{"id":39229,"date":"2015-09-17T11:25:58","date_gmt":"2015-09-17T16:25:58","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-legal\/contracts\/uncategorized\/employment-agreement-healthsouth-corp-and-richard-m-scrushy.html"},"modified":"2015-09-17T11:25:58","modified_gmt":"2015-09-17T16:25:58","slug":"employment-agreement-healthsouth-corp-and-richard-m-scrushy","status":"publish","type":"corporate_contracts","link":"https:\/\/corporate.findlaw.com\/contracts\/compensation\/employment-agreement-healthsouth-corp-and-richard-m-scrushy.html","title":{"rendered":"Employment Agreement &#8211; HealthSouth Corp. and Richard M. Scrushy"},"content":{"rendered":"<pre>                              EMPLOYMENT AGREEMENT\n\n          EMPLOYMENT  AGREEMENT,  dated as of April 1, 1998 (this  'Agreement'),\nbetween HEALTHSOUTH  Corporation,  a Delaware  corporation (the 'Company'),  and\nRICHARD M. SCRUSHY, a resident of Birmingham, Alabama (the 'Executive').\n\n                              W I T N E S S E T H:\n\n          WHEREAS, the Company provides comprehensive rehabilitative,  clinical,\ndiagnostic and surgical healthcare services;\n\n          WHEREAS, the Executive is a founder of the Company and serves as Chief\nExecutive Officer of the Company and as Chairman of its Board of Directors; and\n\n          WHEREAS, the Company wishes to assure itself of the continued services\nof the  Executive  so that it will have the  continued  benefit of his  ability,\nexperience and services, and the Executive is willing to enter into an agreement\nto that end, upon the terms and conditions hereinafter set forth.\n\n          NOW,  THEREFORE,  in consideration of good and valuable  consideration\nthe receipt and sufficiency of which are hereby acknowledged, the parties hereby\ncovenant and agree as follows:\n\n     1.   EMPLOYMENT\n\n          The Company hereby agrees to continue to employ the Executive, and the\nExecutive  hereby agrees to remain in the employ of the Company,  on and subject\nto the terms and conditions of this Agreement.\n\n     2.   TERM\n\n               (a) The period of this  Agreement  (the  'Agreement  Term') shall\ncommence as of the date hereof (the  'Effective  Date') and shall  expire on the\nfifth   anniversary  of  the  Effective   Date.  The  Agreement  Term  shall  be\nautomatically  extended  for an  additional  year  on  each  anniversary  of the\nEffective  Date,  unless written notice of  non-extension  is provided by either\nparty to the other party at least 90 days prior to such anniversary.\n\n               (b) The period of the Executive's employment under this Agreement\n(the  'Employment  Period')  shall  commence as of the Effective  Date and shall\nexpire at the end of the Agreement Term,  unless sooner terminated in accordance\nwith the terms and conditions of this Agreement.\n\n\n\n\n\n\n     3.   POSITION, DUTIES AND RESPONSIBILITIES\n\n               (a) The Executive shall serve as, and with the title,  office and\nauthority of, the Chief Executive Officer of the Company and the Chairman of the\nBoard of Directors of the Company (the 'Board') and shall report directly to the\nBoard. The Executive shall also hold similar titles,  offices and authority with\nthe Company's  subsidiaries  and\/or their successors.  The Company shall use its\nbest efforts to cause the Executive to be nominated and elected (or  renominated\nand reelected, as the case may be) during the Employment Period as a director of\nthe Company and its subsidiaries or their successors.\n\n               (b) The Executive  shall have effective  supervision  and control\nover,  and  responsibility  for, the strategic  direction and general and active\nday-to-day  leadership and management of the business and affairs of the Company\nand the direct and indirect  subsidiaries  of the  Company,  subject only to the\nauthority of the Board, and shall have all of the powers, authority,  duties and\nresponsibilities  usually  incident  to  the  positions  and  offices  of  Chief\nExecutive Officer and Chairman of the Board of the Company.\n\n               (c) The  Executive  agrees  to  devote  substantially  all of his\nbusiness  time,  efforts  and  skills  to  the  performance  of his  duties  and\nresponsibilities under this Agreement;  provided,  however, that nothing in this\nAgreement shall preclude the Executive from devoting reasonable periods required\nfor  (i)  participating  in  professional,  educational,  philanthropic,  public\ninterest, charitable, social or community activities, (ii) serving as a director\nor member of an advisory  committee of any  corporation or other entity that the\nExecutive is serving on as of the  Effective  Date or any other  corporation  or\nentity that is not in direct  competition with the Company or (iii) managing his\npersonal investments,  provided that such activities do not materially interfere\nwith the  Executive's  regular  performance  of his duties and  responsibilities\nhereunder.