{"id":43700,"date":"2015-09-17T11:25:58","date_gmt":"2015-09-17T16:25:58","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-legal\/contracts\/uncategorized\/stock-purchase-agreement-novacare-inc-nc-resources-inc-and.html"},"modified":"2015-09-17T11:25:58","modified_gmt":"2015-09-17T16:25:58","slug":"stock-purchase-agreement-novacare-inc-nc-resources-inc-and","status":"publish","type":"corporate_contracts","link":"https:\/\/corporate.findlaw.com\/contracts\/planning\/stock-purchase-agreement-novacare-inc-nc-resources-inc-and.html","title":{"rendered":"Stock Purchase Agreement &#8211; NovaCare Inc., NC Resources Inc. and HealthSouth Corp."},"content":{"rendered":"<pre>\n                            STOCK PURCHASE AGREEMENT\n\n\n\n\n                                    ******\n\n\n\n                                NOVACARE, INC.,\n\n                               NC RESOURCES, INC. \n\n\n\n                                      AND\n\n\n\n                            HEALTHSOUTH Corporation\n\n\n\n\n                            Dated: February 3, 1995\n\n\n\n                            STOCK PURCHASE AGREEMENT\n\n                               Table of Contents\n\n\n\n                                   ARTICLE 1\n                                  DEFINITIONS\n\n...........................................................................  1\nSection 1.1  Certain Defined Terms.........................................  1\nSection 1.2  Index of Other Defined Terms..................................  3\n\n                                   ARTICLE 2\n                               BASIC TRANSACTIONS\n\n...........................................................................  4\nSection 2.1  Conveyance of RSC Shares......................................  4\nSection 2.2  Purchase Price; Post Closing Adjustment.......................  4\nSection 2.3  Excluded Assets...............................................  5\nSection 2.4  Employee Matters..............................................  6\nSection 2.5  Use of Names and Manuals......................................  6\nSection 2.6  Procedure for Consents or Default.............................  7\nSection 2.7  Closing.......................................................  7\nSection 2.8  Resolution of Cooperative Arrangements........................  8\nSection 2.9  Guaranty by NovaCare..........................................  9\n\n                                   ARTICLE 3\n                    REPRESENTATIONS AND WARRANTIES OF SELLER\n\n...........................................................................  9\nSection 3.1  Organization and Corporate Power..............................  9\nSection 3.2  RSC and Subsidiaries.......................................... 10\nSection 3.3  Authority Relative to this Agreement.......................... 10\nSection 3.4  Absence of Breach............................................. 10\nSection 3.5  Private Party Consents........................................ 11\nSection 3.6  Governmental Consents......................................... 11\nSection 3.7  Brokers....................................................... 11\nSection 3.8  Title to Personal Property.................................... 11\nSection 3.9  Contracts and Leases.......................................... 12\nSection 3.10  Licenses..................................................... 12\nSection 3.11  Employee Relations........................................... 12\nSection 3.12  Employee Plans............................................... 12\nSection 3.13  Litigation................................................... 13\nSection 3.14  Inventory.................................................... 13\nSection 3.15  Hazardous Substances......................................... 13\nSection 3.16  Financial Information and Related Matters.................... 13\nSection 3.17  Changes Since Balance Sheet.................................. 15\nSection 3.18  Compliance with Laws......................................... 15\nSection 3.19  Lists of Other Data.......................................... 16\n\n                                      (i)\n\n                                   ARTICLE 4\n                    REPRESENTATIONS AND WARRANTIES OF BUYER\n\n........................................................................... 16\nSection 4.1  Organization and Corporate Power.............................. 16\nSection 4.2  Authority Relative to this Agreement.......................... 16\nSection 4.3  Absence of Breach............................................. 17\nSection 4.4  Private Party Consents........................................ 17\nSection 4.5  Governmental Consents......................................... 17\nSection 4.6  Brokers....................................................... 17\nSection 4.7  Qualified for Licenses........................................ 17\nSection 4.8  Financial Ability to Perform.................................. 17\nSection 4.9  No Assurance.................................................. 18\nSection 4.10  Disposal of Assets........................................... 18\n\n                                   ARTICLE 5\n                            COVENANTS OF EACH PARTY\n\n........................................................................... 18\nSection 5.1  Efforts to Consummate Transactions............................ 18\nSection 5.2  Cooperation................................................... 18\nSection 5.3  Further Assistance............................................ 19\nSection 5.4  Cooperation Respecting Proceedings............................ 19\nSection 5.5  Expenses...................................................... 19\nSection 5.6  Announcements; Confidentiality................................ 20\nSection 5.7  Cost Reports.................................................. 21\n\n                                   ARTICLE 6\n                         ADDITIONAL COVENANTS OF SELLER\n\n........................................................................... 22\nSection 6.1  Conduct Pending Closing....................................... 22\nSection 6.2  Access and Information; Environmental Survey; Remediation or\n             Adjustment.................................................... 23\nSection 6.3  Updating...................................................... 24\nSection 6.4  No Solicitation............................................... 24\nSection 6.5  Filing of Cost Reports........................................ 24\n\n                                   ARTICLE 7\n                         ADDITIONAL COVENANTS OF BUYER\n\n........................................................................... 24\nSection 7.1  Waiver of Bulk Sales Law Compliance........................... 24\nSection 7.2  Cost Reports and Audit Contests............................... 24\nSection 7.3  Letters of Credit............................................. 25\n\n\n\n                                      (ii)\n\n                                   ARTICLE 8\n                         BUYER'S CONDITIONS TO CLOSING\n\n........................................................................... 25\nSection 8.1  Performance of Agreement...................................... 25\nSection 8.2  Accuracy of Representations and Warranties.................... 25\nSection 8.3  Officer's Certificate......................................... 25\nSection 8.4  Consents...................................................... 25\nSection 8.5  Absence of Injunctions........................................ 25\nSection 8.6  Opinion of Counsel............................................ 26\nSection 8.7  Receipt of Other Documents.................................... 26\nSection 8.8  Certificates of Need and Consents............................. 26\n\n                                   ARTICLE 9\n                         SELLER'S CONDITIONS TO CLOSING\n\n........................................................................... 27\nSection 9.1  Performance of Agreement...................................... 27\nSection 9.2  Accuracy of Representations and Warranties.................... 27\nSection 9.3  Officer's Certificate......................................... 27\nSection 9.4  Consents...................................................... 27\nSection 9.5  Absence of Injunctions........................................ 28\nSection 9.6  Opinion of Counsel............................................ 28\nSection 9.7  Receipt of Other Documents.................................... 28\n\n                                   ARTICLE 10\n                                  TERMINATION\n\n........................................................................... 29\nSection  10.1  Termination................................................. 29\nSection  10.2  Effect of Termination....................................... 29\n\n                                   ARTICLE 11\n                     SURVIVAL AND REMEDIES; INDEMNIFICATION\n\n........................................................................... 29\nSection 11.1  Survival..................................................... 29\nSection 11.2  Exclusive Remedy............................................. 29\nSection 11.3  Indemnity by Seller.......................................... 30\nSection 11.4  Indemnity by Buyer........................................... 30\nSection 11.5  Further Qualifications Respecting Indemnification............ 31\nSection 11.6  Procedures Respecting Third Party Claims..................... 32\n\n\n                                     (iii)\n\n                                   ARTICLE 12\n                               GENERAL PROVISIONS\n\n........................................................................... 32\nSection 12.1  Notices...................................................... 32\nSection 12.2  Attorneys' Fees.............................................. 34\nSection 12.3  Successors and Assigns....................................... 34\nSection 12.4  Counterparts................................................. 34\nSection 12.5  Captions and Paragraph Headings.............................. 34\nSection 12.6  Entirety of Agreement; Amendments............................ 34\nSection 12.7  Construction................................................. 34\nSection 12.8  Waiver....................................................... 35\nSection 12.9  Governing Law................................................ 35\nSection 12.10  Severability................................................ 35\nSection 12.11  Consents Not Unreasonably Withheld.......................... 35\nSection 12.12  Time Is of the Essence...................................... 35\n\n\n                                      (iv)\n\n                               LIST OF SCHEDULES\n\n\n                  A-1               Subsidiaries and Their\n                                    Respective States of Incorporation and\n                                    Qualification\n\n                  A-2               Facilities\n\n                  1.1-1             Leased Real Property\n\n                  1.1-2             Other Contracts\n\n                  1.1-3             Owned Real Property\n\n                  1.1-5             Transferred Business Names\n\n                  2.3               Excluded Assets\n\n                  2.4               Employee Pension Benefit Plans\n\n                  3.7               Brokers\n\n                  3.13              Litigation\n\n                  3.16(a)           EBITDA Statements\n\n                  3.16(b)           Balance Sheet\n\n                  3.19(a)           Depreciation Schedule\n\n                  3.19(b)           Personal Property Leases\n\n                  3.19(c)           Insurance\n\n                  3.19(d)           Employee Benefit Arrangements\n\n                  3.19(f)           Material Licenses\n\n                  7.3               Bonds, Letters of Credit, etc.\n\n\n                                      (v)\n\n                            STOCK PURCHASE AGREEMENT\n\n\n         STOCK  PURCHASE  AGREEMENT,  made and entered  into as of the 3d day of\nFebruary,   1995,  by  and  among   NOVACARE,   INC.,  a  Delaware   corporation\n(\"NovaCare\"),  NC  RESOURCES,  INC.,  a  Delaware  corporation  (\"Seller\"),  and\nHEALTHSOUTH Corporation, a Delaware corporation (\"Buyer\").\n\n\n                             W I T N E S S E T H :\n\n\n         WHEREAS, Seller owns all of the issued and outstanding capital stock of\nRehab Systems Company, a Delaware corporation (\"RSC\");\n\n         WHEREAS,  through  subsidiary  corporations  identified on Schedule A-1\nhereto (each, a \"Subsidiary\", and collectively, the \"Subsidiaries\"), RSC engages\nin the business of delivering  rehabilitative health care services to the public\nthrough 11  rehabilitation  hospitals,  five community  re-entry  centers,  five\nsub-acute  units  and two  satellite  outpatient  facilities,  all of which  are\nidentified on Schedule A-2 (the \"Facilities\");\n\n         WHEREAS,  Buyer desires to purchase from Seller,  and Seller desires to\nsell to Buyer, all of the issued and outstanding  shares of capital stock of RSC\n(the  \"RSC  Shares\"),   such  transaction   being  referred  to  herein  as  the\n\"Transaction\"; and\n\n         WHEREAS,  NovaCare is the  ultimate  parent of Seller and is willing to\nguarantee the obligations of Seller hereunder.\n\n         NOW,  THEREFORE,  in  consideration  of the  premises  and  the  mutual\npromises  and  covenants  contained  herein,  and for  other  good and  valuable\nconsideration,  the receipt and sufficiency of which are hereby acknowledge, the\nparties hereto to hereby agree as follows:\n\n\n                                   ARTICLE 1\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                  \"Code\"  shall  mean the  Internal  Revenue  Code of  1986,  as\namended.\n\n                  \"Cost Report\" shall mean the cost report required to be filed,\nas of the end of a provider  cost year or for any other  required  period,  with\ncost-based Payors with respect to cost reimbursement.\n\n                  \"Cost  Report  Settlements\"  shall mean all  right,  title and\ninterest of RSC or any Subsidiary in assets resulting from the finalization with\nPayors of amounts due with respect to Cost Reports.\n\n                  \"Equipment\"   means  fixed  machinery  and  equipment,   other\nfixtures and  fittings,  movable  plant,  machinery,  equipment  and  furniture,\ntrucks, tractors, trailers, and other vehicles, tools and other similar items of\ntangible  personal  property (i) that are not consumed,  disposed of or held for\nsale or as Inventory in the ordinary course of business, and (ii) that are owned\nor leased by or consigned to RSC or any Subsidiary as of the closing.\n\n                  \"Inventory\" means all of RSC's or any Subsidiary right,  title\nand interest in and to inventories  and supplies,  drugs,  food,  janitorial and\noffice  supplies,  maintenance  and shop  supplies,  and other  similar items of\ntangible personal property intended to be consumed,  disposed of or sold, in the\nordinary  course  of  business  that  are  owned by or  consigned  to RSC or any\nSubsidiary as of the Closing.\n\n                  \"Knowledge\" of a party shall mean the collective  knowledge of\nthe  persons  who  serve as of the date of this  Agreement  as the duly  elected\nofficers of such party.\n\n                  \"Laws\"   shall   mean  all   statutes,   rules,   regulations,\nordinances,  orders, codes, permits, licenses and agreements with or of federal,\nstate, local and foreign governmental and regulatory  authorities and any order,\nwrit,  injunction  or decree  issued by any court,  arbitrator  or  governmental\nagency or in connection with any judicial,  administrative or other non-judicial\nproceeding (including, without limitation, arbitration or reference).