{"id":43534,"date":"2015-09-17T11:25:58","date_gmt":"2015-09-17T16:25:58","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-legal\/contracts\/uncategorized\/purchase-and-sale-agreement-healthsouth-corp-horizon-cms.html"},"modified":"2015-09-17T11:25:58","modified_gmt":"2015-09-17T16:25:58","slug":"purchase-and-sale-agreement-healthsouth-corp-horizon-cms","status":"publish","type":"corporate_contracts","link":"https:\/\/corporate.findlaw.com\/contracts\/planning\/purchase-and-sale-agreement-healthsouth-corp-horizon-cms.html","title":{"rendered":"Purchase and Sale Agreement &#8211; HealthSouth Corp., Horizon\/CMS Healthcare Corp. and Integrated Health Services Inc."},"content":{"rendered":"<pre>\n                           PURCHASE AND SALE AGREEMENT\n\n\n     This PURCHASE AND SALE AGREEMENT (the \"Agreement\") is made and entered into\non the 3rd day of November,  1997,  by and between  HEALTHSOUTH  CORPORATION,  a\nDelaware corporation  (\"HEALTHSOUTH\"),  HORIZON\/CMS  HEALTHCARE  CORPORATION,  a\nDelaware  corporation  (\"Seller\"),  and  INTEGRATED  HEALTH  SERVICES,  INC.,  a\nDelaware corporation (\"Buyer\"), with reference to the following facts:\n\n     A. Seller is a wholly-owned subsidiary of HEALTHSOUTH.\n\n     B. Directly or through wholly-owned  subsidiary  corporations identified on\nSchedule A-1 hereto (each, a \"Subsidiary\" and collectively, the \"Subsidiaries\"),\nSeller  engages  in the  business  of  delivering  long-term  care,  diagnostic,\ninstitutional  pharmacy and contract  therapy services to the public through the\nfacilities and businesses identified in Schedule A-2 (the \"Facilities\").\n\n     C. Buyer  desires to  purchase  from  Seller and the  Subsidiaries,  either\ndirectly or through wholly-owned  subsidiaries of the Buyer (any such subsidiary\nwhich is purchasing any of the Transferred  Assets hereunder being herein called\na \"Buyer Subsidiary\" and such purchasing  subsidiaries being collectively called\nthe \"Buyer  Subsidiaries\"),  and  HEALTHSOUTH  desires  to cause  Seller and the\nSubsidiaries to sell to Buyer, such Facilities together with related assets (the\n\"Transactions\").\n\n     NOW,  THEREFORE,  in  consideration  of  the  foregoing  recitals  and  the\nagreements contained herein, and for other good and valuable consideration,  the\nreceipt and  sufficiency of which are hereby  acknowledged,  the parties hereto,\nintending to be legally bound, do hereby agree as follows:\n\n\n                                    ARTICLE 1\n\n                                   DEFINITIONS\n\n     Section 1.1 Certain  Defined  Terms.  For purposes of this  Agreement,  the\nfollowing terms shall have the following meanings:\n\n         \"Affiliate\"  of  a  specified   person  shall  mean  any   corporation,\npartnership,  sole  proprietorship  or other person or entity which  directly or\nindirectly through one or more intermediaries  controls,  is controlled by or is\nunder common control with the person  specified.  The term  \"control\"  means the\npossession, direct or indirect, of the power to direct or cause the direction of\nthe management and policies of a person or entity.\n\n         \"Cost Report\" means the cost report required to be filed, as of the end\nof a provider cost year or for any other required period, with cost-based Payors\nwith respect to cost reimbursement.\n\n         \"knowledge\"  of a party  shall  mean the  collective  knowledge  of the\npersons who serve as of the date of this Agreement as the duly elected  officers\nof such party.\n\n         \"Laws\" shall mean all statutes, rules, regulations, ordinances, orders,\ncodes,  permits,  licenses and agreements with or of federal,  state,  local and\nforeign governmental and regulatory  authorities and any order, writ, injunction\nor decree issued by any court, arbitrator or governmental agency or in\n\n                                      A-1\n\n\n\n\n\nconnection with any judicial,  administrative or other  non-judicial  proceeding\n(including, without limitation, arbitration or reference).\n\n         \"Licenses\"   shall   mean   certificates   of   need,   accreditations,\nregistrations, licenses, permits and other consents or approvals of governmental\nagencies or accreditation organizations.\n\n         \"Payor\" shall mean Medicare,  Medicaid,  CHAMPUS and Medically Indigent\nAssistance  programs,  Blue  Cross,  Blue  Shield or any other third party payor\n(including an insurance company),  or any health care provider (such as a health\nmaintenance   organization,   preferred  provider   organization,   peer  review\norganization, or any other managed care program).\n\n         \"Taxes\" shall mean (i) all federal, state, county and local sales, use,\nproperty,  payroll,  recordation  and transfer taxes,  (ii) all federal,  state,\ncounty  and local  taxes,  levies,  fees,  assessments  or  surcharges  (however\ndesignated,  including  privilege taxes,  room or bed taxes and user fees) which\nare based on the gross receipts,  net operating revenues,  net income or patient\ndays of a Facility for a period  ending on, before or including the Closing Date\n(as defined in Section 2.13) or a formula  taking any one of the foregoing  into\naccount, and (iii) any interest,  penalties and additions to tax attributable to\nany of the foregoing,  but shall not include income and other taxes described in\nSections 2.4(a) and (b).\n\n     Section  1.2 Index of Other  Defined  Terms.  In  addition  to those  terms\ndefined  above,  the following  terms shall have the  respective  meanings given\nthereto in the sections indicated below:\n\n                Defined Term                                         Section\n                ------------                                         -------\n\n                Adjustment Sections                                  2.14\n                Agreement                                            Preamble\n                Allocation Schedule                                  2.7\n                Assigned Stock                                       2.1(c)\n                Assumed Contracts                                    2.3(a)\n                Assumed Guarantees                                   2.3(a)\n                Assumed Liabilities                                  2.3\n                Balance Sheet                                        3.17(b)\n                Buyer                                                Preamble\n                Buyer's Affidavit                                    2.15(d)\n                Buyer's Subsidiaries                                 Recitals\n                Charter Documents                                    3.4\n                Claim Notice                                         11.6\n                Closing                                              2.13\n                Closing Date                                         2.13\n                COBRA                                                2.10(d)\n                Code                                                 3.11\n                Consents                                             8.4\n                Delivery Date                                        2.15(d)\n                EBITDA                                               3.17(a)\n                EBITDA Statements                                    3.17(a)\n                Employee Benefit Arrangements                        3.19(d)\n                Environmental Regulations                            3.16(a)\n                Equipment                                            2.1(e)\n                ERISA                                                2.10(a)\n                Escrow Agent                                         2.13(c)\n                Excluded Assets                                      2.2\n                Excluded Liabilities                                 2.4\n\n                                      A-2\n\n\n\n\n\n                Execution Fee                                        2.6(a)\n                Facilities                                           Recitals\n                Facility Records                                     5.7(a)\n                Final Delivery Date                                  2.15(e)\n                Final Net Book Values                                2.6(d)\n                Financial Schedule                                   3.17\n                Hazardous Materials                                  3.16\n                Headquarters Assets                                  2.1(q)\n                Headquarters Liabilities                             2.3(o)\n                HEALTHSOUTH                                          Preamble\n                Hired Employees                                      2.10(c)\n                HSR Act                                              3.4\n                Indemnitee                                           11.5\n                Indemnitor                                           11.5(a)\n                Intercompany Transactions                            2.1(g)(ii)\n                Inventory                                            2.1(f)\n                Leased Real Property                                 2.1(b)\n                Losses                                               11.3(a)\n                Management Agreement                                 2.15\n                Material Adverse Change                              8.9\n                Material Adverse Effect                              3.4\n                Measurement Date                                     2.8\n                Multiemployer Plans                                  2.10(a)\n                Other Assigned Contracts                             2.1(g)\n                Owned Real Property                                  2.1(a)\n                Panel                                                2.12(b)\n                Patient Records                                      5.7(a)\n                Pension Plans                                        2.10(a)\n                Permitted Encumbrances                               3.8\n                Prepayments                                          2.1(l)\n                Purchase Price                                       2.5\n                Real Property Leases                                 2.1(b)\n                Receivables                                          2.1(m)\n                Related Agreements                                   3.4\n                Retained Employees                                   2.10(b)\n                Seller                                               Preamble\n                Seller's Affidavit                                   2.15(d)\n                Subsidiaries                                         Recitals\n                Termination Fee                                      10.3\n                Third Party Claims                                   11.5(a)\n                Title Insurer                                        8.6\n                Title Policies                                       8.6\n                Topping Fee                                          10.4\n                Transactions                                         Recitals\n                Transferred Business Names                           2.1(j)\n                Transferred Records                                  5.7\n                Transferred Subsidiaries                             2.1(a)\n                Venture Agreements                                   2.1(d)\n                WARN Act                                             2.10(e)\n\n\n                                      A-3\n\n\n\n\n\n                                    ARTICLE 2\n                               BASIC TRANSACTIONS\n\n     Section 2.1 Purchased  Assets.  On the terms and subject to the  conditions\ncontained in this  Agreement,  including,  but not limited to, the provisions of\nSection 2.15, at the Closing (as defined in Section 2.13),  Buyer shall purchase\nfrom Seller and each relevant Subsidiary, and HEALTHSOUTH shall cause Seller and\neach relevant Subsidiary to sell, convey, assign, transfer and deliver to Buyer,\nthe  following  assets,  and only  the  following  assets,  of  Seller  and such\nSubsidiary  as of the Closing (the  \"Transferred  Assets\"),  but  excluding  all\nExcluded  Assets as defined in Section 2.2, and in the case of items  identified\nin Section  2.1(b) -- (q), only to the extent that such sale and purchase is not\nencompassed  by the sale and  purchase  of the  Assigned  Stock (as  defined  in\nSection 2.1(a):\n\n         (a) All of Seller's or the  Subsidiary's  right,  title and interest in\nand to the shares of the  capital  stock of the  Subsidiaries  shown on Schedule\n2.1(a) that are owned by Seller or the Subsidiary (such shares being referred to\nas the \"Assigned Stock\", and such Subsidiaries and the wholly owned subsidiaries\nof  such   Subsidiaries   being  referred  to  individually  as  a  \"Transferred\nSubsidiary\" and collectively as the \"Transferred Subsidiaries\");\n\n         (b) All of Seller's or the  Subsidiary's  right,  title and interest in\nand to the real  property  owned  in fee (the  \"Owned  Real  Property\")  that is\nidentified in Schedule 2.1(b) on which Facilities are located, together with the\nFacilities,   construction   work-in-progress,   and  all  other  buildings  and\nimprovements  thereon,  and  all  rights,  privileges,   permits  and  easements\nappurtenant thereto,  subject,  however, to the mortgages and capitalized leases\nidentified on Schedule 2.1(b) relating to certain of the Owned Real Property;\n\n         (c) All of Seller's or the  Subsidiary's  right,  title and interest in\nand to the leasehold  estates (the \"Real Property  Leases\") in land,  Facilities\nand real  property  improvements  (whether  owned or leased)  (the  \"Leased Real\nProperty\")  identified  in  Schedule  2.1(c),  together  with  all  construction\nwork-in-progress  in respect of same and all rights,  privileges  and  easements\nappurtenant thereto,  subject,  however, to the mortgages and capitalized leases\nidentified on Schedule 2.1(b) relating to certain of the Leased Real Property;\n\n         (d) All of Seller's or the  Subsidiary's  right,  title and interest in\nand to the joint ventures or  partnerships  identified in Schedule 2.1(d) hereto\nthat relate to  partnerships  or joint ventures that own or lease  Facilities or\nother  Transferred  Assets,  together  with all of Seller's or the  Subsidiary's\nright, title and interest in and to the joint venture or partnership agreements,\nalso  identified in such Schedule (the \"Venture  Agreements\"),  that govern such\npartnerships or joint ventures;\n\n         (e) All of Seller's or the  Subsidiary's  right,  title and interest in\nand to fixed  machinery and  equipment,  other  fixtures and fittings,  moveable\nplant, machinery,  equipment and furniture, trucks, tractors, trailers and other\nvehicles,   tools  and  other  similar  items  of  tangible   personal  property\n(collectively  \"Equipment\")  (i) that are not consumed,  disposed of or held for\nsale or as inventory in the ordinary course of business,  (ii) that are owned or\nleased by or consigned to Seller or the Subsidiary as of the Closing,  and (iii)\nthat are used solely with respect to the operation of Facilities;\n\n         (f) All of Seller's or the  Subsidiary's  right,  title and interest in\nand to inventories of supplies,  drugs,  food,  janitorial and office  supplies,\nmaintenance  and shop  supplies,  and other similar  items of tangible  personal\nproperty intended to be consumed,  disposed of or sold in the ordinary course of\nbusiness  (collectively,  the  \"Inventory\")  that are owned by or  consigned  to\nSeller or the  Subsidiary  as of the  Closing and that are used by Seller or the\nSubsidiary solely with respect to the operation of the Facilities;\n\n                                      A-4\n\n\n\n\n\n         (g) All of Seller's or the  Subsidiary's  right,  title and interest in\nand to all contracts and agreements to which Seller or the Subsidiary is a party\nat the Closing,  other than the Real Property Leases and the Venture Agreements,\nto the  extent  the same are  transferable  to Buyer  (whether  by action of the\nSubsidiary or Seller or, in the case of Medicare provider agreements, the Health\nCare  Finance  Administration),  and which,  or to the  extent,  the same relate\nsolely to the operations of Facilities operated by Seller or the Subsidiary (the\n\"Other  Assigned  Contracts\"),  including,  but not  limited  to, the  contracts\nidentified on Schedule 2.1(g), which contains a list of the following categories\nof Other Assigned  Contracts:  construction  contracts  relating to construction\nwork-in-progress  at the  Facilities;  Equipment  leases  (whether  operating or\ncapitalized  leases) and  installment  purchase  contracts  where the annualized\nlease or installment payments exceed $100,000; contracts or arrangements binding\non  a  Facility   which  contain  any  covenant  not  to  compete  or  otherwise\nsignificantly  restrict  the  nature  of the  business  activities  in which the\nFacility  may  engage;   employment  contracts,  if  any,  between  Seller,  the\nSubsidiary or a Facility and the chief executive or chief  financial  officer of\nsuch Facility;  collective bargaining agreements,  if any; Medicare and Medicaid\nprovider numbers and provider  agreements with other Payors; any other contracts\nrelating  solely to the  Facilities  pursuant to which Seller or the  Subsidiary\npaid or received over  $100,000  during its last fiscal year or is due to pay or\nreceive over $100,000  during any  subsequent  fiscal year,  including,  but not\nlimited to, any employment  contracts relating solely to the Facilities pursuant\nto which Seller or the Subsidiary paid or received over $100,000 during its last\nfiscal year or is obligated to pay over $100,000 in any subsequent  fiscal year;\nand any contracts which will be binding on Buyer or any  Transferred  Subsidiary\nafter the Closing pursuant to which Seller or the Subsidiary has agreed with any\nthird party that such third party shall be the  exclusive or preferred  provider\nof goods or  services to a Facility,  pursuant to which  Seller or a  Subsidiary\npaid over  $100,000  during  its last  fiscalyear  or is  obligated  to pay over\n$100,000 in any subsequent  fiscal year;  provided that Schedule 2.1(g) need not\nlist an Other  Assigned  Contract if all material  obligations  of Seller or the\nSubsidiary thereunder have been, or, prior to the Closing, will be completed, or\nSeller  or the  Subsidiary  is  entitled,  or has or by the  Closing  will  have\nexercised a right, to terminate the contract  without penalty on 90 days' notice\nor less.  Notwithstanding the foregoing,  the Other Assigned Contracts shall not\ninclude:\n\n               (i) Except for  instruments  of  indebtedness  relating  to those\n          mortgages and capitalized  leases  identified on Schedule 2.1(b),  any\n          contract  which  evidences  indebtedness  for  money  borrowed  or the\n          deferred  portion of the purchase price for Owned Real Property and is\n          therefore  an  Excluded  Liability  under the  provisions  of  Section\n          2.4(g),  unless the parties  mutually  agree,  in accordance  with the\n          provisions  of such Section  2.4(g),  that such  indebtedness  will be\n          assumed by Buyer,  in which case the contract or contracts  evidencing\n          such indebtedness will be Transferred Assets; and\n\n               (ii) Any contract respecting an intercompany  transaction between\n          Seller or the  Subsidiary,  on the one  hand,  and  HEALTHSOUTH  or an\n          Affiliate  of  HEALTHSOUTH,   on  the  other,   whether  or  not  such\n          transaction  relates to the provision of goods and services (except as\n          set forth in the following proviso), tax sharing arrangements, payment\n          arrangements,   intercompany   charges  or   balances,   or  the  like\n          (\"Intercompany  Transactions\");   provided,  however,  that  contracts\n          relating to the  provision  of goods or services  (such as  laboratory\n          services, contract therapy services or pharmacy services) by Seller to\n          a  Subsidiary,  or by a  Subsidiary  to a Seller,  with respect to the\n          operations  of  Facilities  shall  not be  deemed  to be  Intercompany\n          Transactions and shall be included in the Other Assigned Contracts.\n\n         (h) All of Seller's or the  Subsidiary's  right,  title and interest in\nand to the right to receive mail and other communications addressed to Seller or\nthe  Subsidiary  insofar  as such  mail or other  communication  relates  to the\noperation of the Facilities after the Closing;\n\n                                      A-5\n\n\n\n\n\n         (i) All of Seller's or the  Subsidiary's  right,  title and interest in\nand  to  the  business  names  utilized  in the  businesses  represented  by the\nTransferred Assets,  other than the names \"Horizon\/CMS\" and \"Continental Medical\nSystems\" (the \"Transferred Business Names\");\n\n         (j) All of Seller's or the  Subsidiary's  right,  title and interest in\nand to Licenses in favor of Seller or the  Subsidiary as of the Closing that are\ndirectly  related  to,  necessary  for, or used  solely in  connection  with the\noperation of the Facilities as presently  operated by Seller or the  Subsidiary,\nprovided that Licenses in favor of Seller or the Subsidiary shall be included in\nthe Transferred Assets only to the extent they are lawfully  transferable,  and,\nto the extent a Facility is the subject of a  Management  Agreement by virtue of\nSection  2.15(i),  Seller or the  Subsidiary  shall  remain the licensee of such\nFacility  under  those  Licenses  contained  on  Schedule  3.19(f) to the extent\ncontemplated by the Management Agreement;\n\n         (k) All of Seller's or the  Subsidiary's  right,  title and interest in\nand to unexpired  warranties  as of the Closing that are  transferable  to Buyer\nwhich Seller or the  Subsidiary  has received from third parties with respect to\nthe Transferred  Assets,  including,  but not limited to, such warranties as are\nset forth in any construction  agreement,  lease agreement,  equipment  purchase\nagreement,  consulting  agreement or agreement for architectural and engineering\nservices;\n\n         (l) To the  extent  lawfully  and  contractually  transferable,  all of\nSeller's  or the  Subsidiary's  right,  title  and  interest  in and to  advance\npayments,  prepayments,  prepaid  expenses,  deposits  and the like  made by the\nSubsidiary or Seller on its behalf in the ordinary  course of business  prior to\nthe Closing,  which exist as of the Closing and with respect to which Buyer will\nreceive  the benefit  after the  Closing,  and other  items  recorded as prepaid\nexpenses by Seller and the Subsidiaries (collectively, \"Prepayments\");\n\n         (m) All of Seller's or the Subsidiary's right, title and interest as of\nthe Closing in and to accounts  receivable  recorded by Seller or the Subsidiary\nas an account  receivable  from Payors,  patients  and other third  parties with\nrespect to services provided at or by the Facilities, including, but not limited\nto, amounts receivable under Cost Reports  (collectively,  \"Receivables\"),  and,\nsubject to the provisions of Section 2.2(a) and Section 2.2(h),  all other items\nof working capital  relating  solely to the Facilities,  including cash and cash\nequivalents not to exceed  $10,000,000,  securities,  other current assets,  all\nrights under that certain  Note dated  February 11, 1994,  given by B&amp;G Partners\nLimited  Partnership  in favor of Seller  in the  original  principal  amount of\n$20,000,000  and under any  guaranty or other  instrument  related  thereto (the\ncurrent  outstanding  balance of which is included in the  Headquarters  Assets)\nincluding any cash proceeds  therefrom  received between the date hereof and the\nClosing Date,  and all claims  (including  claims under any  insurance  policies\nretained by Seller or any  Subsidiary),  choses in action,  rights of  recovery,\nrights of  set-off,  rights to  refunds,  and  similar  rights,  whether  or not\nincluded in working capital, but only to the extent that such claims,  choses in\naction,  rights of recovery,  rights of set-off,  rights to refunds, and similar\nrights are related to the Transferred Assets (other than those described in this\nsubsection (m)) and the Assumed Liabilities;\n\n         (n) All of Seller's or the  Subsidiary's  right,  title and interest in\nand to the goodwill of the businesses  evidenced by the Transferred Assets, and,\nexcept for Excluded Assets, any and all other assets of Seller or the Subsidiary\nutilized  solely in the operations of the  Facilities as conducted  prior to the\nClosing Date, whether or not such assets have any value for accounting purposes;\n\n         (o) Subject to  applicable  law and the  provisions of Section 5.7, any\nand all  business  and  patient  records of or related to the  operation  of the\nFacilities which are maintained at the Facilities;\n\n         (p) All proprietary materials,  documents,  information, media, methods\nand processes owned by Seller or a Subsidiary and used exclusively in connection\nwith the  businesses  represented  by the  Transferred  Assets,  and any and all\nrights to use the same, including,  but not limited to, all intangible\n\n\n                                      A-6\n\n\n\nassets of an intellectual  property nature such as  trademenarks,  service marks\nand trade names (whether or not registered),  proprietary computer software, all\nproprietary  procedures and manuals, and all promotional or marketing materials,\nincluding all marketing computer hardware and software; and\n\n         (q) All right,  title and interest of Seller or any Subsidiary in those\nassets  identified  under  the  third  column  under  the  heading  \"Albuquerque\nCorporate\"  on the Balance  Sheet,  which  assets  relate to Seller's  corporate\nheadquarters in Albuquerque, New Mexico (the \"Headquarters Assets\").\n\n     Section 2.2 Excluded Assets. The parties hereto agree that assets of Seller\nand the Subsidiaries not expressly  described in Section 2.1 are not intended to\nbe part of the  Transferred  Assets and are excluded  from the purchase and sale\ncontemplated  hereby.  