding  shares of Subsidiary Common Stock,  which are\nvalidly issued and outstanding, fully paid and nonassessable,  free and clear of\nall liens and  encumbrances.  HEALTHSOUTH has the corporate power to endorse and\nsurrender  such  Subsidiary  Shares  for  cancellation  pursuant  to the Plan of\nMerger.  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.  HEALTHSOUTH has heretofore  furnished SHC with\nthe following documents:\n\n     (i) its Annual Report on Form 10-K for the Fiscal Year Ended December\n31, 1993;\n\n    (ii) its 1993 Annual Report to Stockholders;\n\n   (iii) the Proxy Statement utilized in soliciting proxies in connection\nwith the 1994 Annual Meeting of Stockholders of HEALTHSOUTH;\n\n    (iv) its Quarterly  Reports on Form 10-Q for the fiscal quarters ended March\n31, June 30 and September 30, 1994;\n\n     (v) the Registration Statement on Form S-3 (Registration No. 33-52111)\nrelating to a recent public offering of debt securities of HEALTHSOUTH,\ntogether with Amendments No. 1, No. 2 and No. 3 thereto; and\n\n    (vi) the Proxy  Statement --  Prospectus  relating to its recent merger with\nReLife, Inc.\n\n(documents  (i)-  (vi)  above  being  collectively  referred  to  herein  as the\n\"HEALTHSOUTH  Documents\").   As  of  their  respective  dates,  the  HEALTHSOUTH\nDocuments  did not contain any untrue  statements  of material  facts or omit to\nstate  material  facts  required to be stated  therein or  necessary to make the\nstatements  therein,  in light of the circumstances  under which they were made,\nnot misleading.  As of their respective dates, the descriptions of the business,\noperations and financial  condition of HEALTHSOUTH  contained in the HEALTHSOUTH\nDocuments complied in all material respects with the applicable  requirements of\nthe Securities Act of 1933, as amended, and the Securities Exchange Act of 1934,\nas amended, and the regulations  promulgated under such statutes.  The financial\nstatements  contained  in the  HEALTHSOUTH  Documents,  together  with the notes\nthereto,  have been prepared in accordance  with generally  accepted  accounting\nprinciples  consistently followed throughout the periods indicated,  reflect all\nknown liabilities of HEALTHSOUTH,  including all known contingent liabilities as\nof the end of each period  reflected  therein,  and present fairly the financial\ncondition  of  HEALTHSOUTH  at  said  dates  and  the  consolidated  results  of\noperations and cash flows of HEALTHSOUTH for the periods then ended.\n\n     5.7 Investment  Intent.  HEALTHSOUTH is acquiring the SHC Shares  hereunder\nfor its own account and not with a view to the distribution or sale thereof, and\nHEALTHSOUTH has no understanding,  agreement or arrangement to sell, distribute,\npartition or  otherwise  transfer or assign all or any part of the SHC Shares to\nany other person, firm or corporation.\n\n     5.8 Commissions and Fees.  Except for fees owed to Smith Barney Inc., there\nare no claims for brokerage  commissions,  investment  bankers' fees or finder's\nfees in  connection  with the  transactions  contemplated  by the Plan of Merger\nresulting from any action taken by HEALTHSOUTH or any of its officers, Directors\nor agents.\n\n     5.9 Legal  Proceedings.  Except as disclosed in the HEALTHSOUTH  Documents,\nthere is no material litigation,  governmental investigation or other proceeding\npending or, so far as is known to HEALTHSOUTH, threatened against or relating to\nHEALTHSOUTH,  its properties or business, or the transaction contemplated by the\nPlan of Merger  and,  so far as is known to  HEALTHSOUTH,  no basis for any such\naction exists.\n\n     5.10 No Violations.  Subject to compliance with applicable  securities laws\nand the HSR Act,  the  consummation  of the Merger  will not  violate any law or\nrestriction to which HEALTHSOUTH is subject.\n\n     5.11 No Material Changes.  Since September 30, 1994, except as set forth on\nExhibit  5.11,  there  has not  been  (i) any  material  adverse  change  in the\nfinancial  condition,  business,  properties,  or assets of HEALTHSOUTH  and its\nsubsidiaries;  (ii) any  material  loss or  damage to any of the  properties  or\nassets of HEALTHSOUTH and its subsidiaries (whether or not covered by insurance)\nwhich  affects or impairs the ability of  HEALTHSOUTH  and its  subsidiaries  to\nconduct their businesses or any labor trouble or any other event or condition of\nany character which has materially and adversely affected HEALTHSOUTH's business\nor the business of any of its subsidiaries;  (iii) any mortgage or pledge of any\nof the properties or assets of HEALTHSOUTH  or any of its  subsidiaries,  or any\nindebtedness  incurred by HEALTHSOUTH or any of its  subsidiaries  maturing more\nthan one year from the date the  indebtedness  was incurred;  (iv) any purchase,\nredemption,  or other  acquisition  by  HEALTHSOUTH  of any shares of its Common\nStock; (v) any payment or declaration of a dividend or any other distribution or\npayment in respect of  HEALTHSOUTH  Common Stock;  (vi) any  issuance,  sale, or\nother disposition of any shares, options or warrants of HEALTHSOUTH Common Stock\nor of any  shares of  capital  stock of any  subsidiary  of  HEALTHSOUTH  or any\nevidence of  indebtedness  or securities of HEALTHSOUTH or any of  HEALTHSOUTH's\nsubsidiaries, except upon exercise of previously outstanding stock options or in\nthe ordinary course of HEALTHSOUTH's  business;  or (vii) any notice received by\nHEALTHSOUTH  or any  of its  subsidiaries  from  any  state  or  federal  taxing\nauthorities  notifying that HEALTHSOUTH or any of its subsidiaries is subject to\nany material action or proceeding for assessment or collection of taxes asserted\nagainst HEALTHSOUTH or any of its subsidiaries other than actions or proceedings\nor claims for  assessment or  collection  of taxes which are being  contested in\ngood faith by appropriate proceedings.\n\n     5.12 Retirement or Re-Acquisition of HEALTHSOUTH Common Stock.  HEALTHSOUTH\nhas not agreed directly or indirectly to retire or re-acquire all or part of the\nshares of HEALTHSOUTH Common Stock issued pursuant to Section 2.1 hereof.\n\n     5.13 Disposition of Assets of Surviving  Corporation.  HEALTHSOUTH does not\nintend or plan to dispose of, or to cause the Surviving  Corporation  to dispose\nof, a  significant  part of the assets of the Surviving  Corporation  within two\nyears after the Effective Time,  other than  dispositions in the ordinary course\nof business of the Surviving  Corporation and dispositions intended to eliminate\nduplicate facilities or excess capacity.\n\n     5.14 Vote Required.  The  affirmative  vote of the holders of a majority of\nthe outstanding  shares of HEALTHSOUTH  Common Stock entitled to vote thereon is\nthe only vote of the  holders  in each  class or series of  HEALTHSOUTH  capital\nstock necessary to approve this Plan of Merger,  the Merger and the transactions\ncontemplated by this Plan of Merger.\n\n     5.15  Opinion of  Financial  Advisor.  HEALTHSOUTH  has  received  the oral\nopinion of Smith  Barney Inc. to the effect  that,  as of the date  hereof,  the\nMerger  Consideration  is fair to HEALTHSOUTH  from a financial point of view, a\nwritten copy of which opinion will be delivered by  HEALTHSOUTH  to SHC prior to\nthe date on which the  definitive  proxy  materials for the Proxy  Statement (as\ndefined  in  Section   7.4(a))  are  filed  with  the  Securities  and  Exchange\nCommission.\n\n     5.16 Tax  Returns.  HEALTHSOUTH  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\nHEALTHSOUTH.  HEALTHSOUTH  has made all payments  shown as due on such  returns.