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                                                                   EXHIBIT 10.78


                     SEVERANCE AGREEMENT AND GENERAL RELEASE


         This Severance Agreement and General Release (the "Agreement") is made
between Capstone Capital Corporation (hereinafter referred to as the "Company")
and William C. Harlan (hereinafter "Employee"). Unless the Company and Employee
enter into this Agreement, Employee does not have a right to any of the
considerations described in this Agreement. However, in consideration for
Employee agreeing to these terms, and Employee's agreement to resign as an
employee of the Company as described below, the Company will provide severance
and other consideration as set forth herein.

         1. Consideration and Release. In consideration of payment by the
Company to the Employee of (a) the sum of Eighty-Three Thousand Dollars
($83,000) payable to Employee in twelve (12) semi-monthly installments, payable
on the 1st and 15th of each month, of Six Thousand Nine Hundred Sixteen and
67/100 Dollars ($6,916.67), less legally required deductions and withholdings,
commencing on November 1, 1997, (b) the sum of Eighty-five Thousand Dollars
($85,000), less legally required deductions and withholdings, payable upon
execution of this Agreement, which represents Employee's bonus for 1996, (c) the
sum of Twenty-Four Dollars ($24.00) per share against redemption of shares of
Common Stock of the Company acquired by Employee upon the exercise of all but
not less than all of Employee's stock options, less (i) Ninety-Eight Thousand
Five Hundred Sixty-Four and 77/100 Dollars ($98,564.77), which represents the
outstanding principal balance of and interest on the Employee's loan to purchase
Common Stock at October 12, 1997, (ii) Eighty-Five Thousand Dollars ($85,000)
which represents the outstanding principal balance of Employee's advance against
bonus for 1996, and (iii) less legally required deductions and withholdings, (d)
the sum of $85,000, less legally required deductions and withholdings and (e)
other good and valuable consideration, Employee agrees to release the Company as
follows:

         Employee agrees on behalf of himself and all of his heirs or personal
         representatives and assigns, and his estate, to release, remise,
         forgive and forever discharge the Company , and all of its directors,
         officers, agents and employees of and from any and all claims, rights,
         demands, actions, liability, causes of action, damages, costs, expenses
         or compensation, whether or not known or unknown, which presently
         exists or which may hereinafter arise, or which in any way arises out
         of or relates to Employee's employment or termination of Employee's
         employment with the Company, including, but not limited to, any and all
         claims of breach of contract or failure to pay compensation of any
         kind, against the Company concerning events occurring at any time up to
         the date of this Agreement. This release and covenant not to sue shall
         be absolute and shall operate as a discharge and a bar to any suit at
         law, or in equity, whether such suit arises out of contract, fraud, or
         any other cause of action whatsoever, whether under any applicable
         federal laws, state or local laws or ordinances for any reason
         whatsoever.


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         By executing this Agreement, Employee agrees to surrender for
redemption to the Company all shares of Common Stock acquired through the
exercise of all outstanding options against the payment described in
subparagraph (c) above, and Employee agrees to execute and deliver to the
Company any and all assignments or other documents necessary to transfer such
shares to the Company.

         2.       No Admission of Liability. Employee acknowledges and
understands that this Agreement does not constitute an admission of any kind by
the Company, but is simply an accommodation which offers a certain benefit in
return for Employee's agreeing to and signing this Agreement.

         3.       Confidentiality. The Company and Employee mutually agree that
the terms and provisions of this Agreement are strictly confidential and each
agree that neither the Company nor Employee will disclose or otherwise
communicate to any third party (including, in the case of Employee, to an
employee of the Company) the existence or provisions of this Agreement. The
Company and Employee further agree not to publish or otherwise communicate any
derogatory remark, in the case of Employee, concerning the Company, its
directors, officers, employees or agents, and in the case of the Company,
concerning the Employee, or do anything which would directly or indirectly
damage the business, business prospects or reputation of the Company or its
directors, officers, employees or agents or the business, business prospects or
reputation of the Employee, as the case may be. The Company further agrees to
provide Employee with a copy of any press release to be issued by the Company in
connection with Employee's resignation as an executive officer of the Company
prior to the public dissemination of such press release. Nothing in this Section
3 shall prohibit the Company from making such disclosures regarding the
existence and terms of this Agreement as shall be required under the federal
securities laws or in dealing with analysts and investment bankers on behalf of
the Company.