Without  limiting the generality of the  foregoing,  such\nexcluded assets (the \"Excluded Assets\") include the following:\n\n         (a) All  cash and  cash  equivalents  of  Seller  and the  Subsidiaries\nrelating to the Facilities in excess of $10,000,000;\n\n         (b) [Intentionally omitted.];\n\n         (c) The rights of Seller or any Subsidiary under any insurance  policy,\nif any,  included in the Transferred  Assets which relates to any Excluded Asset\nor Excluded Liability (as defined in Section 2.4) (it being understood, however,\nthat Buyer shall have no  obligation to take any action under any such policy to\nseek any recovery except at the reasonable request,  and at the sole expense, of\nSeller or a Subsidiary (other than a Transferred  Subsidiary) or to continue any\nsuch policies in force);\n\n         (d) The rights of Seller or of any Subsidiary to receive mail and other\ncommunications  addressed  to any of them with  respect  to  Excluded  Assets or\nExcluded Liabilities;\n\n         (e) All property,  plant,  equipment and other assets pertaining to any\nfacility,  business  or  operations  of  HEALTHSOUTH,  Seller  or any  of  their\nrespective Affiliates not included in the Facilities;\n\n         (f)  Any  and  all  rights  respecting  computer  and  data  processing\nhardware,  software  or  firmware  that is  proprietary  to  HEALTHSOUTH  or any\nAffiliate of HEALTHSOUTH  (other than a Transferred  Subsidiary,  and other than\nSeller or a Subsidiary  but only to the extent that such  hardware,  software or\nfirmware is used solely in connection  with the  operations of the  Facilities),\nand any  computer  and data  processing  hardware  or  firmware,  whether or not\nlocated at a Facility,  that is part of a computer system the central processing\nunit for which is not located at a Facility\n\n         (g) All  amounts  due to the  Subsidiaries  arising  from  Intercompany\nTransactions;\n\n         (h)  Such  other  assets,  if any,  as are  specifically  described  in\nSchedule  2.2(h) and assets  which would be  Transferred  Assets  except for the\noperation of Sections 2.12, 2.15, 8.5, 8.6 or 9.5; and\n\n         (i)  All  capital  stock  of  Subsidiaries  that  are  not  Transferred\nSubsidiaries.\n\nTo the extent that any items which  constitute  Excluded  Assets are Assets of a\nTransferred Subsidiary, Seller shall cause such Transferred Subsidiary to convey\nsuch items to Seller by dividend, distribution or otherwise immediately prior to\nthe Closing.  Buyer  acknowledges and agrees that Seller shall have the right to\nremove,  and may  remove at any time  prior to or within 30 days  following  the\nClosing Date (in each case, at Seller's expense, but without charge by Buyer for\nstorage),  from  time  to  time  any and all of the  Excluded  Assets  from  the\nFacilities, provided that Seller shall do so in a manner that does not unduly or\nunnecessarily disrupt Buyer's normal business activities at the Facilities.\n\n                                      A-7\n\n\n\n\n\n     Section 2.3 Assumed  Liabilities.  Subject to the terms and  conditions set\nforth in this  Agreement,  Buyer shall assume at the Closing and pay,  discharge\nand perform as and when due the following  obligations and liabilities,  in each\ncase only to the extent that such  assumption is not encompassed by the sale and\npurchase of the Assigned Stock (as defined in Section 2.1(a)), but excluding all\nExcluded Liabilities as defined in Section 2.4 (the \"Assumed Liabilities\"):\n\n         (a) All liabilities and obligations of Seller or the Subsidiaries which\narise under any contract, license, permit, agreement, arrangement, understanding\nor undertaking  included in the Transferred Assets,  including the Real Property\nLeases, the Venture  Agreements,  the Other Assigned Contracts and the Licenses,\nand any  obligation or liability  (the \"Assumed  Guarantees\")  of HEALTHSOUTH or\nSeller or any Affiliate of  HEALTHSOUTH or Seller  (including  letters of credit\nand performance  bonds) which is in the nature of a guaranty of the foregoing or\nof other  liabilities  and  obligations  of the  Subsidiaries  or of  others  in\nconnection  with  the  operation  of  the  Facilities  (together,  the  \"Assumed\nContracts\"), including without limitation, any capitalized lease liabilities and\nobligations;\n\n         (b) Without affecting the provisions of Sections 2.1(l) all liabilities\nand obligations under open purchase orders that were entered into by Seller or a\nSubsidiary  in the  ordinary  course of business  with respect to operation of a\nFacility on or prior to the Closing  Date and which  provide for the delivery of\ngoods or services subsequent to the Closing Date;\n\n         (c) All  obligations and liabilities to the Hired Employees (as defined\nin Section  2.10(c))  for paid time off  (including,  for all  purposes  of this\nAgreement,  vacation  pay)  through  the  Closing  Date in  accordance  with the\nemployment  policies  of  Seller  as they  exist on the date of this  Agreement;\nprovided  that  except as may be  expressly  set forth  herein,  nothing in this\nAgreement  shall be deemed  to  require  Buyer to  continue  to follow  any such\nemployment  policies of Seller with respect to services of Hired Employees after\nthe  Closing  Date;  provided,  however  that Buyer shall have no  liability  or\nobligation  with  respect  to  any of  Seller's  employees  at  its  Albuquerque\ncorporate  headquarters  except for liabilities  with respect to Hired Employees\naccruing  after the Closing and  liabilities  pursuant to Section  2.3(n) not to\nexceed $19,000,000 in the aggregate.\n\n         (d) [Intentionally omitted.];\n\n         (e)  Subject  to the  provisions  of  Sections  3.16  and  6.2(c),  all\nliabilities  arising out of or in  connection  with the  existence  of Hazardous\nMaterials  (as defined in Section  3.16) upon,  about,  beneath or  migrating or\nthreatening  to migrate to or from the Owned Real  Properties or the Leased Real\nProperties or the existence of any  violation of any  Environmental  Regulations\n(as defined in Section  3.16)  pertaining  to any such Owned Real  Properties or\nLeased Real Properties or the businesses operated therefrom;\n\n         (f)  All  liabilities   and  obligations   respecting  any  changes  or\nimprovements  needed to the  Facilities  for them to be in  material  compliance\nfollowing the Closing with safety,  building,  fire, land use, access (including\nwithout  limitation  the  Americans  With  Disabilities  Act)  or  similar  Laws\nrespecting the physical condition of the Facilities;\n\n         (g) All liabilities and obligations respecting employee matters assumed\nby Buyer pursuant to the provisions of Section 2.10(a);\n\n         (h)  All  liabilities,  obligations  and  expenses  of  Seller  and the\nSubsidiaries  arising from, or connected with, any  determination by Medicare or\nany other Payor to seek to recapture  any costs  reimbursed or  reimbursable  to\nSeller or any  Subsidiary  with  respect  to the  Facilities  as a result of the\npurchases  and  sales   contemplated   hereby  (including  any  gain  from  sale\nliability);\n\n                                      A-8\n\n\n\n\n\n         (i) Any liability or obligation  which becomes an Assumed  Liability by\noperation of Section 2.4(g);\n\n         (j) Any accrued or unpaid liabilities (whether or not due) of Seller or\nthe  Subsidiaries  in  existence  on  the  Closing  Date  which  relate  to  the\nFacilities,  which were incurred in the ordinary  course of the operation of the\nFacilities and which represent (i) trade payables incurred to suppliers of goods\nor services;  (ii) water,  gas,  electricity  and other utility  charges;  (iii)\nlicense fees; (iv) rent, common area maintenance charges, operating expenses and\nother charges arising under the Real Property  Leases;  (v) insurance  premiums;\n(vi) accrued salaries,  benefits  (including  accrued vacation and sick pay) and\npayroll taxes respecting Hired Employees;  (vi) Taxes relating to the Facilities\nor the Transferred  Subsidiaries to the extent that such Taxes relate to periods\nafter the Closing Date; and (vii) similar  liabilities  incurred in the ordinary\ncourse of the operation of the Facilities and customarily  recorded as a current\nliability,   other  than  the  current  portion  of  long-term  liabilities  and\nobligations;\n\n         (k) Any  liability or  obligation  owed by Seller or a Subsidiary  as a\nresult of  determinations  with respect to Cost Reports  filed with respect to a\nFacility before or after the Closing Date;\n\n         (l)  Liabilities  of Seller  and the  Subsidiaries  arising  from or in\nconnection with  litigation  described in Section 3.14, or from or in connection\nwith any other litigation, whether or not pending or threatened, to which Seller\nor any  Subsidiary or any Affiliate of Seller or any Subsidiary is or may become\na party with respect to causes of action  against them in existence  (i.e.,  all\nelements of the claim are complete) prior to the Closing, but only to the extent\nthat such  litigation  relates to the  Transferred  Assets or the  businesses or\noperations represented thereby;\n\n         (m)  Liabilities  or  obligations  of  Seller or the  Subsidiaries  now\nexisting or which may hereafter exist by reason of any alleged violation of Laws\nby Seller or any of the  Subsidiaries  on or prior to the Closing Date, but only\nto the extent that such alleged  violation  of Laws  relates to the  Transferred\nAssets or the businesses or operations represented thereby;\n\n         (n)  Liabilities or obligations of Seller or the  Subsidiaries  arising\nunder the  employment,  change-of-  control,  retention  bonus  and  pay-to-stay\nagreements described on Schedule 2.3(n); provided,  however, that if HEALTHSOUTH\nor  Seller  shall  have paid any  amounts  in  respect  of such  liabilities  or\nobligations  prior to the Closing Date,  Buyer shall  reimburse  HEALTHSOUTH  or\nSeller for the amounts so paid upon demand on or after the Closing Date; and\n\n         (o) All  obligations  and  liabilities  of Seller or any  Subsidiary in\nthose assets  identified  under the third column under the heading  \"Albuquerque\nCorporate\"  on the Balance  Sheet,  which  assets  relate to Seller's  corporate\nheadquarters in Albuquerque,  New Mexico (the \"Headquarters Liabilities\") not to\nexceed, in the aggregate with liabilities under Section 2.3, $19,121,000.\n\n     Section 2.4 Excluded Liabilities. The parties hereto agree that liabilities\nand  obligations  of Seller and the  Subsidiaries  not  expressly  described  in\nSection 2.3 are not  intended to be part of the Assumed  Liabilities,  and Buyer\nshall not assume or become  obligated  with respect to any other  obligation  or\nliability of  HEALTHSOUTH,  Seller or any  Subsidiary or any Affiliate of any of\nthem (collectively, \"Excluded Liabilities\"),  including, but not limited to, the\nliabilities and obligations described in this Section, all of which shall remain\nthe sole  responsibility  of Seller or the  pertinent  Subsidiary  (other than a\nTransferred  Subsidiary) or Affiliate,  as the case may be, it being understood,\nhowever,   that,  as  between  Seller  and  the  Subsidiaries  (other  than  the\nTransferred Subsidiaries), on the one hand, and Buyer, on the other, Buyer shall\nbear the risk of and be responsible for the ongoing operations of the Facilities\nafter the Closing,  including the continuation or performance by Buyer after the\nClosing of any agreement or practice of the  Subsidiaries.  Without limiting the\ngenerality of the foregoing,  Buyer shall not assume and shall have no\n\n\n                                      A-9\n\n\n\n\n\nliability or obligation of any kind for or with respect to any of the following,\nexcept to the extent expressly set forth in Section 2.3:\n\n         (a)  Any  of  Seller's  or  any of  the  Subsidiaries'  liabilities  or\nobligations (including, but not limited to, any liabilities or obligations under\nany tax sharing  agreements) with respect to franchise taxes and with respect to\nforeign, federal, state or local taxes and other Taxes imposed upon or measured,\nin whole or in part,  by the net income for any period ending on or prior to the\nClosing Date of Seller and\/or such  Subsidiaries  or any member of a combined or\nconsolidated group of companies of which Seller and\/or such Subsidiaries are, or\nwere at any time, a part, or with respect to interest, penalties or additions to\nany of such  taxes,  it being  understood  that Buyer  shall not be deemed to be\nSeller's or any Subsidiary's transferee with respect to any such tax liability;\n\n         (b)  Any  of  Seller's  or  any of  its  Subsidiaries'  liabilities  or\nobligations  with respect to the recapture of foreign,  federal,  state or local\ntax  deductions  or credits  taken by Seller or such  Subsidiary  for any period\nending  on or prior to the  Closing  Date  imposed  upon,  or any  taxable  gain\nrecognized  by,  Seller  or  such  Subsidiary  on  account  of the  Transactions\ncontemplated hereby;\n\n         (c) Liabilities or obligations of Seller or its Affiliates now existing\nor which may  hereafter  exist by reason of any  alleged  violation  of Laws (as\ndefined in Section  1.1) by Seller or any of its  Affiliates  on or prior to the\nClosing Date which does not relate to the  Transferred  Assets or the businesses\nor operations represented thereby;\n\n         (d)  Liabilities  or  obligations  of Seller or a Subsidiary  under any\nAssumed  Contract which would be included in the Transferred  Assets but for the\nprovisions  of  Section  2.12,  unless  Buyer  is  provided  with  the  benefits\nthereunder as contemplated in such Section;\n\n         (e)  Liabilities  of Seller  and the  Subsidiaries  arising  from or in\nconnection  with  litigation  not  relating  to the  Transferred  Assets  or the\nbusinesses or operations represented thereby;\n\n          (f) Subject to Section 2.12(b), liabilities of Seller and the\nSubsidiaries   incurred  in  connection   with  their   obtaining  any  consent,\nauthorization or approval necessary for them to sell, convey,  assign,  transfer\nor deliver any Transferred Asset to Buyer hereunder;\n\n         (g)  Except  with  respect  to the  mortgages  and  capitalized  leases\nidentified  on  Schedule  2.1(b) and the  indebtedness  evidenced  thereby,  all\nliabilities and obligations (including interest, penalties and other amounts due\nin respect thereof) with respect to which shall constitute Assumed  Liabilities,\nany  liability of Seller or a  Subsidiary  representing  indebtedness  for money\nborrowed  or the  deferred  portion  of the  purchase  price for any Owned  Real\nProperty  (and  any  refinancing  thereof),  including  without  limitation  the\nindebtedness identified on Schedule 2.4(g) and all interest, penalties and other\namounts due in respect thereof;  provided that if, prior to Closing, the parties\nmutually agree that any such indebtedness or obligation will be assumed by Buyer\nand  further  agree  upon an  equitable  reduction  in the cash  portion  of the\nPurchase Price (as defined in Section 2.5) to reflect Buyer's assumption of such\nindebtedness  or obligation,  then any such  indebtedness  or obligation will be\ndeemed to  constitute an Assumed  Liability for all purposes of this  Agreement;\nand provided  further that with respect to any such  indebtedness  or obligation\nnot so  assumed  by  Buyer  that  constitutes  a lien or  encumbrance  upon  any\nTransferred Asset,  Seller agrees that substantially  concurrently with or prior\nto the Closing it will either pay or discharge such indebtedness or liability in\nfull or  otherwise  cause  such  lien or  encumbrance  to be  removed  from such\nTransferred Asset, so that such Transferred Asset is sold,  conveyed,  assigned,\ntransferred and delivered to Buyer at the Closing free and clear of such lien or\nencumbrance;\n\n\n                                      A-10\n\n\n\n\n\n         (h)  Such  other  liabilities  and  obligations,  if any,  specifically\ndescribed in Schedule 2.4(h) and liabilities which would be Assumed  Liabilities\nbut for the provisions of Sections 2.12, 2.15, 8.5, 8.6 or 9.5;\n\n         (i)  Amounts  due  from  Seller  or  the   Subsidiaries   arising  from\nIntercompany Transactions;\n\n         (j)  Any  liabilities  or  obligations  of  HEALTHSOUTH,  Seller  or  a\nSubsidiary to employees who are not Hired Employees;\n\n         (k) Any  liabilities  of  HEALTHSOUTH  or  Seller  to  stockholders  of\nHEALTHSOUTH or Seller (solely in their capacity as  stockholders) as a result of\nthe acquisition of Seller by HEALTHSOUTH;\n\n         (l)  Any  liability  for  workers'  compensation,   general  liability,\nprofessional  liability or automobile liability arising out of occurrences prior\nto the Closing;\n\n         (m) Any  liability  arising  out of the  termination  by  Seller or any\nSubsidiary of any of the Pension Plans;\n\n         (n)  Any  obligation  of  Seller  or any  Subsidiary  with  respect  to\n\"earn-out\"  or  similar   contingent  or  deferred   payments  relating  to  the\nacquisition of assets or businesses prior to the Closing Date;\n\n         (o) Any  liability  of Seller or any  Subsidiary  with respect to their\nrespective employees arising out of occurrences prior to the Closing,  except as\notherwise expressly provided herein; and\n\n         (p) Any liabilities in connection with Seller's  Albuquerque  corporate\nheadquarters   (including   liabilities  under  Section  2.3(n))  in  excess  of\n$19,121,000.\n\nWith respect to Transferred Subsidiaries, Seller shall assume, immediately prior\nto the Closing,  all  liabilities  of such  Transferred  Subsidiaries  which are\nExcluded Liabilities.\n\n     Section 2.5 Purchase  Price.  The purchase price (the \"Purchase  Price\") in\nthe aggregate for all of the Transferred Assets shall be $1,250,000,000.\n\n     Section  2.6  Payment  of  Purchase  Price.  The  Purchase  Price  for  the\nTransferred Assets shall be paid as follows:\n\n         (a) Execution Fee. Buyer  acknowledges that Seller and the Subsidiaries\nwill incur  substantial  damage that may be  impossible to quantify in the event\nthe Transactions  are not  consummated.  In order to induce Seller to enter into\nthis Agreement and to terminate its discussions  with other parties with respect\nto the sale of the  Transferred  Assets,  Buyer is,  contemporaneously  with the\nexecution of this Agreement,  paying to Seller, in immediately  available funds,\nthe sum of $50,000,000 as an earnest money deposit (the  \"Execution  Fee\") to be\napplied  against the Purchase Price due in the event of a Closing.  In the event\nthat (i) this  Agreement is  terminated  by Buyer  because of  HEALTHSOUTH's  or\nSeller's  material breach of their  obligations  hereunder,  or (ii) there is no\nClosing prior to the Termination  Date (as defined in Section  10.1(b))  because\n(A) the express  conditions in Article 8 to the obligations of Buyer are not met\nor waived  (except,  in the case of the conditions  specified in Section 8.5, if\nany such action,  suit or proceeding therein described shall have been commenced\nor  threatened  by  Buyer  or  any  of  its  Affiliates,  associates,  officers,\ndirectors,  stockholders,  creditors, or prospective or actual financing sources\nin respect of the Transactions), or (B) the express conditions in Section 9.5 to\nthe  obligations  of  HEALTHSOUTH  and Seller are not met or waived and any such\naction,  suit or  proceeding  therein  described  shall have been  commenced  or\nthreatened  by  HEALTHSOUTH,  Seller  or any  Subsidiary  or any of its or their\nAffiliates,\n\n\n                                      A-11\n\n\n\n\n\nassociates,  officers, directors,  stockholders or creditors, then and in either\nof such events,  within two business days after the earlier of such  termination\nor the  occurrence  of the  Termination  Date,  as the case may be, Seller shall\nreturn the Execution Fee to Buyer with interest at the rate of 5% per annum, and\nless any costs of Seller and the Subsidiaries to be reimbursed by Buyer pursuant\nto Section 5.5, via wire transfer of immediately  available  funds. In all other\ncases,  the Execution Fee shall be retained by Seller,  and such retention shall\nnot relieve  Buyer of its  obligations  to reimburse any costs of Seller and the\nSubsidiaries  pursuant  to  Section  5.5.  In the  event of any  breach  of this\nAgreement  or other  liability  of Buyer to Seller,  unless the Closing  occurs,\nretention of the Execution Fee by Seller and, as applicable, payment by Buyer to\nor  on  behalf  of  HEALTHSOUTH,   Seller  and  the   Subsidiaries  the  amounts\nreimbursable  by Buyer to Seller pursuant to Section 5.5 and the Termination Fee\nshall  constitute the sole and exclusive  remedy of HEALTHSOUTH,  Seller and the\nSubsidiaries  against  Buyer with  respect to such breach or  liability.  In the\nevent of any breach of this Agreement or other liability of HEALTHSOUTH,  Seller\nor the Subsidiary to Buyer,  unless the Closing occurs,  return of the Execution\nFee to Buyer and, as applicable,  payment of the Topping Fee,  shall  constitute\nthe sole and  exclusive  remedy of Buyer  against  HEALTHSOUTH,  Seller  and the\nSubsidiaries with respect to such breach or liability.\n\n         (b) Payment of Remaining  Purchase Price.  At the Closing,  Buyer shall\ndeliver to Seller an amount equal to the Purchase  Price less (i) the  Execution\nFee plus accrued  interest thereon at 5% per annum and (ii) the principal amount\nof any indebtedness,  any accrued but unpaid interest thereon and the balance of\nany capitalized  leases assumed by Buyer pursuant to Section 2.1(b),  subject to\nadjustment as provided in Section 2.14.\n\n         (c)  Seller  as  Agent  of  Subsidiaries.  Seller  shall,  prior to the\nClosing,  cause each Subsidiary to irrevocably  designate Seller as its agent to\nreceive on its behalf  delivery of that  portion of all  payments  made by Buyer\nhereunder to which such Subsidiary may be entitled, including without limitation\nthat portion of the Purchase Price  attributable to the Transferred  Assets sold\nto Buyer by it, and to acknowledge that delivery of such payments, including the\nPurchase  Price,  to Seller in accordance with the terms of this Agreement shall\nbe conclusive  and binding  evidence  against such  Subsidiary  that, as between\nBuyer and such Subsidiary,  any payments or consideration due to such Subsidiary\nin respect of the Transferred Assets sold to Buyer by it, or in respect of other\npayments  due to it from  Buyer  under  the terms of this  Agreement,  have been\ndelivered.\n\n     Section 2.7 Allocation of Purchase Price.  Within 90 days after the Closing\nDate,  HEALTHSOUTH  and Seller,  on the one hand, and Buyer,  on the other hand,\nshall agree to an allocation of the Purchase Price among the Transferred  Assets\nand shall prepare a written schedule reflecting such allocation (the \"Allocation\nSchedule\").  Seller and Buyer shall, and Seller shall cause the Subsidiaries to,\nallocate the Purchase Price in accordance  with the Allocation  Schedule,  to be\nbound by such  allocations  for all  purposes,  to  account  for and  report the\npurchases and sales  contemplated  hereby for all purposes  (including,  without\nlimitation,  financial, accounting, Medicare reimbursement and federal and state\ntax purposes) in accordance with such allocations,  and not to take any position\n(whether in financial statements,  Cost Reports, tax returns, Cost Report or tax\naudits, or otherwise),  including  without  limitation any claim to a step up in\nthe basis of such assets by Buyer or its  successors  and  assigns for  Medicare\npurposes which is inconsistent with such allocations in the Allocation  Schedule\nwithout the prior written consent of the other party,  except to the extent,  if\nany,  required by applicable Law or generally  accepted  accounting  principles.\nWithout limiting the generality of the foregoing,  Buyer agrees to indemnify and\nhold harmless Seller and the Subsidiaries,  in accordance with the provisions of\nSections 11.4,  11.5 and 11.6,  from and against any and all Losses arising from\nor connected  with any  determination  by Medicare or any other Payor to seek to\nrecapture any costs  reimbursed or reimbursable to Seller or any Subsidiary as a\nresult of the purchases and sales  contemplated  hereby (including any gain from\nsale liability).\n\n     Section 2.8 [Intentionally omitted.]\n\n\n                                      A-12\n\n\n\n\n\n     Section 2.9 Remittances,  Mail and Other  Communications.  All remittances,\nmail and other  communications  relating  to the  Excluded  Assets  or  Excluded\nLiabilities received by Buyer at any time after the Closing shall be immediately\nturned over by Buyer to the addressee thereof,  or if the addressee is no longer\naffiliated with Seller, to Seller,  and pending such delivery,  Buyer shall have\nno  interest  in the  same and  shall  hold  such  remittances,  mail and  other\ncommunications  in trust for the  benefit  of Seller and the  Subsidiaries.  All\nremittances, mail and other communications relating to the Transferred Assets or\nthe Assumed  Liabilities  received by Seller or any Subsidiary at any time after\nthe Closing shall be immediately turned over by Seller or such Subsidiary to the\naddressee  thereof,  or if the addressee is no longer  affiliated with Buyer, to\nBuyer,  and  pending  such  delivery,  Seller or such  Subsidiary  shall have no\ninterest  in  the  same  and  shall  hold  such  remittances,   mail  and  other\ncommunications in trust for the benefit of Buyer.\n\n     Section 2.10 Employee Matters.\n\n         (a) Pension Plans. Schedule 2.10(a) lists all \"employee pension benefit\nplans\"  (\"Pension  Plans\")  within the meaning of Section  3(2) of the  Employee\nRetirement  Income  Security  Act  of  1974,  as  amended  (\"ERISA\"),   and  any\n\"multiemployer   plans\"   within  the   meaning   of  Section   3(37)  of  ERISA\n(\"Multiemployer  Plans\"),  in which Retained Employees (as defined in Subsection\n(b) below)  directly  employed  to work at the  Facilities  participate.  Seller\nshall, or shall cause the  Subsidiaries to, (i) terminate as of the Closing Date\nall Pension Plans relating solely to the Transferred Subsidiaries,  terminate as\nof the  Closing  Date the  active  participation  of all such  employees  in the\nPension Plans who  constitute  Hired  Employees  (as defined in  Subsection  (c)\nbelow),  (ii) cause the Pension Plans to make timely appropriate  distributions,\nto the extent required,  to such employees in accordance with, and to the extent\npermitted  by, the terms and  conditions  of such  Pension  Plans,  and (iii) in\nconnection  with  the  termination  of the  active  participation  of  all  such\nemployees in such Pension Plans,  comply, and cause each Pension Plan to comply,\nwith all applicable Laws.  