Employment Agreement - HealthSouth Corp. and Anthony J. Tanner


                              EMPLOYMENT AGREEMENT

     EMPLOYMENT AGREEMENT, dated as of April 1, 1998 (this 'Agreement'), between
HEALTHSOUTH Corporation,  a Delaware corporation (the 'Company'), and ANTHONY J.
TANNER, a resident of Birmingham, Alabama (the 'Executive').


                              W I T N E S S E T H:
                               - - - - - - - - - -


     WHEREAS,  the  Company  provides  comprehensive  rehabilitative,  clinical,
diagnostic and surgical healthcare services;

     WHEREAS,  the Executive is a founder of the Company and serves as Executive
Vice  President-Administration  and  Secretary of the Company and as a member of
its Board of Directors; and

     WHEREAS,  the Company wishes to assure itself of the continued  services of
the  Executive  so that it will  have  the  continued  benefit  of his  ability,
experience and services, and the Executive is willing to enter into an agreement
to that end, upon the terms and conditions hereinafter set forth.

     NOW,  THEREFORE,  in consideration of good and valuable  consideration  the
receipt and  sufficiency  of which are hereby  acknowledged,  the parties hereby
covenant and agree as follows:

     1. EMPLOYMENT

     The Company  hereby  agrees to continue  to employ the  Executive,  and the
Executive  hereby agrees to remain in the employ of the Company,  on and subject
to the terms and conditions of this Agreement.

     2. TERM

     (a) The period of this Agreement (the  'Agreement  Term') shall commence as
of the date  hereof  (the  'Effective  Date')  and  shall  expire  on the  third
anniversary of the Effective  Date.  The Agreement  Term shall be  automatically
extended for an  additional  year on each  anniversary  of the  Effective  Date,
unless written notice of  non-extension is provided by either party to the other
party at least 90 days prior to such anniversary.

     (b) The period of the  Executive's  employment  under this  Agreement  (the
'Employment Period') shall commence as of the Effective Date and shall expire at
the end of the Agreement Term,  unless sooner  terminated in accordance with the
terms and conditions of this Agreement.

     3. POSITION, DUTIES AND RESPONSIBILITIES

     (a) The Executive shall serve as, and with the title,  office and authority
of, the Executive Vice President-Administration and Secretary of the Company and
as a member of the Board of  Directors  of the Company  (the  'Board') and shall
report  directly to the Chairman of the Company.  The Company shall use its best
efforts to cause the Executive to be nominated and



elected (or renominated and reelected, as the case may be) during the Employment
Period as a director of the Company.

     (b) The  Executive  shall  have all of the  powers,  authority,  duties and
responsibilities usually incident to the positions and offices of Executive Vice
President-Administration and Secretary of the Company.

     (c) The Executive agrees to devote  substantially all of his business time,
efforts and skills to the performance of his duties and  responsibilities  under
this Agreement; provided, however, that nothing in this Agreement shall preclude
the Executive from devoting reasonable periods required for (i) participating in
professional, educational, philanthropic, public interest, charitable, social or
community  activities,  (ii)  serving  as a  director  or member of an  advisory
committee of any corporation or other entity that the Executive is serving on as
of the Effective  Date or any other  corporation or entity that is not in direct
competition  with  the  Company  or (iii)  managing  his  personal  investments,
provided that such  activities do not materially  interfere with the Executive's
regular performance of his duties and responsibilities hereunder.

     4. PLACE OF PERFORMANCE

     The  Executive  shall  perform his duties at the  principal  offices of the
Company located at One HealthSouth Parkway,  Birmingham,  Alabama, but from time
to time the Executive may be required to travel to other locations in the proper
conduct of his responsibilities under this Agreement.

     5. COMPENSATION AND BENEFITS

     In  consideration  of the  services  rendered by the  Executive  during the
Employment Period, the Company shall pay or provide to the Executive the amounts
and benefits set forth below.

     (a) Salary.  The Company shall pay the Executive an annual base salary (the
'Base Salary') of at least $375,000.  The Executive's  Base Salary shall be paid
in arrears  in  substantially  equal  installments  at monthly or more  frequent
intervals,  in accordance with the normal payroll practices of the Company.  The
Executive's  Base Salary shall be reviewed at least annually by the Compensation
Committee  of the Board (the  'Compensation  Committee')  for  consideration  of
appropriate merit increases and, once established,  the Base Salary shall not be
decreased during the Employment Period.