\n\n               (d) The  foregoing  provisions of this Section 3 shall be subject\nto the Executive's right to elect to serve the Company solely as the Chairman of\nthe Board, as provided in Section 22 hereof.\n\n     4.   PLACE OF PERFORMANCE\n\n          The Executive shall perform his duties at the principal offices of the\nCompany located at One HealthSouth Parkway,  Birmingham,  Alabama, but from time\nto time the Executive may be required to travel to other locations in the proper\nconduct of his responsibilities under this Agreement.\n\n     5.   COMPENSATION AND BENEFITS\n\n          In consideration of the services  rendered by the Executive during the\nEmployment  Period,  the Company  shall pay or provide the Executive the amounts\nand benefits set forth below.\n\n\n                                        2\n\n\n\n\n\n\n               (a) Salary.  The Company  shall pay the  Executive an annual base\nsalary (the 'Base Salary') of at least  $1,200,000.  The Executive's Base Salary\nshall be paid in arrears in substantially  equal installments at monthly or more\nfrequent  intervals,  in  accordance  with the normal  payroll  practices of the\nCompany.  The Executive's Base Salary shall be reviewed at least annually by the\nCompensation   Committee  of  the  Board  (the  'Compensation   Committee')  for\nconsideration  of appropriate  merit increases and, once  established,  the Base\nSalary shall not be decreased during the Employment Period,  except as otherwise\ncontemplated by Section 22 hereof.\n\n               (b) Annual Target Bonus.  The Company shall provide the Executive\nwith the  opportunity to earn an annual target bonus (the 'Annual Target Bonus')\nequal to at least  $2,400,000.  The  amount of the Annual  Target  Bonus will be\nreviewed at least annually by the  Compensation  Committee for  consideration of\nappropriate  merit increases and, once  established at a specified  amount,  the\nAnnual Target Bonus shall not be decreased during the Employment Period,  except\nas otherwise  contemplated by Section 22 hereof. The Annual Target Bonus will be\npayable in the event that the Company's  operations meet the annual  performance\nstandard  set  forth  in  the  Company's  business  plan,  as  approved  by  the\nCompensation  Committee  in each year of the  Employment  Period (the  'Business\nPlan'). In the event that the Company's  operations meet the monthly performance\nstandard set forth in the Business Plan, an amount equal to  one-twelfth  (1\/12)\nof the Annual Target Bonus (a 'Monthly  Target  Bonus') shall be payable  within\nfive days following the date the Company's internal monthly financial statements\nhave been  completed.  In the event that any Monthly  Target  Bonus shall not be\npaid  during the course of such  calendar  year  because  the  relevant  monthly\nperformance  standard was not met, such Monthly  Target Bonus shall again become\navailable for payment if the Company attains its annual performance standard for\nsuch calendar  year.  For the remainder of the 1998 calendar year  following the\nEffective  Date, the Executive will be paid $200,000  within five days following\nthe date the Company's internal monthly financial statements have been completed\nfor each  calendar  month  ending  following  the  Effective  Date in which  the\nrelevant  monthly  performance  standard  is met and,  in the event the  Company\nattains its annual  performance  standard for 1998, the Executive  shall be paid\n$200,000 for any month, dating back to January, 1998, in which the Executive was\nnot paid the  Monthly  Target  Bonus  due to the  relevant  monthly  performance\nstandard not having been met.\n\n               (c) Other Incentive Plans. The Executive shall participate in all\nother bonus or incentive plans or arrangements in which other senior  executives\nof the Company are eligible to participate from time to time, including, without\nlimitation,  any management bonus pool  arrangement.  The Executive's  incentive\ncompensation opportunities under such plans and arrangements shall be determined\nfrom  time to time by the  Compensation  Committee  upon  consultation  with the\nExecutive.\n\n               (d)   Equity   Incentives.   The   Executive   shall   be   given\nconsideration, at least annually, by the Compensation Committee for the grant of\noptions to purchase shares of the common stock of the Company. In addition,  the\nExecutive  shall be entitled to receive  awards  under any stock  option,  stock\npurchase or equity-based  incentive  compensation plan or arrangement adopted by\nthe Company  from time to time for which  senior  executives  of the Company are\neligible  to  participate.   