Prior to the Closing,  Seller shall have delivered to\nBuyer,  for  information  purposes  only,  forms of any letters or other written\ncommunications  which Seller or the Subsidiaries  shall distribute  generally to\nsuch employees  notifying them of their rights in respect of their  cessation of\nactive  participation  in the Pension Plans.  With respect to the  Multiemployer\nPlans, Buyer agrees that Buyer shall contribute to such Multiemployer Plans with\nrespect to the operations  covered thereby for  substantially the same number of\ncontribution base units for which Seller and\/or the pertinent  Subsidiaries have\nan obligation to contribute to such  Multiemployer  Plans.  Buyer shall take all\naction  necessary  to comply  with  Section  4204 of ERISA,  including,  without\nlimitation, posting, prior to the Closing Date, a bond or escrow for each of the\nMultiemployer  Plans for which a bond or escrow is required,  in an amount,  for\nthe period of time and in a form which  complies with Section  4204(a)(1)(B)  of\nERISA, or, prior to the Closing Date,  obtaining a variance from such bonding or\nescrow requirement from the applicable Plan or Plans or from the Pension Benefit\nGuaranty Corporation, so that a transfer of contribution obligations to Buyer as\nset forth herein does not result in a complete or partial  withdrawal  of Seller\nor any  Subsidiary  from any of such Plans under ERISA,  and Buyer shall furnish\nSeller proof  thereof.  The cost of each bond or escrow  required  under Section\n4204(a)(1)(B)  of  ERISA  shall  be paid by Buyer  and  Buyer  shall be the sole\nobligor  thereunder.  Buyer shall in accordance  with the provisions of Sections\n11.4, 11.5, and 11.6,  indemnify and hold harmless  HEALTHSOUTH,  Seller and the\nSubsidiaries (other than the Transferred Subsidiaries) for any Losses (including\nany  secondary  liability  of the Seller or any such  Subsidiary  as a result of\nBuyer's failure to make any withdrawal  liability payment when due) arising from\nor in connection with the Multiemployer Plans, and any change or termination of,\nor any  partial or complete  withdrawal  from,  any of such  Plans,  which might\naccrue to HEALTHSOUTH,  Seller and the Subsidiaries  (other than the Transferred\nSubsidiaries)  from acts or  omissions  occurring  or  required  on or after the\nClosing Date,  including but not limited to, any liability  associated  with any\ncontinuation  of coverage under such Plans on or after the Closing Date required\nby Law or contract.\n\n         (b) Retained Employees. Except with respect to Facilities which are the\nsubject of a Management Agreement,\n\n\n                                      A-13\n\n\n\n\n\n               (i) Buyer shall offer to hire at the Closing,  on a  probationary\n          basis,  each of the direct employees of Seller or a Subsidiary  (other\n          than a  Transferred  Subsidiary)  who, as of the Closing,  work at the\n          Facilities  (including  any such direct  employees  who are on medical\n          disability  or  leaves of  absence  and who  worked at the  Facilities\n          immediately prior to such disability or leave).\n\n               (ii)  Buyer  shall  retain  immediately  after  the  Closing,  in\n          accordance   with  their   then-existing   terms  and   conditions  of\n          employment,   each  of  the  direct   employees  of  the   Transferred\n          Subsidiaries who, as of the Closing, work at the Facilities (including\n          any such direct  employees who are on medical  disability or leaves of\n          absence  and who worked at the  Facilities  immediately  prior to such\n          disability or leave).\n\n               (iii) All such direct employees to whom Buyer is required to make\n          offers of  employment  or to retain  pursuant  to clauses (i) and (ii)\n          above are herein referred to as the \"Retained Employees.\"\n\n               (iv) Any such offer of employment to a Retained Employee by Buyer\n          shall  be to  perform  comparable  services,  in such  position  as is\n          comparable to the position such Retained  Employee held with Seller or\n          any of its  subsidiaries  as of the Closing,  provided  that Buyer may\n          offer compensation to such Retained  Employees at levels  commensurate\n          with  compensation  levels paid to other  employees  of Buyer  holding\n          comparable  positions,   and  provided  further  that  any  change  in\n          compensation  levels does not result in any constructive  discharge of\n          any such Retained Employee,  breach of any employment contract assumed\n          by  Buyer   hereunder  or  any  other  liability  of  Seller  and  the\n          Subsidiaries. HEALTHSOUTH, Seller or their respective Affiliates shall\n          have the right (but not the  obligation)  to employ or offer to employ\n          any Retained Employee who declines Buyer's offer of employment.\n\n         (c) Hiring of Retained Employees. Buyer shall hire at the Closing, on a\nprobationary  basis,  each Retained  Employee referred to in clause (b)(i) above\nwho  elects to accept  employment  with  Buyer and shall  retain  each  Retained\nEmployee  referred  to in clause  (b)(ii) in  accordance  with the terms of such\nclause (all of such  employees  who accept  employment  with Buyer or who remain\nemployed  by  the  Transferred  Subsidiaries  being  herein  called  the  \"Hired\nEmployees\")  and  shall  indemnify  and  hold  HEALTHSOUTH,   Seller  and  their\nAffiliates  harmless,  in accordance with Sections 11.4, 11.5 and 11.6, from and\nagainst any Losses arising from or relating to any subsequent termination of any\nsuch employee by Buyer.  Subject to the proviso to Section 2.3(c),  Buyer agrees\nto give such Hired  Employees  hired by it full credit for the paid time off and\nsick pay earned or accrued by them  during,  and to which they are entitled as a\nresult  of,  their  employment  by Seller  and\/or  the  Subsidiaries,  either by\nallowing  such  employees  such  paid  time off and  sick  pay as to which  such\nemployees would have been entitled as of their termination date by Seller and\/or\nthe  Subsidiaries  under the policies of Seller and\/or the  Subsidiaries  (as in\neffect on the date of this  Agreement) if such employees had remained  employees\nof Seller and\/or the Subsidiaries or, upon termination of employment,  by making\nfull payment to such  employees of the paid time off that such  employees  would\nhave  received  had they taken such paid time off, and Buyer  further  agrees to\nreimburse  Seller for any payments made by Seller and\/or the  Subsidiaries  with\nrespect to such accrued or earned paid time off or sick pay.\n\n         (d) Health Benefits.  Buyer shall provide the Hired Employees a program\nof health  care  benefits  which is  equivalent  to the  program of health  care\nbenefits  currently  provided  by Buyer  to its  existing  employees,  provided,\nhowever,  that such health care benefits shall be immediately  available to such\nHired Employees as of their  respective hire dates by Buyer,  and such employees\nshall become as of\n\n\n                                      A-14\n\n\n\n\n\ntheir  respective  hire dates  participants  thereunder,  without  regard to any\napplicable  waiting  period  or  any  limitation  with  respect  to  preexisting\nconditions; provided, however, that such covenant of Buyer shall apply only with\nrespect to Hired  Employees  who were  covered by health  insurance  provided by\nHEALTHSOUTH,  Seller  or  a  Subsidiary  immediately  prior  to  Closing.  Buyer\nacknowledges  and agrees that Buyer is a successor  employer for purposes of the\nConsolidated  Omnibus Budget  Reconciliation  Act of 1985, as amended (\"COBRA\"),\nthat the Retained Employees hired by it will not, as a result, be deemed to have\nhad a termination of employment for purposes of COBRA and that any COBRA notices\nor coverages  required to be given or made  available  to any Retained  Employee\nhired by it shall be given or made by Buyer and not  HEALTHSOUTH,  Seller or the\nSubsidiaries (other than, as applicable, the Transferred Subsidiaries), provided\nthat Buyer does not assume,  and shall not be deemed to have assumed,  any COBRA\nobligations  which  Seller or any  Subsidiary  may have to former  employees  of\nSeller or such  Subsidiary  whose  employment  was terminated on or prior to the\nClosing Date, or to any Retained  Employees  who do not accept  employment  with\nBuyer.  Notwithstanding  the foregoing,  HEALTHSOUTH and Seller will provide the\nHired Employees with COBRA  continuation  coverage for 90 days after the Closing\nDate at the expense  (including any claims expense with respect to  self-insured\nclaims) of Buyer.\n\n         (e)  Acknowledgment of  Responsibility.  Buyer  acknowledges and agrees\nthat as of the date and time the Closing is effective,  Buyer is considered  for\npurposes of the Worker  Adjustment  and Retraining  Notification  Act (the \"WARN\nAct\")  the  employer  of  the  Retained   Employees  and  that  Buyer  (and  not\nHEALTHSOUTH,  Seller or the  Subsidiaries)  shall  thereupon be responsible  for\ncomplying  with the WARN Act with  respect to the  Retained  Employees  and that\nprior to such time none of the  Retained  Employees  shall be, nor shall they be\ndeemed to be, terminated. Buyer shall indemnify and hold HEALTHSOUTH, Seller and\ntheir Affiliates harmless, in accordance with Sections 11.4, 11.5 and 11.6, from\nand against all Losses (i) resulting from any compliance obligation  (including,\nwithout  limitation,  the obligation to give notice or pay money) HEALTHSOUTH or\nSeller  or its  Affiliates  or Buyer has  under  the WARN Act  arising  from the\ntermination of any Retained  Employee,  or (ii) resulting from any claims of the\nHired Employees (including,  without limitation, claims for health care coverage\nor benefits).\n\n         (f) To the  extent  that  Buyer  does not hire as of the  Closing  Date\nRetained  Employees  with  respect  to a  Facility  that  is  the  subject  of a\nManagement  Agreement,  the  provisions of this Section 2.10 shall apply at such\ntime, if any, as Buyer acquires ownership of such Facility.\n\nNotwithstanding  the foregoing,  nothing in this Section 2.10 shall, or shall be\ndeemed to,  create  any  rights in favor of any person not a party  hereto or to\nconstitute an employment  agreement or condition of employment  for any employee\nof  HEALTHSOUTH  or  Seller or any  Affiliate  of  HEALTHSOUTH  or Seller or any\nRetained Employee.\n\n     Section 2.11 [Intentionally omitted.]\n\n     Section  2.12 No  Assignment  If  Breach;  Seller's  Discharge  of  Assumed\nLiabilities.\n\n         (a)  Notwithstanding  anything  contained  in  this  Agreement  to  the\ncontrary,  this  Agreement  shall not  constitute  an  agreement  to assign  any\nTransferred Asset, or assume any Assumed Liability,  if the attempted assignment\nor  assumption  of the  same,  as a result  of the  absence  of the  consent  or\nauthorization  of a third party,  would constitute a breach or default under any\nlease, agreement, encumbrance or commitment or would in any way adversely affect\nthe rights, or increase the obligations,  of Buyer,  HEALTHSOUTH,  Seller or any\nSubsidiary with respect  thereto;  provided that the assignment of any contract,\nincluding without limitation Medicare, Medicaid and similar provider agreements,\nwhich may lawfully be made subject to customary  conditions  subsequent (such as\nneeds   surveys,   evaluations   of  Buyer  or  other   determinations   by  the\ncounterparties  to such agreements)  shall be deemed not to constitute a default\nunder, or to in any way adversely  affect the rights or increase the obligations\nof Buyer with respect\n\n\n                                      A-15\n\n\n\n\n\nto, such lease,  agreement,  encumbrance or commitment,  unless the counterparty\nindicates prior to the Closing that such condition or conditions  subsequent are\nnot likely to be met. If any such consent or authorization  is not obtained,  or\nif an attempted assignment or assumption would be ineffective or would adversely\naffect  the  rights or  increase  the  obligations  of  HEALTHSOUTH,  Seller,  a\nSubsidiary or Buyer, with respect to any such lease,  agreement,  encumbrance or\ncommitment, so that Buyer would not, in fact, receive all such rights, or assume\nthe  obligations,  of Seller or  Subsidiary  with respect  thereto as they exist\nprior to such attempted  assignment or assumption,  then, in accordance with the\nprocedures  described in Section 2.14, but subject to the  Management  Agreement\nprovisions of Section 2.15,  Seller and Buyer shall, and Seller shall cause each\nSubsidiary to, enter into such  reasonable  cooperative  arrangements  as may be\nreasonably  acceptable to both Buyer and Seller (including  without  limitation,\nsublease, agency, partial closing, management, indemnity or payment arrangements\nand  enforcement  at the cost and for the benefit of Buyer of any and all rights\nof Seller and the  Subsidiaries  against an involved third party) to provide for\nBuyer the  benefits  of such  Transferred  Asset or to  relieve  Seller  and the\nSubsidiaries from the obligations of such Assumed Liability, and any transfer or\nassignment to Buyer by Seller or a Subsidiary of any such Transferred  Asset, or\nany assumption by Buyer of any such Assumed Liability,  which shall require such\nconsent or  authorization  of a third party that is not  obtained  shall be made\nsubject  to  such  consent  or  authorization  being  obtained.  Subject  to the\nprovisions of Section 2.15, if the parties cannot agree on any such arrangement,\nor any such arrangement  would not be reasonably  practicable,  to provide Buyer\nwith materially all the benefits of such Transferred Asset or materially all the\nobligations of such Assumed  Liability,  then such Transferred  Asset or Assumed\nLiability, as the case may be, shall be excluded from the Transactions and shall\nbe deemed to be an Excluded Asset or an Excluded Liability,  as the case may be,\nand Buyer and Seller shall  negotiate in good faith an equitable  adjustment  in\nthe Purchase Price, or resolve any disagreement  respecting such adjustment,  in\naccordance with the procedures of Section 2.14.\n\n         (b) Notwithstanding  any other provision of this Agreement,  during the\nperiod  between  the date  hereof and the  Closing,  Seller may (or,  at Buyer's\nrequest and expense, will), for the purpose of facilitating  consummation of the\nTransactions,  cause any  Subsidiary  to acquire (on  customary  and  reasonable\nterms,  conditions and purchase prices) a fixed asset, or any direct or indirect\ninterest  therein,  that results in the simultaneous  discharge of the effective\ncost of all or any part of a liability  that exists as of the date hereof which,\nbut for such acquisition,  would be an Assumed Liability;  provided that in each\nsuch case it gives prompt notice of such  acquisition to Buyer.  In the event of\nany  such  acquisition,  Buyer  and  Seller  shall  negotiate  in good  faith an\nequitable  adjustment  to  the  Purchase  Price,  or  resolve  any  disagreement\nrespecting such adjustment, in accordance with the procedures of Section 2.14.\n\n     Section  2.13  Closing.  Subject to the terms and  conditions  hereof,  the\nconsummation  of the  Transactions  (the  \"Closing\")  shall  occur at a mutually\nagreeable  time and place or places  within five  business  days after the first\ndate on which all of the  conditions set forth in Article 8 and Article 9 hereof\nare  satisfied,  but in no event  later than the  Termination  Date set forth in\nSection  10.1(b).  The date on which the Closing  actually occurs is referred to\nherein as the \"Closing Date\". The Closing shall be effective for all purposes as\nto each Facility (and the  Transferred  Assets and Assumed  Liabilities  related\nthereto) at 11:59 p.m. on the Closing  Date,  as  determined by reference to the\nlocal time zone in which the Facility is located.  At the Closing and subject to\nthe terms and conditions hereof, the following will occur:\n\n         (a)  Deliveries  by  Seller.   Seller  shall  deliver,   or  cause  the\nSubsidiaries to deliver, to Buyer:\n\n                   (i) Stock powers properly executed and acknowledged by Seller\n     or the  relevant  Subsidiary  (or by Seller as its  attorney-in-fact)  with\n     respect to the Assigned Stock;\n\n                   (ii) A Bill of Sale and Assignment in substantially  the form\n     of Exhibit A executed by Seller or the relevant Subsidiary (or by Seller as\n     its  attorney-in-fact)  with respect to the\n\n\n                                      A-16\n\n\n\n\n\n     Transferred  Assets of Seller or such Subsidiary  (other than shares of the\n     Assigned Stock) covered thereby;\n\n                   (iii) Special or limited  warranty deeds,  properly  executed\n     and acknowledged by Seller or the relevant  Subsidiary (or by Seller as its\n     attorney-in-fact)  with respect to the Owned Real  Properties  of Seller or\n     such Subsidiary included in the Transferred Assets;\n\n                   (iv)  Assignments  in  substantially  the form of  Exhibit  B\n     executed  by  Seller  or  the  relevant  Subsidiary  (or by  Seller  as its\n     attorney-in-fact)  with respect to Real  Property  Leases of Seller or such\n     Subsidiary included in the Transferred Assets;\n\n                   (v) Instruments of transfer,  sufficient to transfer personal\n     property  interests of Seller or the relevant  Subsidiary that are included\n     in the  Transferred  Assets but not otherwise  transferred  by the Bills of\n     Sale and Assignment referred to in clause (ii) above, executed by Seller or\n     the relevant Subsidiary (or by Seller as its  attorney-in-fact) in the form\n     customarily  used in  commercial  transactions  in the areas in which  such\n     other personal property of Seller or such Subsidiary is located;\n\n                   (vi) Such other  instruments of transfer,  executed by Seller\n     and   each   of  the   relevant   Subsidiaries   (or  by   Seller   as  its\n     attorney-in-fact)  necessary  to  transfer  to and  vest  in  Buyer  all of\n     Seller's  and the  Subsidiaries'  rights,  title and interest in and to the\n     Transferred Assets;\n\n                   (vii) An Assumption  Agreement,  in substantially the form of\n     Exhibit C, in favor of Buyer with  respect to all Excluded  Liabilities  of\n     the Transferred Subsidiaries; and\n\n                   (viii) Possession of the Transferred Assets.\n\n         (b) Deliveries by Buyer. Buyer shall deliver to Seller:\n\n                   (i) Immediately  available  funds, by way of wire transfer to\n     an account  or  accounts  designated  by  Seller,  in an amount  determined\n     pursuant to Section 2.6(b), less any adjustments  pursuant to Section 2.14;\n     and\n\n                   (ii) An  Assumption  Agreement or Assumption  Agreements,  in\n     substantially  the form of  Exhibit  D, in favor of Seller  and each of the\n     Subsidiaries.\n\n         (c) Escrow.  If either of the parties desires to consummate the Closing\nthrough an escrow,  an escrow shall be opened  with,  and the escrow agent shall\nbe, Fidelity National Title Company (the \"Escrow Agent\"),  by depositing a fully\nexecuted  copy  of  this   Agreement  with  Escrow  Agent  to  serve  as  escrow\ninstructions. This Agreement shall be considered the primary escrow instructions\nbetween the parties,  but the parties  shall  execute such  additional  standard\nescrow instructions as Escrow Agent shall require in order to clarify the duties\nand  responsibilities of Escrow Agent. In the event of any conflict between this\nAgreement and such additional standard escrow instructions, this Agreement shall\nprevail.  If the Closing is to be consummated  through the Escrow Agent, then on\nor prior to the Closing Date, Buyer shall cause the funds required by Subsection\n(b)(i)  above to be wired to Escrow  Agent,  and the parties  shall  deliver the\ninstruments  of  sale,  assignment,  conveyance  and  assumption  called  for by\nSubsections (a) and (b) above to the Escrow Agent,  and on the Closing Date, the\nEscrow Agent shall close the escrow by:\n\n                   (i)  Causing  the deeds for the Owned  Real  Properties,  the\n     assignments of the Real Property Leases,  and any other documents which the\n     parties may mutually  designate  to be re-\n\n\n                                      A-17\n\n\n\n\n\n     corded in the  official  records of the  appropriate  counties in which the\n     pertinent Transferred Assets are located;\n\n                   (ii)  Delivering  to Seller by wire  transfer of  immediately\n     available  funds,  to an  account or  accounts  designated  by Seller,  the\n     amounts called for by Subsection (b)(i) above; and\n\n                   (iii) Delivering to Buyer or Seller,  as the case may be, the\n     other instruments referred to in Subsections (a) and (b) above.\n\n     Section 2.14 Purchase Price Adjustment.\n\n         (a) In the event that  circumstances  exist that require the parties to\nnegotiate in good faith cooperative arrangements under Section 2.12 or potential\namendments  to this  Agreement  pursuant to Sections 8.5 and 9.5  (dealing  with\npossible  subsequent  transfers of  Transferred  Assets after the Closing in the\nevent  of  certain  injunctions)  or  potential  amendments  to  the  Management\nAgreement  referred to in Section 2.15, or to negotiate in good faith  equitable\nadjustments  in the Purchase  Price  pursuant to the provisions of the foregoing\nSections, or the provisions of Section 8.6 (respecting the condition of title to\ninterests  in real  property)  (Sections  2.12,  2.15,  8.5,  8.6 and 9.5  being\ncollectively referred to as the \"Adjustment Sections\"),  then and in any of such\nevents,  such  negotiations,   and  the  resolution  of  disagreements   arising\ntherefrom,  shall be conducted in accordance with the provisions of this Section\n2.14.  The parties shall  negotiate  such  cooperative  arrangements,  potential\namendments  and equitable  adjustments in the Purchase Price in good faith prior\nto any  scheduled  Closing  Date (as may be extended by mutual  agreement of the\nparties),  and, in connection  with an adjustment to the Purchase  Price,  shall\nalso  negotiate  appropriate  amendments  to  the  Allocation  Schedule  arising\ntherefrom,  provided  that  any  adjustment  in  the  Purchase  Price  shall  be\nconsistent with the original Allocation  Schedule.  If the parties are unable to\nagree by the day prior to such  scheduled  Closing  Date,  then  such  scheduled\nClosing Date (and the Termination  Date, if necessary)  shall be extended for up\nto 15 business days to provide for the opportunity to resolve such  disagreement\npursuant to the  provisions  of this Section  2.14. On the day the Closing would\nhave occurred but for the absence of agreement  between the parties,  each party\nshall  designate  an  individual  (who may not be a present  or former  officer,\ndirector,  partner  or  employee  of the  party  or of  any  present  or  former\ninvestment  banker,  accounting firm, law firm or attorney regularly used by the\nparty) to mediate  such  disagreement,  and advise the other party in writing of\nthe identity of such individual,  which advice shall be accompanied by a list of\nup to ten  suggested  neutral  individuals  to  serve as a third  mediator.  The\nmediators  originally  designated by each party shall promptly  confer about the\nselection of a third  mediator  from such lists,  and within five  business days\nfollowing the originally  scheduled  Closing Date (or  Termination  Date, as the\ncase may be), the originally  designated mediators shall agree upon and (subject\nto  availability)  select the third  mediator  from the lists  submitted  by the\nparties or  otherwise,  provided  that if the  originally  designated  mediators\ncannot agree upon a third  mediator by such date,  the third  mediator  shall be\ndesignated by the Alternative Dispute Resolution Service of NHLA\/AAHA,  Inc. The\nthree  mediators so selected are herein  referred to as the \"Panel\".  Within two\nbusiness days following the designation of the third mediator,  each party shall\nsubmit  to  the  Panel,  in  writing,  its  proposed  cooperative  arrangements,\namendments to this  Agreement,  amendments to the Management  Agreements  and\/or\nequitable  adjustments  in the  Purchase  Price  in  the  absence  of  any  such\ncooperative arrangements or amendments, except that the parties need only submit\ntheir proposed adjustments to the Purchase Price (and proposed amendments to the\nAllocation  Schedule) in the case of disagreements about adjustments for certain\nacquisitions and modifications  under Section 2.12(b), or imperfections of title\nunder Section 8.6).  Such proposals  shall be materially in accordance  with the\nlast  proposals  made by such party to the other party  during the course of the\naforementioned  good faith negotiations  between the parties.  The parties shall\nadditionally submit such memoranda, arguments, briefs and evidence in support of\ntheir  respective  positions,  and in  accordance  with  such  procedures,  as a\nmajority of the Panel may  determine.  Within seven  business days following the\ndesignation of the third mediator, the Panel shall, by majority vote, select the\nproposed  cooperative  arrangements,  amendments\n\n\n                                      A-18\n\n\n\n\n\nor adjustments of the Purchase Price, as the case may be, proposed by one of the\nparties,  it being  agreed  that the Panel may modify  such  proposal in any way\nwhich  is  not  otherwise   inconsistent  with  the  terms  of  this  Agreement.\nThereafter,  the  parties  shall,  subject to the terms and  conditions  of this\nAgreement, consummate the Transactions on the basis of such selected cooperative\narrangements,  amendments or adjustments at a mutually  agreeable time and place\nor places,  in accordance with the provisions of Section 2.13, which shall be no\nlater than the 15th business day following the originally scheduled Closing Date\nor such later date as the parties may agree upon. Subject to the foregoing,  the\nPanel may determine the issues in dispute following such procedures,  consistent\nwith  the  language  of  this  Agreement,   as  it  deems   appropriate  to  the\ncircumstances  and  with  reference  to the  amounts  in  issue.  