     (b) Incentive  Plans.  The Executive  shall  participate  in all annual and
long-term  bonus or  incentive  plans or  arrangements  in  which  other  senior
executives of the Company of a comparable level are eligible to participate from
time  to  time,  including,   without  limitation,  any  management  bonus  pool
arrangement.  The Executive's  incentive  compensation  opportunities under such
plans and arrangements shall be determined from time to time by the Compensation
Committee.

     (c) Equity Incentives. The Executive shall be given consideration, at least
annually,  by the  Compensation  Committee  for the grant of options to purchase
shares of the common stock of the Company.  In addition,  the Executive shall be
entitled  to  receive   awards  under  any  stock  option,   stock  purchase  or
equity-based  incentive  compensation plan or arrangement adopted by the Company
from time to time for which  senior  executives  of the Company of a  comparable
level are eligible to participate.  The Executive's  awards under such plans and
arrangements  shall  be  determined  from  time  to  time  by  the  Compensation
Committee.



     (d) Employee  Benefits.  The Executive  shall be entitled to participate in
all employee benefit plans,  programs,  practices or arrangements of the Company
in which  other  senior  executives  of the  Company of a  comparable  level are
eligible to participate from time to time,  including,  without limitation,  any
qualified or non-qualified pension,  profit sharing and savings plans, any death
benefit and  disability  benefit  plans,  and any  medical,  dental,  health and
welfare plans.  Without  limiting the  generality of the foregoing,  the Company
shall provide the Executive with the following:

          (i) long-term  disability  insurance coverage paying benefits equal to
     at  least  60% of the  Executive's  Base  Salary  for the  duration  of any
     permanent and total disability of the Executive;

          (ii) continued provision of split-dollar life insurance coverage; and

          (iii) provision of the pension benefits provided under a non-qualified
     retirement  plan for the  Executive,  a  summary  of the  terms of which is
     attached hereto as Exhibit A.

     (e) Fringe  Benefits and  Perquisites.  The Executive  shall be entitled to
continuation of all fringe benefits and perquisites provided to the Executive on
the  Effective  Date,  and to all  fringe  benefits  and  perquisites  which are
generally  made  available to senior  executives  of the Company of a comparable
level from time to time.  Without limiting the generality of the foregoing,  the
Company shall provide the Executive with the following:

          (i) provision of executive offices and secretarial staff;

          (ii) vacation in accordance with the Company's policy for other senior
     executives of a comparable level;

          (iii) provision of a non-accountable automobile allowance in an amount
     to be determined from time to time by the Board of Directors; and

          (iv)  reimbursement  of  all  reasonable  travel  and  other  business
     expenses and disbursements  incurred by the Executive in the performance of
     his duties under this Agreement,  upon proper accounting in accordance with
     the Company's normal practices and procedures for reimbursement of business
     expenses.

     6. TERMINATION OF EMPLOYMENT

     The Employment  Period will be terminated  upon the happening of any of the
following events:

     (a)  Resignation.  The Executive may  voluntarily  terminate his employment
hereunder for any reason at any time.

     (b)  Termination  for Cause.  The Company  may  terminate  the  Executive's
employment  hereunder for Cause.  For purposes of this Agreement,  the Executive
shall be considered  to be  terminated  for 'Cause' only if (i) the Executive is
found, by a  non-appealable  order of a court or competent  jurisdiction,  to be
guilty of a felony under the laws of the United  States or any state  thereof or
(ii) the Executive is found, by a  non-appealable  order of a court of competent
jurisdiction,  to have committed a fraud, which has a material adverse effect on
the Company. However, in no event shall the Executive's employment be considered
to have been terminated for



'Cause'  unless and until the  Executive  receives a copy of a  resolution  duly
adopted by the  affirmative  vote of a majority of the Board at a meeting called
and held for such purpose  (after  reasonable  written notice is provided to the
Executive setting forth in reasonable detail the facts and circumstances claimed
to  provide  a basis of  termination  for Cause  and the  Executive  is given an
opportunity,  together with counsel,  to be heard before the Board) finding that
the Executive is guilty of acts or omissions constituting Cause.