The   Executive's   awards  under  such  plans  and\narrangements shall be determined from time to time by the Compensation Committee\nupon consultation with the Executive.\n\n\n\n                                        3\n\n\n\n\n\n\n               (e)  Employee  Benefits.  The  Executive  shall  be  entitled  to\nparticipate in all employee benefit plans,  programs,  practices or arrangements\nof the Company in which other senior  executives  of the Company are eligible to\nparticipate from time to time, including,  without limitation,  any qualified or\nnon-qualified  pension,  profit sharing and savings plans, any death benefit and\ndisability  benefit plans,  and any medical,  dental,  health and welfare plans.\nWithout limiting the generality of the foregoing,  the Company shall provide the\nExecutive with the following:\n\n                    (i)  provision of long-term  disability  insurance  coverage\n               paying  benefits equal to at least 100% of the  Executive's  Base\n               Salary and Annual  Target Bonus for the duration of any permanent\n               and  total  disability  of  the  Executive,   either  through  an\n               individual disability insurance policy or otherwise;\n\n                    (ii)  continued  provision of  split-dollar  life  insurance\n               coverage  and  payment  of  premiums  pursuant  to  that  certain\n               Split-Dollar  Agreement  between the  Executive  and the Company,\n               dated February 1, 1992, as amended; and\n\n                    (iii)  provision of the pension  benefits  provided  under a\n               non-qualified retirement plan for the Executive, a summary of the\n               terms of which is attached hereto as Exhibit A.\n\n               (f) Fringe  Benefits  and  Perquisites.  The  Executive  shall be\nentitled to continuation of all fringe benefits and perquisites  provided to the\nExecutive on the  Effective  Date,  and to all fringe  benefits and  perquisites\nwhich are generally made available to senior executives of the Company from time\nto time.  Without  limiting the generality of the  foregoing,  the Company shall\nprovide the Executive with the following:\n\n                    (i) provision of executive offices and secretarial staff;\n\n                    (ii) six weeks paid vacation during each calendar year;\n\n                    (iii) provision of an automobile of the  Executive's  choice\n               (which may be traded in for a new  automobile  each  year),  plus\n               payment  of  all  related  automobile  expenses,  including  gas,\n               maintenance expenses and automobile insurance;\n\n                    (iv)  payment of  initiation  fees and  annual  dues for two\n               country clubs of the Executive's  choice, and payment of dues for\n               any   professional   societies  and  associations  of  which  the\n               Executive is a member in furtherance of his duties hereunder;\n\n                    (v) in order to ensure the accessibility and security of the\n               Executive,  use of the Company's  aircraft and related facilities\n               for  both   business  and  personal   travel  and   provision  of\n               appropriate  personal  residence  security  services,  a  24-hour\n               bodyguard service, a  security-trained  driver\/bodyguard  and any\n               other  measures  prescribed  from  time to time by the  Company's\n               corporate security advisor and approved by the Board; and\n\n                    (vi)  reimbursement  of  all  reasonable  travel  and  other\n               business expenses and disbursements  incurred by the Executive in\n               the performance of his duties under this  Agreement,  upon proper\n               accounting in accordance with the Company's normal practices\n\n\n                                        4\n\n\n\n\n\n\n          and procedures for reimbursement of business expenses.\n\n     6.   TERMINATION OF EMPLOYMENT\n\n          The Employment  Period will be terminated upon the happening of any of\nthe following events:\n\n               (a)  Resignation  for Good Reason.  The Executive may voluntarily\nterminate  his  employment  hereunder  for Good  Reason.  