No  particular\nprocedures are intended to be imposed upon the Panel, it being the desire of the\nparties  that any such  disagreement  shall be  resolved  as  expeditiously  and\ninexpensively as reasonably  practicable.  No member of the Panel shall have any\nliability  to the  parties in  connection  with  service  on the Panel,  and the\nparties shall provide such indemnities to the members of the Panel as they shall\nrequest.\n\n         (b)  Notwithstanding  the  foregoing,  or any other  provisions of this\nAgreement,  unless the parties  otherwise  agree,  no adjustment to the Purchase\nPrice  (except in connection  with an adjustment  made pursuant to Section 2.15)\nshall  be made  which  exceeds,  individually  or in the  aggregate  of all such\nadjustments,  50% of the original  Purchase  Price,  it being agreed that if the\nconditions  to  consummation  of the  Transactions  are  otherwise  met  but for\nPurchase Price adjustments  contemplated by the Adjustment Sections in excess of\nsuch percentage,  then the conditions to consummation of the Transactions  shall\nbe deemed not to have been met.  In such  event,  Buyer  shall be  entitled to a\nrefund of the Execution Fee and accrued  interest  thereon and the parties shall\nbe deemed to have been released from their  obligations  under Sections 10.3 and\n10.4.\n\n     Section 2.15  Management  Agreements.  In the event that the  conditions to\nconsummation of the Closing have otherwise been met or waived, but:\n\n              (i) Buyer has not been  issued  Licenses  referred  to in  Section\n         8.4(d)  respecting the conduct of business from one or more Facilities,\n         and the absence of such  Licenses  would  result in a Material  Adverse\n         Effect  upon the  conduct of such  business  from any such  Facility by\n         Buyer following the Closing; or\n\n              (ii) Seller has not received  one or more  Consents (as defined in\n         Section  8.4)  necessary  to  effectively  assign  to Buyer  (A) a Real\n         Property  Lease  (and\/or  agreements  which,  by the  terms of the Real\n         Property Lease in question,  are tied thereto,  such as certain service\n         contracts,  subordination  or security  agreements,  parking  leases or\n         equip ment leases),  the lack of which assignment would have a Material\n         Adverse  Effect  on a  Facility,  or (B) any  other  Assumed  Contracts\n         identified  by Buyer in  writing to Seller,  and the  parties  have not\n         entered into an alternative arrangement pursuant to Section 2.12;\n\nthen and in either of such events the parties shall nevertheless  consummate the\nTransactions in accordance with the provisions of this Agreement, as modified by\nthe following provisions:\n\n         (a) At the Closing,  the parties shall  execute one or more  management\nagreements (each a \"Management Agreement\"), substantially in the form of Exhibit\nE hereto,  pursuant  to which Buyer shall  undertake  to manage such  Facilities\nunder Licenses held by Seller and the Subsidiaries and\/or pending the receipt of\nsuch Consents, as the case may be.\n\n         (b) The  instruments  of transfer and  assumption set forth in Sections\n2.13(a) and 2.13(b)(ii)  respecting each such Real Property Lease (or related or\nother  agreement),  and\/or  respecting  those  Transferred  Assets  and  Assumed\nLiabilities that may not be lawfully  transferred or assumed until\n\n\n                                      A-19\n\n\n\n\n\nthe  requisite  Licenses  are  obtained,  as the case may be, shall be delivered\n(together with a fully  executed copy of this  Agreement) by the parties to, or,\nin the  event an escrow  has been  established  pursuant  to the  provisions  of\nSection 2.13(c), retained by, the Escrow Agent until they are to be delivered in\naccordance with the terms hereof. This Agreement shall be considered the primary\nescrow  instructions  between the parties,  but the parties  shall  execute such\nadditional  standard escrow  instructions as Escrow Agent shall require in order\nto clarify the duties and  responsibilities of Escrow Agent. In the event of any\nconflict   between  this   Agreement  and  such   additional   standard   escrow\ninstructions,  this Agreement shall prevail.  All other  instruments of transfer\nand assumption  shall be delivered in accordance  with Section 2.13, so that the\nBuyer will become the owner of the  Transferred  Assets,  and the  obligor  with\nrespect to Assumed  Liabilities,  not  described  in the first  sentence of this\nSection 2.15(b).\n\n         (c) The  provisions of Sections 5.1, 5.2 and 5.3 shall remain in effect\npending the  receipt of such  Licenses  by Buyer,  and\/or  such  Consents by the\nSeller, as the case may be.\n\n         (d) With respect to each such Facility,  the Escrow Agent shall deliver\nthe  aforementioned  instruments of assumption to Seller and the  aforementioned\ninstruments  of  transfer  to  Buyer  (and  cause  to be  recorded  any of  such\ninstruments as are contemplated by Section  2.13(c)(i)) upon the date (each such\ndate  being a  \"Delivery  Date\")  that the  Escrow  Agent has  received,  if the\nprovisions  of  clause  2.15(i)  apply,   an  affidavit  of  Buyer  (a  \"Buyer's\nAffidavit\"), executed by a duly authorized officer of Buyer, to the effect that:\n\n               (x) Such Licenses  respecting such Facility have been obtained by\n          Buyer; and\n\n               (y) There is not in  effect a  temporary  restraining  order or a\n          preliminary or permanent  injunction or other order,  decree or ruling\n          by a court of competent jurisdiction or by a governmental agency which\n          restrains or prohibits such deliveries,  or any threat by governmental\n          authorities to exact any penalty or impose any economic detriment upon\n          Buyer if such  deliveries are made that would have a Material  Adverse\n          Effect  upon  Buyer,  provided  that the  parties  will use their best\n          efforts to litigate against the entry of, or to obtain the lifting of,\n          any such order or injunction or potential  penalty or imposition,  and\n          the existence of any such  temporary  restraining  order,  preliminary\n          injunction or potential  penalty or imposition  shall operate,  at the\n          option of Seller,  only to delay the delivery of such  instruments and\n          extend the Final  Delivery Date (as defined below) until the fifth day\n          following the lifting of any such order or injunction or threat;\n\nand, in any event,  unless such requirement is waived by Buyer, the Escrow Agent\nhas also received an additional affidavit (a \"Seller's  Affidavit\") addressed to\nthe Escrow Agent and Buyer and executed by a duly  authorized  officer of Seller\nto the effect that:\n\n                    (i) There is not in effect a temporary  restraining order or\n          a preliminary or permanent injunction or other order, decree or ruling\n          by a court of competent jurisdiction or by a governmental agency which\n          restrains or prohibits such deliveries,  or any threat by governmental\n          authorities to exact any penalty or impose any economic detriment upon\n          Seller if such deliveries are made that would have a Material  Adverse\n          Effect upon  Seller,  provided  that the  parties  will use their best\n          efforts to litigate against the entry of, or to obtain the lifting of,\n          any such order or injunction or potential  penalty or imposition,  and\n          the existence of any such  temporary  restraining  order,  preliminary\n          injunction or potential  penalty or imposition  shall operate,  at the\n          option of Seller,  only to delay the delivery of such  instruments and\n          extend the Final  Delivery Date (as defined below) until the fifth day\n          following the lifting of any such order or injunction or threat;\n\n                    (ii)  Since the  Closing  Date,  neither  the Seller nor the\n          Subsidiaries have sold, conveyed,  assigned,  transferred or delivered\n          any Transferred Asset to any third party, or created any lien, charge,\n          claim,  pledge,   security  interest  or  encumbrance  respecting  any\n          Transferred Asset\n\n\n                                      A-20\n\n\n\n\n\n          except for Permitted Encumbrances (as defined in Section 3.8), without\n          the consent of, or  participation in such transaction by, Buyer in its\n          role as manager of the Facility or Facilities in question; and\n\n                    (iii)  If the  provisions  of  clause  2.15(ii)  apply,  the\n          requisite Consents necessary to assign such Real Property Lease(s) (or\n          related or other agreement(s)) have been obtained.\n\nEach party covenants and agrees not to intentionally  take (or omit to take) any\naction if such action (or omission)  would prevent it from being able to provide\nits respective Affidavit.\n\n         (e) Subject to the provisions of this  Subsection  2.15(e),  all of the\naforementioned  deliveries of instruments  of transfer and  assumption  shall be\ncompleted  on or before June 30, 1998 (or such later date upon which the parties\nmay agree upon) (such date, or any date to which it may be extended  pursuant to\nany of the  provisions  of this Section  2.15,  being  referred to as the \"Final\nDelivery Date\"),  provided that if, in the reasonable judgment of Seller,  Buyer\nis diligently  continuing to pursue the receipt of any such Licenses,  or in the\nreasonable  judgment of Buyer,  Seller is  diligently  continuing  to pursue the\nreceipt of such Consents,  as the case may be, then Seller and\/or Buyer,  as the\ncase may be,  shall  deposit  into  escrow  its  agreement  to extend  the Final\nDelivery Date for an additional 90 days. On the Final  Delivery Date  (including\nany date to which it may be  extended),  the Escrow Agent shall close the escrow\nby delivering to Buyer all instruments of transfer, and delivering to Seller all\ninstruments of assumption,  remaining in escrow,  provided that the Escrow Agent\nshall have  received a Seller's  Affidavit  effective as of such Final  Delivery\nDate. In the event that a Seller's Affidavit is not provided to the Escrow Agent\neffective  as of such  Final  Delivery  Date,  then and in such event the Escrow\nAgent shall provide  notice of such fact to Buyer and Seller.  In the event that\n(i) a  Seller's  Affidavit  cannot  be  delivered  with  respect  to  any of the\nTransferred  Assets and (ii) that  parties are unable to agree upon  appropriate\namendments  to the  Management  Agreement  to provide  Buyer  with the  economic\nbenefits and risk of ownership of such Transferred Assets as contemplated by the\nfollowing  sentence,  the parties  shall  thereupon  attempt to negotiate  for a\nperiod of 30 days an equitable  adjustment in the Purchase Price  respecting the\nTransferred  Assets and the  Assumed  Liabilities  that  remain in escrow.  Such\nappropriate amendments to the Management Agreement shall extend the term thereof\nfor at least 25 years (or the  remaining  terms of the Real  Property  Leases in\nquestion,  including extensions,  if shorter); shall prohibit the Seller and the\nSubsidiaries during such period from transferring or encumbering the Transferred\nAssets not delivered to Buyer without  Buyer's  written  consent;  shall require\nSeller, to the extent Buyer has not obtained the requisite Licenses respecting a\nFacility,  to exercise its best efforts to maintain or cause its Subsidiaries to\nmaintain Licenses in force as will permit the Facilities to be operated in their\ncurrent  status;  shall  provide  Buyer with the right to control any  elections\nrelating  to  extensions  or  renewals of any Real  Property  Leases;  and shall\notherwise provide the Buyer with  substantially all of the economic benefits and\nrisks arising from the operation of the Facilities;  provided that to the extent\nany such  amendments  shall not be consistent  with  applicable law, or shall be\nprohibited by the terms of any  injunction or order or result in the  imposition\nof any  material  penalty upon Seller or Buyer , or not be permitted by the Real\nProperty  Leases  in  question,  then to  such  extent  and in lieu of any  such\namendment,  the parties shall negotiate an equitable  adjustment in the Purchase\nPrice respecting the Transferred Assets and the Assumed  Liabilities that remain\nin escrow.  In the event the parties cannot agree within such 30-day period upon\nsuch amendments to the Management  Agreement and\/or  adjustments to the Purchase\nPrice, as the case may be, then such disagreement  shall be resolved pursuant to\nthe  provisions  of Section 2.14  (without  regard to the  provisions of Section\n2.14(b))  as though  the day after the  expiration  of such  30-day  negotiating\nperiod was the scheduled  Closing Date or Termination  Date referred to therein.\nUpon  agreement  of the  parties,  or  resolution  of any such  disagreement  in\naccordance  with the  provisions  of Section 2.14, as the case may be, Buyer and\nSeller shall  deposit into escrow  executed  counterparts  of  amendments to the\nManagement  Agreement,  if  any,  and  Seller  shall  deposit  into  escrow,  in\nimmediately  available  funds, an amount equal to the adjustment of the Purchase\nPrice if any (without interest), as agreed upon by the\n\n\n                                      A-21\n\n\n\n\n\nparties or determined  under the  provisions of Section  2.14,  and,  subject to\nreceipt of such deposits into escrow, the Escrow Agent shall:\n\n                   (i) Deliver such funds,  if any, to Buyer by wire transfer of\n         immediately available funds;\n\n                   (ii) Deliver to Buyer all instruments of assumption remaining\n         in  escrow  and a  counterpart  of the  amendments  to  the  Management\n         Agreement, if any, executed by Seller; and\n\n                   (iii) Deliver to Seller all instruments of transfer remaining\n         in  escrow  and a  counterpart  of the  amendments  to  the  Management\n         Agreements, if any, executed by Buyer.\n\n         (f) Unless  amended  pursuant to the above  provisions,  the Management\nAgreement shall be terminated,  in accordance with its provisions,  with respect\nto any Facility  with respect to which  instruments  of transfer and  assumption\nhave been  delivered  out of escrow,  and the escrow  shall  close when all such\ninstruments of transfer and assumption have been delivered out of escrow.\n\n         (g) Notwithstanding the foregoing,  the provisions of this Section 2.15\nshall not apply (i) to circumstances described in Section 2.15(i), to the extent\nthat applicable laws or rules of  accreditation  governing  healthcare  facility\nLicenses  held by  Seller  or a  Subsidiary  would  not  permit  the  Management\nAgreement arrangements  contemplated hereby, or (ii) to circumstances  described\nin Section  2.15(ii),  to the extent that the Real  Property  Lease or Leases in\nquestion would not permit such Management Agreement  arrangements.  In either of\nsuch events, and to such extent, the other provisions of this Agreement shall be\nunaffected by this Section 2.15 and the parties shall  negotiate an  appropriate\nadjustment to the Purchase Price as contemplated by Section 2.14.\n\n         (h)  Notwithstanding   this  Section  2.15  and  without  limiting  the\ngenerality of the introductory paragraph of this Section 2.15, the provisions of\nSection 2.5 through  2.11 shall be fully  operative  as though all  Licenses and\nConsents had been received as of the Closing and all  Transactions  scheduled to\noccur at the Closing had occurred  without  regard to this Section 2.15,  except\nthat Buyer shall, with respect to Receivables not assigned to it at Closing as a\nresult of the  provisions  of this Section  2.15,  collect such  Receivables  at\nmanaged  Facilities  in its  capacity as manager of the  Facilities  in question\nrather than as principal, and shall retain such collections as a management fee.\n\n     Section 2.16.  Assignment of Rights and Obligations to Buyer  Subsidiaries.\nNotwithstanding  any contrary  provisions  contained herein,  the parties hereto\nagree that, prior to the Closing Date, Buyer, in its sole discretion, may assign\nany or all of its rights and obligations with respect to the Transferred  Assets\nand the Assumed Liabilities to one or more Buyer Subsidiaries,  provided that no\nsuch  assignment  shall relieve  Buyer of any  obligation or liability to Seller\nhereunder, and provided further that the following shall apply:\n\n         (a) Buyer will  provide  HEALTHSOUTH  and Seller  with  prompt  written\nnotice of any such assignment.\n\n         (b)  No  such  assignment  shall  be  effected  if  the  making  of the\nassignment  will result in Seller's  inability to obtain any Consent  reasonably\nneeded to  consummate  the  Transactions  or to avoid any economic  detriment to\nHEALTHSOUTH or Seller arising from the consummation of the Transactions.\n\n         (c) Each such  Buyer  Subsidiary  that is an  assignee  of Buyer  shall\nirrevocably  appoint  Buyer as its sole and exclusive  representative  and agent\nauthorized to act for and to receive notices and payments on behalf of the Buyer\nSubsidiaries  in all matters  arising from or related to this  Agreement and the\nTransactions.\n\n\n                                      A-22\n\n\n\n\n\n         (d) As a condition  to  HEALTHSOUTH's  and  Seller's  agreement to such\nassignments,  Buyer  hereby  agrees that Buyer will at all times be the ultimate\nparent entity of the  consolidated  group of companies of which Buyer is a group\nmember  or that,  in the  event of any  reorganization  involving  Buyer and its\nsubsidiaries,  the ultimate parent entity of the consolidated group of companies\nemerging from such  reorganization  that includes  Buyer and its  successors and\nassigns shall, prior to any such  reorganization,  execute such documents as are\nreasonably necessary to confirm the assumption by such ultimate parent entity of\nBuyer's obligations to HEALTHSOUTH and Seller hereunder.\n\n         (e) Buyer shall remain  jointly and  severally  liable to  HEALTHSOUTH,\nSeller and the  Subsidiaries  (other than the Transferred  Subsidiaries)  and to\nthird  parties with respect to any Assumed  Liabilities  transferred  to a Buyer\nSubsidiary,  and,  without  limiting the  generality  of the  foregoing,  hereby\nabsolutely  and  unconditionally   guarantees  the  full,  prompt  and  faithful\nperformance  by each Buyer  Subsidiary of all covenants  and  obligations  to be\nperformed  by such  Buyer  Subsidiary  under  this  Agreement  and  any  Related\nAgreement which are assigned to such Buyer Subsidiary, including but not limited\nto, the  payment  of all sums  stipulated  to be paid by such  Buyer  Subsidiary\npursuant to such  assignment,  it being  understood  that each such covenant and\nobligation   constitutes  the  direct  and  primary   obligation  of  Buyer,  is\nindependent of the covenants and obligations of the Buyer  Subsidiaries and that\na separate action or actions may be brought and prosecuted against Buyer whether\naction is brought against the pertinent  Buyer  Subsidiary or whether such Buyer\nSubsidiary  is joined in any such action or actions  (Buyer  hereby  waiving any\nright to require Seller or a Subsidiary to proceed against a Buyer  Subsidiary).\nBuyer  hereby  authorizes  HEALTHSOUTH  and Seller,  without  notice and without\naffecting  Buyer's  liability  hereunder,  from  time  to  time  to  (x)  renew,\ncompromise,  extend, accelerate, or otherwise change the terms of any obligation\nof a Buyer Subsidiary hereunder with the agreement of such Buyer Subsidiary, (y)\nif agreed to by the Buyer Subsidiary, take and hold security for the obligations\nguaranteed, and exchange,  enforce, waive and release any such security, and (z)\napply such  security and direct the order or manner of sale thereof as Seller in\nits discretion may determine. Buyer hereby further waives:\n\n                   (i) Any right to subrogation,  reimbursement,  exoneration or\n         contribution  or any other  rights  that  would  result in Buyer  being\n         deemed a creditor of a Buyer  Subsidiary  under the federal  Bankruptcy\n         Code or any other  law,  in each case  arising  from the  existence  or\n         performance  of  Buyer's   guaranty  of  the  obligations  of  a  Buyer\n         Subsidiary hereunder;\n\n                   (ii) Any defense  that may arise by reason of the  incapacity\n         or lack of authority of any Buyer Subsidiary;\n\n                   (iii) Any  defense  based upon a statute or rule of law which\n         provides  that the  obligations  of a surety must be neither  larger in\n         amount  nor  in  other  respects  more  burdensome  than  those  of the\n         principal; and\n\n                   (iv)  Any  duty  on the  part  of  HEALTHSOUTH,  Seller  or a\n         Subsidiary  to disclose to Buyer any facts that Seller or a  Subsidiary\n         may now or hereafter know about a Buyer Subsidiary,  since Buyer hereby\n         acknowledges  that  it is  fully  responsible  for  being  and  keeping\n         informed of the financial  condition of each Buyer  Subsidiary  and all\n         circumstances  bearing on the risk of  non-payment  of any  obligations\n         assigned to such Buyer Subsidiary.\n\n\n                                      A-23\n\n\n\n\n\n                                    ARTICLE 3\n            REPRESENTATIONS AND WARRANTIES OF HEALTHSOUTH AND SELLER\n\n     HEALTHSOUTH and Seller, jointly and severally, hereby represent and warrant\nto Buyer, as of the date hereof, as follows, except as disclosed in Schedule 3:\n\n     Section 3.1  Organization and Corporate  Power;  Related  Matters.  Each of\nSeller and HEALTHSOUTH is a corporation  duly  incorporated and validly existing\nunder the laws of, and is authorized to exercise its  corporate  powers,  rights\nand  privileges  and is in good  standing in, the State of Delaware and has full\ncorporate  power to carry on its business as presently  conducted  and to own or\nlease and operate its  properties and assets now owned or leased and operated by\nit.  HEALTHSOUTH owns all of the issued and outstanding  shares of capital stock\nof  Seller.  Seller  is  duly  qualified  and  in  good  standing  as a  foreign\ncorporation  in all  jurisdictions  in which such  qualification  is required by\nreason  of its  business,  properties  or  activities  in or  relating  to  such\njurisdictions  (which, in the case of Subsidiaries  existing on the date of this\nAgreement,  is likewise  indicated on Schedule A-1), except where the failure to\nbe so qualified  will not have a Material  Adverse Effect (as defined in Section\n3.4) on the Transferred  Assets.  The Transferred Assets (including the Assigned\nStock) constitute all of the assets of Seller and the Subsidiaries  encompassing\nthe Facilities and the operations  thereof (except for the Excluded Assets) and,\nexcept to the extent that such  businesses  are  Excluded  Assets  which will be\nretained by Seller at Closing,  the Facilities and their  operations  constitute\nthe  only  businesses  represented  by the  Transferred  Assets  (including  the\nAssigned Stock).\n\n     Section 3.2 Subsidiaries.\n\n         (a) Each Subsidiary is a corporation  duly organized,  validly existing\nand in good standing under the laws of its state of incorporation (which, in the\ncase of  Subsidiaries  existing on the date of this  Agreement,  is indicated on\nSchedule  A-1)  and  is  duly  qualified  and  in  good  standing  as a  foreign\ncorporation  in all  jurisdictions  in which such  qualification  is required by\nreason  of its  business,  properties  or  activities  in or  relating  to  such\njurisdictions  (which, in the case of Subsidiaries  existing on the date of this\nAgreement,  is likewise  indicated on Schedule A-1), except where the failure to\nbe so  qualified  will not have a  Material  Adverse  Effect on the  Transferred\nAssets.  Each  Subsidiary has all requisite  power and authority  (corporate and\notherwise)  to  perform  the  transactions  on its  part  contemplated  by  this\nAgreement and all other agreements contemplated hereby.\n\n         (b) All of the  outstanding  capital stock of each  Subsidiary has been\nduly authorized and is validly issued,  fully paid and nonassessable and, except\nas indicated on Schedule A-1, is owned  beneficially  and of record by Seller or\nanother  wholly-owned  subsidiary of Seller as indicated on Schedule A-1.  There\nare no rights, subscriptions, warrants, options, conversion rights or agreements\nof any kind  outstanding to purchase or otherwise  acquire any shares of capital\nstock  of  or  securities  or  obligations  of  any  kind  convertible  into  or\nexchangeable for any shares of capital stock of any Subsidiary, and the Assigned\nStock  constitutes  all of the  issued  and  outstanding  capital  stock  of the\nTransferred Subsidiaries.\n\n         (c) Upon  consummation  of the  Transactions,  Buyer will acquire valid\ntitle to the Assigned Stock,  free and clear of all liens,  charges,  pledges or\nsecurity interests (except for those created or allowed to be suffered by Buyer)\nand free of any  restrictions  on voting and transfer except as may be disclosed\non  Schedule  A-1.  The  Assigned  Stock  is  validly  issued,  fully  paid  and\nnon-assessable.\n\n         (d) The board of directors  of each  Subsidiary  and, if required,  its\nstockholders,  have  duly  and  effectively  authorized  (i)  the  sale  of  the\nTransferred  Assets  to be sold by such  Subsidiary;  and  (ii)  the  execution,\ndelivery and  performance of the Related  Agreements (as defined in Section 3.4)\nand  all  other  agreements  contemplated  hereby  and  thereby  to  which  such\nSubsidiary is a party.  No other  corporate act\n\n\n                                      A-24\n\n\n\n\n\nor  proceeding  on the part of any  Subsidiary,  its board of  directors  or its\nstockholders is necessary to authorize any Related  Agreement or other agreement\ncontemplated  hereby and  thereby or the  transactions  contemplated  hereby and\nthereby.