     (c)  Termination  other than for Cause.  The Board  shall have the right to
terminate  the  Executive's  employment  hereunder  for any  reason at any time,
including  for any  reason  that  does  not  constitute  Cause,  subject  to the
consequences of such termination as set forth in this Agreement.

     (d) Disability.  The Executive's  employment hereunder shall terminate upon
his  Disability.  For purposes of this  Agreement,  'Disability'  shall mean the
inability  of the  Executive  to perform his duties to the Company on account of
physical or mental illness for a period of six consecutive full months, or for a
period  of eight  full  months  during  any  12-month  period.  The  Executive's
employment  shall  terminate  in such a case on the last  day of the  applicable
period;  provided,  however,  in no event shall the  Executive be  terminated by
reason of  Disability  unless (i) the  Executive is eligible  for the  long-term
disability  benefits set forth in Section  5(d)(i) hereof and (ii) the Executive
receives  written  notice from the Company,  at least 30 days in advance of such
termination,  stating its  intention to terminate  the  Executive  for reason of
Disability  and setting forth in reasonable  detail the facts and  circumstances
claimed to provide a basis for such termination.

     (f) Death.  The Executive's  employment  hereunder shall terminate upon his
death.

     7. COMPENSATION UPON TERMINATION OF EMPLOYMENT

     In the event the Executive's employment by the Company is terminated during
the Agreement  Term, the Executive  shall be entitled to the severance  benefits
set forth below:

     (a)  Resignation.  In the event the Executive  voluntarily  terminates  his
employment  hereunder  for any  reason,  the  Company  shall pay and provide the
Executive any Accrued Rights (as defined in paragraph (c) below).

     (b)  Termination  for  Cause.  In  the  event  the  Executive's  employment
hereunder  is  terminated  by the Company for Cause,  the Company  shall pay and
provide to the Executive any Accrued Rights (as defined in paragraph (c) below).

     (c) Termination other than for Cause, Disability or Death. In the event the
Executive's  employment  hereunder is  terminated  by the Company for any reason
other than for Cause,  Disability or death,  the Company shall pay the Executive
and provide him with the following:

          (i) Accrued  Rights.  The Company  shall pay the  Executive a lump-sum
     amount  equal to the sum of (A) his earned but unpaid Base  Salary  through
     the date of termination,  (B) any earned but unpaid bonus for any completed
     calendar year,  (C) pro-rata  payment of any bonus (based on the bonus paid
     or payable to Executive for the most recently  completed calendar year) for
     any partial year or period of service  through the date of termination  and
     (D)  any  unreimbursed  business  expenses  or  other  amounts  due  to the
     Executive from the Company as of the date of termination.  In addition, the
     Company shall  provide to the  Executive all payments,  rights and benefits
     due as of the date of termination under the terms of the Company's employee
     and fringe benefit plans, practices,  programs and arrangements referred to
     in  Sections



     5(d) and  5(e)  hereof  (including,  but not  limited  to,  the  retirement
     benefits  set  forth on  Exhibit  A  hereto)  (together  with the  lump-sum
     payment, the 'Accrued Rights').

          (ii) Severance  Payment.  The Company shall provide the Executive with
     continued  payment of the Executive's Base Salary, as in effect on the date
     of  termination,  for a  period  of two  years  following  the  Executive's
     termination,  payable at the times and in the manner such Base Salary would
     have been paid if the  Executive  had  continued in the  employment  of the
     Company.

          (iii) Equity Rights. All stock options and other  equity-based  rights
     held by the Executive at the date of termination  shall become  immediately
     and fully vested and exercisable,  and the Executive shall retain the right
     to  exercise  all  outstanding  stock  options  for the  duration  of their
     original  full  term  (without  regard to  termination  of  employment)  in
     accordance with the Founder  Retirement  Benefit Program attached hereto as
     Exhibit B (the 'Founders'  Program').  The Company shall forthwith take all
     necessary steps to amend any relevant stock option plans of the Company and
     stock option  agreements to the extent necessary to allow for the foregoing
     vesting and term of exercise.

     (d)  Disability.  In the  event the  Executive's  employment  hereunder  is
terminated by reason of the  Executive's  Disability,  the Company shall pay and
provide to the Executive any Accrued Rights,  including all disability insurance
coverage.