\nHEALTHSOUTH  has not been  notified  that any tax  returns  of  HEALTHSOUTH  are\ncurrently under audit by the Internal  Revenue Service or any state or local tax\nagency. No agreements have been made by HEALTHSOUTH for the extension of time or\nthe waiver of the statute of  limitations  for the  assessment or payment of any\nfederal, state or local taxes.\n\n     5.17 Employee Benefit Plans; Employment Matters. (a) Except as disclosed in\nthe HEALTHSOUTH Documents, HEALTHSOUTH has neither established nor maintains nor\nis obligated to make  contributions to or under or otherwise  participate in (i)\nany bonus or other type of  incentive  compensation  plan,  program,  agreement,\npolicy,  commitment,  contract  or  arrangement  (whether  or not set forth in a\nwritten document), (ii) any pension,  profit-sharing,  retirement or other plan,\nprogram  or  arrangement,  or (iii) any other  employee  benefit  plan,  fund or\nprogram,  including,  but not limited to,  those  described  in Section  3(3) of\nERISA.  All such plans  have been  operated  and  administered  in all  material\nrespects in accordance with, as applicable,  ERISA, the Internal Revenue Code of\n1986,  as amended,  Title VII of the Civil Rights Act of 1964,  as amended,  the\nEqual Pay Act of 1967, as amended,  the Age  Discrimination in Employment Act of\n1967, as amended, and the related rules and regulations adopted by those federal\nagencies  responsible for the  administration of such laws. No act or failure to\nact by  HEALTHSOUTH  has resulted in a \"prohibited  transaction\"  (as defined in\nERISA)  with  respect  to the  Plans  that  is not  subject  to a  statutory  or\nregulatory  exception.  No \"reportable event\" (as defined in ERISA) has occurred\nwith  respect to any of the Plans which is subject to Title IV of ERISA.  Except\nas disclosed in the HEALTHSOUTH Documents,  HEALTHSOUTH has not previously made,\nis not  currently  making,  and is  not  obligated  in  any  way  to  make,  any\ncontributions   to  any   multi-employer   plan   within  the   meaning  of  the\nMulti-Employer Pension Plan Amendments Act of 1980.\n\n     (b) Except as disclosed in the HEALTHSOUTH Documents,  HEALTHSOUTH is not a\nparty to any oral or written (i) union, guild or collective bargaining agreement\nwhich  agreement  covers  employees in the United States (nor is it aware of any\nunion  organizing  activity  currently  being conducted in respect to any of its\nemployees),  (ii) agreement with any executive officer or other key employee the\nbenefits of which are contingent,  or the terms of which are materially altered,\nupon the occurrence of a transaction of the nature  contemplated by this Plan of\nMerger and which  provides  for the payment of in excess of  $100,000,  or (iii)\nagreement or plan,  including any stock option plan, stock  appreciation  rights\nplan, restricted stock plan or stock purchase plan, any of the benefits of which\nwill be increased,  or the esting the benefits of which will be accelerated,  by\n\nthe occurrence of any of the transactions contemplated by this Plan of Merger or\nthe value of any of the benefits of which will be calculated on the basis of any\nof the transactions contemplated by this Plan of Merger.\n\n     5.18  Compliance  with  Laws  in  General.   Except  as  disclosed  in  the\nHEALTHSOUTH  Documents,  HEALTHSOUTH  has not  received  any notices of material\nviolations  of any federal,  state and local laws,  regulations  and  ordinances\nrelating to its business and  operations,  including,  without  limitation,  the\nFederal  Environmental  Protection Act, the Occupational  Safety and Health Act,\nthe  Americans  with  Disabilities  Act,  the  Medicare or  applicable  Medicaid\nstatutes  and  regulations  and any  Environmental  Laws,  and no  notice of any\npending  inspection  or violation of any such law,  regulation  or ordinance has\nbeen received by HEALTHSOUTH with respect to any alleged  violation which, if it\nwere determined that a violation occurred,  would have a material adverse effect\non HEALTHSOUTH.\n\n     5.19 Regulatory Approvals.  HEALTHSOUTH holds all licenses, certificates of\nneed and other regulatory  approvals  required or necessary to be applied for or\nobtained in connection  with its business as presently  conducted or as proposed\nto be conducted, except where the failure to obtain such license, certificate of\nneed or  regulatory  approval  would  not  have a  material  adverse  effect  on\nHEALTHSOUTH.  All  such  licenses,  certificates  of need and  other  regulatory\napprovals relating to the business, operations and facilities of HEALTHSOUTH are\nin full force and effect. Except as disclosed in the HEALTHSOUTH Documents,  any\nand all past  litigation  concerning  such  licenses,  certificates  of need and\nregulatory  approvals,  and all claims and causes of action raised therein,  has\nbeen finally  adjudicated.  No such license,  certificate  of need or regulatory\napproval  has  been  revoked,  conditioned  (except  as  may  be  customary)  or\nrestricted,  and,  except as disclosed in the HEALTHSOUTH  Documents,  no action\n(equitable,  legal or administrative),  arbitration or other process is pending,\nor to the best knowledge of HEALTHSOUTH, threatened, which in any way challenges\nthe  validity of, or seeks to revoke,  condition  or restrict any such  license,\ncertificate  of  need,  or  regulatory  approval.  Subject  to  compliance  with\napplicable  securities laws and the HSR Act, the consummation of the Merger will\nnot violate any law or restriction to which HEALTHSOUTH is subject.\n\n     5.20 No Untrue Representation. No representation or warranty by HEALTHSOUTH\nin this Plan of Merger,  and no Exhibit or Certificate issued by HEALTHSOUTH and\nfurnished or to be furnished to SHC pursuant  hereto,  or in connection with the\ntransactions  contemplated hereby, contains or will contain any untrue statement\nof a material  fact in response to the  disclosure  requested,  or omits or will\nomit to state a material fact necessary to make the statement or facts contained\ntherein in response to the  disclosure  requested not misleading in light of all\nof the circumstances then prevailing.\n\nSection 6. Access to Information and Documents.\n\n     6.1 Access to  Information.  Between the date hereof and the Closing  Date,\neach of SHC and  HEALTHSOUTH  will  give to the  other  party  and its  counsel,\naccountants  and  other  representatives  full  access  to all  the  properties,\ndocuments,  contracts, personnel files and other records of such party and shall\nfurnish the other party with copies of such documents and with such  information\nwith  respect to the  affairs of such party as the other  party may from time to\ntime  reasonably  request.  Each party will  disclose and make  available to the\nother party and its representatives all books,  contracts,  accounts,  personnel\nrecords,  letters of intent,  papers,  records,  communications  with regulatory\nauthorities and other documents  relating to the business and operations of such\nparty.  In addition,  SHC shall make available to HEALTHSOUTH  all such banking,\ninvestment  and  financial  information  as shall be  necessary to allow for the\nefficient  integration of SHC's banking,  investment and financial  arrangements\nwith those of HEALTHSOUTH at the Effective Time.\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  of such  party  shall be\ndeemed to be confidential information, unless and until such information becomes\npublic otherwise than through the act or omission of the other party. Each party\nagrees  that it will not cause any  confidential  information  to be isclosed to\n\nunauthorized  persons and that it will not, without the prior written consent of\nthe  affected  person,  disclose  or make use of such  confidential  information\nexcept in connection with the  transactions  contemplated by this Plan of Merger\nor as otherwise required by applicable law.