\n\n     Section 3.3 Authority Relative to this Agreement.  The execution,  delivery\nand performance of this Agreement and all other agreements  contemplated  hereby\nand the  consummation of the transactions  contemplated  hereby and thereby have\nbeen duly and  effectively  authorized  by the  boards of  directors  of each of\nHEALTHSOUTH  and Seller;  no other  corporate  act or  proceeding on the part of\nHEALTHSOUTH,  Seller,  their respective  boards of directors or their respective\nstockholders is necessary to authorize this Agreement,  any such other agreement\nor the transactions  contemplated  hereby and thereby.  This Agreement has been,\nand each of the other  agreements  contemplated  hereby will, as of the Closing,\nhave been,  duly executed and delivered by each of HEALTHSOUTH  and Seller,  and\nthis  Agreement  constitutes,  and each such other  agreement  when executed and\ndelivered  will  constitute,  a valid and binding  obligation of  HEALTHSOUTH or\nSeller,  as the case may be,  enforceable  against them in  accordance  with its\nterms,  except that the remedy of specific  performance and injunctive and other\nforms of  equitable  relief  may be  subject to  equitable  defenses  and to the\ndiscretion of the court before which any proceeding may be brought.\n\n     Section 3.4 Absence of Breach.  Subject to the  provisions  of Sections 3.5\nand 3.6 below regarding private party and governmental  consents, and except for\ncompliance with the requirements of the Hart-Scott-Rodino Antitrust Improvements\nAct of 1976, as amended (the \"HSR Act\"),  and any  regulatory or licensing  Laws\napplicable to the businesses and assets  represented by the Transferred  Assets,\nthe  execution,  delivery  and  performance  by  HEALTHSOUTH  and Seller of this\nAgreement and all other agreements contemplated hereby or executed in connection\nherewith (the \"Related Agreements\"),  and the performance by the Subsidiaries of\nthe transactions contemplated by this Agreement and the Related Agreements to be\nperformed by the  Subsidiaries,  do not, (a) conflict with or result in a breach\nof any of the provisions of the Articles or  Certificates  of  Incorporation  or\nBylaws or similar  charter  documents (the \"Charter  Documents\") of HEALTHSOUTH,\nSeller  or of any of the  Subsidiaries,  (b)  contravene  any Law or  cause  the\nsuspension or revocation  of any License  presently in effect,  which affects or\nbinds HEALTHSOUTH,  Seller or any of the Subsidiaries,  or any of their material\nproperties,  except where such contravention,  suspension or revocation will not\nhave a Material  Adverse  Effect (as defined below) on any Facility and will not\naffect  the  validity  or  enforceability  of this  Agreement  and  the  Related\nAgreements or the validity of the Transactions  contemplated hereby and thereby,\nor (c) conflict  with or result in a breach of or default under any indenture or\nloan  or  credit  agreement  or any  other  agreement  or  instrument  to  which\nHEALTHSOUTH, Seller or any of the Subsidiaries is a party or by which it or they\nor any of their  properties  may be  affected  or  bound,  the  effect  of which\nconflict,  breach  or  default  would  be  a  Material  Adverse  Effect  on  the\nTransferred  Assets or on the ability of HEALTHSOUTH,  Seller or a Subsidiary to\nconsummate the Transactions.  As used herein, a \"Material  Adverse Effect\":  (a)\nwhen used with  respect to the  Transferred  Assets,  means a  material  adverse\neffect on the  Transferred  Assets  and on the  businesses  operated  therefrom,\nincluding  their  condition  (financial or otherwise) and results of operations,\ntaken as a whole;  (b) when used with respect to any portion of the  Transferred\nAssets,  means a material  adverse  effect on such  portion  of the  Transferred\nAssets and on the  businesses  operated  therefrom,  including  their  condition\n(financial or otherwise)  and results of operations,  taken as a whole;  and (c)\nwhen used with  respect to an entity,  such as Seller,  a  Subsidiary  or Buyer,\nmeans a  material  adverse  effect  on the  business,  condition  (financial  or\notherwise) and results of operations of such entity taken as a whole  (including\nany subsidiaries of such entity).\n\n     Section 3.5 Private Party Consents. The execution, delivery and performance\nby Seller of this Agreement and the Related  Agreements,  and the performance by\nthe  Subsidiaries  of the  transactions  contemplated  by this Agreement and the\nRelated  Agreements  to be  performed  by the  Subsidiaries,  do not require the\nauthorization, consent or approval of any non-governmental third party of such a\nnature that the failure to obtain the same would have a Material  Adverse Effect\non the Transferred Assets.\n\n\n                                      A-25\n\n\n\n\n\n     Section 3.6 Governmental Consents. The execution,  delivery and performance\nby Seller of this Agreement and the Related  Agreements,  and the performance by\nthe  Subsidiaries  of the  transactions  contemplated  by this Agreement and the\nRelated  Agreements  to be  performed  by the  Subsidiaries,  do not require the\nauthorization,  consent,  approval,  certification,  license or order of, or any\nfiling with, any court or governmental  agency of such a nature that the failure\nto obtain  the same  would have a  Material  Adverse  Effect on the  Transferred\nAssets,  except for compliance with the HSR Act and except for such governmental\nauthorizations,  consents, approvals,  certifications,  licenses and orders that\ncustomarily  accompany  the  transfer  of  health  care  facilities  such as the\nFacilities.\n\n     Section 3.7 Brokers.  No broker,  finder,  or investment  banker other than\nSmith  Barney  Inc.  is  entitled  to any  brokerage,  finder's  or other fee or\ncommission in connection  with this Agreement or the  Transactions  contemplated\nhereby based upon any  agreements or  arrangements  or  commitments,  written or\noral, made by or on behalf of HEALTHSOUTH, Seller or any of their Affiliates.\n\n     Section 3.8 Title to Personal Property.  Seller or the relevant Subsidiary,\nas the  case may be,  has good and  defensible  title,  or valid  and  effective\nleasehold  rights  in the case of  leased  property,  to all  tangible  personal\nproperty  included in the  Transferred  Assets to be sold,  conveyed,  assigned,\ntransferred and delivered to Buyer by Seller or such Subsidiary,  free and clear\nof all  liens,  charges,  claims,  pledges,  security  interests,  equities  and\nencumbrances of any nature whatsoever, except for those created or allowed to be\nsuffered by Buyer and except for the following  (individually  and collectively,\nthe \"Permitted Encumbrances\"): (a) the lien of current taxes not delinquent, (b)\nmatters that do not have a Material  Adverse Effect on the  Transferred  Assets,\n(c) the Assumed Liabilities,  (d) such consents,  authorizations,  approvals and\nlicenses  referred to in Sections 3.5 and 3.6, and (e) liens,  charges,  claims,\npledges, security interests,  equities and encumbrances which will be discharged\nor released either prior to, or substantially simultaneously with, the Closing.\n\n     Section 3.9 Assumed  Contracts.  Except for such matters that do not have a\nMaterial Adverse Effect on the Transferred  Assets, (a) there is no liability to\nany person by reason of the default by Seller or a Subsidiary  under any Assumed\nContract,  (b) neither Seller nor any  Subsidiary has received  written or other\nnotice that any person intends to cancel or terminate any Assumed Contract,  (c)\nall of the Assumed  Contracts  are in full force and effect,  (d) subject to the\nprovisions  of  Sections  3.5 and  3.6,  the  consummation  of the  transactions\ncontemplated  by this Agreement will not constitute and, to the best of Seller's\ncurrent  actual  knowledge,  no event has  occurred  which,  with or without the\npassage of time or the giving of notice, would constitute a breach or default by\nSeller or a Subsidiary of such Assumed  Contract or would cause the acceleration\nof any  obligation  of  Seller or any  Subsidiary  or the  creation  of any lien\n(except for Permitted  Encumbrances)  upon any  Transferred  Asset,  (e) neither\nSeller nor any Subsidiary has waived any right under any Assumed  Contract,  and\n(f) Seller has no knowledge of any material  default by any  counterparty to any\nsuch Assumed Contract.\n\n     Section 3.10 Licenses and Related  Regulatory  Matters.  Except for matters\nassociated with the significant legal proceedings and investigations referred to\nin Seller's  Annual  Report on Form 10-K for the fiscal year ended May 31, 1997,\nas amended,  and its  Quarterly  Report on Form 10-Q for the three  months ended\nAugust  31,  1997,  and  except  for such  matters  which do not have a Material\nAdverse  Effect on the  Transferred  Assets,  (a) the  Subsidiaries  possess all\nLicenses necessary for their operation of the Facilities at the locations and in\nthe manner presently operated,  (b) if required,  such Facilities are accredited\nby  applicable  accrediting  agencies as necessary  for their  operations in the\nmanner presently  operated,  (c) such Facilities are certified for participation\nin the Medicare program and have current and valid provider  contracts with such\nprogram,  and (d) to the current actual knowledge of Seller,  there is no matter\nwhich would  adversely  affect the  maintenance  of any such  Licenses,  program\nparticipations or accreditations  other than matters that have been disclosed in\nwriting to Buyer.\n\n\n                                      A-26\n\n\n\n\n\n     Section 3.11 U.S.  Person.  Neither Seller nor any Subsidiary is a \"foreign\nperson\" for purposes of Section 1445 of the  Internal  Revenue Code of 1986,  as\namended (the \"Code\"), or any other Laws requiring withholding of amounts paid to\nforeign persons.\n\n     Section 3.12 Employee Relations. With respect to the Retained Employees:\n\n         (a) Neither  Seller,  nor any Subsidiary nor any Facility is a party to\nany  agreement  with any union,  trade  association  or other  similar  employee\norganization,  no  written  demand  has  been  made for  recognition  by a labor\norganization,  and to the best of Seller's  current  actual  knowledge  no union\norganizing activities by or with respect to any such employees are taking place;\nand\n\n         (b) There are no  controversies  (including,  without  limitation,  any\nunfair labor practice complaints,  labor strikes,  arbitrations,  disputes, work\nslowdowns  or work  stoppages)  affecting  a  material  number of such  Retained\nEmployees  pending,  or to  the  best  of  Seller's  current  actual  knowledge,\nthreatened.\n\n     Section 3.13 Employee Plans.  None of Seller or the Subsidiaries  maintains\nor makes  contributions  to any Pension  Plans as to which Buyer will assume any\nliability as a result of the  Transactions.  With respect to those Pension Plans\nmaintained or contributed to by Seller or the  Subsidiaries,  such Pension Plans\nhave been operated and administered in all material  respects in acordance with,\nall  applicable  Laws.  No act or failure to act by Seller or a  Subsidiary  has\nresulted in a \"prohibited transaction\" (as defined in ERISA) with respect to any\nPension Plan which is not subject to a statutory  or  regulatory  exception.  No\n\"reportable  event\" (as  defined  in ERISA,  but  excluding  any event for which\nnotice is waived under the ERISA  regulations)  has occurred with respect to any\nPension  Plan  which is subject  to Title IV of ERISA.  No Pension  Plan has any\naccumulated  funding  deficiency  or liability to the Pension  Benefit  Guaranty\nCorporation.  With  respect to each  Multiemployer  Plan,  there has occurred no\n\"complete  withdrawal\" or \"partial  withdrawal,\"  as each is defined in Sections\n4203 and 4205,  respectively,  of ERISA, and all payments required to be made to\nsuch  Multiemployer  Plans  by a  Subsidiary  under  any  collective  bargaining\nagreement have been made.\n\n     Section 3.14 Litigation. Except for matters associated with the significant\nlegal  proceedings and  investigations  referred to in Seller's Annual Report on\nForm 10-K for the fiscal year ended May 31, 1997, as amended,  and its Quarterly\nReport on Form 10-Q for the three months ended August 31, 1997, ordinary routine\nclaims and litigation incidental to the businesses represented by the Facilities\n(including,   but  not  limited  to,   actions  for   negligence,   professional\nmalpractice,  workers' compensation claims, so-called \"slip-and-fall\" claims and\nthe  like),  and  governmental  inspections  and  reviews  customarily  made  of\nbusinesses  such as those  operated from the  Facilities,  there are no actions,\nsuits,  claims or proceedings  pending,  or to the current  actual  knowledge of\nSeller,  threatened  against or affecting the Transferred  Assets or relating to\nthe  operations  of the  Facilities,  at law or in  equity,  or before or by any\nfederal, state, municipal or other governmental department,  commission,  agency\nor instrumentality.\n\n     Section 3.15 Tax Returns. All tax returns, statements, reports and forms or\nextensions  (\"Returns\")  with  respect  thereto  required  to be filed  with any\nfederal, state or local taxing authority on or before the Closing Date have been\nor will be timely  filed by Seller and each  Subsidiary  and will be prepared in\naccordance in all material  respects with all applicable  Laws.  Seller and each\nSubsidiary  have timely paid,  or have  obtained  extensions to pay, all amounts\nshown as due by such  Returns  which are  required  to have been paid before the\ndate hereof and will timely pay all amounts  shown as due by such Returns  which\nare required to be paid on or before the Closing Date. No audits of any material\nReturns filed by or on behalf of the Transferred  Subsidiaries is pending or, to\nthe knowledge of HEALTHSOUTH or Seller, threatened.\n\n\n                                      A-27\n\n\n\n\n\n     Section 3.16 Hazardous Substances.  Except for matters which would not have\na Material Adverse Effect on the Transferred Assets and matters disclosed by the\nenvironmental  surveys which have been made  available to Buyer for review prior\nto the execution and delivery hereof:\n\n         (a) Other than normal amounts incidental to the operation of businesses\nsuch  as  the  Facilities  (to  the  extent  stored,  used  and  disposed  of in\nsubstantial  compliance  with  all  applicable  Laws),  there  are no  Hazardous\nMaterials (as defined below) upon, about, beneath or migrating or threatening to\nmigrate to or from the Owned Real  Properties  or the Leased Real  Properties or\nthe existence of any  violation in any material  respect of any Laws relating to\nindustrial   hygiene,   Hazardous   Materials   and   environmental   protection\n(\"Environmental Regulations\"); and\n\n         (b) There is no  proceeding  or action  pending  or  threatened  by any\nperson  or  governmental   agency  regarding  the  environmental   condition  or\noccupational safety of the Facilities.\n\n\"Hazardous Materials\" shall mean any substance  (including,  without limitation,\nany asbestos, formaldehyde, radioactive substance, hydrocarbons, polychlorinated\nbiphenyls,  industrial solvents, flammables,  explosives and any other hazardous\nsubstance or toxic material) which, in any material respect,  is known to cause,\nas of the date of this Agreement,  a health,  safety or environmental hazard and\nrequire remediation at the behest of any governmental agency.\n\n     Section 3.17 Financial Information.\n\n         (a) Attached  hereto as Schedule  3.17(a) is an unaudited  statement of\ncertain  combined  earnings from the  operations of the  Transferred  Assets and\nAssumed  Liabilities  (as  they  were  constituted  on the \"as of\"  date of such\nschedule)   before  interest,   income  taxes,   depreciation  and  amortization\n(\"EBITDA\")  for the fiscal  year ended May 31,  1997 and for the fiscal  quarter\nended August 31, 1997 (the \"EBITDA  Statements\").  The EBITDA Statements present\nfairly the combined EBITDA of such operations, taken as a whole, as of the dates\nand for the periods shown,  and were derived from and are in accordance with the\ninternal  books and  records of Seller and the  Subsidiaries  and the  regularly\nprepared unaudited internal  financial  statements of the Facilities,  which are\nprepared  on a basis  materially  in  accordance  with  the  generally  accepted\naccounting  principles  utilized in the  preparation of the published  financial\nstatements of Seller.\n\n         (b)  Attached  hereto  as  Schedule  3.17(b)  is a  regularly  prepared\ninternal  unaudited  combined  balance sheet of the  Facilities as of August 31,\n1997 (the  \"Balance  Sheet\";  collectively,  the  Balance  Sheet and the  EBITDA\nStatement  are the  \"Financial  Schedule\").  The Balance Sheet has been prepared\nfrom,  and is in accordance  with,  the internal books and records of Seller and\nthe Subsidiaries and presents fairly the financial  condition of the Facilities,\ntaken as a whole,  as of the date  shown.  The  Balance  Sheet was  prepared  in\naccordance  with Seller's  practices for the  preparation of internal  financial\nstatements,  consistently  applied,  and is materially  in  accordance  with the\ngenerally  accepted  accounting  principles  utilized in the  preparation of the\npublished financial statements of Seller.\n\n         (c) Notwithstanding the foregoing,  the Financial Schedule does not (i)\nreflect  allocations  of  indirect  costs and  overhead  (other  than  benefits,\ninsurance   (including   workers'   compensation)   and  legal   costs)  or  the\ncorresponding  cost  reimbursement  impact of claiming  such costs in a Facility\ncost  report,  (ii)  reflect  all  intercompany  eliminations,  adjustments  and\naccruals  that are reflected in financial  statements  of Seller,  (iii) contain\nfootnotes or other  explanatory  material  associated with financial  statements\nprepared in accordance with generally accepted  accounting  principles,  or (iv)\ncontain  normal  year-end  adjustments  with  respect  to  interim  periods.  In\naddition,  the  Financial  Schedule is to be read in  conjunction  with,  and is\nsubject to, all notes and other explanatory material set forth therein.\n\n\n                                      A-28\n\n\n\n\n\n         (d)  Nothing  in  Section  4.10  hereof  shall be  deemed  to limit the\nrepresentations made in this Section 3.17.\n\n     Section 3.18 Changes  Since  Balance  Sheet.  Since the date of the Balance\nSheet  and up to and  including  the  date  of  this  Agreement,  other  than as\ncontemplated or permitted by this Agreement,  Seller and the  Subsidiaries  have\nconducted  the  businesses  represented  by the  Transferred  Assets only in the\nordinary  and  normal  course,   except  for  matters  in  anticipation  of  the\ndivestiture of the Transferred Assets, and there has not been:\n\n         (a) Any entry  into or  termination  by Seller or a  Subsidiary  of any\nmaterial  commitment,  contract,  agreement or transaction  (including,  without\nlimitation, any borrowing or lending transaction or capital expenditure) related\nto the  Transferred  Assets except for  transactions  in the ordinary  course of\nbusiness and  renegotiation of credit  agreements to which Seller and certain of\nits subsidiaries are parties;\n\n         (b)  Any  casualty,  physical  damage,  destruction  or  physical  loss\nrespecting,  or change in the  physical  condition  of, the  Facilities  and the\nEquipment that has had a Material Adverse Effect on the Transferred Assets;\n\n         (c) Any transfer of or rights  granted  under any contract  which would\nhave been an Assumed Contract on the date of the Balance Sheet;\n\n         (d) Other than in the ordinary  course of  business,  any sale or other\ndisposition  of any fixed asset  included in the Balance Sheet having a net book\nvalue in excess of $100,000 or any material  mortgage,  pledge or  imposition of\nany lien or other  encumbrances on any such asset, or sales or dispositions  of,\nor the  imposition of material  encumbrances  on, fixed assets  included in such\nBalance Sheet having a net book value that exceeds  $5,000,000 in the aggregate,\nor any sale or other disposition of Inventories included in the Balance Sheet;\n\n         (e) Any  amendment  (other than  general  amendments  which the carrier\nmakes for a category  of  policy)  or  termination  of any  insurance  policy or\nfailure to renew any insurance  policy covering the Transferred  Assets,  except\nfor  amendments,  terminations  or failures to renew that do not have a Material\nAdverse Effect on the Transferred Assets;\n\n         (f) Any default or breach by Seller or a Subsidiary  under any contract\nthat would have been an Assumed Contract on the date of the Balance Sheet which,\nwhen viewed  individually  or in the aggregate of all such breaches or defaults,\nhas had a Material Adverse Effect on the Transferred Assets; or\n\n         (g) Any  increase  made in the  compensation  levels  of any  member of\nsenior  management  of  any  Facility,  or  any  general  increase  made  in the\ncompensation  levels of the other  Retained  Employees,  except in the  ordinary\ncourse of business.\n\n     Section  3.19 Lists of Other  Data.  Except for  contracts  and  agreements\nalready listed in Schedule 2.1(g),  Schedules 3.19(a) through (g) contain lists,\ncomplete and correct as of the dates shown thereon, of the following:\n\n         (a) The most recent regularly generated  depreciation schedules related\nto tangible personal property  constituting  Equipment,  together with copies of\nsuch schedules;\n\n         (b) Each lease  constituting an Other Assigned Contract as of such date\n(whether an operating or a capital lease) under which tangible personal property\nwas leased, where the annualized lease payments exceed $100,000;\n\n\n                                      A-29\n\n\n\n\n\n         (c) A brief  description  of insurance in force  covering  fixed assets\nthat would constitute Transferred Assets as of such date;\n\n         (d) All compensation,  bonus, incentive, deferred payments, retirement,\npension, severance, profit-sharing, stock purchase and stock option plans, group\nlife, automobile, medical, dental, disability, welfare or other employee benefit\nplans or  insurance  policies,  and other  similar  arrangements  (collectively,\n\"Employee Benefit Arrangements\")  generally applicable to the Retained Employees\nor a  substantial  part  thereof or  generally  applicable  to members of senior\nmanagement of the Facilities as of such date;\n\n         (e) The aggregate  accrued paid time off (including  vacation time) and\nearned or available sick pay for all employees at each Facility,  as of the date\nshown; and\n\n         (f) Material  Licenses of Seller and the  Subsidiaries  in force, as of\nthe date shown, with respect to the health care facilities to be included in the\nTransferred Assets.\n\n     3.20 Compliance with Laws in General. Except for matters disclosed pursuant\nto or described in Sections  3.10,  3.14 and 3.16,  Seller and the  Subsidiaries\nhave not  received  any notices of  violations  of any Laws with  respect to the\nbusinesses   represented  by  the  Transferred  Assets,  which  violations,   if\nestablished, would have a Material Adverse Effect on the Transferred Assets.\n\n\n\n                                    ARTICLE 4\n                     REPRESENTATIONS AND WARRANTIES OF BUYER\n\n     Buyer hereby  represents and warrants to HEALTHSOUTH and Seller,  as of the\ndate hereof, as follows:\n\n     Section 4.1 Organization  and Corporate Power.  Buyer is a corporation duly\nincorporated  and  validly  existing  under the laws of,  and is  authorized  to\nexercise its corporate powers, rights and privileges and is in good standing in,\nthe State of Delaware and has full  corporate  power to carry on its business as\npresently  conducted and to own or lease and operate its  properties  and assets\nnow owned or leased and operated by it.\n\n     Section 4.2 Authority Relative to this Agreement.  The execution,  delivery\nand   performance  of  this  Agreement  and  the  Related   Agreements  and  the\nconsummation of the transactions  contemplated hereby and thereby have been duly\nand  effectively  authorized  by the  board  of  directors  of  Buyer;  no other\ncorporate act or proceeding on the part of Buyer,  its board of directors or its\nstockholders  is  necessary  to  authorize  this  Agreement,  any  such  Related\nAgreement or the transactions  contemplated  hereby and thereby.  This Agreement\nhas been, and each of the Related Agreements contemplated hereby will, as of the\nClosing,  have been,  duly  executed and  delivered by Buyer and this  Agreement\nconstitutes,  and each such Related  Agreement  when executed and delivered will\nconstitute,  a valid and binding obligation of Buyer,  enforceable against Buyer\nin accordance with its terms, except that the remedy of specific performance and\ninjunctive  and other  forms of  equitable  relief may be  subject to  equitable\ndefenses and to the  discretion of the court before which any  proceeding may be\nbrought.\n\n     Section 4.3 Absence of Breach.  Subject to the  provisions  of Sections 4.4\nand 4.5 below regarding private party and governmental  consents, and except for\ncompliance with the  requirements of the HSR Act and any regulatory or licensing\nLaws  applicable to the  businesses and assets  represented  by the  Transferred\nAssets,  the execution,  delivery and performance by Buyer of this Agreement and\nthe Related\n\n\n                                      A-30\n\n\n\n\n\nAgreements  do not,  (a)  conflict  with or  result  in a  breach  of any of the\nprovisions of Charter  Documents of Buyer,  (b)  contravene any Law or cause the\nsuspension or revocation  of any License  presently in effect,  which affects or\nbinds Buyer or any of its material properties,  except where such contravention,\nsuspension or revocation will not affect the validity or  enforceability of this\nAgreement  and  the  Related  Agreements  or the  validity  of the  Transactions\ncontemplated  hereby and thereby,  or (c) conflict with or result in a breach of\nor  default  under  any  indenture  or loan or  credit  agreement  or any  other\nagreement or  instrument  to which Buyer is a party or by which it or any of its\nproperties  may be affected or bound,  the effect of which  conflict,  breach or\ndefault  would be a  Material  Adverse  Effect  on Buyer  or on its  ability  to\nconsummate the Transactions.