For  purposes  of this\nAgreement, 'Good Reason' shall mean:\n\n                    (i)  the   assignment   to  the   Executive  of  any  duties\n               inconsistent  with the Executive's  position  (including  status,\n               offices, titles or reporting relationships), authority, duties or\n               responsibilities  as  contemplated  by  Section 3 hereof,  or any\n               action  by the  Company  that  results  in a  diminution  in such\n               position,  authority,  duties or responsibilities,  but excluding\n               for these  purposes  any isolated  and  insubstantial  action not\n               taken in bad faith and which is remedied by the Company  promptly\n               after receipt of notice thereof given by the Executive;\n\n                    (ii)  any  material  change  in  the  Executive's  reporting\n               responsibilities;\n\n                    (iii)  any  material  failure  by the  Company  to honor its\n               obligations under this Agreement;\n\n                    (iv)  a  notice  of  non-extension  of  the  Agreement  Term\n               provided by the Company to the  Executive as set forth in Section\n               2 hereof;\n\n                    (v) the  relocation  of the  Company's  principal  executive\n               offices  to a  location  more  than 40  miles  from  its  current\n               location  in  Birmingham,   Alabama,   or  the  location  of  the\n               Executive's  own  office to other  than the  Company's  principal\n               executive offices;\n\n                    (vi) any failure by the Company to obtain an  assumption  of\n               this  Agreement  by a successor  corporation  as  required  under\n               Section 14(a) hereof;\n\n                    (vii) the failure of the Company to renominate the Executive\n               to the Board or the  failure  of the  Company's  stockholders  to\n               reelect the Executive to the Board; or\n\n                    (viii)  any  purported  termination  by the  Company  of the\n               Executive's  employment  otherwise than as expressly permitted by\n               this Agreement.\n\nHowever,  in no event shall the Executive be considered to have  terminated  his\nemployment  for 'Good  Reason'  unless and until the  Company  receives  written\nnotice from the Executive identifying in reasonable detail the acts or omissions\nconstituting  'Good Reason' and the provision of this Agreement relied upon, and\nsuch  acts  or  omissions  are  not  cured  by the  Company  to  the  reasonable\nsatisfaction  of the Executive  within 30 days of the Company's  receipt of such\nnotice.\n\n\n                                        5\n\n\n\n\n\n\n               (b)  Resignation  other than for Good Reason.  The  Executive may\nvoluntarily  terminate his  employment  hereunder for any reason other than Good\nReason.\n\n               (c)  Termination  for  Cause.   The  Company  may  terminate  the\nExecutive's employment hereunder for Cause. For purposes of this Agreement,  the\nExecutive  shall be  considered  to be  terminated  for 'Cause'  only if (i) the\nExecutive  is  found,  by  a  non-appealable  order  of  a  court  of  competent\njurisdiction,  to be guilty of a felony  under the laws of the United  States or\nany state thereof or (ii) the Executive is found, by a non-appealable order of a\ncourt of competent jurisdiction, to have committed a fraud, which has a material\nadverse  effect on the  Company.  However,  in no event  shall  the  Executive's\nemployment be considered to have been  terminated  for 'Cause'  unless and until\nthe Executive  receives a copy of a resolution  duly adopted by the  affirmative\nvote of a majority  of the Board at a meeting  called and held for such  purpose\n(after  reasonable  written notice is provided to the Executive setting forth in\nreasonable  detail  the facts and  circumstances  claimed  to provide a basis of\ntermination for Cause and the Executive is given an  opportunity,  together with\ncounsel,  to be heard before the Board)  finding that the Executive is guilty of\nacts or omissions constituting Cause.\n\n               (d)  Termination  other than for Cause.  The Board shall have the\nright to terminate the  Executive's  employment  hereunder for any reason at any\ntime,  including for any reason that does not constitute  cause,  subject to the\nconsequences of such termination as set forth in this Agreement.\n\n               (e)  Disability.   The  Executive's  employment  hereunder  shall\nterminate  upon his  Disability.  For purposes of this  Agreement,  'Disability'\nshall mean the  inability of the  Executive to perform his duties to the Company\non account of physical or mental  illness for a period of six  consecutive  full\nmonths,  or for a period of eight full months  during any 12-month  period.  The\nExecutive's  employment  shall  terminate  in such a case on the last day of the\napplicable  period;  provided,  however,  in no event  shall  the  Executive  be\nterminated by reason of Disability  unless (i) the Executive is eligible for the\nlong-term  disability  benefits set forth in Section 5(e)(i) hereof and (ii) the\nExecutive receives written notice from the Company,  at least 30 days in advance\nof such termination, stating its intention to terminate the Executive for reason\nof Disability and setting forth in reasonable detail the facts and circumstances\nclaimed to provide a basis for such termination.