\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 parties shall be entitled to rely upon\nsuch express  representations and warranties  irrespective of any investigations\nmade by such parties,  except to the extent that such  investigations  result in\nactual  knowledge of the  inaccuracy or falsehood of particular  representations\nand warranties.\n\nSection 7. Covenants.\n\n     7.1 Preservation of Business. SHC will use its best efforts to preserve the\nbusiness  organization  of SHC intact,  to keep available to HEALTHSOUTH and the\nSurviving  Corporation  the  services of the present  employees  of SHC,  and to\npreserve  for  HEALTHSOUTH  and the  Surviving  Corporation  the goodwill of the\nsuppliers, customers and others having business relations with SHC.\n\n     7.2 Material  Transactions.  Prior to the Closing Date, SHC will not (other\nthan as  required  pursuant  to the terms of the Plan of Merger and the  related\ndocuments), without first obtaining the written consent of HEALTHSOUTH:\n\n     (a) Encumber any asset or enter into any  transaction  or make any contract\nor commitment relating to the properties, assets and business of SHC, other than\nin the ordinary course of business or as otherwise disclosed herein.\n\n     (b) Enter into any employment  contract which is not terminable upon notice\nof 30 days or less,  at will,  and  without  penalty to SHC  except as  provided\nherein.\n\n     (c) Except in connection  with the ongoing  construction  or development of\nnew surgery  centers as  disclosed  to  HEALTHSOUTH,  enter into any contract or\nagreement  (i) which  cannot be performed  within three months or less,  or (ii)\nwhich involves the expenditure of over $100,000.\n\n     (d) Issue or sell,  or agree to issue or sell,  any shares of capital stock\nor other securities of SHC, except upon exercise of currently  outstanding stock\noptions or warrants.\n\n     (e) Except for  contributions  to the  Outpatient\/Midwest  Retirement Plan,\nmake any  payment or  distribution  to the  trustee  under any  bonus,  pension,\nprofit-sharing  or  retirement  plan or incur  any  obligation  to make any such\npayment  or  contribution  which is not in  accordance  with  SHC's  usual  past\npractice,  or make any payment or contributions or incur any obligation pursuant\nto or in respect of any other plan or  contract  or  arrangement  providing  for\nbonuses,  executive incentive  compensation,  pensions,  deferred  compensation,\nretirement  payments,  profit-sharing  or the like,  establish or enter into any\nsuch plan, contract or arrangement, or terminate any Plan.\n\n     (f) Extend  credit to anyone,  except in the  ordinary  course of  business\nconsistent with prior practices.\n\n     (g) Guarantee the obligation of any person, firm or corporation,  except in\nthe ordinary course of business consistent with prior practices.\n\n     (h) Amend its Certificate of Incorporation or Bylaws.\n\n     (i) Take any action of a character described in Section 3.11(a) to 3.11(h),\ninclusive.\n\n     7.3 Meetings of Stockholders. (a) Each of HEALTHSOUTH and SHC will take all\nsteps   necessary  in  accordance   with  their   respective   Certificates   of\nIncorporation  and Bylaws to call,  give notice of, convene and hold meetings of\ntheir respective  stockholders as soon as practicable after the effectiveness of\nthe Registration  Statement (as defined in Section 7.4 hereof),  for the purpose\nof  approving  this  Plan  of  Merger  and for  such  other  purposes  as may be\nnecessary.  Unless  this Plan of Merger  shall have been  alidly  terminated  as\n\nprovided herein, the Boards of Directors of HEALTHSOUTH and SHC (subject, in the\ncase of SHC, to the  provisions of Section  8.1(d) hereof) will (i) recommend to\ntheir  respective  stockholders  the  approval  of  this  Plan  of  Merger,  the\ntransactions  contemplated  hereby and any other  matters to be submitted to the\nstockholders  in  connection  therewith,  to the extent  that such  approval  is\nrequired by applicable law in order to consummate the Merger, and (ii) use their\nrespective  reasonable,  good  faith  efforts to obtain  the  approval  by their\nrespective stockholders of this Plan of Merger and the transactions contemplated\nhereby.\n\n     (b) Nothing  contained  herein shall affect the right of  HEALTHSOUTH,  the\nSubsidiary  and SHC to take action by written  consent in lieu of meeting to the\nextent  permitted  by  applicable  law  and  their  respective  Certificates  of\nIncorporation and Bylaws.\n\n     7.4 Registration Statement. (a) HEALTHSOUTH shall prepare and file with the\nSecurities and Exchange  Commission and any other applicable  regulatory bodies,\nas soon as reasonably  practicable,  a  Registration  Statement on Form S-4 with\nrespect to the  shares of  HEALTHSOUTH  Common  Stock to be issued in the Merger\n(the \"Registration  Statement\"),  and will otherwise proceed promptly to satisfy\nthe  requirements of the Securities Act of 1933,  including Rule 145 thereunder.\nSuch Registration Statement shall contain a joint proxy statement of HEALTHSOUTH\nand SHC containing the  information  required by the Securities  Exchange Act of\n1934 (the \"Proxy  Statement\").  HEALTHSOUTH  shall take all reasonable  steps to\ncause the Registration  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.  HEALTHSOUTH\nshall  use its  reasonable,  good  faith  efforts  to have the  Proxy  Statement\napproved by the SEC under the provisions of the Securities Exchange Act of 1934.\n\n     (b) Prior to the Closing Date,  HEALTHSOUTH shall use its reasonable,  good\nfaith  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     (c) Prior to the Closing Date, HEALTHSOUTH shall file an additional listing\napplication (the \"Listing Application\") with the Exchange relating to the shares\nof  HEALTHSOUTH  Common Stock to be issued in  connection  with the Merger,  and\nshall use its reasonable, good faith efforts to cause such shares of HEALTHSOUTH\nCommon Stock to be approved for listing on the Exchange, upon official notice of\nissuance, prior to the Closing Date.\n\n     (d) SHC shall furnish all  information to  HEALTHSOUTH  with respect to SHC\nand the SHC  Subsidiaries  and SHC  Partnerships  as HEALTHSOUTH  may reasonably\nrequest for inclusion in the Registration Statement, the Proxy Statement and the\nListing  Application,  and shall  otherwise  cooperate  with  HEALTHSOUTH in the\npreparation and filing of such documents.\n\n     7.5 Exemption from State Takeover Laws. SHC shall take all reasonable steps\nnecessary  to  exempt  SHC and the  Merger  from the  requirements  of any state\ntakeover  statute or other  similar  state law which would prevent or impede the\nconsummation of the transactions  contemplated  hereby, by action of SHC's Board\nof Directors or otherwise.\n\n     7.6 HSR Act  Compliance.  HEALTHSOUTH  and SHC shall  promptly  make  their\nrespective  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\nSHC will use their respective reasonable, good faith efforts to obtain all other\npermits,   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 SHC will consult with each other\nbefore issuing any press release or otherwise  making any public  statement with\nrespect to the transactions  contemplated by this Plan of Merger,  and shall not\nissue any such press  release  or make any such  public  tatement  prior to such\n\nconsultation  except as may be required by applicable law or requirements of the\nExchange. The parties shall issue a joint press release,  mutually acceptable to\nHEALTHSOUTH  and SHC,  promptly  upon  execution  and  delivery  of this Plan of\nMerger.\n\n     7.8  Resignation  of SHC  Directors.  