\n\n     Section 4.4 Private Party Consents. The execution, delivery and performance\nby Buyer  of this  Agreement  and the  Related  Agreements  do not  require  the\nauthorization,  consent or approval of any  non-governmental  third party, other\nthan  the  consent  of the  required  lenders  under  Buyer's  principal  credit\nagreement.\n\n     Section 4.5 Governmental Consents. The execution,  delivery and performance\nby Buyer  of this  Agreement  and the  Related  Agreements  do not  require  the\nauthorization,  consent,  approval,  certification,  license or order of, or any\nfiling with, any court or  governmental  agency,  except for compliance with the\nHSR Act and except for such governmental  authorizations,  consents,  approvals,\ncertifications,  licenses and orders that customarily  accompany the transfer of\nhealth care facilities such as the Facilities.\n\n     Section 4.6  Brokers.  Other than  Donaldson  Lufkin &amp; Jenrette  Securities\nCorporation (\"DLJ\"), no broker,  finder, or investment banker is entitled to any\nbrokerage, finder's or other fee or commission in connection with this Agreement\nor  the   transactions   contemplated   hereby  based  upon  any  agreements  or\narrangements or  commitments,  written or oral, made by or on behalf of Buyer or\nany of its Affiliates.  Buyer shall be solely responsible for the payment of any\nsuch fee or commission to DLJ.\n\n     Section 4.7  Qualified  for Licenses.  To the current  actual  knowledge of\nBuyer,  Buyer is qualified  to obtain any  Licenses  and program  participations\nnecessary for the operation by Buyer of the Transferred  Assets in substantially\nthe same manner as the Transferred  Assets are presently  operated by Seller and\nthe Subsidiaries.\n\n     Section  4.8  Financial  Ability to  Perform.  Buyer has liquid  capital or\ncommitted  sources  therefor  sufficient  to permit  it to  perform  timely  its\nobligations  hereunder,  including,  but not  limited  to,  the  payment  of the\nTentative  Purchase  Price to Seller at the  Closing  and the other  payments to\nSeller required hereunder.\n\n     Section 4.9 [Intentionally omitted.]\n\n     Section  4.10 \"AS IS\"  Purchase.  Except as set forth in Sections  3.16 and\n6.2.(c),   Buyer  acknowledges  and  agrees  (and  upon  which  Seller  and  its\nSubsidiaries  shall have materially relied in selling the Transferred  Assets to\nBuyer at the  Purchase  Price and on the other terms and  conditions  herein set\nforth)  that Seller  makes no  representation  or  warranty,  either  express or\nimplied, with respect to the physical condition of the Transferred Assets, their\nfitness or suitability  for any particular  purpose,  or their  compliance  with\napplicable  local  building  codes,  safety,  fire,  land  use  or  access  laws\n(including,  without  limitation,  the Americans With Disabilities  Act), or any\nsimilar  Law.  In this  respect,  Buyer  confirms  that it is  relying  upon its\ninvestigation of the Transferred Assets to purchase the same on an \"AS IS\" basis\nand in \"WITH ALL FAULTS\"  condition.  Without  limiting  the  generality  of the\nforegoing,  Buyer hereby  acknowledges  that,  except as otherwise  specifically\nprovided in this Agreement,  neither Seller, nor any of its officers,  employees\nor  agents,  has made any  warranty  regarding  the  physical  condition  of the\nTransferred Assets,  including, but not limited to, any warranty of habitability\nor warranty of  merchantability  or warranty  of  suitability  for a  particular\npurpose,   and  Buyer  hereby  expressly   disclaims  the  implied \n\n\n                                      A-31\n\n\n\n\n\nwarranty of habitability,  the implied warranty of merchantability,  the implied\nwarranty of fitness  for a  particular  purpose,  and all  expressed  or implied\nwarranties  relating to the  quality of or  otherwise  relating to the  physical\ncondition of the Transferred Assets.\n\n     Section 4.11 No Assurance.  Buyer acknowledges and agrees that the rates or\nbases  used  in  calculating  payments  or  reimbursements  to it by  any  Payor\n(including but not limited to Medicare) may differ from the rates and bases used\nin calculating such payments or  reimbursements  to Seller and the Subsidiaries.\nBuyer  further  acknowledges  and agrees that the  Financial  Schedule  has been\nprepared  based  upon the  records  and  historical  methodology  of  Seller  as\ndescribed in Section 3.17, and that HEALTHSOUTH has not  independently  verified\nthe information contained therein; provided,  however, that the foregoing clause\nshall not impair Buyer's right to the satisfaction of the condition set forth in\nSection 8.2.\n\n\n                                    ARTICLE 5\n                             COVENANTS OF EACH PARTY\n\n     Section 5.1 Efforts to  Consummate  Transactions.  Subject to the terms and\nconditions  herein  provided,  each  of the  parties  hereto  agrees  to use its\nreasonable  commercial  efforts to take, or to cause to be taken, all reasonable\nactions  and to do, or to cause to be done,  all  reasonable  things  necessary,\nproper or advisable under  applicable Laws to consummate and make effective,  as\nsoon as reasonably practicable,  the Transactions contemplated hereby, including\nthe satisfaction of all conditions thereto set forth herein.  Such actions shall\ninclude,  without  limitation,  exerting their reasonable  efforts to obtain the\nconsents,  authorizations  and approvals of all private parties and governmental\nauthorities whose consent is reasonably necessary to effectuate the Transactions\ncontemplated  hereby,  and  effecting  all  other  necessary  registrations  and\nfilings,  including  but not  limited to  filings  under  Laws  relating  to the\ntransfer or  obtaining of  necessary  Licenses,  under the HSR Act and all other\nnecessary filings with governmental authorities.  The foregoing notwithstanding,\nit shall be the responsibility of Buyer to use its reasonable commercial efforts\nand to act diligently and at its expense to obtain any authorizations, approvals\nand consents in connection  with acquiring  Licenses and program  participations\nthat will permit it to operate the Facilities  after the Closing,  provided that\nBuyer will seek to obtain  Licenses  and program  participations  subject to the\nexisting conditions under which the Subsidiaries operate the Facilities and will\nnot seek to change the same until the Transferred Assets and Assumed Liabilities\nrespecting  the  Facilities in question have been  transferred to and assumed by\nBuyer.  Subject  to  Sections  2.6(a)  and 5.5,  neither  party  shall  have any\nliability to the other if, after using its reasonable  commercial  efforts (and,\nin the case of Buyer's efforts to obtain requisite Licenses, acting diligently),\nit is unable to obtain any consents,  authorizations or approvals  necessary for\nsuch party to consummate the Transactions. As used herein, the terms \"reasonable\ncommercial efforts\" or \"reasonable  efforts\" do not include the provision of any\nconsideration to any third party or the suffering of any economic detriment to a\nparty's   ongoing   operations   for  the   procurement  of  any  such  consent,\nauthorization  or approval  except for the costs of gathering and supplying data\nor other  information  or making any  filings,  fees and expenses of counsel and\nconsultants and for customary fees and charges of  governmental  authorities and\naccreditation organizations.\n\n     Section  5.2  Cooperation.  Prior to and  after  the  Closing,  upon  prior\nreasonable  written  request,  each party agrees to cooperate  with the other in\nevery reasonable commercial way to consummate the Transactions.  Notwithstanding\nthe foregoing,  all analyses,  appearances,  presentations,  memoranda,  briefs,\narguments,  opinions and  proposals  made or submitted by or on behalf of either\nparty hereto in connection with proceedings  under or relating to the HSR Act or\nany other federal or state  antitrust or fair trade law, or made or submitted by\nor on behalf of Buyer in connection with  proceedings to obtain the Licenses and\nprogram  participations  referred to in Section 5.1 hereof,  shall be subject to\nthe joint  approval or  disapproval  and the joint  control of Buyer and Seller,\nacting with the advice of their respective  counsel,\n\n\n                                      A-32\n\n\n\n\n\nit being the intent of the  foregoing  that the parties  hereto will consult and\ncooperate with one another, and consider in good faith the views of one another,\nin connection with any such analysis, presentation, memorandum, brief, argument,\nappearance,  opinion or proposal;  provided  that nothing  herein shall  prevent\neither  party   hereto  or  any  of  their   Affiliates   or  their   authorized\nrepresentatives  from (a) making or submitting  any such  analysis,  appearance,\npresentation,  memorandum, brief, argument, opinion or proposal in response to a\nsubpoena  or  other  legal  process  or as  otherwise  required  by Law,  or (b)\nsubmitting factual  information to the United States Department of Justice,  the\nFederal  Trade  Commission,  any  other  governmental  agency  or any  court  or\nadministrative  law judge in  response  to a request  therefor  or as  otherwise\nrequired by Law.\n\n     Section 5.3 Further Assistance. From time to time, at the request of either\nparty, whether on or after the Closing,  without further  consideration,  either\nparty,  at its  expense  and within a  reasonable  amount of time after  request\nhereunder  is made,  shall  execute  and deliver  such  further  instruments  of\nassignment,  transfer  and  assumption  and take  such  other  action  as may be\nreasonably  required to more  effectively  assign and transfer  the  Transferred\nAssets to,  and vest the  Assumed  Liabilities  in,  Buyer,  deliver or make the\npayment of the Purchase Price to Seller or any amounts due from one party to the\nother pursuant to the terms of this Agreement or confirm  Seller's  ownership of\nthe Excluded Assets and obligations with respect to the Excluded Liabilities.\n\n     Section 5.4 Cooperation  Respecting  Proceedings.  After the Closing,  upon\nprior reasonable written request,  each party shall cooperate with the other, at\nthe requesting  party's  expense (but including only  out-of-pocket  expenses to\nthird  parties  and not the costs  incurred  by any party for the wages or other\nbenefits  paid  to  its  officers,   directors  or  employees),   in  furnishing\ninformation,  testimony and other  assistance in connection  with any inquiries,\nactions,  tax or cost  report  audits,  proceedings,  arrangements  or  disputes\ninvolving  either of the parties hereto (other than in connection  with disputes\nbetween the parties  hereto) and based upon  contracts,  arrangements or acts of\nSeller or any of the  Subsidiaries  which were in effect or occurred on or prior\nto the Closing and which relate to the Transferred  Assets,  including,  without\nlimitation, arranging discussions with (and the calling as witness of) officers,\ndirectors, employees, agents, and representatives of Buyer.\n\n     Section 5.5 Expenses.  Whether or not the Transactions  contemplated hereby\nare consummated,  except as otherwise provided in this Agreement,  all costs and\nexpenses  incurred  in  connection  with  this  Agreement  and the  transactions\ncontemplated  hereby  shall  be  paid  by the  party  incurring  such  expenses.\nNotwithstanding the foregoing:\n\n         (a) Costs associated with preliminary  title reports and title policies\nshall be borne by Seller up to the costs that would have been  incurred  had the\ntitle  policies  been standard  coverage  policies of title  insurance,  and the\nremaining  costs,  if any,  including  all costs of any  surveys  in  connection\ntherewith, shall be borne by Buyer;\n\n         (b) All escrow charges,  and charges of any neutral  independent public\naccountant or mediator,  and related costs, shall be borne one-half by Buyer and\none-half by Seller (it being  agreed that each party shall bear the costs of its\nown independent public accountant or designated mediator);\n\n         (c) All recording  costs and charges  respecting  real property will be\nallocated  between  Buyer  and  Seller in  accordance  with the  customs  of the\ncounties in which the pertinent real property is located;\n\n         (d) All transfer taxes respecting real property will be borne by Buyer;\n\n\n                                      A-33\n\n\n\n\n\n         (e) All fees and charges of governmental  authorities and accreditation\nagencies in  connection  with the  transfer,  issuance or  authorization  of any\nLicense, accreditation or program participation shall be borne by Buyer;\n\n         (f) All fees or costs  associated  with the issuance of any bond or the\nestablishment of any escrow required by Section 2.10(a) shall be borne by Buyer;\n\n         (g) All fees,  charges or costs,  including auditing fees and expenses,\nincurred as a result of Buyer's  compliance with the Securities  Exchange Act of\n1934, as amended,  and the rules and regulations  thereunder,  shall be borne by\nBuyer; and\n\n         (h) Costs not to exceed $6,000,000 incurred by HEALTHSOUTH,  Seller and\nthe  Subsidiaries in connection with investment  banking and financial  advisory\nservices  relating to the  Transactions  rendered by Smith Barney Inc.  shall be\nborne by Buyer.\n\nAll such charges and expenses shall be promptly  settled  between the parties at\nthe Closing or upon termination or expiration of further  proceedings under this\nAgreement,  or with respect to such charges and  expenses not  determined  as of\nsuch time, as soon thereafter as is reasonably practicable.\n\n     Section 5.6 Announcements;  Confidentiality.  Prior to the Closing Date, no\npress or other public  announcement,  or public statement or comment in response\nto any inquiry,  relating to the  transactions  contemplated  by this  Agreement\nshall be issued or made by Buyer or Seller or any  Subsidiary  without the joint\napproval  of Buyer and Seller;  provided  that a press  release or other  public\nannouncement, statement or comment made without such joint approval shall not be\nin violation  of this  Section if it is made in order to comply with  applicable\nsecurities Laws or stock exchange policies and in the reasonable judgment of the\nparty  making such  release or  announcement,  based upon advice of  independent\ncounsel,  prior review and joint approval,  despite reasonable efforts to obtain\nthe same,  would  prevent  dissemination  of such release or  announcement  in a\ntimely enough fashion to comply with such Laws or policies, provided that in all\ninstances  prompt notice from one party to the other shall be given with respect\nto  any  such  release,  announcement,  statement  or  comment.  Subject  to the\nforegoing,  the  parties  hereto  recognize  and  agree  that  all  information,\ninstruments,  documents and details  concerning the businesses of Buyer,  Seller\nand the Subsidiaries are strictly  confidential,  and Seller and Buyer expressly\ncovenant and agree with each other that,  prior to and after the  Closing,  they\nwill not,  nor will  they  allow any of their  respective  officers,  directors,\nemployees,  representatives  or  agents  (including  professional  advisors)  to\ndisclose or publicly  comment  upon any matters  relating to the business of the\nother or relating to this Agreement,  including,  without limitation, the terms,\ntiming or progress of the transactions  contemplated hereby, or its negotiation,\nterms, provisions or conditions, including Purchase Price, except for disclosure\nto their respective  professional  advisors (who shall agree not to disclose the\nsame) which is reasonably necessary to effectuate the Transactions  contemplated\nhereby  and in a  manner  consistent  with  the  provisions  of this  Agreement.\nNotwithstanding anything contained in this Agreement to the contrary,  except in\nconnection  with filings to obtain  Licenses  necessary for  consummation of the\nTransactions  (but  subject to Section 5.2) and except as may be required by any\nLaws (based on advice of independent counsel),  Buyer shall not (nor shall Buyer\nallow any of its officers, directors, employees,  representatives or agents to),\nwithout  the prior  written  consent of Seller (in  Seller's  sole and  absolute\ndiscretion), disclose to or otherwise discuss with any person, regulatory board,\nfiscal intermediary or other entity Buyer's proposed purchase of the Transferred\nAssets,  Seller's proposed sale of the Transferred  Assets, the contents of this\nAgreement  or the  negotiation  of this  Agreement.  Each  party  shall keep all\ninformation  obtained  from the  other  either  before or after the date of this\nAgreement confidential,  and neither party shall reveal such information to, nor\nproduce copies of any written information for, any person outside its management\ngroup or its  lenders,  attorneys,  accountants,  investment  bankers  and other\nprofessional  advisors  without the prior  written  consent of the other  party,\nunless such party is  compelled  to  disclose  such  information  by judicial or\nadministrative  process or by any other requirements of Law. If the Transactions\ncontemplated by this Agreement should\n\n\n                                      A-34\n\n\n\n\n\nfail to close for any reason,  each party  shall  return to the other as soon as\npracticable  all  originals and copies of written  information  provided to such\nparty by or on behalf of the other party and none of such  information  shall be\nused by either  party,  or their  employees,  agents or  representatives  in the\nbusiness operations of any person.  Notwithstanding the foregoing,  each party's\nobligations  under this Section shall not apply to any  information  or document\nwhich  is or  becomes  available  to the  public  other  than as a  result  of a\ndisclosure by the other party in violation of this Agreement or other obligation\nof confidentiality under which such information may be held or becomes available\nto the party on a  non-confidential  basis  from a source  other  than the other\nparty or its officers,  directors,  employees,  representatives  or agents.  The\nparties'  obligations  under this Section shall survive the  termination of this\nAgreement.  Nothing in this Section  shall,  or is intended to, impair or modify\nany of the rights or obligations  of Buyer or its Affiliates  under that certain\nconfidentiality  agreement  dated  ______________,  1997, all of which remain in\neffect until  termination of such letter agreement in accordance with its terms.\nNotwithstanding the foregoing, however, Buyer may provide information concerning\nthe Transferred Assets constituting Seller's  institutional pharmacy business to\npotential  purchasers  thereof  so  long  as  Buyer  obtains  a  confidentiality\nagreement (which shall name HEALTHSOUTH and Seller as third party beneficiaries)\ncontaining substantially the same terms as the confidentiality agreement between\nHEALTHSOUTH and Buyer.\n\n     Section 5.7 Access to Certain  Records.  Buyer shall  provide  HEALTHSOUTH,\nSeller and the  Subsidiaries  with access upon  reasonable  notice to any or all\nportion of the  medical,  clinical  and other  records  directly  or  indirectly\nassociated with the admission, care and treatment of patients on or prior to the\nclosing date (the \"Patient  Records\") and all financial and other records of the\nFacilities  for the period  ending on or prior to the Closing  Date (the Patient\nRecords and such other  records are  collectively  referred to as the  \"Facility\nRecords\") for such proper  purposes as HEALTHSOUTH,  Seller or the  Subsidiaries\nmay require. HEALTHSOUTH,  Seller and the Subsidiaries shall utilize such access\nto  Facility  Records  in  accordance  with all  applicable  provisions  of law,\nincluding, but not limited to, provisions relating to confidentiality of Patient\nRecords.  HEALTHSOUTH  shall provide Buyer with access upon reasonable notice to\nsuch records of Seller and the  Subsidiaries  which are not transferred to Buyer\nhereunder for such proper purposes as Buyer may require.\n\n     Section 5.8 Tax Election.  Buyer is eligible to make,  and Buyer and Seller\nwill jointly make, a timely  election  under Section  338(h)(10) of the Internal\nRevenue Code of 1986,  as amended with respect to the shares of capital stock of\nNational Institutional  Pharmacy Services,  Inc. included in the Assigned Stock.\nAt the  Closing,  Buyer and Seller will jointly  execute a Form 8023  reflecting\nsuch election, and therafter Seller will timely file such form with the Internal\nRevenue Service and will provide proof of such filing to Buyer.\n\n\n                                    ARTICLE 6\n                 ADDITIONAL COVENANTS OF SELLER AND HEALTHSOUTH\n\n     Seller and HEALTHSOUTH hereby additionally  covenant,  promise and agree as\nfollows:\n\n     Section  6.1  Conduct  Pending  Closing.   Prior  to  consummation  of  the\nTransactions  contemplated  hereby  or the  termination  or  expiration  of this\nAgreement  pursuant  to its  terms,  unless  Buyer  shall  otherwise  consent in\nwriting, which consent shall not be unreasonably withheld or delayed, and except\nfor  actions  taken  pursuant to Assumed  Contracts,  or which arise from or are\nrelated to the anticipated  transfer of the Transferred  Assets, or as otherwise\ncontemplated by this Agreement,  HEALTHSOUTH and Seller shall,  and Seller shall\ncause the Subsidiaries to:\n\n\n                                      A-35\n\n\n\n\n\n         (a) Conduct the business  represented  by, and otherwise deal with, the\nTransferred Assets only in the usual and ordinary course,  materially consistent\nwith practices followed prior to the execution of this Agreement;\n\n         (b) Use reasonable  efforts to keep intact the  Transferred  Assets and\nthe business  they  represent and to preserve  relationships  beneficial to such\nbusiness  that  doctors,  patients,  Payors,  suppliers and others have with the\nFacilities;\n\n         (c) Except as required by their  terms,  not amend,  terminate,  renew,\nfail to renew or  renegotiate  any  material  contract,  except in the  ordinary\ncourse of business and consistent  with practices of the recent past, or default\n(or take or omit to take any action  that,  with or without the giving of notice\nor passage of time, would constitute a default) in any of its obligations  under\nany such contracts, that would be an Assumed Contract as of the date hereof;\n\n         (d) Not sell,  lease,  mortgage,  encumber,  or otherwise dispose of or\ngrant any interest in, or permit or suffer to exist any lien or encumbrance upon\nor the disposition of, any Facility,  Inventory, or items of Equipment having an\nundepreciated book value in excess of $50,000,  including without limitation any\nof its  leasehold  interests  therein,  whether  by the  taking of action or the\nfailure  to take  action,  except  for (i) sales of  Inventory  in the  ordinary\ncourse,  (ii)  liens  constituting  Permitted  Encumbrances,  or (iii)  sales or\ndispositions of Equipment in the ordinary course of business that are consistent\nwith practices of the recent past;\n\n         (e) Maintain in force and effect the insurance  policies  identified in\nSection 3.19(c);\n\n         (f) Not  enter  into any  contract  that  will  constitute  an  Assumed\nContract  as of the  Closing  except  in the  ordinary  course of  business  and\nconsistent with practices of the recent past; or\n\n         (g) Not grant any  general or uniform  increase  in the rates of pay or\nbenefits to Retained Employees (or a class thereof) or any increase in salary or\nbenefits  of any  senior  management  personnel  of  any  Facility,  except  for\ncompensation  previously  agreed to prior to the date hereof or normal  year-end\nmerit increases consistent with HEALTHSOUTH's general practices;\n\nprovided  that  nothing  in  this  Section  shall  (i)  obligate  Seller  or any\nSubsidiary to make  expenditures  other than in the ordinary  course of business\nand  consistent  with  practices of the recent past or to  otherwise  suffer any\neconomic  detriment,  (ii) preclude  Seller from paying,  prepaying or otherwise\nsatisfying any liability  which, if outstanding as of the Closing Date, would be\nan Assumed  Liability or an Excluded  Liability,  or (iii) preclude  Seller from\nincurring any  liabilities or obligations to any third party in connection  with\nobtaining such party's consent to any transaction contemplated by this Agreement\nor the Related  Agreements  provided such liabilities and obligations under this\nclause (iii) shall be Excluded Liabilities pursuant to Section 2.4(h) hereof.\n\n     Section 6.2 Access and  Information.  Subject to the restrictions set forth\nin Section 5.6 respecting  confidentiality  and provided that Buyer has complied\nwith  each and every  provision  thereof,  Seller  shall,  and  shall  cause the\nSubsidiaries  to,  afford  Buyer,   and  the  counsel,   accountants  and  other\nrepresentatives of Buyer, reasonable access, throughout the period from the date\nhereof to the Closing,  to the Transferred  Assets and the employees,  personnel\nand medical staff associated therewith and all the properties, books, contracts,\ncommitments,   cost  reports  and  records  respecting  the  Transferred  Assets\n(regardless  of where such  information  may be  located).  Such access shall be\nafforded  after no less than 24  hours'  prior  written  notice,  during  normal\nbusiness hours whenever reasonably possible and only in such manner so as not to\ndisturb  patient  care  or to  interfere  with  the  normal  operations  of  the\nFacilities;  provided,  however, that, notwithstanding the foregoing and subject\nto the provisions  concerning  nondisclosure  set forth in Section 5.6,  without\nfirst  obtaining the written  consent of the  Executive  Vice  President,  Chief\nFinancial Officer\n\n\n                                      A-36\n\n\n\n\n\nand Treasurer of HEALTHSOUTH or the Senior Vice President and Corporate  Counsel\nof HEALTHSOUTH,  which consent shall not be unreasonably withheld, neither Buyer\nnor its counsel,  accountants and other  representatives shall tour or visit the\nFacilities or contact any of the employees,  personnel or medical staff thereof;\nand  provided  further  that until the first to occur of November 3, 1998 or the\nClosing,  under no  circumstances  shall  Buyer  solicit the  employment  of any\nemployees of Seller or its Subsidiaries,  except as Hired Employees  pursuant to\nthe terms hereof or except as may be permitted with the prior written consent of\na responsible officer of Seller.  