         4.       Reservation of Claims. Employee further acknowledges and
understands that the Company reserves the right to pursue all liability, causes
of action, obligations, liabilities and claims of any kind whatsoever in law or
equity against Employee, whether or not known or unknown, which presently exist
or which may hereinafter arise, or which in any way arises out of or relates to
his employment by the Company.

         5.       Effective Date of Resignation. Employee's resignation from
employment with the Company shall be effective October 13, 1997.

         6.       Reemployment. Employee agrees that he will not apply for or
otherwise seek reemployment with the Company and the Company has no obligation,
contractual or otherwise, to rehire, reemploy, recall or hire Employee in the
future.


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         7.       Nondisclosure.

                  (a)      It is the intent of the parties to this Agreement to
preserve to the Company exclusively the special knowledge, experience and Trade
Secrets, as hereinafter defined, gained by the Employee during the course of
Employee's association with the Company, recognizing that if such knowledge,
experience and Trade Secrets were made available to competitors of the Company,
it would irreparably damage the business of the Company. For all purposes of
this Agreement, Employee's association with the Company shall include Employee's
association as an employee, officer and/or shareholder of the Company.

                  (b)      The Employee hereby acknowledges and agrees that
Employee's obligations hereunder are special, unique and extraordinary and that
Employee has had special access to economically valuable confidential,
nonpublicly available information used or intended for use in the Company's
trade or business, including, but not limited to, development plans, markets,
designs, compositions, scripts, outlines, customer lists, customer information,
rent rolls, tenant information, lessees, developers, mortgagors, financial
information, regarding the Company and its employees, trade secrets (including
trade secrets as defined in the Alabama Trade Secrets Act), and any other
material or information relating to the business activities of the Company which
Employee may have developed or had access to either solely or jointly, or
arising directly or indirectly, from Employee's association with the Company
(collectively, the "Trade Secrets").

                  (c)      It is further agreed that disclosure of such Trade
Secrets in any way, whether directly or indirectly, including copying or
removing of any records of the Company, except with the express written consent
of the Chief Executive Officer of the Company, would be deemed material and
would result in immediate and irreparable injury to the Company not properly or
completely compensable by damages in an action at law; and that the provisions
of this Agreement are necessary for the protection of the Company and that any
breach of this Agreement by Employee shall entitle the Company, in addition to
any other legal remedies available to it, including those remedies available
pursuant to the Alabama Trade Secrets Act, to apply to a court of competent
jurisdiction to enjoin any violation of this Agreement and/or to recover damages
for any breach of this Agreement, and to recover all costs of such action,
including a reasonable attorneys' fee. All of the rights and remedies of the
Company hereunder shall be cumulative and not alternative.

                  (d)      Employee recognizes and has been advised by the
Company that such experience, knowledge and Trade Secrets are intended for use
in the Company's business, are not publicly known or cannot be readily
ascertained or derived from publicly available information. The Company and
Employee further agree that the Company's protection of the experience,
knowledge and Trade Secrets gained by the Employee during Employee's association
with the Company through agreements and through daily business practices is
reasonable under the circumstances and that such special experience, knowledge
or Trade Secrets have significant economic value and if it were made available
to others it would irreparably damage the business of the Company. Except as
otherwise provided in Section 7(e) of this Agreement, Employee agrees that
Employee will not in any manner


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or at any time disclose or make available to any person, business concern or
other entity any such experience, knowledge or Trade Secrets relating to the
Company or the business of the Company, or the employees or customers of the
Company, which was disclosed to Employee or came within Employee's knowledge
during the course of Employee's employment by or association with the Company,
nor shall Employee make or cause to be made any use of such experience,
knowledge or Trade Secrets as an employee, consultant, officer, director,
shareholder, partner, member or any other owner of any person, firm, business
concern or other entity.