\n\n                  \"Leased Real  Property\"  shall mean the land,  Facilities  and\nreal property  improvements  (whether  owned or leased) which are held by RSC or\nany Subsidiary  pursuant to the Real Property Leases and which are identified in\nSchedule  1.1-1,  together  with all  construction  work-in-progress  in respect\nthereof and rights, privileges and easements appurtenant thereto.\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                  \"Other  Contracts\"  shall mean all contracts and agreements to\nwhich  RSC or any  Subsidiary  is a party as of the  Closing,  other  than  Real\nProperty  Leases,  including,  but not limited to the  contracts  identified  on\nSchedule  1.1-2,  which  contains a list of the  following  categories  of Other\nContracts:  constructions contracts relating to construction work-in-progress at\na  Facility;   equipment  leases  (whether  operating  or  capitalized  leases),\ninstallment  purchase  contracts  where  the  annualized  lease  or  installment\npayments exceed $25,000;  contracts or arrangements binding on a Subsidiary or a\nFacility  which  contain any covenant not to compete or otherwise  significantly\nrestrict  the nature of the  business  activities  in which such  Subsidiary  or\nFacility may engage;  employment contracts,  if any, between RSC, any Subsidiary\nor any Facility and any person providing services for such Facility;  collective\nbargaining  agreements,  if any;  Medicare  and  Medicaid  provider  numbers and\nprovider  agreements,  and provider  agreements with other Payors; and any other\ncontracts  pursuant to which RSC or any Subsidiary paid or received over $25,000\nduring its last fiscal year;  provided,  however,  that Schedule  1.1-2 need not\nlist an Other Contract if all material  obligations of RSC and\/or the Subsidiary\nthereunder have been, or prior to the Closing will be,  completed or RSC, or RSC\nor the  Subsidiary is entitled,  or has or by the Closing will have  exercised a\nright, to terminate the contract without penalty on 90 days' notice or less.\n\n                  \"Owned Real  Property\"  shall mean the real property  owned in\nfee by RSC or any Subsidiary that is identified on Schedule 1.1-3, together with\nthe Facilities  located thereon,  construction  work-in-progress,  and all other\nbuildings and  improvements  thereon,  and all rights,  privileges,  permits and\neasements appurtenant thereto.\n\n                  \"Payor\" shall mean Medicare,  Medicaid,  CHAMPUS and Medically\nIndigent Assistance  programs,  Blue Cross, Blue Shield or any other third party\npayor (including an insurance  company),  or any health care provider (such as a\nhealth maintenance  organization,  preferred provider organization,  peer review\norganization, or any other managed care program).\n\n                  \"Prepayments\"   shall  mean  advance  payments,   prepayments,\nprepaid  expenses,  deposits and the like made by RSC or any  Subsidiary  in the\nordinary course of business prior to the Closing,  which exist as of the Closing\nand with respect to which RSC or any  Subsidiary  will receive the benefit after\nthe  Closing,  and other  items  recorded  as  prepaid  expenses  by RSC and the\nSubsidiaries.\n\n                  \"Real Property Leases\" shall mean all leases pursuant to which\nRSC or any Subsidiary holds a leasehold interest in land, Facilities and\/or real\nproperty improvements, all of which are identified on Schedule 1.1-4.\n\n                  \"Receivables\"  shall  mean all of  RSC's  or any  Subsidiary's\nright,  title and  interest  as of the  Closing  in and to  accounts  receivable\nrecorded  by RSC or  such  Subsidiary  as an  account  receivable  from  Payors,\npatients  and other third  parties,  including,  but not limited to, Cost Report\nSettlements.\n\n                  \"Taxes\"  shall mean (i) all federal,  state,  county and local\nsales, use, property,  payroll,  recordation and transfer taxes, (ii) all 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 or patient days of a\nFacility  for a period  ending on,  before or  including  the  Closing  Date (as\ndefined  in  Section  2.7) 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.\n\n                  \"Transferred  Business  Names\"  means  all  right,  title  and\ninterest  of RSC or any  Subsidiary  in and to the  business  names set forth in\nSchedule 1.1-5.\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      Balance Sheet                                       3.16(b)\n      Buyer                                              Preamble\n      Charter Documents                                   3.4\n      Claim Notice                                       11.6\n      Closing                                             2.7\n      Closing Balance Sheet                               2.2(b)\n      Closing Date                                        2.7\n      Consultant                                          6.2(b)\n      Current Cost Reports                                5.7(a)\n      EBITDA                                              3.16(a)\n      EBITDA Statements                                   3.16(a)\n      Employee Benefit Arrangements                       3.18(d)\n      Environmental Regulations                           3.15(a)\n      Environmental Survey                                6.2(b)\n      ERISA                                               2.4\n      Excluded Assets                                     2.3\n      Facilities                                         Recitals\n      Financial Schedule                                  3.16\n      Hazardous Materials                                 3.15\n      HSR Act                                             3.4\n      Indemnitee                                         11.5\n      Indemnitor                                         11.5(a)\n      Losses                                             11.3(a)\n      Manuals                                             2.5(b)\n      Material Adverse Effect                             3.4\n      NovaCare                                           Preamble\n      Panel                                               2.8\n      Pension Plans                                       2.14\n      Permitted Encumbrances                              3.8\n      Post-Closing Adjustment Amount                      2.2(b)\n      Prior Cost Reports                                  5.7(b)\n      Purchase Price                                      2.2(a)\n      Related Agreements                                  3.4\n      Seller                                             Preamble\n      Subsidiaries                                       Recitals\n      Termination Date                                   10.1(b)\n      Third Party Claims                                 11.5(a)\n      Transaction                                        Recitals\n      Working Capital                                    2.2(b)\n\n\n                                   ARTICLE 2\n                               BASIC TRANSACTIONS\n\n         Section 2.1 Conveyance of RSC Shares.  On the Closing Date, Seller will\nconvey,  transfer and assign to Buyer all the Seller's right, title and interest\nin and to the RSC  Shares,  free and clear of all  liens,  claims,  charges  and\nencumbrances of any kind whatsoever.\n\n         Section 2.2 Purchase Price;  Post-Closing Adjustment.  (a) The purchase\nprice (the \"Purchase Price\") in the aggregate for all of the RSC Shares shall be\n$215,000,000,  as adjusted  pursuant to this Section  2.2,  which price is based\nupon the retention by RSC and the  Subsidiaries  of all assets which they own or\nlease immediately prior to the Closing,  including,  but not limited to, working\ncapital and Receivables, subject only to Section 2.3 below.\n\n                  (b) Within 30 days after the Closing,  Seller shall deliver to\nBuyer a balance  sheet (the  \"Closing  Balance  Sheet\") of RSC as of the Closing\nDate, which shall be prepared in accordance with generally  accepted  accounting\nprinciples,  in a manner  consistent with the methods and principles used by RSC\nin preparing its financial statements on the date of this Agreement. Buyer shall\nprovide Seller with access to the books and records of RSC and the  Subsidiaries\nand the  cooperation  of their  employees in connection  with such  preparation.\nSeller  shall also at that time  prepare  and  deliver a  statement  computing a\n\"Post-Closing Adjustment Amount\" equal to the difference between $26,573,000 and\nthe Working  Capital of RSC as  reflected  on the  Closing  Balance  Sheet.  For\npurposes  of this  Section  2.2,  \"Working  Capital\"  shall  mean the sum of the\nfollowing  categories on the Closing Balance Sheet:  (i) Cash, (ii) Net Patients\nAccounts  Receivable,   (iii)  Due  (To)  From  Medicare,  (iv)  Other  Accounts\nReceivable,  and (v) Other  Current  Assets,  less (i)  Accounts  Payable,  (ii)\nAccrued Expenses and (iii) Other Current  Liabilities.  The following categories\nshall not be included in the computation of Working Capital: (i) Current Portion\nof Capital Leases and (ii) Current Portion of Long-Term Debt.\n\n                      RSC and the  Subsidiaries  have  received  cash  payments,\nthrough the Subsidiary Cost Reports by interim or tentative cost report payments\nand  otherwise,  based on Home Office Cost  Statements  of NovaCare for 1994 and\nprior years. These amounts have historically been included as a liability in the\ncategory Due (To) From Medicare.  On the Closing  Balance  Sheet,  these amounts\nwill be reclassified to a liability account entitled NovaCare,  Inc. Home Office\nLiability.\n\n                      Cash  held  in  trust  accounts  or  other  funds  to  pay\nindebtedness pursuant to the Trust Indentures and Loan Agreements as amended (i)\nby and between Mercer  County,  West Virginia and American  Health  Enterprises,\nLtd.,  and (ii) by and between Wood  County,  West  Virginia  and West  Virginia\nRehabilitation  Services,  Inc.  will be  included in the  category  Cash on the\nClosing Balance Sheet.\n\n                  (c) Buyer  shall  have  a period  of 15 days  from the date of\ndelivery  to it of the Closing  Balance  Sheet and the  Post-Closing  Adjustment\nAmount statement to object to the  determination of the Post-Closing  Adjustment\nAmount,  computed as aforesaid.  In the event of an objection from Buyer,  Price\nWaterhouse, LLP and a public accounting firm chosen by Buyer shall have a period\nof 15 days in which to  review  the  Closing  Balance  Sheet  and the  statement\nshowing  Seller's  computation of the  Post-Closing  Adjustment  Amount.  If the\ndispute is not resolved in the said 15-day period to the  satisfaction  of Buyer\nand Seller,  such accounting firms shall have an additional period of 15 days to\nselect a third  accounting firm acceptable to both of them to review the Closing\nBalance  Sheet,  and  to  make  the  final  determination  of  the  Post-Closing\nAdjustment Amount,  which  determination,  absent fraud, shall be conclusive and\nbinding.  If Price Waterhouse and the second accounting firm are unable to agree\nupon a third accounting firm to make the final determination, such an accounting\nfirm  shall  be  appointed  in  accordance  with the  then-current  rules of the\nAmerican Arbitration Association.  The fees and expenses of the third accounting\nfirm shall be shared equally by Buyer and Seller.\n\n                  (d) Upon the  determination  of  the  Post-Closing  Adjustment\nAmount as provided for in the preceding two paragraphs, the Purchase Price to be\npaid by Buyer  hereunder  shall be  adjusted  by the amount of the  Post-Closing\nAdjustment Amount. Such adjustment shall be paid by the appropriate party within\nten days after final determination of the Post-Closing Adjustment Amount.\n\n         Section 2.3 Excluded Assets.  Notwithstanding any contrary provision of\nthis Agreement,  the parties  acknowledge and agree that the following described\nassets  of RSC and the  Subsidiaries  and the  assets  listed  on  Schedule  2.3\n(collectively,  \"Excluded  Assets\")  are  not  intended  to be  included  in the\nTransaction and that Seller,  RSC and the  Subsidiaries may take such actions as\nare reasonably  necessary to cause RSC and the Subsidiaries to sign all of their\nrespective  right,  title and interest in and to such Excluded  Assets to Seller\n(or a person or entity  designated by Seller)  immediately prior to the Closing:\nall proprietary materials, documents,  information, media, methods and processes\nowned by  Seller,  and any and all  rights to use the same,  including,  but not\nlimited to, all intangible  assets of an  intellectual  property  nature such as\ntrademarks, service marks and trade names (whether or not registered) other than\nthe  Transferred  Business Names,  proprietary  computer  software,  proprietary\nprocedures  and manuals,  promotional  and marketing  materials  (including  all\nmarketing and computer  hardware and software);  provided,  however,  that Buyer\nshall have the rights set forth in Section 2.5.\n\n         Section 2.4 Employee Matters.  Schedule 2.4 lists all \"employee pension\nbenefit  plans\"  (\"Pension  Plans\")  within the  meaning of Section  3(2) of the\nEmployee Retirement Income Security Act of 1974, as amended (\"ERISA\"),  in which\nemployees (as defined in Subsection (b) below) directly  employed to work at the\nFacilities participate. Neither Seller nor RSC nor any Subsidiary is a party to,\nnor do any such employees  participate in, any \"multiemployer  plans\" within the\nmeaning of Section 3(37) of ERISA. Seller shall, or shall cause the Subsidiaries\nto, (i)  terminate as of the Closing Date the active  participation  of all such\nemployees  in the Pension  Plans,  (ii) cause the  Pension  Plans to make timely\nappropriate  distributions,  to  the  extent  required,  to  such  employees  in\naccordance  with,  and to the extent  permitted by, the terms and  conditions of\nsuch Pension Plans,  and (iii) in connection  with the termination of the active\nparticipation  of all such  employees in such Pension Plans,  comply,  and cause\neach Pension Plan to comply,  with all  applicable  Laws.  Prior to the Closing,\nSeller shall have delivered to Buyer,  for information  purposes only,  forms of\nany letters or other  written  communications  which Seller or the  Subsidiaries\nshall distribute  generally to such employees  notifying them of their rights in\nrespect of their cessation of active participation in the Pension Plans.\n\n       Section 2.5  Use of Names and Manuals.\n\n                  (a) Although trade names of Seller, other than the Transferred\nBusiness Names, are Excluded  Assets,  such names appear on certain fixtures and\nEquipment, and on supplies,  materials,  stationery and similar consumable items\nwhich will be on hand at the  Facilities  at the Closing.  Notwithstanding  that\nsuch names are Excluded  Assets,  Buyer shall be entitled to use such consumable\nitems for a period of three  months  following  the Closing and shall have up to\nsix  months  following  the  Closing to remove  such  names  from fixed  assets,\nprovided that Buyer shall not send  correspondence  or other  materials to third\nparties on any  stationery  that contains a trade name (other than a Transferred\nBusiness Name) of Seller or any Affiliate of Seller.\n\n                  (b) Seller  hereby  grants to Buyer,  for the period  from the\nClosing  Date  through the  expiration  of the  ninetieth  day  thereafter,  the\nnon-exclusive  right and license to use, solely in connection with the operation\nof the  Facilities,  the clinical  policy and procedures  manuals of Seller (the\n\"Manuals\")  presently  used at the  Facilities.  