\n\n               (f) Death. The Executive's  employment  hereunder shall terminate\nupon his death.\n\n     7.   COMPENSATION UPON TERMINATION OF EMPLOYMENT\n\n         In the event the  Executive's  employment  by the Company is terminated\nduring the  Agreement  Term,  the  Executive  shall be entitled to the severance\nbenefits set forth below:\n\n               (a)  Resignation  for Good  Reason.  In the event  the  Executive\nvoluntarily  terminates  his employment  hereunder for Good Reason,  the Company\nshall pay the Executive and provide him with the following:\n\n\n                                        6\n\n\n\n\n\n\n                    (i) Accrued  Rights.  The Company  shall pay the Executive a\n               lump-sum  amount  equal to the sum of (A) his  earned  but unpaid\n               Base Salary through the date of  termination,  (B) any earned but\n               unpaid Annual Target Bonus for any completed  calendar  year, (C)\n               any earned  but unpaid  Monthly  Target  Bonus for any  completed\n               month in the calendar year of the Executive's termination and (D)\n               any  unreimbursed  business  expenses or other amounts due to the\n               Executive  from the  Company  as of the date of  termination.  In\n               addition,   the  Company  shall  provide  to  the  Executive  all\n               payments,  rights and benefits due as of the date of  termination\n               under the terms of the  Company's  employee  and  fringe  benefit\n               plans,  practices,  programs  and  arrangements  referred  to  in\n               Sections  5(e)  and  5(f)  hereof  (together  with  the  lump-sum\n               payment, the 'Accrued Rights').\n\n                    (ii) Severance Payment.  The Company shall pay the Executive\n               a  lump-sum   amount   equal  to  the  sum  of  the   Executive's\n               then-current  Base Salary and Annual  Target Bonus at the time of\n               the  Executive's  termination,  for each  year  remaining  in the\n               Agreement  Term (with  pro-rated  amounts of such Base Salary and\n               Annual Target Bonus, on a daily basis,  for any partial  calendar\n               years during such remaining  Agreement Term),  with such lump-sum\n               payment  discounted to present value using an interest rate equal\n               to 100% of the monthly  compounded  applicable  federal rate (the\n               'Applicable  Rate'),  as in effect under  Section  1274(d) of the\n               Internal  Revenue Code of 1986, as amended (the 'Code'),  for the\n               month in which payment is required to be made.\n\n                    (iii) Continued  Benefits.  The Company shall pay or provide\n               the Executive with all employee and fringe  benefits  referred to\n               in Sections 5(e) and 5(f) hereof for the balance of the Agreement\n               Term;  provided,  however,  that if and to the extent the Company\n               determines  that any such  benefits  cannot  be paid or  provided\n               under the plans in  question  due to Code or other  restrictions,\n               the Company shall provide payments,  coverages or benefits, which\n               are at least as favorable to the Executive on an after-tax basis,\n               through other means reasonably satisfactory to the Executive.\n\n                    (iv) Equity Rights. All stock options and other equity-based\n               rights held by the  Executive  at the date of  termination  shall\n               become  immediately  and fully  vested and  exercisable,  and the\n               Executive  shall  retain the right to  exercise  all  outstanding\n               stock  options  for the  duration  of their  original  full  term\n               (without  regard to termination of employment) in accordance with\n               the Founder Retirement Benefit Program attached hereto as Exhibit\n               B (the 'Founders' Program'). The Company shall forthwith take all\n               necessary  steps to amend any relevant  stock option plans of the\n               Company and stock option  agreements  to the extent  necessary to\n               allow for the foregoing vesting and term of exercise.\n\n               (b)  Resignation  other  than for Good  Reason.  In the event the\nExecutive  voluntarily  terminates his employment  hereunder other than for Good\nReason, the Company shall pay the Executive and provide him with the following:\n\n                    (i) Accrued Rights. The Company shall pay and provide to the\n               Executive any Accrued Rights.\n\n\n                                        7\n\n\n\n\n\n\n                    (ii) Severance Payment.  