     (e) Death. In the event the Executive's  employment hereunder is terminated
by reason of the  Executive's  death,  the Company  shall pay and provide to the
Executive's  representatives  or estate any Accrued  Rights,  including all life
insurance coverage.

     8. FOUNDERS' BENEFITS

     Upon the  Executive's  termination of employment  hereunder for any reason,
and in addition to any severance benefits payable to him under Section 7 hereof,
the Company shall treat such  termination as a 'retirement'  for purposes of the
Founder's Program, and shall provide the Executive with the benefits outlined in
the Founders' Program in recognition of his status as a founder of the Company.

     9. CHANGE IN CONTROL

     (a) Supplemental  termination Rights. In the event Executive's  termination
other  than  for  Cause,  Disability  or death  or in the  event of a  voluntary
termination of employment by the Executive  pursuant to Section 6(a) hereof,  in
either case occurring within one year following a Change in Control, the Company
shall  pay to the  Executive  and  provide  him with  the  benefits  and  rights
described in Section 7(c) hereof.

     (b) Definition. For purposes of this Agreement, a 'Change in Control' shall
be deemed to have occurred by reason of:

          (i) the  acquisition  (other  than from the  Company)  by any  person,
     entity or 'group'  (within the meaning of Sections  13(d)(3) or 14(d)(2) of
     the Securities Exchange Act of 1934, but excluding,  for this purpose,  the
     Company or its subsidiaries, or any employee benefit plan of the Company or
     its subsidiaries which acquires  beneficial  ownership of voting securities
     of the Company) of beneficial  ownership  (within the meaning of Rule 13d-3
     promulgated  under the  Securities



     Exchange Act of 1934) of 25% or more of either the then-outstanding  shares
     of the common  stock of the  Company or the  combined  voting  power of the
     Company's  then-outstanding voting securities entitled to vote generally in
     the election of directors; or

          (ii) individuals who, as of the date hereof,  constitute the Board (as
     of such date, the 'Incumbent  Board') cease for any reason to constitute at
     least a majority of the Board; provided,  however, that any person becoming
     a  director  subsequent  to such date whose  election,  or  nomination  for
     election,  was  approved by a vote of at least a majority of the  directors
     then constituting the Incumbent Board (other than an election or nomination
     of an individual  whose initial  assumption of office is in connection with
     an actual or  threatened  election  contest  relating  to the  election  of
     directors of the Company) shall be, for purposes of this Section  9(b)(ii),
     considered as though such person were a member of the Incumbent Board; or

          (iii) approval by the stockholders of the Company of a reorganization,
     merger, consolidation or share exchange, in each case with respect to which
     persons who were the stockholders of the Company  immediately prior to such
     reorganization, merger, consolidation or share exchange do not, immediately
     thereafter, own more than 75% of the combined voting power entitled to vote
     generally  in  the  election  of  directors  of  the  reorganized,  merged,
     consolidated   or  other   surviving   entity's   then-outstanding   voting
     securities,  or a liquidation  or dissolution of the Company or the sale of
     all or substantially all of the assets of the Company.

     10. NO MITIGATION OR OFFSET

     The Executive  shall not be required to seek other  employment or to reduce
any severance benefit payable to him under Section 7, 8 or 9 hereof, and no such
severance  benefit shall be reduced on account of any  compensation  received by
the Executive from other employment.  The Company's  obligation to pay severance
benefits  under this  Agreement  shall not be reduced by any amount  owed by the
Executive to the Company.

     11. TAX WITHHOLDING; METHOD OF PAYMENT

     All compensation  payable  pursuant to this Agreement,  shall be subject to
reduction by all  applicable  withholding,  social  security and other  federal,
state and local taxes and  deductions.  Any  lump-sum  payments  provided for in
Sections 7 or 9 hereof shall be made in a cash payment,  net of any required tax
withholding, no later than the fifth business day following the Executive's date
of  termination.  Any payment  required to be made to the  Executive  under this
Agreement  that is not made in a timely  manner  shall bear  interest  at a rate
equal to 100% of the monthly  compounded  applicable  federal rate, as in effect
under Section 1274(d) of the Internal Revenue Code of 1986, as amended,  for the
month in which payment was required to be made.