Such  license  shall  be on the\nfollowing terms and conditions:\n\n                           (i) Buyer shall  accept the Manuals in their  present\n         condition, \"AS IS\" and \"WITH ALL FAULTS\" and without any representation\n         or  warranty of any kind  whatsoever,  either  express or  implied,  by\n         Seller,  including,  but not limited to, any representation or warranty\n         that the Manuals are adequate for Buyer's  operation of the  Facilities\n         after the Closing or are in compliance with any Laws;\n\n                           (ii)  Buyer   agrees  that   Seller   shall  have  no\n         obligation  whatsoever to update or otherwise revise the Manuals,  even\n         if Seller or its  Affiliates  are  revising  similar  manuals  at other\n         healthcare  facilities,  and that Buyer shall have sole  responsibility\n         for updating and revising such manuals;\n\n                           (iii) Buyer  acknowledges and agrees that the Manuals\n         are  confidential  and  proprietary   information  of  Seller  and  its\n         Affiliates  and Buyer agrees that it will not,  directly or indirectly,\n         reproduce, distribute or disclose the contents of the Manuals except as\n         may be required in the operation of the Facilities (including,  but not\n         limited to, as may be required by any Laws) and shall exercise due care\n         to otherwise preserve and protect the proprietary nature thereof;\n\n                           (iv)  Upon  the  termination  of  Buyer's  use of the\n         Manuals  pursuant to this  Section,  Buyer  shall  return to Seller all\n         originals and copies of the Manuals; and\n\n                           (v) Buyer shall  diligently  implement its own policy\n         and procedure  manuals promptly  following the Closing Date, and in any\n         event  by the  date on  which  the  license  hereby  granted  to  Buyer\n         terminates.\n\n         Section 2.6 Procedure for Consents or Default.  The transfer of the RSC\nShares,  in the absence of the consent or authorization of a third party,  could\nconstitute a breach or default under a lease, agreement, encumbrance, obligation\nor commitment or could adversely affect the rights, or increase the obligations,\nof Buyer,  Seller,  RSC or any  Subsidiary  with  respect  thereto.  If any such\nconsent or  authorization  is not obtained before Closing,  and transfer of such\nlease, agreement,  encumbrance,  obligation or commitment in the absence of such\nconsent or  authorization  would be  ineffective or would  adversely  affect the\nrights or increase the obligations of Seller,  RSC, a Subsidiary or Buyer,  with\nrespect to any such lease, agreement,  encumbrance or commitment,  so that Buyer\nwould not,  in fact,  receive  all such  rights,  or assume the  obligations  of\nSeller,  RSC or such  Subsidiary  with respect  thereto,  as they exist prior to\nClosing,  then,  in  accordance  with the  procedures  described in Section 2.8,\nSeller and Buyer shall, and Seller shall cause RSC and each Subsidiary to, enter\ninto such reasonable cooperative arrangements as may be reasonably acceptable to\nboth  Buyer  and  Seller  (including,  without  limitation,   sublease,  agency,\nmanagement,  indemnity or payment arrangements and\/or other means to enforce, at\nthe cost and for the  benefit  of Buyer  and any and all  rights  of RSC and the\nSubsidiaries  against an involved third party) to provide for Buyer the benefits\nof such items or to relieve  Seller  from the  obligations  of such  items.  The\nassignment  of  any  contract,  lease,  agreement,  encumbrance,  obligation  or\ncommitment,  including,  but not  limited  to,  Medicare,  Medicaid  and similar\nprovider agreements,  which may lawfully be made subject to customary conditions\nsubsequent (such as needs surveys,  evaluations of Buyer or other determinations\nby the  counterparties  to such agreements)  shall be deemed not to constitute a\ndefault  under,  or to in any way  adversely  affect the rights or increase  the\nobligations  of Buyer with  respect to, such lease,  agreement,  encumbrance  or\ncommitment,  whether or not the counterparty indicates prior to the Closing that\nsuch condition or conditions subsequent are likely or not likely to be met.\n\n         Section 2.7 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 capable of being satisfied,  but in no event later than the Termination Date\nset forth in Section  10.1(b).  The date on which the Closing actually occurs is\nreferred to herein as the \"Closing Date\". The Closing shall be effective for all\npurposes at 11:59 p.m.  Eastern Time on the Closing  Date.  At the Closing,  and\nsubject to the 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) A certificate or  certificates  representing  the\n         RSC Shares, together with stock powers duly executed in blank:\n\n                           (ii) The documents and instruments  required pursuant\n         to Section 8.7; and\n\n                           (iii) Such other  instruments of transfer executed by\n         Seller as may be  necessary  or  advisable  to  transfer to and vest in\n         Buyer  all of  Seller's  right,  title and  interest  in and to the RSC\n         Shares.\n\n                  (b)  Deliveries by Buyer.  Buyer shall deliver to Seller:\n\n                           (i)  Immediately  available  funds,  by way  of  wire\n         transfer to an account or accounts  designated by Seller,  in an amount\n         equal to the Purchase Price, as adjusted by the expenses due at Closing\n         pursuant to Section 5.5; and\n\n                           (ii) The  documents  and  instruments  required to be\n         delivered pursuant to Section 9.7.\n\n\n         Section 2.8 Resolution of Cooperative  Arrangements.  In the event that\ncircumstances  exist  that  require  the  parties  to  negotiate  in good  faith\ncooperative  arrangements  under  Section 2.6 or  potential  amendments  to this\nAgreement  pursuant to Sections 8.5 then and in such event,  such  negotiations,\nand the resolution of  disagreements  arising  therefrom,  shall be conducted in\naccordance  with the provisions of this Section 2.8. The parties shall negotiate\nsuch cooperative  arrangements in good faith prior to any scheduled Closing Date\n(as may be  extended by mutual  agreement  of the  parties).  If the parties are\nunable  to agree by the day  prior to such  scheduled  Closing  Date,  then such\nscheduled  Closing  Date  (and the  Termination  Date,  if  necessary)  shall be\nextended for up to 15 business  days to provide for the  opportunity  to resolve\nsuch disagreement pursuant to the provisions of this Section 2.8. On the day the\nClosing  would have  occurred  but for the  absence  of  agreement  between  the\nparties,  each party shall  designate an individual (who may not be a present or\nformer officer,  director, partner or employee of the party or of any present or\nformer  investment  banker,  accounting firm, law firm or attorney of or for 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 10  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 fail\nto agree  upon a third  mediator  by such  date,  the  third  mediator  shall be\ndesignated  by the  American  Arbitration  Association  in  accordance  with its\nthen-current  rules.  The three  mediators so selected are herein referred to as\nthe \"Panel\".  Within two business days  following the  designation  of the third\nmediator,  each  party  shall  submit  to the  Panel in  writing,  its  proposed\ncooperative arrangements.  Such proposals shall be materially in accordance with\nthe last  proposals  made by such party to the other party  during the course of\nthe  aforementioned  good faith negotia- tions between the parties.  The parties\nshall  additionally  submit such  memoranda,  arguments,  briefs and evidence in\nsupport of their respective  positions,  and in accordance with such procedures,\nas a majority of the Panel may  determine.  Within seven business days following\nthe designation of the third mediator, the Panel shall, by majority vote, select\nthe proposed cooperative  arrangements  proposed by one of the parties, it being\nagreed that the Panel shall have no authority to alter any such  proposal in any\nway. Thereafter,  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 2.7, which shall be no\nlater than the fifteenth business day following the originally scheduled Closing\nDate or such later date as the parties may agree upon. Subject to the foregoing,\nthe  Panel may  determine  the  issues in  dispute  following  such  procedures,\nconsistent with the language of this Agree- ment, 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         Section  2.9  Guaranty  by  NovaCare.  To induce  Buyer to execute  and\ndeliver  this  Agreement,   NovaCare  hereby   absolutely  and   unconditionally\nguarantees the full, prompt and faithful  performance by Seller of all covenants\nand obligations to be performed by Seller under this Agreement and any Schedule,\ncertificate  and  agreement  executed  and  delivered  in  connection  herewith,\nincluding,  without limitation, the payment of all sums stipulated to be paid by\nSeller  pursuant  to this  Agreement.  In the event that  Seller  fails to fully\nperform all such covenants and obligations in accordance with their terms or pay\nall or any part of such sums when due,  NovaCare will perform all such covenants\nand  obligations in accordance  with their terms or immediately pay to Buyer (or\nsuch other payee as may be provided  herein or in any such agreement) the amount\ndue and  unpaid by  Seller,  it being  understood  that each  such  covenant  or\nobligation and each obligation to pay any such amount constitutes the direct and\nprimary obligation of NovaCare.  NovaCare hereby waives  presentment,  demand of\npayment,  protest,  dishonor,  notice of  protest  or  dishonor,  and  notice of\nacceptance  of the  guaranty  set forth in this  Section  2.9 and all  rights to\nrequire Buyer to proceed  against  Seller,  or to pursue any other remedy it may\nhave  against  Seller in the event of a breach by Seller of any  representation,\nwarranty,  obligation  or  covenant  in  this  Agreement  or  in  any  Schedule,\ncertificate or agreement executed and delivered in connection therewith.  In the\nevent that Seller is not liable to perform  any such  obligations  or  covenants\nbecause  the act  creating  such  obligation  or  covenant  is  ultra  vires  or\nunauthorized,  and for such reasons  such  obligations  or  covenants  cannot be\nenforced against Seller,  such fact shall not affect NovaCare's  liability under\nthis  Section  2.9.  In the  event  of  the  merger,  acquisition,  termination,\nliquidation or dissolution of Seller, this unconditional guaranty shall continue\nin full force and effect.\n\n\n                                   ARTICLE 3\n                    REPRESENTATIONS AND WARRANTIES OF SELLER\n\n         Seller hereby  represents and warrants to Buyer, as of the date hereof,\nas follows, except as disclosed in Schedule 3:\n\n         Section 3.1 Organization  and Corporate Power.  Seller is a corporation\nduly  incorporated  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 3.2 RSC and Subsidiaries.\n\n                  (a)  Each of RSC and each  Subsidiary  is a  corporation  duly\norganized,  validly existing and in good standing under the laws of its state of\nincorporation  (which in each case is  indicated  on  Schedule  A-1) and is duly\nqualified and in good standing as a foreign  corporation in all jurisdictions in\nwhich such  qualification  is required by reason of its business,  properties or\nactivities in or relating to such jurisdictions  (which is likewise indicated on\nSchedule  A-1),  except  where the  failure to be so  qualified  will not have a\nMaterial  Adverse  Effect (as defined in Section  3.4) on RSC or the  applicable\nSubsidiary.\n\n                  (b) (i) All of the  outstanding  capital stock of RSC has been\nduly authorized and is validly issued, fully paid and nonassessable and is owned\nbeneficially  and of  record by  Seller.  There  are no  rights,  subscriptions,\nwarrants,  options,  conversion  rights or agreements of any kind outstanding to\npurchase or otherwise  acquire any shares of capital  stock of or  securities or\nobligations  of any kind  convertible  into or  exchangeable  for any  shares of\ncapital stock of RSC.\n\n                           (ii)  All of the  outstanding  capital  stock of each\nSubsidiary  has been duly  authorized  and is  validly  issued,  fully  paid and\nnonassessable  and,  except as indicated on Schedule A-1, is owned  beneficially\nand of record by RSC.  Except as provided in Schedule A- 1, there are no rights,\nsubscriptions,  warrants,  options,  conversion rights or agreements of any kind\noutstanding  to purchase or otherwise  acquire any shares of capital stock of or\nsecurities or obligations of any kind  convertible  into or exchangeable for any\nshares of capital stock of any Subsidiary.\n\n                  (c) Upon  consummation of the Transaction,  Buyer will acquire\nvalid title to the RSC Shares, 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.\n\n                  (d) No corporate  act or  proceeding on the part of RSC or any\nSubsidiary or their respective  boards of directors or shareholders is necessary\nto authorize the Transaction.\n\n         Section  3.3  Authority  Relative  to this  Agreement.  The  execution,\ndelivery and performance of this Agreement and all other agreements contemplated\nhereby and the consummation of the transactions  contemplated hereby and thereby\nhave been duly and  effectively  authorized by the board of directors of Seller;\nno other  corporate  act or  proceeding  on the  part of  Seller,  its  board of\ndirectors or its stockholders is necessary to authorize this Agreement, any such\nother  agreement  or the  transactions  contemplated  hereby and  thereby.  This\nAgreement has been, and each of the other agreements contemplated hereby will as\nof the Closing  have been,  duly  executed  and  delivered  by Seller,  and this\nAgreement constitutes, and each such other agreement when executed and delivered\nwill constitute,  a valid and binding obligation of Seller,  enforceable against\nSeller in accordance with its terms,  except as it may be limited by bankruptcy,\ninsolvency, reorganization, moratorium or other similar Laws now or hereafter in\neffect relating to creditors'  rights  generally and that the remedy of specific\nperformance and injunctive and other forms of equitable relief may be subject to\nequitable  defenses  and to  the  discretion  of  the  court  before  which  any\nproceeding may be brought.\n\n         Section 3.4 Absence of Breach.  Subject to the  provisions  of Sections\n3.5 and 3.6 below regarding private party and governmental  consents, and except\nfor  compliance  with  the  requirements  of  the  Hart-Scott-Rodino   Antitrust\nImprovements  Act of 1976,  as amended (the \"HSR Act\"),  and any  regulatory  or\nlicensing  Laws  applicable  to the  businesses  and assets  represented  by the\nTransferred  Assets,  the execution,  delivery and performance by Seller of this\nAgreement and all other agreements contemplated hereby or executed in connection\nherewith  (the  \"Related  Agreements\"),  do not (a) conflict with or result in a\nbreach of any of the provisions of the Articles or Certificates of Incorporation\nor Bylaws or similar charter  documents (the \"Charter  Documents\") of Seller, of\nRSC  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  Seller  or  RSC 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 RSC and the  Subsidiaries\nand will not affect the validity or  enforceability  of this  Agreement  and the\nRelated  Agreements or the validity of the Transaction  contemplated  hereby and\nthereby,  or (c)  conflict  with or result in a breach of or  default  under any\nindenture or loan or credit  agreement or any other  agreement or  instrument to\nwhich Seller or any of the Subsidiaries is a party or by which it or they or any\nof their  properties  may be  affected or bound,  the effect of which  conflict,\nbreach, or default, either individually or in the aggregate, would be a Material\nAdverse Effect on RSC and the Subsidiaries.  