On or prior to the Closing Date,  SHC\nshall  deliver  to  HEALTHSOUTH  evidence  satisfactory  to  HEALTHSOUTH  of the\nresignation  of the Directors of SHC, such  resignations  to be effective on the\nClosing Date.\n\n     7.9 Notice of Subsequent  Events.  Each party hereto shall notify the other\nparties of any  changes,  additions  or events  which would  cause any  material\nchange in or material  addition to any Exhibit  delivered by the notifying party\nunder this Plan of Merger,  promptly  after the  occurrence  of the same. If the\neffect of such change or addition  would,  individually or in the aggregate with\nthe effect of changes or additions previously disclosed pursuant to this Section\n7.9,   constitute  a  material  adverse  effect  on  the  notifying  party,  the\nnon-notifying party may, within ten days after receipt of such notice,  elect to\nterminate this Plan of Merger. If the non-notifying  party does not give written\nnotice of such termination  within such 10-day period,  the non-notifying  party\nshall be deemed to have  consented  to such change or addition  and shall not be\nentitled  to  terminate  this Plan of Merger by reason  thereof  (except  to the\nextent that a material adverse change with respect to the notifying party occurs\nwhen the effect of such  change or  addition  is  aggregated  with the effect of\nsubsequently-disclosed changes or additions).\n\n     7.10 No Solicitations. SHC may, directly or indirectly, furnish information\nand access,  in response to unsolicited  requests  therefor,  to the same extent\npermitted  by Section  6.1,  to any  corporation,  partnership,  person or other\nentity or group,  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 to acquire SHC upon a\nmerger,  purchase  of  assets,  purchase  of or tender  offer for SHC  Shares or\nsimilar transaction (an \"Acquisition Transaction\"), if the Board of Directors of\nSHC  determines  in its good faith  judgment in the  exercise  of its  fiduciary\nduties,  after consultation with legal counsel and its financial advisors,  that\nsuch  action  is  appropriate  in  furtherance  of  the  best  interest  of  its\nstockholders.  Except as set forth  above,  SHC shall not,  and will direct each\nofficer, director, employee, representative and agent of SHC not to, directly or\nindirectly,  encourage,  solicit,  participate  in or  initiate  discussions  or\nnegotiations  with or provide any information to any  corporation,  partnership,\nperson or other  entity or group  (other than  HEALTHSOUTH  or an  affiliate  or\nassociate or agent of HEALTHSOUTH)  concerning any merger,  sale of assets, sale\nof or tender  offer for SHC Shares or similar  transactions  involving  SHC. SHC\nshall promptly notify HEALTHSOUTH if it shall, on or after the date hereof, have\nentered into a confidentiality agreement with any third party in response to any\nunsolicited  request for  information  and access in connection  with a possible\nAcquisition  Transaction  involving such party, such notification to include the\nidentity of such third party and the proposed terms of such possible Acquisition\nTransaction.\n\n     7.11 Other Actions.  Subject to the provisions of Section 7.10 hereof,  SHC\nshall not knowingly or  intentionally  take any action that would, or reasonably\nmight be expected to, result in any of its  representations  and  warranties set\nforth herein being or becoming untrue in any material respect,  or in any of the\nconditions  to the Merger set forth in this Plan of Merger not being  satisfied,\nor (unless  such  action is required by  applicable  law) which would  adversely\naffect the ability of SHC or  HEALTHSOUTH  to obtain any  consents or  approvals\nrequired for the consummation of the Merger without imposition of a condition or\nrestriction  which  would  have a  material  adverse  effect  on  the  Surviving\nCorporation.\n\n     7.12  Accounting  Methods.  Neither  HEALTHSOUTH  nor SHC shall  change its\nmethods of accounting  in effect at its most recent  fiscal year end,  except as\nrequired by changes in generally accepted accounting  principles as concurred by\nsuch parties' independent accountants.\n\n     7.13 Pooling and Tax-Free Reorganization Treatment. Neither HEALTHSOUTH nor\nSHC shall  intentionally  take or cause to be taken any  action,  whether  on or\nbefore the Effective  Time,  which would  disqualify the Merger as a \"pooling of\ninterests\" for accounting  purposes or as a \"reorganization\"  within the meaning\nof Section 368(a) of the Internal Revenue Code of 1986, as amended.\n\n     7.14 Affiliate and Pooling  Agreements.  HEALTHSOUTH  and SHC will each use\ntheir  respective  reasonable,  good  faith  efforts  to  cause  each  of  their\nrespective  Directors  and  executive  officers  and  each of  their  respective\n\"affiliates\"  (within the meaning of Rule 145 under the  Securities Act of 1933,\nas  amended) to execute and deliver to  HEALTHSOUTH  as soon as  practicable  an\nagreement  in  the  form  attached  hereto  as  Appendix  7.14  relating  to the\ndisposition  of the SHC Shares and shares of  HEALTHSOUTH  Common  Stock held by\nsuch person and the shares of HEALTHSOUTH Common Stock issuable pursuant to this\nPlan of Merger.\n\n     7.15 Cooperation. (a) HEALTHSOUTH and SHC shall together, or pursuant to an\nallocation  of  responsibility  agreed to between them,  (i) cooperate  with one\nanother in  determining  whether  any  filings  required  to be made or consents\nrequired to be  obtained  in any  jurisdiction  prior to the  Effective  Time in\nconnection with the  consummation of the  transactions  contemplated  hereby and\ncooperate  in making any such filings  promptly and in seeking to obtain  timely\nany such consents,  (ii) use their respective best efforts to cause to be lifted\nany  injunction  prohibiting  the  Merger,  or any part  thereof,  or the  other\ntransactions  contemplated  hereby,  and (iii) furnish to one another and to one\nanother's  counsel  all  such  information  as may be  required  to  effect  the\nforegoing actions.\n\n     (b) Subject to the terms and conditions  herein  provided,  and unless this\nPlan of Merger shall have been validly  terminated as provided  herein,  each of\nHEALTHSOUTH and SHC shall use all reasonable efforts (i) to take, or cause to be\ntaken,  all actions  necessary to comply  promptly  with all legal  requirements\nwhich may be imposed on such party (or any  subsidiaries  or  affiliates of such\nparty) with  respect to the Plan of Merger and to  consummate  the  transactions\ncontemplated hereby,  subject to the votes of its stockholders  described above,\nand (ii) to  obtain  (and to  cooperate  with the  other  party to  obtain)  any\nconsent,  authorization,  order  or  approval  of,  or  any  exemption  by,  any\ngovernmental  entity  and\/or any other  public or private  third  party which is\nrequired  to be  obtained  or made 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 SHC will promptly  cooperate with\nand furnish information to the other in connection with any such burden suffered\nby, or requirement  imposed upon, either of them or any of their subsidiaries or\naffiliates in connection with the foregoing.\n\n     7.16 SHC Stock Options and Warrants.  (a) As soon as reasonably practicable\nafter the Effective Time of the Merger, HEALTHSOUTH shall deliver to the holders\nof SHC stock  options  and  warrants  appropriate  notices  setting  forth  such\nholders'  rights  pursuant to the stock  option plans under which such SHC stock\noptions  were  issued and the stock  option  agreements  or  warrant  agreements\nevidencing  such  options or  warrants,  which shall  continue in full force and\neffect on the same terms and conditions (subject to the adjustments  required by\nSections  2.1(e) or this Section 7.16 after giving  effect to the Merger and the\nassumption of such options and warrants by  HEALTHSOUTH  as set forth herein) as\nin effect immediately prior to the Effective Time. HEALTHSOUTH shall comply with\nthe terms of the stock option plans, the stock option agreements and the warrant\nagreements as so adjusted,  and shall use its reasonable,  good faith efforts to\nensure,  to the extent required by, and subject to the provisions of, such plans\nor  agreements,  that the SHC stock options which  qualified as incentive  stock\noptions prior to the Effective  Time of the Merger shall  continue to qualify as\nincentive stock options after the Effective Time of the Merger.\n\n     (b) HEALTHSOUTH  shall take all corporate  action  necessary to reserve for\nissuance a sufficient number of shares of HEALTHSOUTH  Common Stock for delivery\nupon exercise of the SHC stock options and warrants  assumed by  HEALTHSOUTH  in\naccordance with Section 2.1(e).  At the Effective Time,  HEALTHSOUTH  shall file\nwith the SEC a  registration  statement  on Form S-8 with  respect  to shares of\nHEALTHSOUTH  Common  Stock  subject to such SHC stock  options and shall use its\nbest  efforts to maintain  the  effectiveness  of a  registration  statement  or\nregistration  statements  covering such options (and maintain the current status\nof the  prospectus or  prospectuses  contained  therein) for so long as such SHC\nstock  options  remain  outstanding.  With  respect  to  those  individuals  who\nsubsequent  to the Merger will be subject to the  reporting  requirements  under\nSection  16(a)  of  the  Exchange  Act,  where  applicable,   HEALTHSOUTH  shall\nadminister the plans assumed  pursuant to Section 2.1(e) hereof in a manner that\ncomplies  with Rule 16b-3  promulgated  under the Exchange Act to the extent the\napplicable plan complied with such rule prior to the Merger.\n\n     (c)  Except  to  the  extent  otherwise  agreed  to  by  the  parties,  all\nrestrictions  or  limitations  on transfer  and vesting  with respect to the SHC\nstock options awarded under any plan,  program,  or arrangement of SHC 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  Publication of Combined  Results.  HEALTHSOUTH  agrees that within 15\ndays after the end of the first calendar month  following at least 30 days after\nthe Closing Date, HEALTHSOUTH shall cause publication of the combined results of\noperations of  HEALTHSOUTH  and SHC. For purposes of this Section 7.17, the term\n\"publication\"  shall have the meaning provided in SEC Accounting  Series Release\nNo. 135.\n\n     7.18 Employee Welfare.  HEALTHSOUTH agrees that following the Closing Date,\nemployees  of SHC shall be  entitled  to  receive  the same  customary  employee\nbenefits as HEALTHSOUTH  provides its employees.  In addition,  except for those\nemployees  identified  in Section  7.19  below,  if during the  one-year  period\nfollowing  the  Closing  Date,  any  employee  of SHC listed on Exhibit  7.18 is\nterminated,  such  terminated  employee  shall receive a lump sum cash severance\npayment in the amount of not less than three months' salary or wages.\n\n     7.19 Retention Bonus Agreement;  Employment Agreement.  Between the date of\nthis Plan of Merger and the Closing Date,  HEALTHSOUTH and SHC shall, subject to\nconfirmation  by Ernst &amp; Young  that such  agreements  do not  adversely  affect\npooling-of-interests accounting treatment, enter into (i) an Agreement with Rock\nA. Morphis in the form of Exhibit 7.19.1 attached hereto; and (ii) an Employment\nAgreement with H. Michael Finley in the form of Exhibit 7.19.2 attached  hereto.\n\nSection 8. Termination, Amendment and Waiver.\n\n     8.1 Termination. This Plan of Merger may be terminated at any time prior to\nthe Effective  Time of the Merger,  whether  before or after approval of matters\npresented  in  connection  with the Merger by the  holders of SHC Shares and the\nholders of HEALTHSOUTH Common Stock:\n\n     (a) by mutual written consent of HEALTHSOUTH, the Subsidiary and SHC;\n\n     (b) by either HEALTHSOUTH or SHC:\n\n     (i)  if,  upon a  vote  at a  duly  held  meeting  of  stockholders  or any\nadjournment  thereof,  any required approval of the holders of SHC Shares or the\nholders of HEALTHSOUTH Common Stock shall not have been obtained;\n\n     (ii) if the Merger  shall not have been  consummated  on or before June 30,\n1995, unless the failure to consummate the Merger is the result of a willful and\nmaterial  breach of this Plan of Merger by the party  seeking to terminate  this\nPlan of Merger;  provided,  however,  that the passage of such  period  shall be\ntolled for any part thereof (but not exceeding 60 days in the aggregate)  during\nwhich any party shall be subject to a nonfinal order,  decree,  ruling or action\nrestraining,  enjoining or otherwise  prohibiting the consummation of the Merger\nor the calling or holding of a meeting of stockholders;\n\n     (iii) if any court of competent  jurisdiction or other governmental  entity\nshall  have  issued  an order,  decree  or  ruling  or taken  any  other  action\npermanently enjoining,  restraining or otherwise prohibiting the Merger and such\norder, decree, ruling or other action shall have become final and nonappealable;\n\n     (iv) in the  event of a breach by the  other  party of any  representation,\nwarranty, covenant or other agreement contained in this Plan of Merger which (A)\nwould give rise to the failure of a condition set forth in Section 9.2(a) or (b)\nor Section 9.3(a) or (b), as applicable, and (B) cannot be or has not been cured\nwithin 30 days after the giving of written notice to the breaching party of such\nbreach (a \"Material Breach\") (provided that the terminating party is not then in\nMaterial  Breach of any  representation,  warranty,  covenant or other agreement\ncontained in this Plan of Merger); or\n\n     (v) if either  HEALTHSOUTH or SHC gives notice of  termination  pursuant to\nSection 7.9;\n\n     (c)  by  either  HEALTHSOUTH  or  SHC  in the  event  that  (i)  all of the\nconditions  to the  obligation  of such  party to effect the Merger set forth in\nSection 9.1 shall have been  satisfied and (ii) any condition to the  obligation\nof such party to effect  the  Merger  set forth in  Section  9.2 (in the case of\nHEALTHSOUTH)  or  Section  9.3 (in the  case of  SHC) is not  capable  of  being\nsatisfied prior to the end of the period referred to in Section 8.1(b)(ii);\n\n     (d) By SHC, if SHC's Board of Directors shall have (i)  determined,  in the\nexercise of its  fiduciary  duties under  applicable  law, not to recommend  the\nMerger to the holders of SHC Shares or shall have withdrawn such  recommendation\nor (ii)  approved,  recommended  or endorsed  any  Acquisition  Transaction  (as\ndefined in Section 7.10) other than this Plan of Merger or (iii)  resolved to do\nany of the foregoing;\n\n     (e) By either  HEALTHSOUTH  or SHC, if the  condition  set forth in Section\n9.1(g)(i) is not satisfied by March 1, 1995; or\n\n     (f) By HEALTHSOUTH, if the holders of more than 10% of the SHC Shares shall\nhave given proper  written  demand for appraisal of the value of such SHC Shares\nas provided in Section 262 of the DGCL before the taking of a vote on the Merger\nat any meeting of the holders of SHC Shares called for that purpose.\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, 8.6 and 8.7, and except\nto the extent that such termination results from the willful and material breach\nby a  party  of any of  its  representations,  warranties,  covenants  or  other\nagreements set 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 SHC Shares or holders of  HEALTHSOUTH  Common\nStock; provided,  however, that after any such approval,  there shall be made no\namendment that pursuant to Section 251(d) of the DGCL requires  further approval\nby such  stockholders  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 proviso\nof Section  8.3,  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 SHC,  action by its Board of Directors or the duly  authorized\ndesignee of the Board of Directors.