Seller's covenants under this Section are made\nwith the  understanding  that Buyer shall use all such information in compliance\nwith all Laws. Buyer shall not have access to patient or employee records or any\nother  records  the  disclosure  of  which  would  be  prohibited  by  any  Law,\naccreditation   standards,   or  rule  or  agreement  (express  or  implied)  of\nconfidentiality,  except that Buyer may be granted access to such records to the\nextent  they are  appropriately  redacted  and in  conformity  with  such  other\nreasonable  procedures as may be required to conform to any such requirements of\nLaw, accreditation standards or rule or agreement of confidentiality.\n\n     Section 6.3  Updating.  HEALTHSOUTH  and Seller  shall  notify Buyer of any\nchanges or  additions  to any of Seller's  Schedules  to this  Agreement  by the\ndelivery of updates  thereof,  if any, not later than two business days prior to\nthe Closing. Subject to the provisions of Sections 4.9 and 4.10, no such updates\nmade  pursuant  to this  Section  shall  be  deemed  to cure any  breach  of any\nrepresentation  or warranty made in this  Agreement,  unless Buyer  specifically\nagrees  thereto in writing,  nor shall any such  notification  be  considered to\nconstitute  or give rise to a waiver by Buyer of any condition set forth in this\nAgreement. In addition,  HEALTHSOUTH and Seller shall provide Buyer with monthly\nupdated financial  information in substantially the form heretofore  provided by\nHEALTHSOUTH  to Buyer  within 25 days after the close of each month prior to the\nClosing Date.\n\n     Section  6.4 No  Solicitation.  HEALTHSOUTH  will not,  and shall cause the\nSeller and the  Subsidiaries  not to, and will use its best efforts to cause its\nand  their  officers,  employees,  agents  and  representatives  (including  any\ninvestment  banker),  in their capacity as such, not to, directly or indirectly,\nsolicit,  encourage or initiate any  discussions  with, or, subject to fiduciary\nduties to  stockholders,  negotiate  or  otherwise  deal with,  or  provide  any\ninformation to, any corporation,  partnership,  person or other entity or group,\nother than Buyer and its officers,  employees and agents, concerning any sale of\nor similar  transactions  involving the  Transferred  Assets or the stock of the\nSubsidiaries.  None of the foregoing shall prohibit the provision of information\nto others in a manner in keeping  with the  ordinary  conduct of  HEALTHSOUTH's,\nSeller's or the Subsidiaries' businesses.\n\n     Section 6.5 Name Changes.  To the extent that the corporate names of any of\nthe  Subsidiaries  incorporate or are  substantially  similar to the Transferred\nBusiness  Names,  Seller  agrees to cause the  Subsidiaries  promptly  after the\nClosing  to  take  all  action  necessary  to  change  such  names  so as not to\nincorporate or be substantially similar to the Transferred Business Names.\n\n     Section 6.6 Use of Controlled  Substance Licenses.  To the extent permitted\nby Law,  Buyer shall have the right,  either as purchaser or as manager  under a\nManagement  Agreement,  for a period  not to  exceed  the  later of (a) 120 days\nfollowing  the  Closing and (b) the  termination  of the  applicable  Management\nAgreement,  to operate under the Licenses of Seller or the Subsidiaries relating\nto controlled substances and the operation of pharmacies, until Buyer is able to\nobtain such Licenses for itself. Seller shall execute and deliver, and cause the\npertinent  Subsidiaries  to execute  and deliver to Buyer any powers of attorney\nand other  instruments  which Buyer or the appropriate  governmental  agency may\nreasonably  require in  connection  with  Buyer's  use of such  Licenses.  Buyer\nacknowledges  that it shall apply for all such  Licenses  as soon as  reasonably\npossible and diligently pursue such applications in accordance with Section 5.1.\n\n     Section 6.7 Letters of Intent.  Promptly  after  execution  and delivery of\nthis Agreement,  Seller shall provide Buyer with copies of all letters of intent\nor similar non-binding expressions of intent or\n\n\n                                      A-37\n\n\n\n\n\nunderstanding  with respect to the  acquisition  or divestiture of any Facility,\nand, to the extent such letters of intent are terminable, will give any required\nnotice of termination if directed in writing by Buyer to do so.\n\n\n\n                                    ARTICLE 7\n                          ADDITIONAL COVENANTS OF BUYER\n\n     Section  7.1  Waiver  of  Bulk  Sales  Law   Compliance.   Subject  to  the\nindemnification  provisions of Section  11.3(a)(iii) hereof, Buyer hereby waives\ncompliance  by Seller and the  Subsidiaries  with the  requirements,  if any, of\nArticle  6 of the  Uniform  Commercial  Code as in force  in any  state in which\nTransferred  Assets are located and all other  similar laws  applicable  to bulk\nsales and transfers.\n\n     Section 7.2 Resale  Certificate.  Buyer agrees to furnish to Seller and the\nSubsidiaries any resale  certificate or certificates or other similar  documents\nreasonably requested by Seller to comply with pertinent sales and use tax laws.\n\n     Section 7.3 Release of Assumed Guarantees. Buyer shall use its best efforts\nto obtain the release of HEALTHSOUTH,  Seller and the  Subsidiaries  (other than\nthe Transferred Subsidiaries,  from the Assumed Guarantees and any other Assumed\nLiabilities  for which  HEALTHSOUTH,  Seller  or any  Subsidiary  (other  than a\nTransferred Subsidiary) remains contingently liable after the Closing; provided,\nhowever,  that \"best  efforts\"  shall not be deemed to require Buyer to pay more\nthan $500,000 in the aggregate as consideration  for the granting of the release\nof  HEALTHSOUTH,  Seller  and  the  Subsidiaries  (other  than  the  Transferred\nSubsidiaries)  from such  liabilities  (exclusive of any amounts paid to satisfy\nthe underlying obligations).\n\n     Section  7.4 Tax  Matters.  Buyer  acknowledges  that  either as manager or\nassignee of the Assigned  Stock,  Buyer shall be responsible for the preparation\nof tax returns for the Transferred  Subsidiaries.  It is further acknowledged by\nBuyer that,  subject to the provisions of Section 2.4(a) regarding income taxes,\nTaxes  (including,  without  limitation,  the Florida indigent care tax) imposed\nupon the right or privilege to do business from the Facilities after the Closing\nshall  be  Buyer's  responsibility  even if  measured  by  gross  receipts,  net\noperating  revenues or patient days for a period  ending on, before or including\nthe Closing Date.\n\n     Section 7.5 Letters of Credit.  Subject to the terms and conditions hereof,\nat the Closing, Buyer shall cause letters of credit and indemnity or performance\nbonds to be provided to substitute  for those letters of credit and bonds listed\nin  Schedule  7.5, so that at and as of the  Closing  Seller and its  Affiliates\nshall have no further obligation to provide such designated letters of credit or\nbonds.\n\n\n                                    ARTICLE 8\n                          BUYER'S CONDITIONS TO CLOSING\n\n     The  obligations  of Buyer to consummate  the  Transactions  at the Closing\nshall be subject to the  fulfillment at or prior to the Closing of the following\nconditions, unless Buyer waives such fulfillment:\n\n     Section 8.1  Performance  of Agreement.  HEALTHSOUTH  and Seller shall have\nperformed in all material  respects its agreements and obligations  contained in\nthis Agreement required to be performed on or prior to the Closing.\n\n\n                                      A-38\n\n\n\n\n\n     Section 8.2 Accuracy of Representations and Warranties. Subject to Sections\n4.9 and 4.10, the  representations and warranties of Seller set forth in Article\n3 of  this  Agreement  shall  be  true in all  respects  as of the  date of this\nAgreement  (unless the matters that caused the inaccuracy or inaccuracies  which\nwould  otherwise  result in a failure of this  condition  have been cured by the\nClosing)  and  as of the  Closing  (as  updated  by the  revising  of  Schedules\ncontemplated  by Section 6.3, to the extent that Buyer shall have  accepted such\nupdates in writing) as if made as of such time,  except where such inaccuracy or\ninaccuracies  would not  individually  or in the aggregate  result in a Material\nAdverse  Effect  on  the  Transferred   Assets;   provided,   however  that  any\nrepresentation or warranty that is qualified by reference to a \"Material Adverse\nEffect\" shall be true and correct as of the Closing in all respects.\n\n     Section  8.3  Officer's   Certificate.   Buyer  shall  have  received  from\nHEALTHSOUTH and Seller an officer's  certificate,  executed on HEALTHSOUTH's and\nSeller's behalf by each of their respective chief executive officer,  president,\nchief financial  officer or treasurer (in his or her capacity as such) dated the\nClosing Date and stating that to the actual knowledge of such individual,  after\ninquiry of the other officers  identified in this Section 8.3, the conditions in\nSections 8.1 and 8.2 above have been met.\n\n     Section  8.4  Consents.  The  waiting  period  under the HSR Act shall have\nexpired or been  terminated,  and,  subject to the  provisions of Sections 2.12,\n2.14  and  2.15,  all  approvals,  consents,  authorizations  and  waivers  from\ngovernmental and accreditation agencies and from other third parties required to\nconsummate the Transactions shall have been obtained, except for such approvals,\nconsents,  authorizations  and  waivers,  the  failure to obtain  which will not\nresult in a Material  Adverse Effect on the  Transferred  Assets.  The foregoing\nnotwithstanding,  the  obtaining of any of the  following  approvals,  consents,\nauthorizations  and waivers  (collectively,  \"Consents\")  shall not constitute a\ncondition to Buyer's consummation of the Transactions:\n\n         (a) Any Consent,  if the result of the failure to obtain same is either\na Purchase Price adjustment or the parties' entry into a cooperative arrangement\npursuant to the provisions of Sections 2.12(a) or 2.14 or a Management Agreement\npursuant to Section 2.15; and\n\n         (b) Any Consent to the sale and assignment of a Transferred Asset, such\nas a Medicare or Medicaid  provider  agreement,  or the assumption of an Assumed\nLiability,  if such sale,  assignment or assumption may lawfully be made subject\nto a customary  condition  subsequent  that a Consent be  obtained  from a third\nparty  based  upon  determinations  of  such  third  party,   including  without\nlimitation  needs surveys or  evaluations  of Buyer,  to be completed  after the\nClosing,  unless such third party  indicates  prior to the Closing that any such\nConsent is not likely to be given.\n\n     Section  8.5  Absence  of  Injunctions.  There  shall  not be in  effect  a\ntemporary  restraining  order or a preliminary or permanent  injunction or other\norder,  decree  or  ruling  by  a  court  of  competent  jurisdiction  or  by  a\ngovernmental   agency  which  restrains  or  prohibits  Buyer's  acquisition  or\noperation of the Transferred  Assets, or any threat by governmental  authorities\nto exact any  penalty  or  impose  any  economic  deteriment  upon  Buyer or the\nTransferred  Assets  following  the Closing,  provided that the parties will use\ntheir  reasonable  efforts to  litigate  against  the entry of, or to obtain the\nlifting  of,  any  such  order  or  injunction,  and the  existence  of any such\ntemporary  restraining  order or preliminary  injunction  shall operate,  at the\noption of the  parties,  only to delay the Closing  (and extend the  Termination\nDate) until the 30th day following the lifting of any such order or  injunction,\nexcept  that such delay may not extend the  original  Termination  Date for more\nthan nine  months.  Notwithstanding  the  foregoing,  in the event that any such\norder or injunction affects only a portion of the Transferred  Assets,  then the\nparties (x) shall negotiate an equitable  adjustment in the Purchase Price so as\nto consummate the  Transactions  with respect to Transferred  Assets and Assumed\nLiabilities  relating  to  Facilities  that are not  affected  by such  order or\ninjunction,  and (y) shall  either  agree upon  appropriate  amendments  to this\nAgreement to effect further  transfers of the remaining  Transferred  Assets and\nassumptions of the remaining Assumed  Liabilities when and if they are no longer\nsubject to such order or injunction  or, if no such  amendments\n\n\n                                      A-39\n\n\n\n\n\nare agreed upon, such remaining Transferred Assets and Assumed Liabilities shall\nbe deemed to be Excluded  Assets and  Excluded  Liabilities  for all purposes of\nthis  Agreement;  provided  that if the  parties  are  unable  to agree  upon an\nequitable adjustment of the Purchase Price, or appropriate  amendments to effect\nfurther  transfers,  prior to any scheduled Closing Date, then such disagreement\nshall be resolved pursuant to the provisions of Section 2.14.\n\n     Section 8.6 Title to Real Property.  Title to Transferred Assets consisting\nof interests in real property  shall have been  evidenced by the  willingness of\nFidelity National Title Insurance Company (or an Affiliate  thereof) (the \"Title\nInsurer\")  to issue ALTA (or the local  equivalents  thereof)  owner's  extended\ncoverage  policies of title insurance  (latest Form B) (the \"Title Policies\") in\namounts equal to the respective portions of the Purchase Price allocated to such\ninterests, showing title to such interests in such real property vested in Buyer\nsubject to transfer of such  interests to Buyer,  subject only to the  following\nconditions of title:\n\n         (a) A lien or  liens  to  secure  payment  of real  estate  taxes,  not\ndelinquent;\n\n         (b) Exceptions,  disclosed by current standard ALTA  Preliminary  Title\nReports, delivered to Buyer within 15 days after the date hereof and approved by\nBuyer  within 15 days  after  the date of  delivery  (as  indicated  by  Buyer's\nsignature of approval  appended  thereto)  together with copies of all documents\nunderlying the exceptions contained therein; and\n\n         (c)  Other  possible  minor  matters  that  in the  aggregate  are  not\nsubstantial in amount and do not  materially  detract from or interfere with the\npresent or intended use of such real property.\n\nThe  willingness  of the Title  Insurer  to issue the  Title  Policies  shall be\nevidenced either by the issuance  thereof or the written  commitments or binders\nof the Title Insurer to issue such Title Policies within a reasonable time after\nthe Closing Date,  subject to actual  transfer of the real property in question.\nIf the Title  Insurer is unwilling to issue any such Title  Policy,  it shall be\nrequired to provide  Buyer and  Seller,  in writing,  notice  setting  forth the\nreason(s) for such  unwillingness  on or before the Closing  Date.  Seller shall\nhave  the  right  to seek to cure  any  defect  which  is the  reason  for  such\nunwillingness,  and, if such notice by the Title  Insurer is given less than ten\nbusiness days prior to the then  scheduled  Closing Date,  then the Closing Date\n(and, to the extent  necessary,  the  Termination  Date) shall be extended for a\nperiod of up to ten business days to provide to Seller such opportunity to cure.\nIn the event that,  despite  Seller's efforts to cure, the Title Insurer remains\nunwilling to issue any such Title Policy on the Closing Date (as may be extended\nas provided  herein),  then, at the election of Buyer, and without affecting the\nother conditions of the parties to consummation of the  Transactions,  such real\nproperty  interests  not covered by such a Title Policy shall not be included in\nthe  Transferred  Assets  and  shall  be  deemed  to  be  Excluded  Assets,  and\nliabilities  associated  therewith that would  otherwise be Assumed  Liabilities\n\n\n                                      A-40\n\n\n\n\n\nshall be deemed to be Excluded Liabilities; and Buyer and Seller shall negotiate\nin good faith  prior to the  Closing an  equitable  adjustment  in the  Purchase\nPrice.  If the parties  cannot agree upon such  equitable  adjustment,  then the\ndisagreement shall be resolved in accordance with Section 2.14.  Notwithstanding\nthe  foregoing,  Buyer  may  accept  such  title  to any such  interests  as the\npertinent  Subsidiary  may be able to  convey,  and such  title  insurance  with\nrespect to the same as the Title Insurer is willing to issue, in which case such\ninterests shall be conveyed as part of the Transferred  Assets without reduction\nof the Purchase  Price or any credit or  allowance  against the same and without\nany other liability on the part of Seller or the Subsidiaries.\n\n     Section  8.7 Receipt of Other  Documents.  Buyer  shall have  received  the\nfollowing:\n\n         (a) Certified copies of the resolutions of HEALTHSOUTH's,  Seller's and\neach  Subsidiary's  board of directors  respecting this  Agreement,  the Related\nAgreements  and  the  Transactions,   together  with  certified  copies  of  any\nstockholder  resolutions  which are  necessary  to  approve  the  execution  and\ndelivery of this Agreement and any Related  Agreements and\/or the performance of\nthe  obligations  of  HEALTHSOUTH,  Seller and the  Subsidiaries  hereunder  and\nthereunder;\n\n         (b) Certified copies of  HEALTHSOUTH's,  Seller's and each Subsidiary's\nCharter Documents,  together with a certificate of the corporate secretary or an\nassistant secretary of each that none of such documents have been amended;\n\n         (c) One or more  certificates  as to the  incumbency of each officer of\nSeller or of any Subsidiary who has signed the Agreement,  any Related Agreement\nor any certificate,  document or instrument  delivered pursuant to the Agreement\nor any Related Agreement;\n\n         (d) Good standing certificates for HEALTHSOUTH,  Seller and each of the\nSubsidiaries  from  the  Secretaries  of State of  their  respective  states  of\nincorporation  dated as of a date not earlier than 30 business days prior to the\nClosing Date;\n\n         (e) Copies of all third party and  governmental  consents,  permits and\nauthorizations  that  HEALTHSOUTH,  Seller or any  Subsidiary  has  received  in\nconnection with the Agreement, the Related Agreements and the Transactions; and\n\n         (f) Certificates of non-foreign  status in the form required by Section\n1445 of the Code duly executed by Seller and the Subsidiaries.\n\n     Section 8.8 Lenders' Consent.  Buyer shall have received the consent of the\nrequired lenders under its principal credit agreement to the Transactions.\n\n     Section  8.9  Absence of  Material  Adverse  Changes.  There shall not have\noccurred  or been  discoverd  any change (a  \"Material  Adverse  Change\") in the\nbusiness,  operations,  financial  condition  or  prospects  of  the  businesses\nrepresented  by the  Transferred  Assets the effect of which has been to cause a\nMaterial  Adverse  Effect  on the  Transferred  Assets,  taken as a  whole,  and\nHEALTHSOUTH  and Seller shall have  furnished  Buyer with the  certificate of an\nexecutive officer of each to such effect;  provided,  however,  that no Material\nAdverse  Change shall be deemed to have occurred as a result of matters  arising\nor  resulting  from  (i)  matters  generally  affecting  businesses  of the type\nrepresented  by the  Transferred  Assets which are not peculiar to Seller or the\nSubsidiaries,  (ii) changes in generally accepted accounting  principles,  (iii)\npublic  announcement of the  Transactions  and compliance with the provisions of\nthis  Agreement,  or (iv) acts  taken or  omitted  by  HEALTHSOUTH,  Seller or a\nSubsidiary  at the  written  direction  or with the express  written  consent of\nBuyer.\n\n\n                                    ARTICLE 9\n                HEALTHSOUTH'S AND SELLER'S CONDITIONS TO CLOSING\n\n     The obligations of HEALTHSOUTH and Seller to consummate the Transactions at\nthe Closing  shall be subject to the  fulfillment  at or prior to the Closing of\nthe following conditions, unless HEALTHSOUTH and Seller waive such fulfillment:\n\n     Section 9.1  Performance  of Agreement.  Buyer shall have  performed in all\nmaterial  respects its  agreements and  obligations  contained in this Agreement\nrequired to be performed on or prior to the Closing.\n\n     Section 9.2 Accuracy of Representations and Warranties. The representations\nand warranties of Buyer set forth in Article 4 of this  Agreement  shall be true\nin all material respects as of the date of this\n\n\n                                      A-41\n\n\n\n\n\nAgreement (unless the inaccuracy or inaccuracies which would otherwise result in\na failure  of this  condition  have  been  cured by the  Closing)  and as of the\nClosing as if made as of such time.\n\n     Section 9.3 Officer's Certificate. Seller shall have received from Buyer an\nofficers'  certificate,  executed  on  Buyer's  behalf  by its  chief  executive\nofficer, president, chief financial officer or treasurer (in his or her capacity\nas such) dated the Closing Date and stating that to the actual knowledge of such\nindividual  after inquiry of the other officers  identified in this Section 9.3,\nthe conditions in Sections 9.1 and 9.2 above have been met.\n\n     Section  9.4  Consents.  The  waiting  period  under the HSR Act shall have\nexpired or been  terminated,  and,  subject to the  provisions of Sections 2.12,\n2.14  and  2.15,  all  approvals,  consents,  authorizations  and  waivers  from\ngovernmental  and  accreditation  agencies and from other third parties required\nfor Seller to consummate the Transactions  shall have been obtained,  except for\nsuch approvals, consents, authorizations and waivers the failure to obtain which\nwill not, individually or in the aggregate,  result in a Material Adverse Effect\non Seller following the Closing. The foregoing notwithstanding, the obtaining of\nany of the  following  Consents  shall not  constitute  a condition  to Seller's\nconsummation of the Transactions:\n\n         (a) Any Consent,  if the result of the failure to obtain same is either\na Purchase Price adjustment or the parties' entry into a cooperative arrangement\npursuant to the provisions of Sections 2.12(a) or 2.14 or a Management Agreement\npursuant to Section 2.15;\n\n         (b) Any Consent to the sale and assignment of a Transferred Asset, such\nas a Medicare or Medicaid  provider  agreement,  or the assumption of an Assumed\nLiability,  if such sale,  assignment or assumption may lawfully be made subject\nto a customary  condition  subsequent  that a Consent be  obtained  from a third\nparty  based  upon  determinations  of  such  third  party,   including  without\nlimitation  needs surveys or  evaluations  of Buyer,  to be completed  after the\nClosing, whether or not such third party indicates prior to the Closing that any\nsuch Consent is likely or not likely to be given.\n\n     Section  9.5  Absence  of  Injunctions.  There  shall  not be in  effect  a\ntemporary  restraining  order or a preliminary or permanent  injunction or other\norder,  decree  or  ruling  by  a  court  of  competent  jurisdiction  or  by  a\ngovernmental  agency which restrains or prohibits  Seller's  consummation of the\nTransactions,  or any threat by governmental authorities to exact any penalty or\nimpose any economic  detriment upon  HEALTHSOUTH or Seller if it consummates the\nTransactions  that would have a Material  Adverse  Effect  upon  HEALTHSOUTH  or\nSeller  following  the  Closing,  provided  that  the  parties  will  use  their\nreasonable  efforts to  litigate  against the entry of, or to obtain the lifting\nof, any such order,  injunction  or  potential  penalty or  imposition,  and the\nexistence of any such temporary  restraining  order,  preliminary  injunction or\npotential  penalty  or  imposition  shall  operate,  at  the  option  of  Buyer,\nHEALTHSOUTH  and Seller,  only to delay the Closing (and extend the  Termination\nDate)  until the  thirtieth  day  following  the  lifting  of any such  order or\ninjunction  or  threat,  except  that such  delay may not  extend  the  original\nTermination Date for more than nine months.  Notwithstanding  the foregoing,  in\nthe event  that any such  order or  injunction  affects  only a  portion  of the\nTransferred Assets, then, at the election of Buyer,  HEALTHSOUTH and Seller, the\nparties (x) shall negotiate an equitable  adjustment in the Purchase Price so as\nto consummate the  Transactions  with respect to Transferred  Assets and Assumed\nLiabilities  relating  to  Facilities  that are not  affected  by such  order or\ninjunction,  and (y) shall  either  agree upon  appropriate  amendments  to this\nAgreement to effect further  transfers of the remaining  Transferred  Assets and\nassumptions of the remaining Assumed  Liabilities when and if they are no longer\nsubject to such order or injunction  or, if no such  amendments are agreed upon,\nsuch remaining  Transferred Assets and Assumed Liabilities shall be deemed to be\nExcluded  Assets and Excluded  Liabilities  for all purposes of this  Agreement;\nprovided that if the parties are unable to agree upon an equitable adjustment of\nthe Purchase Price, or appropriate amendments to effect further transfers, prior\nto any  scheduled  Closing  Date,  then  such  disagreements  shall be  resolved\npursuant to the provisions of Section 2.14.\n\n\n                                      A-42\n\n\n\n\n\n     Section 9.6 Receipt of Other  Documents.  