As used herein, a \"Material Adverse\nEffect\":  (a) when used with  respect to a  Facility,  means a material  adverse\neffect on a Facility and on the businesses operated  therefrom,  including their\ncondition (financial or otherwise) and results of operations,  taken as a whole;\nand (b) when used with respect to an entity,  such as Seller,  RSC, a Subsidiary\nor Buyer, means a material adverse effect on the business,  condition (financial\nor  otherwise)  and  results  of  operations  of such  entity  taken  as a whole\n(including any subsidiaries of such entity).\n\n         Section 3.5  Private  Party  Consents.  Except as set forth on Schedule\n3.5, the execution, delivery and performance by Seller of this Agreement and the\nRelated Agreements do not require the authorization,  consent or approval of any\nnon-governmental  third  party of such a nature  that the  failure to obtain the\nsame would have a Material Adverse Effect on RSC and the Subsidiaries.\n\n         Section  3.6  Governmental  Consents.   The  execution,   delivery  and\nperformance  by Seller  of this  Agreement  and the  Related  Agreements  do not\nrequire the authorization, con- sent, approval, certification,  license or order\nof, or any filing with, any court or  governmental  agency of such a nature that\nthe  failure to obtain the same  would  have a  Material  Adverse  Effect on the\nTransferred  Assets,  except for compliance with the HSR Act and except for such\ngovernmental authorizations,  consents, approvals, certifications,  licenses and\norders that customarily accompany the transfer of health care facilities such as\nthe Facilities.\n\n         Section  3.7  Brokers.  No  broker,  finder,  or  investment  banker is\nentitled to any  brokerage,  finder's or other fee or  commission  in connection\nwith this  Agreement  or the  Transaction  contemplated  hereby  based  upon any\nagreements or arrangements or commitments, written or oral, made by or on behalf\nof Seller or any of its Affiliates.  Seller shall be solely  responsible for the\npayment of any such fee or commission to any person or entity listed on Schedule\n3.7 as an exception to the foregoing.\n\n         Section 3.8 Title to Personal  Property.  Each  Subsidiary has good and\ndefensible title, or valid and effective  leasehold rights in the case of leased\nproperty,  to all tangible personal property owned by such Subsidiary or used in\nthe operations of the applicable Facility, free and clear of all liens, charges,\nclaims,  pledges,  security  interests,  equities and encumbrances of any nature\nwhatsoever,  except for those  created or  allowed to be  suffered  by Buyer and\nexcept  for  the  following  (individually  and  collectively,   the  \"Permitted\nEncumbrances\"):  (a) the lien of current taxes not delinquent,  (b) matters that\nwhen viewed in the aggregate,  do not have a Material  Adverse Effect on RSC and\nthe Subsidiaries, (c) such consents,  authorizations,  approvals and Licenses as\nare referred to in Sections 3.5 and 3.6, (e) liens,  charges,  claims,  pledges,\nsecurity  interests,  equities  and  encumbrances  which will be  discharged  or\nreleased either prior to, or substantially simultaneously with, the Closing, and\n(f) liens created under or pursuant to the Real Property Leases.\n\n         Section 3.9 Contracts and Leases.  Except for matters that, when viewed\nin the  aggregate,  do  not  have a  Material  Adverse  Effect  on RSC  and  the\nSubsidiaries,  (a) there is no  liability to any person by reason of the default\nby Seller,  RSC or a Subsidiary under any Real Property Lease or Other Contract,\n(b) neither  Seller nor RSC nor any  Subsidiary  has  received  written or other\nnotice that any person intends to cancel or terminate any Real Property Lease or\nOther  Contract,  (c) all of the Real Property Leases and Other Contracts are in\nfull force and effect,  (d) subject to the  provisions  of Sections 3.5 and 3.6,\nthe  consummation  of the  transactions  contemplated by this Agreement will not\nconstitute and, to the best of Seller's current actual  knowledge,  no event has\noccurred  which,  with or without  the  passage of time or the giving of notice,\nwould constitute a breach or default by Seller, RSC or a Subsidiary of such Real\nProperty  Lease or  Other  Contract  or  would  cause  the  acceleration  of any\nobligation of Seller,  RSC or any Subsidiary or the creation of any lien (except\nfor Permitted  Encumbrances)  upon any asset of RSC or any  Subsidiary,  and (e)\nneither  Seller nor RSC nor any  Subsidiary  has waived any right under any Real\nProperty Lease or Other Contract.\n\n         Section  3.10  Licenses.   To  the  best  of  Seller's  current  actual\nknowledge,  and except for such matters which,  in the aggregate,  do not have a\nMaterial  Adverse  Affect  on RSC and  the  Subsidiaries,  (a) the  Subsidiaries\npossess all Licenses  necessary  for their  operation of the  Facilities  at the\nlocations and in the manner presently operated, (b) if required, such Facilities\nare  accredited  by  applicable  accrediting  agencies  as  necessary  for their\noperations in the manner presently  operated,  (c) such Facilities are certified\nfor  participation  in the Medicare and  applicable  Medicaid  programs and have\ncurrent and valid provider  contracts  with such  programs,  and (d) there is no\nmatter  which  would  adversely  affect the  maintenance  of any such  Licenses,\nprogram participations or accreditations.\n\n         Section 3.11 Employee  Relations.  With respect to the employees of RSC\nand the Subsidiaries:\n\n                  (a) Neither Seller nor RSC nor any Subsidiary nor any Facility\nis a party to any agreement with any union,  trade  association or other similar\nemployee  organization,  no written  demand has been made for  recognition  by a\nlabor  organization,  and to the best of Seller's  current  actual  knowledge no\nunion organizing  activities by or with respect to any such employees are taking\nplace; and\n\n                  (b) There are no controversies (including, without limitation,\nany unfair labor practice  complaints,  labor strikes,  arbitrations,  disputes,\nwork slowdowns or work stoppages)  affecting a material number of such employees\npending, or to the best of Seller's current actual knowledge, threatened.\n\n         Section 3.12 Employee Plans.  Except for the Pension Plans,  and except\nas set forth on Schedule  3.19(d)  hereto,  neither RSC nor any  Subsidiary  has\nestablished  or maintains or is obligated to make  contributions  to or under or\notherwise  participate in any Employee  Benefit  Arrangement.  All such Employee\nBenefit  Arrangements  have  been  operated  and  administered  in all  material\nrespects in accordance  with, as applicable,  ERISA,  the Code, Title VII of the\nCivil Rights Act of 1964, as amended, the Equal Pay Act of 1967, as amended, the\nage  discrimination  in employment  act of 1967, as amended,  the Americans with\nDisabilities Act, as amended,  and the related rules and regulations  adopted by\nthose federal  agencies  responsible  for the  administration  of such Laws. All\naccrued  benefits  under any such  Employee  Benefit  Arrangement  will be fully\nfunded at the  Closing  Date.  No act or failure  to act by  Seller,  RSC or any\nSubsidiary  has resulted in a  \"prohibited  transaction\"  (as defined in ERISA).\nWith respect to any employee benefit plan, and no \"reportable event\" (as defined\nin ERISA) has occurred with respect to any such employee benefit plan.\n\n         Section  3.13  Litigation.  Except  for  ordinary  routine  claims  and\nlitigation   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 RSC or the Subsidiaries 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. Schedule 3.13 sets forth identifying information and a brief\ndescription  with respect to any pending or, to the current actual  knowledge of\nSeller, RSC and the Subsidiaries, threatened claims or litigation affecting RSC,\nthe  Subsidiaries or the Facilities (i) where the amount in controversy  exceeds\n$100,000,  (ii) which  involve any alleged  violation of any Laws or (iii) which\ncould otherwise be reasonably  expected to have a Material Adverse Effect on RSC\nor the applicable Subsidiary.\n\n         Section 3.14  Inventory.  All Inventory of the Facilities  will, at the\nClosing  Date,  consist of a quality  and  quantity  usable  and  salable in the\nordinary  course  of  business,  except  for  items of  obsolete  materials  and\nmaterials  of  below-standard  quality,  all  of  which  in  the  aggregate  are\nimmaterial to the financial condition or results of operations of the businesses\noperated from the Facilities taken as a whole, or have been, or prior to Closing\nwill be, written down to realizable market value.\n\n         Section  3.15  Hazardous  Substances.  To the best of Seller's  current\nactual  knowledge,  except as may be disclosed by the  Environmental  Survey (as\ndefined in Section 6.2(b)):\n\n                  (a) There are no Hazardous  Materials (as defined below) upon,\nabout,  beneath or migrating or threatening to migrate to or from the Owned Real\nProperty or the Leased Real  Property or the  existence of any  violation in any\nmaterial respect of any Laws relating to industrial hygiene, Hazardous Materials\nand environmental protection (\"Environmental Regulations\"); and\n\n                  (b) There is no proceeding or action  pending or threatened by\nany person 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 3.16  Financial Information and Related Matters.\n\n                  (a) To be attached  hereto as Schedule  3.16(a)  within  seven\ndays  after  the  execution  and  delivery  of this  Agreement  is an  unaudited\nstatement of certain combined earnings from the operations of the Facilities (as\nthey were comprised on the as of date of such schedule) before interest,  income\ntaxes,  depreciation and amortization  (\"EBITDA\") for the fiscal year ended June\n30, 1994 (the \"EBITDA  Statements\")  and for the six months  ended  December 31,\n1994.  The  EBITDA  Statements  present  fairly  the  combined  EBITDA  of  such\noperations,  taken as a whole,  as of the dates and for the periods  shown,  and\nwere derived from and are in accordance  with the internal  books and records of\nRSC and the Subsidiaries and the regularly prepared unaudited internal financial\nstatements  of the  Facilities,  which are  prepared  on a basis  materially  in\naccordance with the generally  accepted  accounting  principles  utilized in the\npreparation of the published financial statements of Seller.\n\n                  (b)  Attached  hereto  as  Schedule  3.16(b)  is  a  regularly\nprepared  internal  unaudited  combined  balance  sheet of the  Facilities as of\nDecember 31, 1994 (the \"Balance Sheet\"; collectively,  the Balance Sheet and the\nEBITDA  Statement  are the  \"Financial  Schedule\").  The Balance  Sheet has been\nprepared from, and is in accordance  with, the internal books and records of RSC\nand  the  Subsidiaries  and  presents  fairly  the  financial  condition  of the\nFacilities,  taken as a whole,  as of the date  shown.  The  Balance  Sheet  was\nprepared in accordance  with Seller's  practices for the preparation of internal\nfinancial statements, consistently applied, and is materially in accordance with\nthe generally accepted accounting  principles utilized in the preparation of the\npublished financial statements of Seller.\n\n                  (c) Notwithstanding the foregoing, the Financial Schedule does\nnot (i) reflect  allocations of indirect costs and overhead or the corresponding\ncost reimbursement impact of claiming such costs in a Facility cost report, (ii)\nreflect  all  intercompany  eliminations,  adjustments  and  accruals  that  are\nreflected in financial  statements of Seller,  (iii) reflect any anticipation of\nthe  divestiture of the Facilities and any adjustments to the carrying values of\nthe Facilities  occasioned thereby,  (iv) contain footnotes or other explanatory\nmaterial  associated  with  financial  statements  prepared in  accordance  with\ngenerally  accepted  accounting  principles,  or  (v)  contain  normal  year-end\nadjustments  with  respect to interim  peri- ods.  In  addition,  the  Financial\nSchedule  is to be read in  conjunction  with,  and is subject to, all notes and\nother explanatory material set forth therein.\n\n                  (d) The Balance Sheet reflects the amount of Receivables as of\nthe date thereof, net of allowances customarily recorded by the Subsidiaries for\nuncollectible  and doubtful  accounts,  and contractual  allowances  pursuant to\nagreements  with Payors,  all in  conformity  with  Seller's  practices  for the\npreparation of internal  financial  statements and materially in accordance with\nthe generally accepted accounting  principles utilized in the preparation of the\npublished financial  statements of the Seller and the past practices employed by\neach Subsidiary. To the current actual knowledge of Seller, all such Receivables\nincluded in the Balance Sheet  represent  amounts validly owed to the applicable\nSubsidiary by reason of the provision of goods, services and other consideration\nby such  Subsidiary,  and, to the current  actual  knowledge of Seller,  are not\nvalued in excess of the amounts  expected to be collected with respect  thereto.\nEach  Subsidiary  maintains  its  accounting  records  in  sufficient  detail to\nsubstantiate the Receivables  reflected on the Balance Sheet.  Since the date of\nSeller's most recent audited  financial  statements,  neither Seller nor RSC nor\nany  Subsidiary  has  changed any  principle  or  practice  with  respect to the\nrecordation of accounts  receivable or the calculation of reserves therefor,  or\nany material collection, discount or write-off policy or procedure.\n\n                  (e) RSC and the Subsidiaries, as applicable, have timely filed\nall Cost Reports  required to be filed with respect to the  Facilities  prior to\nthe date of this  Agreement.  All such Cost  Reports  are, to the  knowledge  of\nSeller,  true and complete in all  material  respects and comply in all material\nrespects with all applicable Laws  respecting  Cost Reports.  Neither Seller nor\nRSC nor any  Subsidiary  has received any notice with respect to any  challenge,\ndispute or adjustment  with respect to any open Cost Reports except  challenges,\ndisputes or adjustments (i) which, if resolved  adversely to Seller,  RSC or the\nApplicable  Subsidiary,  as the case may be,  would not have a Material  Adverse\nEffect on such entity, or (ii) which are described on Schedule 3.16(e).\n\n                  (f) Each of RSC and the  Subsidiaries  has filed  all  returns\nrequired  to be filed by it, and made all  payments  required  to be made by it,\nwith  respect to any Taxes as to which such  filings or payments  were due on or\nbefore the date of this Agreement.  To the best of Seller's  knowledge,  neither\nRSC nor any Subsidiary has any liability with respect to any Taxes for which its\nreserves are inadequate, except for sales, use, employment and similar Taxes for\nperiods as to which such Taxes have not yet become due and payable.