     12. RESTRICTIVE COVENANTS

     (a) Confidential Information. During the Employment Period and at all times
thereafter,  the Executive agrees that he will not divulge to anyone (other than
the Company or any persons  employed or designated by the Company) any knowledge
or information of a confidential  nature relating to the business of the Company
or any of its subsidiaries or affiliates,  including,  without  limitation,  all
types of trade secrets  (unless readily  ascertainable  from public or published
information or trade sources) and confidential commercial  information,  and the
Executive further



agrees not to disclose, publish or make use of any such knowledge or information
without the consent of the Company.

     (b)  Noncompetition.  During the  Employment  Period and for any applicable
period the Executive is entitled to severance benefits under Section 7(c) hereof
following the  termination of his employment,  the Executive shall not,  without
the  prior  written  consent  of  the  Company,   engage  in  the  comprehensive
rehabilitative and related healthcare services business on behalf of any person,
firm or corporation  within any geographical area in which the Company transacts
such  business,  and the  Executive  shall not  acquire any  financial  interest
(except for an equity interest in publicly-held  companies that do not exceed 5%
of any  outstanding  class of  equity of that  company),  in any  business  that
engages in the  comprehensive  rehabilitative  and related  healthcare  services
business  within  any  geographical  area in which the  Company  transacts  such
business.  Notwithstanding  the  foregoing,  upon the  occurrence of a Change in
Control (whether before or after the termination of the Employment Period),  the
restrictions of this Section 12(b) shall cease to apply to the Executive for any
period following his termination of employment hereunder.

     (c) Enforcement.  The Company shall be entitled to seek a restraining order
or injunction in any court of competent jurisdiction to prevent any continuation
of any violation of the provisions of this Section 12.

     13. SUCCESSORS

     (a) This Agreement  shall be binding upon and shall inure to the benefit of
the Company,  its  successors and assigns and any person,  firm,  corporation or
other entity which succeeds to all or substantially all of the business,  assets
or property of the  Company.  The Company will  require any  successor  (whether
direct or indirect, by purchase, merger, consolidation,  or otherwise) to all or
substantially  all of the  business,  assets  or  property  of the  Company,  to
expressly  assume and agree to perform this  Agreement in the same manner and to
the same  extent  that the  Company  would be  required to perform it if no such
succession had taken place. As used in this Agreement,  the 'Company' shall mean
the Company as hereinbefore defined and any successor to its business, assets or
property as aforesaid  which executes and delivers an agreement  provided for in
this Section 13 or which otherwise becomes bound by all the terms and provisions
of this Agreement by operation of law.

     (b) This Agreement and all rights of the Executive hereunder shall inure to
the  benefit  of and  be  enforceable  by  the  Executive's  personal  or  legal
representatives,  executors,  administrators,  successors,  heirs, distributees,
devisees and legatees. If the Executive should die while any amounts are due and
payable to him hereunder,  all such amounts,  unless otherwise  provided herein,
shall be paid to the Executive's  designated beneficiary or, if there be no such
designated beneficiary, to the legal representatives of the Executive's estate.

     14. NO ASSIGNMENT

     Except as to  withholding of any tax under the laws of the United States or
any other  country,  state or locality,  neither this Agreement nor any right or
interest hereunder nor any amount payable at any time hereunder shall be subject
in any manner to alienation, sale, transfer,  assignment, pledge, attachment, or
other  legal  process,  or  encumbrance  of any  kind  by the  Executive  or the
beneficiaries  of the  Executive  or by his legal  representatives  without  the
Company's  prior  written  consent,  nor shall  there be any right of set-off or
counterclaim  in  respect  of any debts or  liabilities  of the  Executive,  his
beneficiaries or legal representatives;  provided, however, that nothing in this
Section shall preclude the Executive  from  designating a beneficiary to receive
any benefit payable on his death, or the legal  representatives of the Executive
from assigning any rights hereunder to the



person or persons entitled  thereto under his will or, in case of intestacy,  to
the person or persons entitled thereto under the laws of intestacy applicable to
his estate.

     15. ENTIRE AGREEMENT

     This  Agreement  contains  the entire  understanding  of the  parties  with
respect to the  subject  matter  hereof  and,  except as  specifically  provided
herein,  cancels and supersedes any and all other agreements between the parties
with respect to the subject matter hereof. Any amendment or modification of this
Agreement  shall not be binding  unless in writing and signed by the Company and
the Executive.