HEALTHSOUTH and Seller shall have\nreceived the following:\n\n         (a)  Certified  copies of the  resolutions  of  Buyer's  and each Buyer\nSubsidiary's  board  of  directors   respecting  this  Agreement,   the  Related\nAgreements and the Transactions;\n\n         (b)  Certified  copies of Buyer's and each Buyer  Subsidiary's  Charter\nDocuments,  together with a certificate  of Buyer's and each Buyer  Subsidiary's\ncorporate secretary that none of such documents have been amended;\n\n         (c) One or more  certificates  as to the  incumbency of each officer of\nBuyer who has signed the Agreement,  any Related Agreement,  or any certificate,\ndocument  or  instrument  delivered  pursuant  to the  Agreement  or any Related\nAgreement;\n\n         (d) Good standing  certificates for Buyer and for each Buyer Subsidiary\nfrom the Secretaries of State of their respective states of incorporation  dated\nas of a date not earlier than 30 business days prior to the Closing Date;\n\n         (e) Copies of all third party and  governmental  consents,  permits and\nauthorizations  that Buyer has received in connection  with the  Agreement,  the\nRelated Agreements and the Transactions; and\n\n         (f) A certificate  of Buyer executed on its behalf by an Executive Vice\nPresident  of Buyer  stating  that to the best of their  knowledge  and  belief,\nspecifying in reasonable detail their basis for same, after giving effect to the\nTransactions,  neither Buyer nor any of its Subsidiaries is insolvent or will be\nrendered insolvent by obligations incurred in connection  therewith,  or will be\nleft with  unreasonably  small capital with which to engage in their businesses,\nor will have incurred  obligations beyond their respective  abilities to perform\nthe same as and when due.\n\n\n                                   ARTICLE 10\n                                   TERMINATION\n\n     Section 10.1 Termination.  This Agreement and the transactions contemplated\nhereby may be terminated at any time prior to the Closing:\n\n          (a) By mutual consent of HEALTHSOUTH and Buyer; or\n\n          (b) By either Buyer or  HEALTHSOUTH  upon written  notice to the other\n     party, if (i) the Closing shall not have occurred by the later of March 31,\n     1998,  the fifth  business day following the  expiration of the HSR waiting\n     period,  or such later date as may be  provided  for in this  Agreement  or\n     agreed upon by the parties (the \"Termination Date\"); or (ii)(A) in the case\n     of termination by HEALTHSOUTH, the conditions set forth in Article 9 cannot\n     reasonably  be  met by the  Termination  Date,  and  (B)  in  the  case  of\n     termination  by  Buyer,  the  conditions  set  forth  in  Article  8 cannot\n     reasonably be met by the  Termination  Date,  unless in either of the cases\n     described in clauses (A) or (B), the failure of the condition is the result\n     of the material breach of this Agreement by the party seeking to terminate.\n\nEach party's right of  termination  hereunder is in addition to any other rights\nit may have hereunder or otherwise.\n\n\n                                      A-43\n\n\n\n\n\n     Section 10.2 Effect of  Termination.  In the event of  termination  of this\nAgreement as provided above,  there shall be no liability on the part of a party\nto  another  under  and  by  reason  of  this  Agreement  or  the   transactions\ncontemplated  hereby except as set forth in Sections 2.6(a),  5.5, 5.6, 10.3 and\n10.4 and  Articles  11 and 12 and except  for  fraudulent  acts by a party,  the\nremedies for which shall not be limited by the provisions of this Agreement. The\nforegoing  provisions shall not, however,  limit or restrict the availability of\nspecific  performance or other injunctive or equitable relief to the extent that\nspecific  performance  or such other  relief  would  otherwise be available to a\nparty hereunder.\n\n     Section 10.3 Wrongful  Termination by Buyer. If Buyer purports to terminate\nthis  Agreement  otherwise  than  pursuant  to Section  10.1,  or if Buyer shall\notherwise fail to consummate the  Transactions by the  Termination  Date for any\nreason other than a material breach by HEALTHSOUTH,  Seller or the  Subsidiaries\nof their  obligations  hereunder  or a  failure  of the  condition  set forth in\nSection 8.8 to be satisfied,  then in such event Buyer shall pay to Seller, upon\ndemand, a termination fee (the  \"Termination  Fee\") in the amount of $50,000,000\nin  immediately  available  funds.  Buyer  acknowledges  and  agrees  that  such\nTermination Fee represents the parties' best estimate of the out-of-pocket costs\nincurred by HEALTHSOUTH, Seller and the Subsidiaries and the value of management\ntime,  overhead,  opportunity  costs and other unallocated costs of HEALTHSOUTH,\nSeller and the Subsidiaries incurred by or on behalf of HEALTHSOUTH,  Seller and\nthe Subsidiaries in connection with this Agreement.  Buyer further  acknowledges\nthat the  provisions  for the payment of the  Termination  Fee contained in this\nSection 10.3 are an integral part of the  Transactions  and that,  without these\nprovisions,  HEALTHSOUTH  and Seller would not have entered into this Agreement.\nAccordingly, if the Termination Fee shall become due and payable and Buyer shall\nfail to pay such amount when due, and, in order to obtain such payment,  suit is\ncommenced which results in a judgment  against Buyer  therefor,  Buyer shall pay\nall reasonable costs and expenses (including reasonable attorneys' fees incurred\nby HEALTHSOUTH and Seller) in connection with such suit,  together with interest\ncomputed on the amounts  determined to be due pursuant to this Section (computed\nfrom the date upon which such  amounts  were due and  payable  pursuant  to this\nSection) and such costs  (computed  from the date incurred) at the prime rate of\ninterest announced from time to time by NationsBank, N.A. (South).\n\n     Section 10.4 Wrongful  Termination  by Seller.  If  HEALTHSOUTH  and Seller\npurport to terminate this Agreement  otherwise than pursuant to Section 10.1, or\nif HEALTHSOUTH and Seller shall otherwise fail to consummate the Transactions by\nthe Termination Date for any reason other than a material breach by Buyer of its\nobligations  hereunder or a failure by Buyer to obtain the consent  described in\nSection 8.8, then in such event  HEALTHSOUTH and Seller shall pay to Buyer, upon\ndemand,  a fee (the \"Topping  Fee\") in the amount of  $50,000,000 in immediately\navailable funds.  HEALTHSOUTH and Seller acknowledge and agree that such Topping\nFee represents the parties' best estimate of the out-of-pocket costs incurred by\nBuyer and the value of management time,  overhead,  opportunity  costs and other\nunallocated  costs of Buyer incurred by or on behalf of Buyer in connection with\nthis Agreement.  HEALTHSOUTH and Seller further  acknowledge that the provisions\nfor the  payment  of the  Topping  Fee  contained  in this  Section  10.4 are an\nintegral part of the  Transactions  and that,  without these  provisions,  Buyer\nwould not have  entered  into this  Agreement.  Accordingly,  if the Topping Fee\nshall become due and payable and  HEALTHSOUTH  and Seller shall fail to pay such\namount when due, and, in order to obtain such payment,  suit is commenced  which\nresults in a judgment against  HEALTHSOUTH and Seller therefor,  HEALTHSOUTH and\nSeller  shall  pay all  reasonable  costs  and  expenses  (including  reasonable\nattorneys' fees incurred by Buyer) in connection  with such suit,  together with\ninterest  computed on the amounts  determined to be due pursuant to this Section\n(computed from the date upon which such amounts were due and payable pursuant to\nthis Section) and such costs (computed from the date incurred) at the prime rate\nof interest  announced from time to time by NationsBank,  N.A.  (South).  If the\nTopping Fee becomes due and payable, HEALTHSOUTH and Seller will also return the\nExecution Fee with interest as provided in Section 2.6(a).\n\n\n                                      A-44\n\n\n\n\n\n                                   ARTICLE 11\n                     SURVIVAL AND REMEDIES; INDEMNIFICATION\n\n     Section 11.1 Survival. None of the representations and warranties of Buyer,\nHEALTHSOUTH and Seller set forth in this Agreement,  or in any writing  required\nto be delivered in connection with this Agreement, shall survive the Closing and\nthe  consummation  of the  Transactions.  The covenants and agreements of Buyer,\nHEALTHSOUTH and Seller set forth in this Agreement,  or in any writing  required\nto be delivered in connection with this Agreement, shall survive the Closing and\nthe consummation of the Transactions  only to the extent expressly  specified in\nthis Agreement.\n\n     Section 11.2 Exclusive  Remedy.  Absent fraud, if the Closing  occurs,  the\nsole  exclusive  remedy  for  damages  of a party  hereto  for any breach of the\ncovenants and agreements of the other party  contained in this Agreement and the\nRelated Agreements shall be the remedies contained in this Article 11.\n\n     Section 11.3 Indemnity by HEALTHSOUTH and Seller.\n\n          (a)  HEALTHSOUTH  and Seller,  jointly and severally,  shall indemnify\nBuyer and hold Buyer  harmless  from and  against  any and all loss,  liability,\ndamage  and  expense,   including  reasonable   attorneys'  fees  and  costs  of\ninvestigation,  litigation,  settlement  and judgment  (collectively  \"Losses\"),\nwhich  Buyer may  sustain or suffer or to which  Buyer may  become  subject as a\nresult of:\n\n                   (i) The nonperformance or breach of any covenant or agreement\n         made  or  undertaken  by  Seller  in  this  Agreement  or in a  Related\n         Agreement;\n\n                   (ii) The  existence  of,  or the  failure  of  Seller  or any\n         Subsidiary  to  discharge  or  perform as and when due,  any  liability\n         relating to the Excluded Assets; and\n\n                   (iii)  The  existence  of,  or the  failure  of Seller or any\n         Subsidiary  to pay,  discharge  or perform as and when due,  any of the\n         Excluded Liabilities  (including,  without limitation,  any Losses as a\n         result  of  or in  connection  with  the  failure  of  Seller  and  the\n         Subsidiaries  to comply with any Bulk Sales Laws referred to in Section\n         7.1).\n\n         (b) The indemnification  obligations of Seller provided above shall, in\naddition to the  qualifications  and  conditions  set forth in Sections 11.5 and\n11.6, be subject to the following qualifications: Buyer shall not be entitled to\nindemnity under Subsections  (a)(i)-(iii) above except for out-of-pocket  Losses\nactually  suffered or sustained by Buyer or to which Buyer may become subject as\na result of circumstances described in such Subsections  (a)(i)-(iii),  and such\nindemnity shall not include Losses in the nature of consequential  damages, lost\nprofits, diminution in value, damage to reputation or the like.\n\n     Section 11.4 Indemnity by Buyer.\n\n         (a) Buyer shall indemnify HEALTHSOUTH,  Seller and the Subsidiaries and\nhold HEALTHSOUTH,  Seller and the Subsidiaries harmless from and against any and\nall Losses which they may sustain or suffer or to which they may become  subject\nas a result of:\n\n                   (i) The nonperformance or breach of any covenant or agreement\n         made  or  undertaken  by  Buyer  in  this  Agreement  or  in a  Related\n         Agreement, including the indemnity obligations of Buyer in Sections 2.7\n         and 2.10;\n\n                   (ii)  The  existence  of,  or the  failure  of  Buyer to pay,\n         discharge or perform as and when due,  any of the Assumed  Liabilities;\n         and\n\n\n                                      A-45\n\n\n\n\n\n                   (iii) The ongoing operations of Buyer, the Transferred Assets\n         and the  Facilities  after the Closing Date;  provided,  however,  that\n         HEALTHSOUTH,  Seller  and the  Subsdiaries  shall  not be  entitled  to\n         indemnification   under  this  Section  11.4(a)(iii)  with  respect  to\n         liabilities  to third  parties  arising out of matters that  constitute\n         breaches of representations or warranties made by HEALTHSOUTH or Seller\n         herein.\n\n         (b) The  indemnification  obligations of Buyer provided above shall, in\naddition to the  qualifications  and  conditions  set forth in Sections 11.5 and\n11.6, be subject to the following qualifications:  If the Closing occurs, Seller\nand the  Subsidiaries  shall not be  entitled  to  indemnity  under  Subsections\n(a)(i)-(iii)  above  except  for  out-of-pocket   Losses  actually  suffered  or\nsustained  by  them  or  to  which  they  may  become  subject  as a  result  of\ncircumstances  described in such  Subsections  (a)(i)-(iii),  and such indemnity\nshall not include Losses in the nature of consequential  damages,  lost profits,\ndiminution in value, damage to reputation or the like.\n\n     Section 11.5 Further Qualifications Respecting  Indemnification.  The right\nof a party (an  \"Indemnitee\")  to  indemnity  hereunder  shall be subject to the\nfollowing additional qualifications:\n\n         (a) The  Indemnitee  shall  promptly  upon  its  discovery  of facts or\ncircumstances giving rise to a claim for  indemnification,  including receipt by\nit of notice of any demand,  assertion,  claim, action or proceeding,  judicial,\ngovernmental  or  otherwise,  by any third party (such third party actions being\ncollectively referred to herein as \"Third Party Claims\"), give notice thereof to\nthe indemnifying party (the \"Indemnitor\"),  such notice in any event to be given\nwithin 60 days from the date the  Indemnitee  obtains  actual  knowledge  of the\nbasis or alleged basis for the right of indemnity or such shorter  period as may\nbe necessary to avoid material prejudice to the Indemnitor;  provided,  however,\nthat the failure to give such notice shall not limit the  Indemnitee's  right to\nindemnification  except to the extent  that such  failure to timely  give notice\nresults in damages or irremediable prejudice to the Indemnitor; and\n\n         (b) In  computing  Losses,  such  amounts  shall be computed net of any\nrelated  recoveries to which the Indemnitee is entitled under insurance policies\nor other related  payments  received or receivable from third parties and net of\nany  tax  benefits  actually  received  by the  Indemnitee  or for  which  it is\neligible,  taking  into  account  the income  tax  treatment  of the  receipt of\nindemnification.\n\n     Section 11.6 Procedures  Respecting Third Party Claims. In providing notice\nto the Indemnitor of any Third Party Claim (the \"Claim Notice\"),  the Indemnitee\nshall  provide  the  Indemnitor  with a copy of such Third  Party Claim or other\ndocuments  received and shall  otherwise  make  available to the  Indemnitor all\nrelevant  information  material  to the  defense  of such  claim and  within the\nIndemnitee's possession. The Indemnitor shall have the right, by notice given to\nthe Indemnitee  within 15 days after the date of the Claim Notice, to assume and\ncontrol  the  defense of the Third Party Claim that is the subject of such Claim\nNotice,  including the employment of counsel  selected by the  Indemnitor  after\nconsultation with the Indemnitee,  and the Indemnitor shall pay all expenses of,\nand the Indemnitee shall cooperate fully with the Indemnitor in connection with,\nthe  conduct  of such  defense.  The  Indemnitee  shall have the right to employ\nseparate  counsel in any such proceeding and to participate in (but not control)\nthe defense of such Third Party Claim, but the fees and expenses of such counsel\nshall be borne by the Indemnitee unless the Indemnitor shall agree otherwise. If\nthe Indemnitor  shall have failed to assume the defense of any Third Party Claim\nin accordance  with the provisions of this Section,  then the  Indemnitee  shall\nhave the absolute  right to control the defense of such Third Party Claim,  and,\nif and  when it is  finally  determined  that  the  Indemnitee  is  entitled  to\nindemnification  from  the  Indemnitor  hereunder,  the  fees  and  expenses  of\nIndemnitee's  counsel  shall  be  borne  by the  Indemnitor,  provided  that the\nIndemnitor  shall  be  entitled,  at its  expense,  to  participate  in (but not\ncontrol)  such  defense.  The  Indemnitor  shall  have the  right to  settle  or\ncompromise  any such Third Party Claim for which it is  providing  indemnity  so\nlong as such  settlement  does not  impose  any  obligations  on the  Indemnitee\n(except with respect to providing  releases of the third party).  The Indemnitor\nshall not be liable for any\n\n\n                                      A-46\n\n\n\n\n\nsettlement  effected by the Indemnitee  without the  Indemnitor's  consent.  The\nIndemnitor  may  assume and  control,  or bear the  costs,  of any such  defense\nsubject to its  reservation  of a right to  contest  the  Indemnitee's  right to\nindemnification hereunder,  provided that it gives the Indemnitee notice of such\nreservation within 15 days of the date of the Claim Notice.\n\n\n                                   ARTICLE 12\n                               GENERAL PROVISIONS\n\n     Section 12.1 Notices. All notices, requests, demands, waivers, consents and\nother communications hereunder shall be in writing, shall be delivered either in\nperson,  by telegraphic,  facsimile or other electronic  means, by overnight air\ncourier  or by mail,  and shall be  deemed  to have been duly  given and to have\nbecome  effective  (a) upon receipt if  delivered  in person or by  telegraphic,\nfacsimile or other  electronic  means  calculated  to arrive on any business day\nprior to 6:00 p.m.  local time at the address of the  addressee,  or on the next\nsucceeding  business day if delivered on a  non-business  day or after 6:00 p.m.\nlocal time,  (b) one business day after having been  delivered to an air courier\nfor overnight  delivery or (c) five business days after having been deposited in\nthe mails as certified or registered mail,  return receipt  requested,  all fees\nprepaid,  directed to the parties or their permitted  assignees at the following\naddresses  (or at such  other  address  as shall be given in  writing by a party\nhereto):\n\n         If to HEALTHSOUTH or Seller, addressed to:\n\n                  HEALTHSOUTH Corporation\n                  One HealthSouth Parkway\n                  Birmingham, Alabama 35243\n                  Attention:  Michael D. Martin\n                  Facsimile:  (205) 969-4712\n\n         with a copy to:\n\n                  William W. Horton, Esq.\n                  HEALTHSOUTH Corporation\n                  One HealthSouth Parkway\n                  Birmingham, Alabama 35243\n                  Facsimile:  (205) 969-4730\n\n         If to Buyer, addressed to:\n\n                  Integrated Health Services, Inc.\n                  10065 Red Run Boulevard\n                  Owings Mills, Maryland  21117\n                  Attention:        Taylor Pickett (Facsimile:_______)\n                                    Marshall Elkins (Facsimile:_______)\n                                    Beth Kelly (Facimile:  (410)902-2110\n\n         with a copy to:\n\n                  Michael S. Blass, Esq.\n                  Blass &amp; Driggs\n                  461 Fifth Avenue\n                  New York, New York  10017\n\n\n                                      A-47\n\n\n\n\n\n                  Facsimile:  (212) 447-5428\n\n\n     Section 12.2 Successors and Assigns.  The rights under this Agreement shall\nnot be assignable or transferable nor the duties delegable by either HEALTHSOUTH\nand Seller,  on the one hand,  or Buyer,  on the other  hand,  without the prior\nwritten  consent of the other,  except as provided in Section 2.16;  and nothing\ncontained in this Agreement,  express or implied, is intended to confer upon any\nperson  or  entity,   other  than  the  parties   hereto  and  their   permitted\nsuccessors-in-interest  and permitted assignees, any rights or remedies under or\nby reason of this Agreement unless so stated to the contrary.\n\n     Section 12.3  Counterparts.  This  Agreement may be executed in one or more\ncounterparts,  each of  which  shall be  deemed  an  original,  but all of which\ntogether shall constitute one and the same instrument.\n\n     Section  12.4  Captions and  Paragraph  Headings.  Captions  and  paragraph\nheadings  used  herein  are  for  convenience  only  and  are not a part of this\nAgreement and shall not be used in construing it.\n\n     Section 12.5 Entirety of Agreement;  Amendments.  This Agreement (including\nthe  Schedules  and  Exhibits  hereto),  the  Related  Agreements  and the other\ndocuments and instruments  specifically  provided for in this Agreement  contain\nthe entire  understanding  between the parties  concerning the subject matter of\nthis Agreement and such other documents and instruments and, except as expressly\nprovided for herein, supersede all prior understandings and agreements,  whether\noral or written,  between  them with  respect to the subject  matter  hereof and\nthereof. There are no representations,  warranties, agreements,  arrangements or\nunderstandings,  oral or written,  between the  parties  hereto  relating to the\nsubject matter of this Agreement and such other documents and instruments  which\nare not fully  expressed  herein or therein.  This  Agreement  may be amended or\nmodified only by an agreement in writing  signed by each of the parties  hereto.\nAll Exhibits and  Schedules  attached to or  delivered in  connection  with this\nAgreement are integral parts of this Agreement as if fully set forth herein, and\nall statements  appearing  therein  relating to  representations  and warranties\nshall be deemed  disclosed for all purposes and not only in connection  with the\nspecific provision in which they are explicitly referenced.\n\n     Section 12.6 Construction.  This Agreement and any documents or instruments\ndelivered  pursuant hereto shall be construed  without regard to the identity of\nthe  person who  drafted  the  various  provisions  of the same.  Each and every\nprovision of this Agreement and such other  documents and  instruments  shall be\nconstrued  as though the  parties  participated  equally in the  drafting of the\nsame.  Consequently,  the  parties  acknowledge  and  agree  that  any  rule  of\nconstruction that a document is to be construed against the drafting party shall\nnot be  applicable  either  to  this  Agreement  or  such  other  documents  and\ninstruments.\n\n     Section 12.7 Waiver.  The failure of a party to insist,  in any one or more\ninstances,  on performance of any of the terms, covenants and conditions of this\nAgreement  shall not be  construed as a waiver or  relinquishment  of any rights\ngranted  hereunder or of the future  performance  of any such term,  covenant or\ncondition,  but the  obligations  of the  parties  with  respect  thereto  shall\ncontinue in full force and effect.  No waiver of any  provision  or condition of\nthis  Agreement by a party shall be valid unless in writing signed by such party\nor  operational  by the  terms of this  Agreement.  A waiver by one party of the\nperformance of any covenant, condition,  representation or warranty of the other\nparty shall not invalidate this Agreement, nor shall such waiver be construed as\na waiver of any other covenant, condition,  representation or warranty. A waiver\nby any party of the time for performing any act shall not constitute a waiver of\nthe time for  performing  any other act or the time for  performing an identical\nact required to be performed at a later time.\n\n\n                                      A-48\n\n\n\n\n\n     Section  12.8  Governing  Law.  This  Agreement  shall be  governed  in all\nrespects,  including  validity,  interpretation  and effect,  by the laws of the\nState of Delaware, without regard to the principles of conflicts of law thereof,\nprovided  that the validity,  interpretation  and effect of any  instruments  by\nwhich real  property is conveyed at the Closing shall be governed by the laws of\nthe state in which such real property is located.\n\n     Section  12.9  Severability.  Whenever  possible,  each  provision  of this\nAgreement  shall be  interpreted  in such  manner  as to be valid,  binding  and\nenforceable under applicable law, but if any provision of this Agreement is held\nto be invalid,  void (or voidable) or  unenforceable  under applicable law, such\nprovision shall be ineffective  only to the extent held to be invalid,  void (or\nvoidable) or unenforceable, without affecting the remainder of such provision or\nthe remaining provisions of this Agreement.\n\n     Section 12.10 Consents Not Unreasonably  Withheld.  Wherever the consent or\napproval of any party is required under this Agreement, such consent or approval\nshall not be  unreasonably  withheld,  unless such  consent or approval is to be\ngiven by such  party  at the sole or  absolute  discretion  of such  party or is\notherwise similarly qualified.\n\n\n\n\n                                      A-49\n\n\n\n\n\n     IN WITNESS  WHEREOF,  the parties have duly executed this  Agreement on the\ndate first above written.\n\n                                                HEALTHSOUTH CORPORATION\n\n\n                                                By  \/s\/MICHAEL D. MARTIN\n                                                  ------------------------------\n                                                        Michael D. Martin\n                                                    Executive Vice President,\n                                                     Chief Financial Officer\n                                                          and Treasurer\n\n\n\n                                                HORIZON\/CMS HEALTHCARE\n                                                CORPORATION\n\n\n                                                By  \/s\/SCOT SAUDER\n                                                  ------------------------------\n                                                       Scot Sauder\n                                                     Vice President\n\n\n                                                INTEGRATED HEALTH SERVICES, INC.\n\n\n\n                                                By  Taylor Pickett\n                                                  ------------------------------\n                                                   Its  Executive Vice President\n                                                      --------------------------\n\n\n                                      A-50\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-43534","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\/43534","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=43534"}],"wp:term":[{"taxonomy":"corporate_contracts_companies","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_companies?post=43534"},{"taxonomy":"corporate_contracts_industries","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_industries?post=43534"},{"taxonomy":"corporate_contracts_types","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_types?post=43534"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}