\n\n         Section 3.17 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,  RSC and the  Subsidiaries  have\nconducted  their  respective  businesses only in the ordinary and normal course,\nexcept for matters in anticipation  of the  divestiture of the  Facilities,  and\nthere has not been:\n\n                  (a)  Any  entry  into or  termination  by  Seller  or RSC or a\nSubsidiary  of any  material  commitment,  contract,  agreement  or  transaction\n(including,  without limitation, any borrowing or lending transaction or capital\nexpenditure)  related to RSC, the  Subsidiaries  or the  Facilities,  except for\ntransactions  in the  ordinary  course of business and  renegotiation  of credit\nagreements to which Seller and certain of its subsidiaries are parties;\n\n                  (b) Any casualty,  physical  damage,  destruction  or physical\nloss respecting,  or change in the physical condition of, the Facilities and the\nEquipment that has had a Material Adverse Effect on RSC and the Subsidiaries;\n\n                  (c) Any transfer of or rights granted under any contract which\nwould have been an Other  Contract on the date of the Balance  Sheet  except for\ntransactions in the ordinary course of business;\n\n                  (d) Other than in the ordinary course of business, any sale or\nother  disposition of any fixed asset included in the Balance Sheet having a net\nbook value in excess of $50,000 or any material  mortgage,  pledge or imposition\nof any lien or other  encumbrances  on any such asset,  or sales or dispositions\nof, or the imposition of material encumbrances on, fixed assets included in such\nBalance Sheet having a net book value that exceeds $250,000 in the aggregate, or\nany sale or other disposition of Inventories included in the Balance Sheet;\n\n                  (e) Any  amendment  (other than general  amendments  which the\ncarrier makes for a category of policy) or termination  of any insurance  policy\nor failure to renew any insurance  policy  covering the  Facilities,  except for\namendments,  terminations  or  failures  to renew  that do not  have a  Material\nAdverse Effect on RSC and the Subsidiaries;\n\n                  (f) Any default or breach by Seller, RSC or a Subsidiary under\nany contract  that would have been an Other  Contract on the date of the Balance\nSheet which,  when viewed  individually or in the aggregate of all such breaches\nor defaults, has had a Material Adverse Effect on RSC and the Facilities; or\n\n                  (g) Any increase made in the compensation  levels of any chief\nexecutive  officer or chief  financial  officer of any Facility,  or any general\nincrease made in the  compensation  levels of the other  employees of RSC or any\nSubsidiary, except in the ordinary course of business.\n\n         Section 3.18  Compliance  with Laws.  Except as otherwise  disclosed in\nthis  Agreement  (or in the Schedule  thereto),  RSC, each  Subsidiary  and each\nFacility  are, to the  knowledge of NovaCare and Seller,  in  compliance  in all\nmaterial  respects  with all Laws  applicable  to a Facility  or the  operations\nthereof,  and neither  Seller,  RSC nor any Facility has received any notices of\nviolations of any such Laws.\n\n         Section 3.19 Lists of Other Data.  Except for contracts and  agreements\nalready  listed in  Schedules  1.1-2 and 1.1-4,  Schedules  3.19(a)  through (f)\ncontain  lists,  complete  and  correct as of the dates  shown  thereon,  of the\nfollowing:\n\n                  (a) The most recent regularly generated depreciation schedules\n0related to tangible personal  property  constituting  Equipment,  together with\ncopies of such schedules;\n\n                  (b) Each lease  constituting an Other 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 $25,000;\n\n                  (c) A brief  description  of insurance in force covering fixed\nassets that would constitute assets of the Facilities as of such date;\n\n                  (d) All compensation,  bonus,  incentive,  deferred  payments,\nretirement, pension, severance,  profit-sharing, stock purchase and stock option\nplans, group life, automobile,  medical,  dental,  disability,  welfare or other\nemployee  benefit plans or insurance  policies,  and other similar  arrangements\n(collectively,  \"Employee  Benefit  Arrangements\")  generally  applicable to the\nemployees  of  the  Facilities  or  a  substantial  part  thereof  or  generally\napplicable to the chief executive or chief financial officers,  or a substantial\npart thereof, of the Facilities as of such date;\n\n                  (e) The aggregate  accrued paid time off  (including  vacation\ntime) and earned or available sick pay for all employees at each Facility, as of\nthe date shown; and\n\n                  (f) Material Licenses of Seller and the Subsidiaries in force,\nas of the date shown, with respect to the Facilities.\n\n\n                                   ARTICLE 4\n                    REPRESENTATIONS AND WARRANTIES OF BUYER\n\n         Buyer hereby  represents and warrants to Seller, as of the date hereof,\nas follows, except as disclosed in Schedule 4:\n\n         Section 4.1 Organization  and Corporate  Power.  Buyer is a corporation\nduly  incorporated  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,\ndelivery and  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  as it may be  limited  by  bankruptcy,\ninsolvency, reorganization, moratorium or other similar Laws now or hereafter in\neffect relating to creditors'  rights  generally and that the remedy of specific\nperformance and injunctive and other forms of equitable relief may be subject to\nequitable  defenses  and to  the  discretion  of  the  court  before  which  any\nproceeding may be brought.\n\n         Section 4.3 Absence of Breach.  Subject to the  provisions  of Sections\n4.4 and 4.5 below regarding private party and governmental  consents, and except\nfor  compliance  with  the  requirements  of the HSR Act and any  regulatory  or\nlicensing  Laws  applicable  to the  businesses  and assets  represented  by the\nFacilities,  the execution,  delivery and performance by Buyer of this Agreement\nand the Related  Agreements  do not, (a) conflict  with or result in a breach of\nany of the provisions of Charter  Documents of Buyer,  (b) contravene any Law or\ncause the  suspension or revocation  of any License  presently in effect,  which\naffects or binds Buyer or any of its material  properties,  or (c) conflict with\nor result  in a breach  of or  default  under  any  indenture  or loan or credit\nagreement or any other  agreement or  instrument to which Buyer is a party or by\nwhich it or any of its properties may be affected or bound.\n\n         Section  4.4  Private  Party  Consents.  The  execution,  delivery  and\nperformance by Buyer of this Agreement and the Related Agreements do not require\nthe authorization, consent or approval of any non-governmental third party.\n\n         Section  4.5  Governmental  Consents.   The  execution,   delivery  and\nperformance by Buyer of this Agreement and the Related Agreements do not require\nthe authorization, consent, approval, certification, license or order of, or any\nfiling with, any court or governmen- tal 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.  No  broker,  finder,  or  investment  banker is\nentitled to any  brokerage,  finder's or other fee or  commission  in connection\nwith this  Agreement  or the  transactions  contemplated  hereby  based upon any\nagreements or arrangements or commitments, written or oral, made by or on behalf\nof Buyer or any of its  Affiliates.  Buyer shall be solely  responsible  for the\npayment of any such fee or commission to any person or entity listed on Schedule\n4.6 as an exception to the foregoing.\n\n         Section 4.7 Qualified  for  Licenses.  Buyer is qualified to obtain any\nLicenses and program participations  necessary for the operation by Buyer of the\nFacilities in the same manner as the Facilities are presently operated by Seller\nand the  Subsidiaries.  Each of Buyer and its Affiliates  possesses all Licenses\nand program  participations  necessary to permit them to operate the  healthcare\nfacilities  operated by them. If required,  all such  healthcare  facilities are\naccredited by applicable  accrediting agencies as necessary for their operations\nin the manner  presently  operated.  Neither Buyer nor any of its Affiliates has\nreceived any notice or has any  knowledge  of any matter which would  materially\nadversely affect the maintenance of any such Licenses, program participations or\naccreditations.\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\nPurchase  Price to  Seller  at the  Closing  and the  other  payments  to Seller\nrequired hereunder. Promptly after its receipt of letters of commitment or other\ndocuments  related to the  financing of its  obligations  hereunder,  Buyer will\nprovide copies of the same to Seller.\n\n         Section 4.9 No Assurance.  Buyer acknowledges and agrees that the rates\nor bases  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  reim-  bursements  to  Seller,  RSC and the\nSubsidiaries.\n\n         Section 4.10 Disposal of Assets.  Buyer does not intend to or currently\nplan to dispose of, or cause RSC to dispose of, a significant part of the assets\nof RSC or the  Subsidiaries  within  two years  after the  Closing,  other  than\ndispositions  in the  ordinary  course of  business  or to  eliminate  duplicate\nfacilities or excess capacity.\n\n\n                                   ARTICLE 5\n                            COVENANTS OF EACH PARTY\n\n         Section 5.1 Efforts to  Consummate  Transactions.  Subject to the terms\nand  conditions  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 Transaction  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, authoriza- tions and approvals of all private parties and governmental\nauthorities whose consent is reasonably  necessary to effectuate the Transaction\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.  Subject to\nSections 2.6 and 8.8,  neither  party shall have any  liability to the other if,\nafter  using its  reasonable  commercial  efforts  (and,  in the case of Buyer's\nefforts to obtain requisite Licenses, acting diligently), it is unable to obtain\nany consents, authorizations or approvals necessary for such party to consummate\nthe Transactions,  except as may result from cooperative arrangements determined\nin accordance with Section 2.8. As used herein, the terms \"reasonable commercial\nefforts\"  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 Transaction.  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,  it being the intent of the\nforegoing  that the parties  hereto will consult and cooperate with one another,\nand consider in good faith the views of one another, in connection with any such\nanalysis,  presentation,  memorandum,  brief, argument,  appearance,  opinion or\nproposal;  provided that nothing herein shall prevent either party hereto or any\nof their  Affiliates  or their  authorized  representatives  from (a)  making or\nsubmitting  any such  analysis,  appearance,  presentation,  memorandum,  brief,\nargument,  opinion or proposal in response to a subpoena or other legal  process\nor as otherwise  required by Law, or (b) submitting  factual  information to the\nUnited States  Department of Justice,  the Federal Trade  Commission,  any other\ngovern- mental agency or any court or administrative  law judge in response to a\nrequest therefor or as otherwise required by Law.\n\n         Section 5.3 Further  Assistance.  From time to time,  at the request of\neither party,  whether on or after the Closing,  without further  consideration,\neither  party,  at its  expense  and  within a  reasonable  amount of time after\nrequest hereunder 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 RSC Shares to\nBuyer,  deliver  or make the  payment  of the  Purchase  Price to  Seller or any\namounts due from one party to the other  pursuant to the terms of this Agreement\nor confirm Seller's ownership of the Excluded Assets.\n\n         Section 5.4 Cooperation Respecting Proceedings. After the Closing, upon\nprior reason- able written  request,  each party shall cooperate with the other,\nat the 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,  RSC or any of the  Subsidiaries  which were in effect or occurred on or\nprior to the  Closing and which  relate to the  Facilities,  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\nhereby are  consummated,  except as otherwise  provided in this  Agreement,  all\ncosts  and  expenses   incurred  in  connection  with  this  Agreement  and  the\ntransactions  contemplated  hereby  shall be paid by the  party  incurring  such\nexpenses. Notwithstanding the foregoing:\n\n                  (a) All  costs  of the  Environmental  Survey  referred  to in\nSection 6.2(b) shall be borne by Buyer;\n\n                  (b) All charges of any neutral  independent  public accountant\nor mediator, and related costs, shall be borne one-half by Buyer and one-half by\nSeller  (it  being  agreed  that  each  party  shall  bear the  costs of its own\nindependent public accountant or designated mediator);\n\n                  (c) All fees  and  charges  of  governmental  authorities  and\naccreditation   agencies  in   connection   with  the   transfer,   issuance  or\nauthorization of any License,  accreditation or program  participation  shall be\nborne by Buyer; and\n\n                  (d) All fees,  charges or costs,  including  auditing fees and\nexpenses,  incurred  as a result  of  Buyer's  compliance  with  the  Securities\nExchange  Act of 1934,  as amended,  and the rules and  regulations  thereunder,\nshall be borne 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,\nno press or other  public  announcement,  or  public  statement  or  comment  in\nresponse to any  inquiry,  relating  to the  transactions  contemplated  by this\nAgreement  shall be issued or made by Buyer or Seller or any Subsidiary  without\nthe joint  approval of Buyer and Seller;  provided that a press release or other\npublic announcement, statement or comment made without such joint approval shall\nnot be in  violation  of this  Section  if it is made in  order to  comply  with\napplicable  securities  Laws or stock  exchange  policies and in the  reasonable\njudgment of the party making such release or announcement,  based upon advice of\nindependent counsel, prior review and joint approval, despite reasonable efforts\nto obtain the same, would prevent  dissemination of such release or announcement\nin a timely enough  fashion to comply with such Laws or policies,  provided that\nin all  instances  prompt notice from one party to the other shall be given with\nrespect to 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,\nRSC and the  Subsidiaries  are  strictly  confidential,  and  Seller  and  Buyer\nexpressly  covenant  and agree  with  each  other  that,  prior to and after the\nClosing,  they will not, nor will they allow any of their  respective  officers,\ndirectors,   employees,   representatives  or  agents  (including   professional\nadvisors)  to  disclose  or publicly  comment  upon any matters  relating to the\nbusiness  of the  other  or  relating  to  this  Agreement,  including,  without\nlimitation,  the terms,  timing or  progress  of the  transactions  contemplated\nhereby, or its negotiation, terms, provisions or conditions,  including Purchase\nPrice,  except for  disclosure to their  respective  professional  advisors (who\nshall  agree  not to  disclose  the  same)  which  is  reasonably  necessary  to\neffectuate the Transaction  contemplated  hereby and in a manner consistent with\nthe provisions of this Agreement. Each party shall keep all information obtained\nfrom the other either before or after the date of this  Agreement  confidential,\nand neither party shall reveal such  information  to, nor produce  copies of any\nwritten  information  for,  any  person  outside  its  management  group  or its\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 Transaction\ncontemplated by this Agreement  should fail to close for any reason,  each party\nshall return to the other as soon as  practicable  all  originals  and copies of\nwritten  information  provided  to such party by or on behalf of the other party\nand none of such information  shall be used by either party, or their employees,\nagents  or   representatives   in  the  business   operations   of  any  person.\nNotwithstanding the foregoing, each party's obligations under this Section shall\nnot apply to any  information or document  which is or becomes  available to the\npublic other than as a result of a disclosure by the other party in violation of\nthis  Agreement  or  other  obligation  of  confidentiality   under  which  such\ninformation may be held or becomes available to the party on a  non-confidential\nbasis  from a source  other  than the other  party or its  officers,  directors,\nemployees,  representatives  or  agents.  