     16. SEVERABILITY

     In the event that any  provision  of this  Agreement  is  determined  to be
invalid or  unenforceable,  the remaining terms and conditions of this Agreement
shall be  unaffected  and shall  remain in full force and  effect,  and any such
determination of invalidity or unenforceability shall not affect the validity or
enforceability of any other provision of this Agreement.

     17. NOTICES

     All notices  which may be necessary or proper for either the Company or the
Executive  to give to the other  shall be in writing and shall be  delivered  by
hand or sent by registered or certified mail,  return receipt  requested,  or by
air courier, to the Executive at:
              Mr. Anthony J. Tanner
              2112 Swan Lake Cove
              Birmingham, Alabama  35243

and shall be sent in the manner  described above to the Chief Executive  Officer
of the Company at the Company's principal  executives offices at One HealthSouth
Parkway, Birmingham, Alabama 35243, with a copy to the Legal Services Department
at the same address or delivered by hand to the Secretary and the Legal Services
Department  of the Company,  and shall be deemed given when sent,  provided that
any notice required under Section 6 hereof or notice given pursuant to Section 2
hereof shall be deemed given only when received. Any party may by like notice to
the other party  change the  address at which he or they are to receive  notices
hereunder.

     18. GOVERNING LAW

     This Agreement  shall be governed by and enforceable in accordance with the
laws of the  State of  Alabama,  without  giving  effect  to the  principles  of
conflict of laws thereof.

     19. LEGAL FEES AND EXPENSES

     To induce  the  Executive  to execute  this  Agreement  and to provide  the
Executive with reasonable assurance that the purposes of this Agreement will not
be frustrated by the cost of its enforcement  should the Company fail to perform
its  obligations  under this Agreement or should the Company or any  subsidiary,
affiliate or stockholder of the Company  contest the validity or  enforceability
of this  Agreement,  the  Company  shall pay and be solely  responsible  for any
attorneys'  fees and expenses and courts  costs  incurred by the  Executive as a
result of a claim that the Company has breached or  otherwise  failed to perform
this  Agreement or any  provision  hereof to be performed by the Company or as a
result of the Company or any subsidiary, affiliate or stockholder of the Company
contesting  the validity or  enforceability  of this  Agreement or any provision
hereof to be performed by the Company,  in each case  regardless of which party,
if any, prevails in the contest.



     IN WITNESS  WHEREOF,  the  Company and the  Executive  have  executed  this
Agreement as of the date first above written.

                                       EXECUTIVE


                                       /s/ ANTHONY J. TANNER
                                       ------------------------------
                                       Anthony J. Tanner


                                       HEALTHSOUTH Corporation

                                       By   /s/ RICHARD M. SCRUSHY
                                          ---------------------------
                                            Richard M. Scrushy
                                            Chairman of the Board and
                                            Chief Executive Officer



                                                                       EXHIBIT A

                             HEALTHSOUTH CORPORATION

                            EXECUTIVE RETIREMENT PLAN
                              FOR ANTHONY J. TANNER


                                          Summary of Terms(2)
                                          -------------------

Retirement Benefits:          In consideration of Executive's role as a founder,
                              his service to HEALTHSOUTH since its formation and
                              in lieu of the benefits and  compensation  offered
                              through  full-time  employment  as Executive  Vice
                              President, Administration and Secretary, Executive
                              shall be entitled to the benefits  described below
                              upon his retirement  from active  employment  with
                              HEALTHSOUTH  and  continuing  until he reaches the
                              age of 72 (as more  specifically set forth below).
                              In addition,  in  recognition  of the  Executive's
                              founder  status,  HEALTHSOUTH  shall  provide  the
                              Executive  with  suitable  office and  secretarial
                              support  within the corporate  headquarters  for a
                              period of up to 10 years following his retirement.

Benefit Formula:              Annual  retirement  benefit  equal  to 60% of Base
                              Compensation  (defined below) at Normal Retirement
                              Age

Base Compensation:            Average Base Salary and bonus of Executive for the
                              highest four of the five most  recently  completed
                              calendar years of service with HEALTHSOUTH

Vesting:                      Fully vested at all times,  such that all benefits
                              payable  as set  forth in this  Exhibit  A will be
                              payable  upon  Executive's   termination  for  any
                              reason  from and after  January 23, 1999 (the date
                              on which  Executive  will have  completed  fifteen
                              consecutive  years of service  with  HEALTHSOUTH).
                              There can be no breach of this  retirement plan by
                              the  Executive  except  for  violation  of Section
                              12(b)   of   the   Employment   Agreement.    This
                              consideration is fully earned by the Executive and
                              HEALTHSOUTH  has no right under any  circumstances
                              to  discontinue  any  payments  or other  benefits
                              under this plan.