                  (e)      Notwithstanding any other provision of this Agreement
to the contrary, it is the intent of the Company and the Employee that the
provisions of this Agreement shall specifically prohibit Employee, for a period
of two (2) years after the effective date of this Agreement, from soliciting
business or investments from any of the healthcare operators (i) from which the
Company has acquired healthcare properties, (ii) to which the Company leases
leased properties, (iii) to which the Company has made mortgage loans, or (iv)
as of the date of this Agreement, to which the Company is considering the lease
of healthcare properties, from which the Company is considering the purchase of
healthcare properties, or to which the Company is considering the making of a
mortgage loan on healthcare properties; provided, that the limitations imposed
by this Section 7(e) shall not apply to discussions by Employee with Quorum
Health Group, Inc.; provided, further, that the limitations imposed by this
Section 7 shall not prohibit Employee from serving as an employee, consultant,
officer, director, shareholder, partner, member or any other owner of another
healthcare real estate investment trust so long as Employee shall comply with
the provisions of this Section 7 regarding nondisclosure of the Trade Secrets of
the Company.

         8.       Nonsolicitation.

                  (a)      The Employee has agreed and represented to the
Company that, except as otherwise agreed in writing by the Chief Executive
Officer of the Company, for a period of two (2) years after the effective date
of this Agreement the Employee will not call upon or communicate with in any
manner, either directly or indirectly, any employee of the Company, whether now
employed or employed in the future, to solicit any such employee for employment
with any other person, firm, business concern or entity.

                  (b)      It is agreed by the parties hereto that any breach of
this provision shall entitle the Company, in addition to any other legal
remedies available to it, to apply to a court of competent jurisdiction to
enjoin any violation of this provision and/or to recover damages for any breach
of this provision, and to recover all costs of such action, including a
reasonable attorneys' fee.

                  (c)      All of the terms and provisions of this Section shall
survive for and during the period during which solicitation is restricted
hereunder.

         9.       Return of Materials. Employee hereby certifies that all
materials related directly or indirectly to his employment with the Company have
been returned to the Company. He further certifies that no part of any material,
information, monies or property which is confidential, proprietary or protected
by the Company has been retained by him or given to any third person or


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entity in anticipation of Employee's resignation as an employee of the Company
or for any other reason, and he further certifies that none of the foregoing
will be removed by the Employee from the premises of the Company.

         10.      Cooperation. Employee hereby agrees to cooperate fully with
the Company for a period of thirty (30) days following execution of this
Agreement to transition all matters in which Employee has been engaged on behalf
of the Company to such person(s) as may be designated by the Company and to
review in detail with the Company the terms of any pending transactions or
matters in which Employee has been engaged on behalf of the Company. Employee
further agrees that, for a period of five months following the expiration of
such thirty day period, Employee shall cooperate with the Company and make
himself available to the Company at such times and locations as the Company may
reasonably request to discuss such matters related to Employee's activities on
behalf of the Company.

         11.      Remedies.

                  (a)      If Employee commits a breach or threatens to commit a
breach of any of the provisions of this Agreement, the Company shall be entitled
to seek any and all available remedies, including but not limited to the
following rights and remedies:

                           (i)      To recover liquidated damages in the amount
                                    paid to Employee under Section 1(a) hereof
                                    with interest thereon at the rate of twelve
                                    percent (12%) per annum; and

                           (ii)     To have the provisions of this Agreement
                                    specifically enforced by any court having
                                    equity jurisdiction, it being acknowledged
                                    and agreed that any such breach or
                                    threatened breach will cause irreparable
                                    injury to the Company and that money damages
                                    will not provide an adequate remedy to the
                                    Company;

                           (iii)    To terminate payment of and declare void any
                                    benefits payable to Employee under the terms
                                    of this Agreement; and

                           (iv)     To recover money damages.