The  parties'  obligations  under this\nSection shall survive the termination of this Agreement. Nothing in this Section\nshall,  or is intended to, impair or modify any of the rights or  obligations of\nBuyer or its Affiliates  under that certain letter  agreement  dated January 14,\n1995,  1995,  all of which  remain in effect  until  termination  of such letter\nagreement in accordance with its terms.\n\n         Section 5.7  Cost Reports.\n\n                  (a) Buyer shall cause the Subsidiaries to prepare and file the\nCost Reports as required under their  agreements and applicable  laws, rules and\nregulations  pertaining  to Medicare and Medicaid for their  current cost report\nyears (the  \"Current Cost  Reports\";  similar Cost Reports for prior periods are\nreferred to as the \"Prior Cost Reports\")  within the time periods required under\nsaid  agreements,  laws,  rules and  regulations.  Seller shall cooperate in the\npreparation of the Cost Reports.\n\n                  (b) No adjustments or positions shall be taken or agreed to by\nBuyer or the  Subsidiaries or their  successors with respect to the Current Cost\nReports,  or with respect to any Cost Reports for prior or  subsequent  periods,\nwhich  would  create  any  claims on the part of Buyer  pursuant  to  Article 11\nwithout  prior  written  consent of Seller.  With respect to rights  retained by\nSeller relating to Prior Cost Reports,  Seller shall not agree to any adjustment\nor take any position which would adversely  effect Buyer or the  Subsidiaries or\ntheir  successors  without  prior  written  consent of Buyer.  In the event that\nSeller and Buyer fail to agree on any such  adjustments or positions,  either of\nSeller or Buyer may cause the matter to be  resolved by  arbitration;  provided,\nhowever,  that the arbitrator  chosen by the parties shall have  experience with\nand  understanding of the rules and regulations of the Payor with which the Cost\nReport in question is to be filed and in the  preparation  of Cost Reports.  The\nmatter shall be resolved within the time for filing such Cost Reports, or within\nthe time  required for taking any action with respect  thereto,  including  such\nextensions as Buyer can cause the  Subsidiaries to obtain using the best efforts\nof said companies.\n\n                  (c)  NovaCare  shall  prepare  and file its Home  Office  Cost\nStatement  for the fiscal year  beginning on July 1, 1994 and ending on June 30,\n1995  within  the  time  period   required   pursuant  to  applicable  laws  and\nregulations.  Buyer  agrees to include  NovaCare's  home office  expenses in the\napplicable  Subsidiaries'  Cost Reports and to cause RSC and the Subsidiaries to\ndeliver to NovaCare  within ten days after their  receipt  thereof any  payments\nmade by Medicare or other cost-based  payors based on such Cost Reports or based\non the Home  Office Cost  Statement  for prior  periods,  or any appeals of such\nreports.\n\n                  (d)  The  Closing  Balance  Sheet  will  contain   Receivables\nrepresenting   amounts  Seller   determines  are  payable  by  Medicare  to  the\nSubsidiaries  pursuant to the Current Cost Reports and the Prior Cost Reports. A\nseparate  schedule  identifying these amounts based on the financial data in the\nClosing  Balance Sheet and back-up  materials  will be prepared and delivered by\nSeller  along  with  the  Closing  Balance  Sheet.  In  addition,  RSC  and  the\nSubsidiaries  may receive  payments  from  Medicare or other  cost-based  payors\npursuant to appeals of items  contained in the Prior Cost Reports.  Buyer agrees\nto cause RSC and the  Subsidiaries to deliver to NovaCare,  Inc. within ten days\nafter their receipt  thereof (i) any payments  based on the Current Cost Reports\nin excess of the amounts reflected on such schedule; and (ii) any payments based\non the Prior Cost Reports in excess of the amounts reflected on such schedule.\n\n                  (e) Buyer,  RSC or the  Subsidiaries may be obligated to repay\nMedicare or other  cost-based  payors for amounts which were  reflected on Prior\nCost Reports or on the Current Cost Reports.  Seller agrees to reimburse  Buyer,\nwithin ten days after such  repayment  is made,  to the extent  such  repayments\nexceed  the  amounts  reflected  on the  schedule  referred  to in  5.7(d)  as a\nliability for such  repayment.  In such event,  Buyer and Seller shall  mutually\nagree on  whether  to  appeal  the  determination  resulting  in such  repayment\nobligation.\n\n                                   ARTICLE 6\n                         ADDITIONAL COVENANTS OF SELLER\n\n         Seller hereby additionally covenants, promises and agrees as follows:\n\n         Section 6.1  Conduct  Pending  Closing.  Prior to  consummation  of the\nTransaction  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 Real Property or Other  Contracts,  or which arise\nfrom  or are  related  to the  anticipated  transfer  of the RSC  Shares,  or as\notherwise contemplated by this Agreement or disclosed in Schedule 6.1 or another\nSchedule  to  this  Agreement,  Seller  shall,  and  shall  cause  RSC  and  the\nSubsidiaries to:\n\n                  (a) Conduct the business  represented  by, and otherwise  deal\nwith,  the  Facilities  only  in  the  usual  and  ordinary  course,  materially\nconsistent with practices followed prior to the execution of this Agreement;\n\n                  (b) Use  reasonable  efforts to keep intact the Facilities and\nthe business  they  represent and to preserve  relationships  beneficial to such\nbusiness that physicians,  patients,  Payors, suppliers and others have with the\nFacilities;\n\n                  (c) Except as required by their terms,  not amend,  terminate,\nrenew,  fail to  renew or  renegotiate  any  material  contract,  except  in the\nordinary course of business and consistent with practices of the recent past, or\ndefault (or take or omit to take any action that,  with or without the giving of\nnotice or passage of time, would constitute a default) in any of its obligations\nunder any such contracts,  that would be a Real Property Lease or Other Contract\nas of the date hereof;\n\n                  (d) Not sell, lease, mortgage,  encumber, or otherwise dispose\nof or  grant  any  interest  in,  or  permit  or  suffer  to  exist  any lien or\nencumbrance  upon or the  disposition of, any Facility,  Inventory,  or items of\nEquipment  having an  undepreciated  book value in excess of $25,000,  including\nwithout limitation any of its leasehold interests therein, whether by the taking\nof action or the failure to take  action,  except for (i) sales of  Inventory in\nthe ordinary course, (ii) liens constituting  Permitted  Encumbrances,  or (iii)\nsales or dispositions of Equip- ment in the ordinary course of business that are\nconsistent with practices of the recent past;\n\n                  (e)  Maintain  in force  and  effect  the  insurance  policies\nidentified in Section 3.19(c);\n\n                  (f) Not enter into any  contract  that will  constitute a Real\nProperty Lease or Other Contract as of the Closing except in the ordinary course\nof business and consistent with practices of the recent past; or\n\n                  (g) Not grant any general or uniform  increase in the rates of\npay or benefits  to  employees  of the  Facilities  (or a class  thereof) or any\nincrease in salary or benefits of any chief  executive or  financial  officer of\nany Facility,  except for  compensation  previously  agreed to prior to the date\nhereof;\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, or (ii) preclude Seller from paying,  prepaying or otherwise\nsatisfying any liability of RSC or any Subsidiary.\n\n         Section 6.2 Access and Information;  Environmental Survey;  Remediation\nor Adjustment.\n\n                  (a)  Subject  to the  restrictions  set forth in  Section  5.6\nrespecting  confidentiality,  Seller shall, and shall cause the Subsidiaries to,\nafford Buyer, and the counsel,  accountants and other  representatives of Buyer,\nreasonable access, throughout the period from the date hereof to the Closing, to\nthe  Facilities  and the  employees,  personnel  and  medical  staff  associated\ntherewith and all the properties,  books, contracts,  commitments,  cost reports\nand records  respecting RSC, the Subsidiaries and the Facilities  (regardless of\nwhere such  information may be located).  Such access shall be afforded after no\nless than 24 hours' prior written notice,  during normal business hours whenever\nreasonably possible and only in such manner so as not to disturb patient care or\nto interfere with the normal  operations of the Facilities.  Seller's  covenants\nunder this Section are made with the understanding that Buyer shall use all such\ninformation in compliance with all Laws.\n\n                  (b) At least ten business  days prior to the  Closing,  Seller\nshall,  if so  requested by Buyer,  provide to Buyer copies of an  environmental\nsurvey  conducted (at Buyer's  expense)  with respect to each of the  Facilities\n(the \"Environmental  Survey\"). The Environmental Survey shall be conducted by an\nenvironmental consulting firm or firms (the \"Consultant\") and in accordance with\nsuch reasonable  procedures as are jointly  determined by Seller and Buyer.  The\nresults of any such  Environmental  Survey  shall be  delivered  to and owned by\nSeller, and all proceedings in connection with the Environmental  Survey and the\nresults  thereof shall be subject to the  confidentiality  provisions of Section\n5.6  and  such  other  restrictions  as  Seller  may  impose  in its  reasonable\ndiscretion. Buyer acknowledges and agrees that the Environmental Survey shall be\nonly an initial  \"Phase I\"  environmental  site assess-  ment.  If  subsequently\nagreed by Seller and Buyer, after consultation with Consultant,  to be necessary\nor prudent and if Seller and Buyer jointly  thereafter  direct the Consultant to\nundertake the same (at Buyer's sole cost and expense),  the Environmental Survey\nmay include a further \"Phase II\" investigation respecting certain Facilities. In\nany \"Phase  II\"  investigation,  Seller  shall give Buyer no less than 24 hours'\nnotice  before  the  Consultant  enters  onto any  Facility,  and the \"Phase II\"\nEnvironmental  Survey shall be conducted so as not to interfere  with the normal\noperation  of the  Facilities.  Buyer  shall  be  permitted  to have  one of its\nemployees  present during all inspections of, and sample  gatherings  (including\nborings) from the soil or any floor tile, insulation or other internal component\nof, a Facility.\n\n                  (c)  With   respect   to  any   matters   disclosed   by  such\nEnvironmental  Survey that would  constitute a breach of Seller's  warranties in\nSection 3.15, but for the  qualifications  to such warranties  based on Seller's\nknowledge  or  disclosures  in the  Environmental  Survey,  Seller  will  at its\nelection,  either  (i)  clean  up  or  otherwise  remediate  such  matters  in a\nreasonable  manner prior to the Closing Date, at its expense;  or (ii) reimburse\nBuyer for the costs of such reasonable clean-up or remediation incurred by Buyer\nafter the  Closing  Date,  provided  Seller  shall have  approved  such costs in\nadvance and in writing (such approval not unreasonably to be withheld).\n\n                  (d) Promptly after  execution and delivery of this  Agreement,\nSeller  shall  provide,  or shall  cause  RSC or any  applicable  Subsidiary  to\nprovide, Buyer with a copy of the most recent title binder, commitment or policy\nin the  possession  of any of the  foregoing  entities with respect to the Owned\nReal Property and the Leased Real Property,  together with any  documentation in\nany of such  entities'  possession  relating to any  exceptions or  encumbrances\nreflected on such title binders, commitments or policies.\n\n         Section  6.3  Updating.  Seller  shall  notify  Buyer of any changes or\nadditions  to any of Seller's  Schedules  to this  Agreement  by the delivery of\nupdates thereof, if any, not later than five business days prior to the Closing,\nprovided, however, that the Financial Schedule shall not be updated to cover any\nperiod or periods  subsequent to the respective  dates thereof.  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.  Seller has  delivered to Buyer all Other  Contracts  and leases that\nSeller has knowledge of, if such contracts were located at the corporate offices\nof Seller.  Seller  shall  deliver all Other  Contracts  and leases  which it is\nobligated to deliver pursuant to this Agreement within seven business days after\nthe date hereof.  Unless performance under such contracts or leases would have a\nMaterial  Adverse Effect (as defined in Section 3.4),  Buyer shall have no claim\nagainst  Seller based on the delivery  after the date hereof  rather than before\nexecution of this Agreement.\n\n         Section 6.4  No Solicitation.  Seller will not, and shall cause RSC and\nthe  Subsidiaries  not to, and will use its best  efforts to cause its and their\nofficers,  employees,  agents  and  representatives  (including  any  investment\nbanker) not to,  directly or  indirectly,  solicit,  encourage  or initiate  any\ndiscussions with, or, subject to fiduciary duties to shareholders,  negotiate or\notherwise  deal  with,  or  provide  any   information   to,  any   corporation,\npartnership, person or other entity or group, other than Buyer and its officers,\nemployees and agents,  concerning any sale of or similar transactions  involving\nRSC, the  Facilities  or the stock of the  Subsidiaries.  None of the  foregoing\nshall prohibit  providing  information to others in a manner in keeping with the\nordinary conduct of Seller's or the Subsidiaries' businesses.\n\n         Section 6.5 Filing of Cost  Reports.  Seller shall cause to be prepared\nand timely  filed all Cost  Reports  which are required to be filed prior to the\nClosing Date with Medicare and any other  cost-based  Payors with respect to the\noperations of the Facilities for any and all periods ending prior to the Closing\nDate.\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 the\nFacilities  are located and all other similar laws  applicable to bulk sales and\ntransfers.\n\n         Section 7.2 Cost Reports and Audit Contests.  After the Closing and for\nthe period of time  necessary  to  conclude  any pending or  potential  audit or\ncontest of any Cost Reports with respect to the Facilities  that include periods\nending on or before the Closing Date, Buyer shall properly keep and preserve all\nfinancial  books and records  delivered to Buyer by Seller and the  Subsidiaries\n(if any) and utilized in preparing such Reports, including,  without limitation,\naccounts payable invoices,  Medicare logs and billing  information in accordance\nwith Section  5.7.  Upon  reasonable  written  notice by Seller,  Seller (or its\nagents) shall be entitled,  at Seller's expense,  during regular business hours,\nto have access to,  inspect and make copies of all such books and records.  Upon\nthe reasonable request of Seller, Buyer shall assist Seller and the Subsidiaries\nin  obtaining  information  deemed by Seller to be  necessary  or  desirable  in\nconnection with any audit or contest of such reports.  To the extent required to\nmeet its  obligations  under this Section,  Buyer shall  provide the  reasonable\nsupport of its employees at no cost to Seller.\n\n         Section  7.3  Letters  of Credit.  Subject to the terms and  conditions\nhereof,  at the  Closing,  Buyer shall cause  guaranties,  letters of credit and\nindemnity or performance bonds to be provided to substitute for those letters of\ncredit and bonds listed in Schedule 7.3, so that at and as of the Closing Seller\nand its Affiliates  shall have no further  obligation to provide such designated\nletters of credit or bonds. Buyer shall use its reasonable commercial efforts to\ncause the release of NovaCare promptly after Closing from any guaranties related\nto the business of RSC or the  Subsidiaries,  provided that such guaranties have\nbeen disclosed to Buyer in writing.