Payment of Benefits:          The annual  retirement  benefits payable hereunder
                              will be adjusted  annually for inflation (based on
                              the  Consumer  Price Index) and will be paid until
                              Executive  reaches  the age of 65.  From and after
                              the date on which Executive  reaches the age of 65
                              and  continuing  until he  reaches  the age of 72,
                              Executive   will  be   entitled  to  40%  of  Base
                              Compensation  (as  adjusted  for  inflation).   If
                              HEALTHSOUTH fails to provide payment in accordance
                              with the selected schedule and remains  delinquent
                              for a period of 10 business days following receipt
                              of  written  notice  from the  Executive  (made in
                              accordance  with  Section  17  of  the  Employment
                              Agreement),  HEALTHSOUTH shall pay a penalty equal
                              to three times the amount owed.

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     (2)  All  defined  terms  shall  have  the  meanings  given  to them in the
Employment  Agreement to which this Exhibit A is a part, and all  determinations
shall be made in accordance with the terms and provisions hereof.



Alternative Forms of Payment: Unless  Executive  chooses one of the  alternative
                              forms of  payment  listed  below,  payment of this
                              retirement  benefit will be in accordance with the
                              normal payroll practices. Executive may choose one
                              of the following alternative forms of payment:

                                  o Single Life Annuity
                                  o Single Life  Annuity with10 year  guarantee
                                  o Joint and  Survivor  Annuity (50% or 100%)
                                  o Lump Sum
                                  o Payment  of  present  value   of  retirement
                                    benefits in 5 equal annual installments

Death Benefit:                For death  prior to reaching  age 72,  Executive's
                              estate   will   continue  to  receive  the  annual
                              retirement benefits payable to Executive hereunder
                              (as if  Executive  had not died) for a period of 5
                              years.

Unfunded Status:              Plan  is  an  unfunded,  unsecured  obligation  of
                              HEALTHSOUTH,  but HEALTHSOUTH may elect to fund on
                              a tax-neutral basis to Executive



                                                                       EXHIBIT B

                       FOUNDER RETIREMENT BENEFITS PROGRAM

     In recognition of the significant  contributions of the management founders
of HEALTHSOUTH  Corporation,  upon their  retirement from the  Corporation,  the
Corporation  shall  provide  the  following  benefits  to each  of them  for the
remainder  of  their  natural  life or until  their  written  election  to cease
receiving them:

o    Health  Benefits.  The Corporation  will extend its regular Employee Health
     Benefit  Program,  as it may exist from time to time,  to cover the retired
     founder, and his spouse, for the remainder of their natural lives, with the
     founder  continuing  to bear  the  cost of  dependent  coverage.  When  the
     individuals  become  eligible for the Medicare  program,  or any other such
     government-funded  health  benefit,  the  HEALTHSOUTH  benefit program will
     become the individual's secondary coverage.

o    Insurance.  The  Corporation  will allow the retired founder to continue to
     participate in any of the Company's voluntary  insurance programs,  as they
     may exist from time to time, until age 72.

o    Split-Dollar  Policy.  The Corporation will continue to pay the premiums on
     the retired founder's existing split-dollar life insurance policies (or any
     policies issued in substitution therefor) until such founder reaches age 65
     or until the policies are fully paid, whichever comes first.

o    Stock Options.  The  Corporation  will waive the normal option  termination
     period for the  retired  founder,  so that all vested  option  grants  will
     continue for the term of the original grant period.

o    Travel.  The  Corporation  will allow the  retired  founder to utilize  the
     Corporation's  travel department to make personal travel  arrangements.  In
     addition,  the retired  founder will also be able to use the  Corporation's
     aircraft, at no cost, if the aircraft is already scheduled for the trip and
     there are seats available.  Otherwise,  the retired founder will be allowed
     to use the  Corporation's  aircraft  at the  standard  use rate,  including
     direct and indirect expenses.