\n\n     8.6 Expenses.  All costs and expenses incurred in connection with this Plan\nof Merger and the  transactions  contemplated  hereby shall be paid by the party\nincurring  such  expense,  except  that  expenses  incurred in  connection  with\nprinting and mailing the Proxy Statement and the Registration Statement shall be\nshared equally by SHC and HEALTHSOUTH.\n\n     8.7 Certain Rights of HEALTHSOUTH.  If this Plan of Merger is terminated by\nSHC pursuant to Section  8.1(d) and,  within six months after the effective date\nof such termination,  SHC enters into an agreement with another person or entity\n(a \"Third  Party\") with  respect to an  Acquisition  Transaction  (as defined in\nSection 7.10 hereof),  SHC shall immediately  notify HEALTHSOUTH in writing that\nan agreement has been entered into with respect to an  Acquisition  Transaction.\nEach of  HEALTHSOUTH  and the Third Party shall then have not less than 48 hours\n(the exact deadline to be set by SHC) from the time of receipt of written notice\nby SHC to  submit  a final  and best  offer (a  \"Final  Offer\")  for a  business\ncombination  with SHC,  together  with a  fully-executed  definitive  agreement,\nacceptable to SHC,  reflecting the terms of such Final Offer.  Not later than 48\nhours after receipt of any Final Offer from HEALTHSOUTH and the Third Party (but\nin no event  sooner  than  the  expiration  of the  deadline  set by SHC  unless\n\nHEALTHSOUTH  has expressly  declined to submit a Final Offer),  SHC shall notify\nthe party  submitting  the most  favorable  Final Offer (as  determined by SHC's\nBoard of  Directors  after  consulting  with its  legal  counsel  and  financial\nadvisors)  and,  subject to the approval of SHC's Board of Directors,  SHC shall\nenter  into a  definitive  agreement  with the party  which  submitted  the most\nfavorable Final Offer.  HEALTHSOUTH  agrees that any such  determination  of the\nmost  favorable  Final  Offer by SHC's  Board of  Directors  shall be final  and\nbinding,  and HEALTHSOUTH  agrees not to dispute any such  determination  in any\nforum or jurisdiction; provided, however, that the foregoing covenant not to sue\nof HEALTHSOUTH is expressly conditioned upon SHC's obtaining a like covenant not\nto sue from the Third Party prior to SHC's  determination  of the most favorable\nFinal Offer.\n\nSection 9.  Conditions to Closing.\n\n     9.1 Mutual Conditions.  The respective  obligations of each party to effect\nthe  Merger  shall be subject to the  satisfaction,  at or prior to the  Closing\nDate,  of the  following  conditions  (any of which may be waived in  writing by\nHEALTHSOUTH, the Subsidiary and SHC):\n\n     (a) None of HEALTHSOUTH,  the Subsidiary or SHC nor any of their respective\nsubsidiaries  shall be subject to any order,  decree or injunction by a court of\ncompetent  jurisdiction which (i) prevents or materially delays the consummation\nof the Merger or (ii) would  impose any  material  limitation  on the ability of\nHEALTHSOUTH effectively to exercise full rights of ownership of the Common Stock\nof the Surviving  Corporation or any material  portion of the assets or business\nof SHC, the SHC Subsidiaries and the SHC Partnerships, taken as a whole.\n\n     (b)  No  statute,  rule  or  regulation  shall  have  been  enacted  by the\ngovernment  (or any  governmental  agency)  of the  United  States or any state,\nmunicipality or other political  subdivision thereof that makes the consummation\nof the Merger and any other transaction contemplated hereby illegal.\n\n     (c) Any  waiting  period  (and any  extension  thereof)  applicable  to the\nconsummation  of the  Merger  under  the  HSR Act  shall  have  expired  or been\nterminated.\n\n     (d) The  Registration  Statement shall have been declared  effective and no\nstop order with respect to the Registration Statement shall be in effect.\n\n     (e) The holders of  HEALTHSOUTH  Common Stock and the holders of SHC Shares\nshall have  approved the  adoption of this Plan of Merger and any other  matters\nsubmitted to them in accordance with the provisions of Section 7.3 hereof.\n\n     (f) The shares of HEALTHSOUTH  Common Stock to be issued in connection with\nthe Merger  shall have been  approved for listing on the Exchange and shall have\nbeen issued pursuant to an effective registration statement (which is subject to\nno stop order) or in transactions  qualified or exempt from  registration  under\napplicable  securities  or Blue Sky laws of such states and  territories  of the\nUnited States as may be required.\n\n     (g)  The  Merger  shall  qualify  for  \"pooling  of  interests\"  accounting\ntreatment,  and  HEALTHSOUTH  and SHC shall each have  received  letters to that\neffect from Ernst &amp; Young,  independent  accountants  for  HEALTHSOUTH  and SHC,\ndated (i) not later  than  March 1,  1995,  (ii) the date of the  mailing of the\nProxy Statement and (iii) the Closing Date.\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 SHC to be  performed  at or  prior  to the\nClosing Date pursuant to the terms hereof shall have been duly  performed in all\nmaterial respects,  and SHC shall have performed,  in all material respects, all\nof the acts  required to be  performed  by it at or prior to the Closing Date by\nthe terms hereof.\n\n     (b) The  representations and warranties of SHC set forth in Section 3.11(a)\nshall be true and  correct  as of the date of this Plan of Merger  and as of the\nClosing Date.  The  representations  and warranties of SHC set forth in Sections\n3.1,  3.2,  3.6,  3.9,  3.17,  3.18 and 3.19  shall be true and  correct  in all\nmaterial  respects  as of the date of this Plan of Merger and as of the  Closing\nDate as though  made on and as of the  Closing  Date,  except to the extent that\nsuch  representations  and  warranties  expressly  relate to an earlier date (in\nwhich case such  representations and warranties shall be true and correct in all\nmaterial  respects on and as of such  earlier  date).  The  representations  and\nwarranties  of SHC set forth in this Plan of Merger  (other than those set forth\nin Section  3.11(a),  3.2, 3.6,  3.9,  3.17,  3.18 and 3.19),  shall be true and\ncorrect  as of the date of this Plan of  Merger  and as of the  Closing  Date as\nthough  made on and as of the Closing  Date,  (i) except to the extent that such\nrepresentations  and  warranties  expressly  relate to an earlier date (in which\ncase such  representations and warranties shall be true and correct on and as of\nsuch  earlier  date)  and  (ii)  except  for  breaches  of  representations  and\nwarranties  as to  matters  that do not have a material  adverse  effect on SHC.\nHEALTHSOUTH  and the  Subsidiary  shall have been  furnished with a certificate,\nexecuted by a duly authorized officer of SHC, dated the Closing Date, certifying\nin such detail as HEALTHSOUTH  and the  Subsidiary may reasonably  request as to\nthe fulfillment of the foregoing conditions.\n\n     (c)  HEALTHSOUTH  and the Subsidiary  shall have obtained,  or obtained the\ntransfer of, any licenses,  certificates of need and other regulatory  approvals\nnecessary  to allow the  Surviving  Corporation  to operate the SHC  facilities,\nunless the failure to obtain such transfer or approval would not have a material\nadverse effect on SHC.