\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.  Seller shall have performed in\nall material respects its agreements and obligations contained in this Agreement\nrequired to be performed on or prior to the Closing.\n\n         Section  8.2   Accuracy  of   Representations   and   Warranties.   The\nrepresentations  and  warranties  of  Seller  set  forth  in  Article  3 of this\nAgreement shall be true in all respects as of the date of this Agreement (unless\nthe inaccuracy or inaccuracies which would otherwise result in a failure of this\ncondition  have been cured by the  Closing) and as of the Closing (as updated by\nthe  revising of  Schedules  contemplated  by Section 6.3) as if made as of such\ntime, except where such inaccuracy or inaccuracies  would not individually or in\nthe aggregate result in a Material Adverse Effect on RSC and the Subsidiaries.\n\n         Section  8.3  Officer's  Certificate.  Buyer shall have  received  from\nSeller  an  officer's  certificate,  executed  on  Seller's  behalf by its chief\nexecutive  officer,  president,  chief financial officer or treasurer (in his or\nher  capacity  as such) dated the  Closing  Date and stating  that to the actual\nknowledge of such individual,  after inquiry of the other officers identified in\nthis Section 8.3, the conditions in Sections 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.\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 Facilities, provided that the parties will use their reasonable\nefforts to litigate  against the entry of, or to obtain the lifting of, any such\norder or injunction,  and the existence of any such temporary  restraining order\nor preliminary  injunction shall operate, at the option of Seller, only to delay\nthe Closing (and extend the Termination  Date) until the thirtieth day following\nthe  lifting of any such  order or  injunction,  except  that such delay may not\nextend the original Termination Date for more than nine months.\n\n         Section 8.6 Opinion of Counsel. Buyer shall have received, on and as of\nthe  Closing  Date,  an opinion  of Peter D.  Bewley,  Esq.,  counsel to Seller,\nsubstantially as to the matters set forth in Sections 3.1, 3.2, 3.3, 3.4(a), and\n3.4(c) (to the knowledge of such counsel),  subject to customary  conditions and\nlimitations.\n\n         Section 8.7 Receipt of Other  Documents.  Buyer shall have received the\nfollowing:\n\n                  (a) Certified  copies of the  resolutions of Seller's board of\ndirectors respecting this Agreement, the Related Agreements and the Transaction,\ntogether  with  certified  copies  of  any  stockholder  resolutions  which  are\nnecessary  to approve  the  execution  and  delivery of this  Agreement  and any\nRelated Agreements and\/or the performance of the obligations of Seller hereunder\nand thereunder;\n\n                  (b) Certified copies of Seller's,  RSC's and each Subsidiary's\nCharter  Documents,  together with a certificate  of the corporate  secretary of\neach that none of such documents have been amended;\n\n                  (c)  One or more  certificates  as to the  incumbency  of each\nofficer of Seller or of RSC or of any  Subsidiary  who has signed the Agreement,\nany Agreement or any certificate,  document or instrument  delivered pursuant to\nthe Agreement or any Agreement;\n\n                  (d) Good standing certificates for Seller, RSC 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 days prior to the Closing\nDate; and\n\n                  (e)  Copies of all  third  party  and  governmental  consents,\npermits  and  authorizations  that  Seller or any  Subsidiary  has  received  in\nconnection with the Agreement, the Agreements and the Transactions.\n\n         Section 8.8 Certificates of Need and Consents.  The consent of the West\nVirginia  Health  Care  Cost  Review  Authority  (\"HCCRA\")  or other  applicable\nauthority for  facilities  in other states and the issuance of a Certificate  of\nNeed is legally required for Buyer to operate certain of the Subsidiaries  after\nClosing. In addition, other approvals, consents, authorizations and waivers from\ngovernmental  and  accreditation  agencies  and from  other  third  parties  are\nrequired  to  consummate  the   transactions.   If  such  approvals,   consents,\nauthorizations,  waivers  or  issuance  with  respect  to  one  or  more  of the\nSubsidiaries  has not been  obtained  within  three days before the date Closing\nwould  otherwise  have  occurred  pursuant  to  this  Agreement,  the  following\nprocedure shall be followed:\n\n                           (i)  The  shares  of  the  affected   Subsidiary   or\n         Subsidiaries  which are owned by RSC shall be  transferred  from RSC to\n         Seller.\n\n                           (ii) Seller  shall then  deposit  such shares with an\n         escrow agent (the \"Escrow Agent\") chosen by the parties pursuant to the\n         mechanism in Section 2.8.\n\n                           (iii) When the approval and issuance of a Certificate\n         of Need and  delivery of consents,  authorizations  or waivers to Buyer\n         with respect to such Subsidiary  occurs, the Escrow Agent shall deliver\n         the shares of such Subsidiary of Buyer.\n\n                           (iv) If the approval and issuance with respect to any\n         Subsidiary  is not approved  within six months after  Closing,  or such\n         longer  period as Buyer may  determinie,  Buyer shall use  commercially\n         reasonable  efforts to resell the shares of such  Subsidiary to a buyer\n         who is able to obtain the required  Certificate of Need. Buyer shall be\n         entitled to retain any proceeds  from such sale and shall be subject to\n         any  liabilities  or  obligations  in connection  with such sale.  Upon\n         closing of such sale,  the Escrow  Agent  shall  deliver  the  escrowed\n         shares of such Subsidiary to Buyer.\n\n                           (v) After Closing, and until release of the shares of\n         each  Subsidiary  from  escrow,  Buyer  shall  operate  the  Subsidiary\n         pursuant  to a  Management  Agreement.  Buyer  shall be entitled to any\n         income with respect to each  Subsidiary  it manages and shall be liable\n         for any  expenses  or  liabilities  with  respect  to such  Subsidiary;\n         provided,  however,  that  all  employees  providing  services  to  the\n         Subsidiary  shall remain  employees of the Subsidiary and Buyer and the\n         Subsidiary shall enter into appropriate  arrangements to cause Buyer to\n         bear all compensation expense of such employees.\n\n                           (vi)  Within  two  weeks  after   execution  of  this\n         Agreement,  Buyer  and  Seller  shall  agree  on  the  form  of  Escrow\n         Agreement,   designation  of  Escrow  Agent,  and  form  of  Management\n         Agreement to effectuate  the foregoing  process.  If they are unable to\n         reach agreement by such time, the dispute shall be settled  pursuant to\n         the mechanism in Section 2.8.\n\n                                   ARTICLE 9\n                         SELLER'S CONDITIONS TO CLOSING\n\n         The  obligations of Seller to consummate the Transaction at the Closing\nshall be subject to the  fulfillment at or prior to the Closing of the following\nconditions, unless Seller waives 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\nrepresentations and warranties of Buyer set forth in Article 4 of this Agreement\nshall be true in all material  respects as of the date of this Agreement (unless\nthe inaccuracy or inaccuracies which would otherwise result in a failure of this\ncondition have been cured by the Closing) and as of the Closing as if made as of\nsuch time.\n\n         Section 9.3  Officer's  Certificate.  Seller shall have  received  from\nBuyer  an  officers'  certificate,  executed  on  Buyer's  behalf  by its  chief\nexecutive  officer,  president,  chief financial officer or treasurer (in his or\nher  capacity  as such) dated the  Closing  Date and stating  that to the actual\nknowledge of such individual  after inquiry of the other officers  identified in\nthis Section 9.3, the 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 2.6, 2.7\nand 2.8, all approvals,  consents,  authorizations and waivers from governmental\nand  accreditation  agencies and from other third parties required for Seller to\nconsummate the Transaction shall have been obtained,  except for such approvals,\nconsents,  authorizations  and  waivers  the  failure to obtain  which will not,\nindividually or in the aggregate,  result in a Material Adverse Effect on Seller\nfollowing the Closing.\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\nTransaction,  or any threat by governmental  authorities to exact any penalty or\nimpose any economic  detriment upon Seller if it consummates  the Transac- tions\nthat would have a Material  Adverse  Effect upon Seller  following  the Closing,\nprovided that the parties will use their reasonable  efforts to litigate against\nthe entry of, or to  obtain  the  lifting  of,  any such  order,  injunction  or\npotential  penalty  or  imposition,  and the  existence  of any  such  temporary\nrestraining  order,  preliminary  injunction or potential  penalty or imposition\nshall  operate,  at the option of Seller,  only to delay the Closing (and extend\nthe Termination  Date) until the thirtieth day following the lifting of any such\norder or  injunction  or  threat,  except  that such  delay may not  extend  the\noriginal Termination Date for more than nine months.\n\n         Section 9.6 Opinion of Counsel.  Seller shall have received,  on and as\nof the Closing Date,  an opinion  ofWilliam W. Horton,  Esq.,  counsel to Buyer,\nsubstantially  as to the matters set forth in Sections  4.1,  4.2,  4.3(a),  and\n4.3(c) (to the knowledge of such counsel),  subject to customary  conditions and\nlimitations.\n\n         Section 9.7 Receipt of Other Documents.  Seller shall have received the\nfollowing:\n\n                  (a) Certified  copies of the  resolutions  of Buyer's board of\ndirectors   respecting   this   Agreement,   the  Related   Agreements  and  the\nTransactions;\n\n                  (b) Certified  copies of Buyer's Charter  Documents,  together\nwith a certificate  of Buyer's  corporate  secretary that none of such documents\nhave been amended;\n\n                  (c)  One or more  certificates  as to the  incumbency  of each\nofficer of Buyer who has signed the  Agreement,  any Related  Agreement,  or any\ncertificate,  document or instrument  delivered pursuant to the Agreement or any\nRelated Agreement;\n\n                  (d) Good  standing  certificates  for Buyer and for each Buyer\nSubsidiary  from the Secretaries of State of the State of Delaware dated as of a\ndate not earlier than 30 days prior to the Closing Date;\n\n                  (e)  Copies of all  third  party  and  governmental  consents,\npermits  and  authorizations  that Buyer has  received  in  connection  with the\nAgreement, the Related Agreements and the Transactions; and\n\n                  (f) A certificate of Buyer executed on its behalf by the Chief\nExecutive Officer, the Chief Financial Officer or the Treasurer of Buyer stating\nthat to the best of their knowledge and belief,  specifying in reasonable detail\ntheir basis for same, after giving effect to the Transaction,  neither Buyer nor\nany  of  its  Subsidiaries  is  insolvent  or  will  be  rendered  insolvent  by\nobligations incurred in connection therewith,  or will be left with unreasonably\nsmall  capital with which to engage in their  businesses,  or will have incurred\nobligations  beyond their  respective  abilities to perform the same as and when\ndue.\n\n\n                                   ARTICLE 10\n                                  TERMINATION\n\n         Section  10.1   Termination.   This  Agreement  and  the   transactions\ncontemplated hereby may be terminated at any time prior to the Closing:\n\n                  (a)  By mutual consent of Seller and Buyer; or\n\n                  (b) By either Buyer or Seller upon written notice to the other\nparty,  if (i) the  Closing  shall not have  occurred  by the later of April 30,\n1995, the fifth business day following the expiration of the HSR waiting period,\nor such later date as may be provided  for in this  Agreement  or agreed upon by\nthe parties (the  \"Termination  Date\"); or (ii)(A) in the case of termination by\nSeller,  the conditions  set forth in Article 9 cannot  reasonably be met by the\nTermination  Date, and (B) in the case of  termination by Buyer,  the conditions\nset forth in Article 8 cannot  reasonably be met by the Termination Date, unless\nin either of the cases  described  in  clauses  (A) or (B),  the  failure of the\ncondition  is the result of the material  breach of this  Agreement by the party\nseeking 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         Section  10.2 Effect of  Termination.  In the event this  Agreement  is\nterminated  pursuant to Section  10.1,  all further  obligations  of the parties\nhereunder  shall  terminate,  except that the obligations set forth in Sections,\n5.5 and 5.6 and in Articles 11 and 12 shall survive. In the event of termination\nof this Agreement as provided above,  there shall be no liability on the part of\na party to another  under and by reason of this  Agreement  or the  transactions\ncontemplated  hereby except as set forth in Article 11 and except for fraudulent\nacts by a party,  the remedies for which shall not be limited by the  provisions\nof this Agree- ment.  The  foregoing  provisions  shall not,  however,  limit or\nrestrict  the  availability  of  specific  performance  or other  injunctive  or\nequitable  relief to the extent that specific  performance  or such other relief\nwould otherwise be available to a party hereunder.\n\n\n                                   ARTICLE 11\n                     SURVIVAL AND REMEDIES; INDEMNIFICATION\n\n         Section 11.1 Survival.  Except as may be otherwise  expressly set forth\nin this Agreement, the representations,  warranties, covenants and agreements of\nBuyer and Seller set forth in this Agreement,  or in any writing  required to be\ndelivered in connection with this  Agreement,  shall survive the Closing and the\nconsummation of the Transactions.\n\n         Section 11.2 Exclusive Remedy.  Absent fraud, the sole exclusive remedy\nfor damages of a party hereto for any breach of the representations, warranties,\ncovenants and agreements of the other party  contained in this Agreement and the\nAgreements shall be the remedies contained in this Article 11.\n\n         Section 11.3  Indemnity by Seller.\n\n                  (a) Seller shall  indemnify Buyer and hold Buyer harmless from\nand  against  any  and  all  loss,  liability,  damage  and  expense,  including\nreasonable  attorneys' fees and costs of investigation,  litigation,  settlement\nand judgment  (collectively  \"Losses\"),  which Buyer may sustain or suffer or to\nwhich Buyer may become subject as a result of:\n\n                           (i)  The  inaccuracy  of  any  representation  or the\n         breach  of any  warranty  made  by  Seller  herein  or in a  Agreement,\n         provided that any such inaccuracy or breach shall be determined without\n         regard to any  qualification of such  representation  or warranty based\n         upon the  absence  of a  Material  Adverse  Effect  on the  Transferred\n         Assets; and\n\n                           (ii) The  nonperformance or breach of any covenant or\n         agreement  made or  undertaken  by Seller in this  Agreement  or in any\n         Related Agreement.