                  (b)      Each of the rights and remedies enumerated above
shall be independent of the other and shall be severally enforceable, and all of
such rights and remedies shall be in addition to, and not in lieu of, any other
rights and remedies available to the Company at law or in equity.

                  (c)      All costs incurred by the prevailing party in the
enforcement of this Agreement and/or securing payment of damages specified
herein, including a reasonable attorney's


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fee, whether or not suit be instituted shall be paid by the non-prevailing
party; and Employee hereby waives all right to claim exemptions of personal
property under the laws and Constitution of the State of Alabama or any other
state of the United States.

         12.      Enforceability.

                  (a)      If any of the covenants contained in this Agreement
is hereafter construed to be invalid or unenforceable, the same shall not affect
the remainder of the covenant or covenants, which shall be given full effect,
without regard to the invalid portions.

                  (b)      If any of the covenants contained in this Agreement
is held to be unenforceable because of the duration of such provision or the
area covered thereby, the parties agree that the court making such determination
shall have the power to reduce the duration and/or area of such provision and,
in its reduced form, said provision shall then be enforceable.

         13.      Entire Agreement. This Agreement contains the entire Agreement
of the parties and supersedes and cancels any other agreement, representation,
communication or understanding, whether oral or written, between the parties
hereto and relating to the transactions contemplated herein or the subject
matter hereof. This Agreement may not be changed or terminated orally, but may
only be changed by an Agreement in writing signed by the parties hereto.

         14.      Applicable Law. This Agreement is made and entered into in the
State of Alabama, and shall in all respects be interpreted, enforced and
governed under the laws of said State.

         15.      Interpretation of Agreement. All parties have participated
fully in the negotiation and drafting of this Agreement. The Agreement has been
prepared by all parties equally, and is to be interpreted according to its
terms. No inference shall be drawn that the Agreement was prepared by or is the
product of any particular party or parties.

         16.      Voluntary Agreement. Employee understands that he has been
advised by the Company to seek counseling with anyone of his choosing including
an outside attorney, if he so desires. Employee is entering into this Agreement
freely and voluntarily, and Employee is satisfied that he has been given
sufficient opportunity to consider it. Employee acknowledges acceptance of this
Agreement by his signature below.

         17.      Amendments. This Agreement shall not be modified or amended
except by a writing signed by all parties.

         18.      Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of any successor to the Company and any such successor
shall be deemed substituted for the Company under the terms of this Agreement.
As used in this Agreement, the term "successor" shall include any person, firm,
corporation or other business entity which at any time, whether by


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merger, purchase or otherwise, acquires all or substantially all the assets of
the business of the Company.

         19.      Jurisdiction. It is acknowledged by the Company and the
Employee that the place of this Agreement, its situs, and form, is at all times
in the County of Jefferson, State of Alabama, and any action at law, suit in
equity, or judicial proceeding relating to the validity, construction,
interpretation, and enforcement of this Agreement, or any provision hereof,
shall be instituted and determined exclusively in the courts of said County and
State.

         20.      Captions. The captions or headings in this Agreement are made
for convenience and general reference only and shall not be construed to
describe, define or limit the scope or intent of the provisions of this
Agreement.

         21.      Termination of Offer. The offer set forth in this Agreement
shall terminate and be null and void if this Agreement is not executed by
Employee and delivered to the Company by 5:00 p.m. C.S.T. on Monday, October 13,
1997.








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         IN WITNESS WHEREOF, the Company, by and through its duly authorized
officer, and Employee have caused this Agreement to be executed under seal on
the _____ day of October, 1997.


                                        /s/ William C. Harlan
                                        ----------------------------------------
                                        William C. Harlan


/s/ John W. Gant, Jr.
------------------------------------
Witness


                                        CAPSTONE CAPITAL CORPORATION


                                        /s/ Malcolm E. McVay
                                        ----------------------------------------
                                        By: Malcolm E. McVay
                                        Its: Chief Financial Officer


/s/  W. Todd Carlisle
------------------------------------
Attest








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