\n\n     (d) HEALTHSOUTH shall have received an opinion from Haskell Slaughter Young\n&amp; Johnston,  Professional  Association,  to the  effect  that the  merger  will\nconstitute a reorganization within the meaning of Section 368(a) of the Internal\nRevenue Code of 1986,  as amended,  which  opinion may be based upon  reasonable\nrepresentations  of  fact  provided  by  officers  of  HEALTHSOUTH,  SHC and the\nSubsidiary.\n\n     9.3 Conditions to Obligations of SHC. The  obligations of SHC to consummate\nthe Merger and the other  transactions  contemplated  hereby shall be subject to\nthe satisfaction,  at or prior to the Closing Date, of the following  conditions\n(any of which may be waived by SHC):\n\n     (a)  Each  of the  agreements  of  HEALTHSOUTH  and  the  Subsidiary  to be\nperformed  at or prior to the Closing  Date  pursuant to the terms  hereof shall\nhave been duly  performed,  in all material  respects,  and  HEALTHSOUTH and the\nSubsidiary  shall have  performed,  in all  material  respects,  all of the acts\nrequired to be  performed  by them at or prior to the Closing  Date by the terms\nhereof.\n\n     (b) The  representations and warranties of HEALTHSOUTH set forth in Section\n5.11(i)  shall be true and  correct as of the date of this Plan of Merger and as\nof the Closing Date. The representations and warranties of HEALTHSOUTH set forth\nin  Sections  5.1,  5.2,  5.3,  5.12 and 5.13  shall be true and  correct in all\nmaterial  respects,  as of the date of this Plan of Merger and as of the Closing\nDate as though  made on and as of the  Closing  Date,  except to the extent that\nsuch  representations  and  warranties  expressly  relate to an earlier date (in\nwhich case such  representations and warranties shall be true and correct in all\nmaterial  respects on and as of such  earlier  date).  The  representations  and\nwarranties of HEALTHSOUTH set forth in this Plan of Merger (other than those set\nforth in  Sections  5.1,  5.2,  5.3,  5.11(i),  5.13 and 5.14) shall be true and\ncorrect  as of the date of this Plan of  Merger  and as of the  Closing  Date as\nthough  made on and as of the  Closing  Date (i) except to the extent  that such\nrepresentations  and  warranties  expressly  relate to an earlier date (in which\ncase such  representations and warranties shall be true and correct on and as of\nsuch  earlier  date),  and (ii)  except  for  breaches  of  representations  and\nwarranties  as to  matters  that  do  not  have a  material  adverse  effect  on\nHEALTHSOUTH. SHC shall have been furnished with a certificate,  executed by duly\nauthorized  officers of HEALTHSOUTH and the Subsidiary,  dated the Closing Date,\ncertifying in such detail as SHC may reasonably request as to the fulfillment of\nthe foregoing conditions.\n\n\n     (c) SHC shall have  received  an opinion  from  Alston &amp; Bird to the effect\nthat the Merger will  constitute  a  reorganization  with the meaning of Section\n368(a) of the Internal  Revenue Code of 1986,  as amended,  which opinion may be\nbased  upon  reasonable   representations   of  fact  provided  by  officers  of\nHEALTHSOUTH, SHC and the Subsidiary.\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 hereunder\nshall be deemed  to have  been  properly  given if sent by hand  delivery  or by\nfacsimile  and  overnight  courier  to  the  parties  hereto  at  the  following\naddresses,  or at such  other  address  as either  party may advise the other in\nwriting from time to time:\n\n   If to HEALTHSOUTH:\n\n   HEALTHSOUTH Corporation\nTwo Perimeter Park South\nBirmingham, Alabama 35243\nAttention: Michael D. Martin\nFacsimile: (205) 969-4719\n\n   with copies to:\n\n   William W. Horton, Esq.\nHEALTHSOUTH Corporation\nTwo Perimeter Park South\nBirmingham, Alabama 35243\nFacsimile: (205) 969-4732\nand\nJ. Brooke Johnston, Jr., Esq.\nHaskell Slaughter Young &amp; Johnston,\nProfessional Association\n1200 AmSouth\/Harbert Plaza\n1901 Sixth Avenue North\nBirmingham, Alabama 35203\nFacsimile: (205) 324-1133\n\n   If to SHC:\n\n   Surgical Health Corporation\n990 Hammond Drive\nSuite 300\nAtlanta, Georgia 30328\nAttention: Rock A. Morphis\nFacsimile: (404) 673-1970\n\n   with a copy to:\n\n   J. Vaughan Curtis, Esq.\nAlston &amp; Bird\nOne Atlantic Center\n1201 West Peachtree Street\nAtlanta, Georgia 30309-3424\nFacsimile: (404) 881-7777\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 further\nacts and to execute and deliver any documents which may be reasonably  necessary\nto carry out the provisions of this Plan of Merger.\n\n     10.4  Indemnification.  HEALTHSOUTH and Subsidiary agree that all rights to\nindemnification  for acts or omissions  occurring prior to the Effective Time of\nthe Merger now existing in favor of the current or former  directors or officers\nof SHC and the SHC Subsidiaries as provided in their respective  certificates or\narticles of  incorporation or bylaws shall survive the Merger and shall continue\nin full force and effect in accordance with their terms.  The provisions of this\nSection 10.4 are intended to be for the benefit of, and shall be enforceable by,\neach  such  indemnified  party  and each  such  indemnified  party's  heirs  and\nrepresentatives.\n\n     10.5 Governing Law. This Plan of Merger shall be interpreted, construed and\nenforced in accordance  with the laws of the State of Delaware,  applied without\ngiving effect to any conflicts-of-law principles.\n\n     10.6  \"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     10.7 \"Knowledge\".  \"To the knowledge\", \"to the best knowledge,  information\nand belief\",  or any similar phrase shall be deemed to refer to the knowledge of\nthe Chairman of the Board, Chief Executive Officer or Chief Financial Officer of\na party and to  include  the  assurance  that  such  knowledge  is based  upon a\nreasonable investigation, unless otherwise expressly provided.\n\n     10.8 \"Material  adverse  change\" or \"material  adverse  effect\".  \"Material\nadverse change\" or \"material adverse effect\" means, when used in connection with\nSHC or  HEALTHSOUTH,  any change,  effect,  event or occurrence  that has, or is\nreasonably likely to have,  individually or in the aggregate, a material adverse\nimpact on the business or financial  position of such party and its subsidiaries\ntaken  as a  whole;  provided,  however,  that  \"material  adverse  change\"  and\n\"material  adverse  effect\" shall be deemed to exclude the impact of (i) changes\nin generally accepted accounting principles, (ii) changes in applicable law, and\n(iii) any changes  resulting from any  restructuring or other similar charges or\nwrite-offs taken by SHC with the consent of HEALTHSOUTH; provided, however, that\nno such  changes  or  write-offs  will be taken if such would  adversely  affect\npooling-of-interests  accounting  treatment for the Merger.  Notwithstanding the\nforegoing,  \"material  adverse  change\" or \"material  adverse  effect\" shall not\nmean,  with respect to SHC, any  reclassification  of long-term  indebtedness to\nshort-term  indebtedness  solely  by  reason of SHC's  execution,  delivery  and\nperformance of its obligations under this Agreement.\n\n     10.9  \"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 10.10) regardless of the quantity\nof any such material.\n\n     10.10 Environmental Laws. The term \"Environmental  Laws\" means any federal,\nstate or local  statute,  regulation,  rule or  ordinance,  and any  judicial or\nadministrative interpretation thereof, regulating the use, generation, handling,\nstorage,  transportation,  discharge,  emission,  spillage  or other  release of\nHazardous Materials or relating to the protection of the environment.\n\n   10.11 Captions.  The captions or headings in this Plan of Merger are made for\nconvenience  and general  reference only and shall not be construed to describe,\ndefine or limit the scope or intent of the provisions of this Plan of Merger.