\n\n                  (b) The  indemnification  obligations of Seller provided above\nshall,  in addition to the  qualifications  and conditions set forth in Sections\n11.5 and 11.6, be subject to the following qualifications:\n\n                           (i) Buyer shall not be entitled  to  indemnity  under\n         Section 11.3(a)(i) above unless:\n\n                                    (A)  Written  notice to Seller of such claim\n                  specifying  the basis  thereof is made, or an action at law or\n                  in equity  with  respect to such  claim is served,  before the\n                  second anniversary of the earlier to occur of the Closing Date\n                  or the date on which this Agreement is terminated, as the case\n                  may be;\n\n                                    (B)  If  the  Closing  occurs,   the  Losses\n                  sustained  or  suffered by Buyer or to which it may be subject\n                  as  a  result  of  circumstances  described  in  such  Section\n                  11.3(a)(i)   exceeds,   in  the  aggregate,   $3,000,000  (the\n                  \"Deductible  Amount\"),   provided,  however,  that  individual\n                  claims of $10,000 or less shall not be aggregated for purposes\n                  of calculating  the Deductible  Amount or the excess of Losses\n                  over the Deductible Amount; and\n\n                                    (C) If the Closing occurs, in no event shall\n                  Seller be liable to Buyer under  Section  11.3 for (1) amounts\n                  which, in the aggregate,  exceed 100% of the Purchase Price or\n                  (2) amounts below the Deductible Amount.\n\n                           (ii)  If  the  Closing  occurs,  Buyer  shall  not be\n         entitled  to  indemnity  under  Subsection  (a)(ii)  above  except  for\n         out-of-pocket  Losses  actually  suffered or  sustained  by Buyer or to\n         which Buyer may become subject as a result of  circumstances  described\n         in such  Subsections  (a)(ii),  and such  indemnity  shall not  include\n         Losses in the nature of consequential damages, lost profits, diminution\n         in value, damage to reputation or the like.\n\n         Section 11.4  Indemnity by Buyer.\n\n                  (a) Buyer shall indemnify Seller and hold Seller harmless from\nand against  any and all Losses  which they may sustain or suffer or to which it\nmay become subject as a result of:\n\n                           (i)  The  inaccuracy  of  any  representation  or the\n         breach of any warranty made by Buyer herein or in a Agreement;\n\n                           (ii) The  nonperformance or breach of any covenant or\n         agreement  made or  undertaken  by  Buyer in this  Agreement  or in any\n         Related Agreement;\n\n                           (iii) If the Closing occurs,  the ongoing  operations\n         of Buyer,  RSC, the  Subsidiaries  and the Facilities after the Closing\n         Date.\n\n                  (b) The  indemnification  obligations  of Buyer provided above\nshall,  in addition to the  qualifications  and conditions set forth in Sections\n11.5 and 11.6, be subject to the following qualifications:\n\n                           (i) Seller shall not be entitled to  indemnity  under\n         Section 11.4(a)(i) above unless:\n\n                                    (A)  Written  notice to Buyer of such  claim\n                  specifying  the basis  thereof is made, or an action at law or\n                  in equity  with  respect to such  claim is served,  before the\n                  first  anniversary of the earlier to occur of the Closing Date\n                  or the date on which this Agreement is terminated, as the case\n                  may be; and\n\n                                    (B)  If  the  Closing  occurs,   the  Losses\n                  sustained  or suffered by Seller or to which it may be subject\n                  as  a  result  of  circumstances  described  in  such  Section\n                  11.4(a)(i) exceeds,  in the aggregate,  the Deductible Amount,\n                  provided,  however,  that individual claims of $10,000 or less\n                  shall  not be  aggregated  for  purposes  of  calculating  the\n                  Deductible  Amount or the excess of Losses over the Deductible\n                  Amount; and\n\n                                    (C) If the Closing occurs, in no event shall\n                  Buyer be liable to Seller under Section 11.4(a)(i) for amounts\n                  below the Deductible Amount.\n\n                           (ii)  If  the   Closing   occurs,   Seller   and  the\n         Subsidiaries   shall  not  be  entitled  to  indemnity  under  Sections\n         11.4(a)(ii)-(iii)   above  except  for  out-of-pocket  Losses  actually\n         suffered or sustained by them or to which they may become  subject as a\n         result of circumstances  described in such Sections  11.4(a)(ii)-(iii),\n         and  such  indemnity   shall  not  include  Losses  in  the  nature  of\n         consequential  damages,  lost profits,  diminution in value,  damage to\n         reputation or the like.\n\n         Section 11.5 Further  Qualifications  Respecting  Indemnification.  The\nright of a party (an  \"Indemnitee\")  to indemnity  hereunder shall be subject to\nthe following additional qualifications:\n\n                  (a) The Indemnitee  shall promptly upon its discovery of facts\nor circumstances giving rise to a claim for  indemnification,  including receipt\nby it 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; and\n\n                  (b) In computing Losses, such amounts shall be computed net of\nany related  recoveries  to which the  Indemnitee  is entitled  under  insurance\npolicies or other related payments received or receivable from third parties and\nnet of any 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\nnotice to the  Indemnitor  of any Third Party Claim (the  \"Claim  Notice\"),  the\nIndemnitee shall provide the Indemnitor with a copy of such Third Party Claim or\nother  documents  received and shall  otherwise make available to the Indemnitor\nall  relevant  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 settlement  effected by the  Indemnitee  without the\nIndemnitor's  consent. The Indemnitor may assume and control, or bear the costs,\nof any  such  defense  subject  to its  reservation  of a right to  contest  the\nIndemnitee's  right to  indemnification  hereunder,  provided  that it gives the\nIndemnitee  notice of such  reservation  within 15 days of the date of the Claim\nNotice.\n\n\n                                   ARTICLE 12\n                               GENERAL PROVISIONS\n\n         Section 12.1 Notices. All notices, requests, demands, waivers, consents\nand other  communications  hereunder  shall be in  writing,  shall be  delivered\neither in person,  by  telegraphic,  facsimile  or other  electronic  means,  by\novernight  air  courier or by mail,  and shall be deemed to have been duly given\nand to have  become  effective  (a) upon  receipt if  delivered  in person or by\ntelegraphic,  facsimile or other  electronic  means  calculated to arrive on any\nbusiness day prior to 5:30 p.m. local time at the address of the  addressee,  or\non the next succeeding  business day if delivered on a non-business day or after\n5:30 p.m. local time, (b) one business day after having been delivered to an air\ncourier for  overnight  delivery  or (c) five  business  days after  having been\ndeposited  in  the  mails  as  certified  or  registered  mail,  return  receipt\nrequested,  all  fees  prepaid,  directed  to the  parties  or  their  permitted\nassignees at the following addresses (or at such other address as shall be given\nin writing by a party hereto):\n\n         If to NovaCare or Seller, addressed to:\n\n                  NovaCare, Inc.\n                  1016 West Ninth Avenue\n                  King of Prussia, Pennsylvania  19406\n                  Attention:  Timothy E. Foster\n                              President and Chief Operating Officer\n                  Facsimile:  (610) 992-3326\n\nwith a copy to counsel for Seller:\n\n                  NovaCare, Inc.\n                  1016 West Ninth Avenue\n                  King of Prussia, Pennsylvania  19406\n                  Attention:  Peter D. Bewley, Esq.\n                  Facsimile:  (610) 902-3341\n\n                  and\n\n                  Tucci &amp; Semes\n                  Suite 206\n                  Three Mill Road\n                  Wilmington, Delaware  19806\n\nIf to Buyer, addressed to:\n\n                  HEALTHSOUTH Corporation\n                  Two Perimeter Park South\n                  Birmingham, Alabama 35243\n                  Attention:  Richard M. Scrushy\n                              Chairman of the Board, President and\n                              Chief Executive Officer\n                  Facsimile:  (205) 969-4729\n\nwith a copy to counsel for Buyer:\n\n                  HEALTHSOUTH Corporation\n                  Two Perimeter Park South\n                  Birmingham, Alabama 35243\n                  Attention:  William W. Horton, Esq.\n                  Facsimile:  (205) 969-4732\n\n                  and\n\n                  J. Brooke Johnston, Jr., Esq.\n                  Haskell Slaughter Young &amp; Johnston,\n                   Professional Association\n                  1200 AmSouth\/Harbert Plaza\n                  1901 Sixth Avenue North\n                  Birmingham, Alabama 35203\n                  Facsimile:  (205) 324-1133\n\n\n         Section 12.2  Attorneys'  Fees. In any  litigation or other  proceeding\nrelating to this Agreement,  including litigation with respect to any Agreement,\nthe  prevailing  party shall be  entitled  to recover  its costs and  reasonable\nattorneys' fees. The term \"prevailing party\" shall mean the party in whose favor\nfinal  judgment  after  appeal (if any) is rendered  with  respect to the claims\nasserted in such litigation or other  proceeding.  \"Reasonable  attorneys' fees\"\nare no greater  than those  attorneys'  fees  actually  incurred in  obtaining a\njudgment or other determination in favor of the prevailing party.\n\n         Section 12.3  Successors  and Assigns.  The rights under this Agreement\nshall not be assignable or transferable nor the duties delegable by either party\nwithout the prior written  consent of the other;  and nothing  contained in this\nAgreement,  express or implied, is intended to confer upon any person or entity,\nother than the parties  hereto and their  permitted  successors-in-interest  and\npermitted assignees, any rights or remedies under or by reason of this Agreement\nunless so stated to the contrary.\n\n         Section 12.4  Counterparts.  This  Agreement  may be executed in one or\nmore counterparts,  each of which shall be deemed an original,  but all of which\ntogether shall constitute one and the same instrument.\n\n         Section 12.5  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  12.6  Entirety  of  Agreement;   Amendments.   This  Agreement\n(including  the  Schedules  and  Exhibits  hereto) and the other  documents  and\ninstruments  specifically  provided  for in this  Agreement  contain  the entire\nunderstanding  between  the  parties  concerning  the  subject  matter  of  this\nAgreement 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\nunder-  standings,  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 shall be deemed disclosed for all purposes and\nnot only in connection with the specific  provision in which they are explicitly\nreferenced.\n\n         Section  12.7  Construction.   This  Agreement  and  any  documents  or\ninstruments  delivered  pursuant hereto shall be construed without regard to the\nidentity of the person who drafted the various  provisions of the same. Each and\nevery provision of this Agreement and such other documents and instruments shall\nbe construed 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  12.8 Waiver.  The failure of a party to insist,  in any one or\nmore instances,  on performance of any of the terms, covenants and conditions of\nthis  Agreement  shall not be  construed  as a waiver or  relinquishment  of any\nrights granted hereunder or of the future performance of any such term, covenant\nor  condition,  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         Section 12.9  Governing  Law. This  Agreement  shall be governed in all\nrespects,  including  validity,  interpretation  and effect,  by the laws of the\nCommonwealth of  Pennsylvania,  without regard to the principles of conflicts of\nlaw thereof.\n\n         Section 12.10 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 12.11 Consents Not Unreasonably Withheld.  Wherever the consent\nor approval  of any party is  required  under this  Agreement,  such  consent or\napproval shall not be unreasonably withheld,  unless such consent or approval is\nto be given by such party at the sole or absolute discretion of such party or is\notherwise similarly qualified.\n\n         Section 12.12 Time Is of the Essence.  Time is hereby expressly made of\nthe essence with respect to each and every term and provision of this Agreement.\nThe parties acknowledge that each will be relying upon the timely performance by\nthe other of its obligations  hereunder as a material inducement to each party's\nexecution of this Agreement. Consequently, the parties agree that they are bound\nstrictly by the provisions  concerning  timely  performance of their  respective\nobligations  contained  in this  Agreement  and that if any  attempt  is made by\neither party to perform an obligation  required to be performed or comply with a\nprovision of this Agreement  required to be complied with in a manner other than\nin strict  compliance  with the time  period  applicable  thereto,  even if such\npurported  attempt  is  but  one  day  late,  then  such  purported  attempt  at\nperformance or compliance shall be deemed a violation of this Section,  shall be\ndeemed in  contravention  of the intention of the parties  hereto,  and shall be\nnull and void and of no force or effect.\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\/ MICHEAL D. MARTIN\n                                         _______________________________\n\n                                     Its: Senior Vice President and Treasurer\n                                         ______________________________\n\n\n                                     NOVACARE, INC.\n                                     By: \/s\/ TIMOTHY G. FOSTER\n                                         _______________________________\n\n                                     Its: President and Chief Operating Officer\n                                         ______________________________\n\n\n                                     NC RESOURCES, INC.\n                                     By: \/s\/ JOSEPH C. O'NEILL\n                                        _______________________________\n\n                                     Its: President\n                                         ______________________________\n<\/pre>\n","protected":false},"template":"","meta":{"_acf_changed":false,"_stopmodifiedupdate":true,"_modified_date":"","_cloudinary_featured_overwrite":false},"corporate_contracts_companies":[7751],"corporate_contracts_industries":[9438],"corporate_contracts_types":[9622,9627],"class_list":["post-43700","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__purchase"],"acf":[],"_links":{"self":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts\/43700","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=43700"}],"wp:term":[{"taxonomy":"corporate_contracts_companies","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_companies?post=43700"},{"taxonomy":"corporate_contracts_industries","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_industries?post=43700"},{"taxonomy":"corporate_contracts_types","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_types?post=43700"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}