\n\n                                \n\n     10.12 Integration of Exhibits. All Exhibits attached to this Plan of Merger\nare integral parts of this Plan of Merger as if fully set forth herein,  and all\nstatements  appearing therein shall be deemed disclosed for all purposes and not\nonly in connection with the specific representation in which they are explicitly\nreferenced.\n\n     10.13 Entire  Agreement.  This instrument,  including all Exhibits attached\nhereto,  contains the entire agreement of the parties and supersedes any and all\nprior or contemporaneous  agreements between the parties,  written or oral, with\nrespect  to the  transactions  contemplated  hereby.  It may not be  changed  or\nterminated  orally, but may only be changed by an agreement in writing signed by\nthe  party  or  parties  against  whom   enforcement  of  any  waiver,   change,\nmodification, extension, discharge or termination is sought.\n\n     10.14  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     10.15  Binding  Effect.  This Plan of Merger shall be binding on, and shall\ninure to the benefit of, the parties hereto, and their respective successors and\nassigns,  and no other person shall acquire or have any right under or by virtue\nof this Plan of Merger.  No party may assign any right or  obligation  hereunder\nwithout the prior written consent of the other parties.\n\n     10.16 No Rule of  Construction.  The parties  acknowledge that this Plan of\nMerger was initially prepared by HEALTHSOUTH, and that all parties have read and\nnegotiated  the language  used in this Plan of Merger.  The parties  agree that,\nbecause  all parties  participated  in  negotiating  and  drafting  this Plan of\nMerger,  no rule of  construction  shall  apply  to this  Plan of  Merger  which\nconstrues  ambiguous language in favor of or against any party by reason of that\nparty's role in drafting this Plan of Merger.\n\n     IN WITNESS  WHEREOF,  HEALTHSOUTH,  the Subsidiary and SHC have caused this\nAmended  and  Restated  Plan and  Agreement  of Merger to be  executed  by their\nrespective duly authorized officers,  and have caused their respective corporate\nseals to be hereunto affixed, all as of the day and year first above written.\n\nSURGICAL HEALTH CORPORATION\nBy\n                                Rock A. Morphis\n                     President and Chief Executive Officer\n\nATTEST:\n                               H. Michael Finley\n                                   Secretary\n\n[ CORPORATE SEAL ]\n\n                                26\n\n\n\n\n\nHEALTHSOUTH Corporation\nBy\n                               Richard M. Scrushy\n                      Chariman of the Board, President and\n                            Chief Executive Officer\n\nATTEST:\n                               Anthony J. Tanner\n                                   Secretary\n[ CORPORATE SEAL ]\n\n   \n   ASC ATLANTA ACQUISITION\nCOMPANY, INC.\nBy\n                               Richard M. Scrushy\n                                   President\n\nATTEST:\n                               Anthony J. Tanner\n                                   Secretary\n[ CORPORATE SEAL ]\n    \n\n                                27\n\n\n\n\n\n   \n                                                                   APPENDIX 7.14\n\nGentlemen:\n\n     I have been  advised that I might be  considered  to be an  \"affiliate\"  of\nSurgical  Health  Corporation  for  purposes  of Rule 145 under  the  Securities\nExchange Act of 1933, as amended (the \"1993 Act\"), and for purposes of generally\naccepted  accounting  principles  as such term  relates to pooling of  interests\naccounting  treatment for certain  business  combinations  or the Securities and\nExchange Commission's Staff Accounting Bulletin No. 65.\n\n     HEALTHSOUTH Corporation  (\"HEALTHSOUTH\"),  ASC Atlanta Acquisition Company,\nInc.  and  Surgical  Health  Corporation  (\"SHC\")  have  entered into a Plan and\nAgreement  of Merger  dated as of the 22nd day of  January,  1995 (the  \"Plan of\nMerger\").  Upon  consummation  of the  transactions  contemplated by the Plan of\nMerger (the \"Merger\"), I will receive shares of capital stock of HEALTHSOUTH for\nall of the  shares of  capital  stock of SHC owned by me or as to which I may be\ndeemed a beneficial  owner.  I own _______  shares of common stock of SHC.  Such\nshares  will  be  converted  in the  Merger  into  shares  of  common  stock  of\nHEALTHSOUTH as described in the Plan of Merger.  The shares of SHC capital stock\nand  HEALTHSOUTH  capital  stock owned by me or as to which I may deemed to be a\nbeneficial owner prior to the Merger are hereinafter collectively referred to as\nthe \"Pre-Merger  Stock\" and the shares of HEALTHSOUTH  capital stock received by\nme in the Merger  are  hereinafter  collectively  referred  to as the  \"Exchange\nStock\". This agreement is hereinafter referred to as the \"Letter Agreement\".\n\n     I  represent  and  warrant  to, and agree  with,  HEALTHSOUTH,  SHC and the\nSubsidiary 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 SHC.\n\n     B. The  shares of  common  stock of  HEALTHSOUTH  that I shall  receive  in\nexchange for my shares of common stock of SHC are not being  acquired by me with\na view to their distribution except to the extent and in the manner provided for\nin 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 of\nHEALTHSOUTH in any manner that would violate Rule 145.\n\n     I further agree with you that the certificate or certificates  representing\nsuch shares of common stock of  HEALTHSOUTH  may bear a legend  referring to the\nrestrictions  on  disposition  thereof in accordance  with the provisions of the\nforegoing  paragraph  and that  stop  transfer  instructions  may be filed  with\nrespect to such shares with the transfer agent for such shares.\n\n   D. I understand that stop transfer instructions will be given to HEALTHSOUTH,\nSHC and their respective  transfer  agents,  as the case may be, with respect to\nthe shares of Pre-Merger  Stock and the Exchange  Stock in  connection  with the\nrestrictions set forth herein.\n\n     E.  Notwithstanding  the foregoing  and any other  agreements on my part in\nconnection with the Pre-Merger  Stock and the Exchange Stock, I hereby agree (i)\nthat I will not sell or  otherwise  reduce  my risk  relative  to any  shares of\nPre-Merger Stock during the period of thirty days prior to the effective date of\nMerger and (ii) that I will not sell or otherwise reduce my risk relative to any\nshares of Exchange Stock until financial  results  covering at least thirty days\nof combined  operations have been published  following the effective date of the\nMerger so as to ensure that the Merger  qualified as a pooling of interests  for\naccounting purposes.\n\n     It is understood and agreed that this Letter  Agreement shall terminate and\nbe of no further force and effect if the Plan of Merger is  terminated  pursuant\nto 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 paragraph E above,  to deliver\nin exchange for the certificate or certificates  representing  such shares a new\n\n\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  representatives\nand successors.\n\nVery truly yours,\n\n[Name of Shareholder]\n\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-43491","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\/43491","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=43491"}],"wp:term":[{"taxonomy":"corporate_contracts_companies","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_companies?post=43491"},{"taxonomy":"corporate_contracts_industries","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_industries?post=43491"},{"taxonomy":"corporate_contracts_types","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_types?post=43491"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}