The Company shall pay the Executive\n               a lump-sum  amount equal to two times the sum of the  Executive's\n               then-current  Base Salary and Annual  Target Bonus at the time of\n               the   Executive's   termination,   with  such  lump-sum   payment\n               discounted  to present  value using the  Applicable  Rate for the\n               month in which payment is required to be made.\n\n               (c)   Termination   for  Cause.  In  the  event  the  Executive's\nemployment  hereunder is terminated by the Company for Cause,  the Company shall\npay and provide to the Executive any Accrued Rights.\n\n               (d) Termination other than for Cause, Disability or Death. In the\nevent the Executive's  employment hereunder is terminated by the Company for any\nreason  other than for Cause,  Disability  or death,  the Company  shall pay the\nExecutive and provide him with all severance  benefits set forth in Section 7(a)\nhereof.\n\n               (e) Disability. In the event the Executive's employment hereunder\nis terminated by reason of the Executive's Disability, the Company shall pay the\nExecutive and provide him with the following:\n\n                    (i) Accrued Rights. The Company shall pay and provide to the\n               Executive any Accrued Rights,  including all disability insurance\n               coverage.\n\n                    (ii)  Severance  Payment.  The  Company  shall  provide  the\n               Executive with continued  payment of the Executive's  Base Salary\n               and Annual Target Bonus, as in effect on the date of termination,\n               for  a  period  of  three   years   following   the   Executive's\n               termination,  payable  at the times and in the  manner  such Base\n               Salary  and  Annual  Target  Bonus  would  have  been paid if the\n               Executive had  continued in the  employment of the Company and as\n               if all relevant  performance  standards had been achieved  during\n               such periods.\n\n               (f) Death.\n\n         In the event the  Executive's  employment  hereunder is  terminated  by\nreason  of  the  Executive's  death,  the  Company  shall  pay  the  Executive's\nrepresentatives or estate the following:\n\n                    (i) Accrued Rights. The Company shall pay and provide to the\n               Executive's   representatives   or  estate  any  Accrued  Rights,\n               including all life insurance coverage.\n\n                    (ii)   Severance   Payment.   The  Company   shall  pay  the\n               Executive's  representatives or estate a lump-sum amount equal to\n               the sum of the  Executive's  then-current  Base Salary and Annual\n               Target  Bonus at the time of the  Executive's  death,  with  such\n               lump-sum payment discounted to present value using the Applicable\n               Rate for the month in which payment is required to be made.\n\n     8.   FOUNDERS' BENEFITS\n\n          Upon the  Executive's  termination  of  employment  hereunder  for any\nreason, and in\n\n\n                                        8\n\n\n\n\n\n\naddition to any severance  benefits  payable to him under Section 7 hereof,  the\nCompany  shall treat such  termination  as a  'retirement'  for  purposes of the\nFounders' Program, and shall provide the Executive with the benefits outlined in\nthe Founders' Program in recognition of his status as a founder of the Company.\n\n     9.   CHANGE IN CONTROL\n\n          (a)  Supplemental  Termination  Rights.  In the  event of a  voluntary\ntermination of employment by the Executive  pursuant to Section 6(b) hereof that\noccurs within two years following a Change in Control,  the Company shall pay to\nthe Executive,  in addition to the severance benefits payable under Section 7(b)\nhereof, an additional lump-sum amount equal to the Executive's then-current Base\nSalary and Annual Target Bonus at the time of the Executive's termination,  with\nsuch lump-sum payment  discounted to present value using the Applicable Rate for\nthe month in which payment is required to be made.\n\n          (b) Definition.  For purposes of this Agreement, a 'Change in Control'\nshall be deemed to have occurred by reason of:\n\n               (i) the acquisition  (other than from the Company) by any person,\n          entity or 'group' (within the meaning of Sections 13(d)(3) or 14(d)(2)\n          of the  Securities  Exchange  Act of  1934,  but  excluding,  for this\n          purpose, the Company or its subsidiaries, or any employee benefit plan\n          of the Company or its subsidiaries which acquires beneficial ownership\n          of voting  securities of the Company) of beneficial  ownership (within\n          the meaning of Rule 13d-3  promulgated  under the Securities  Exchange\n          Act of 1934) of 25% or more of either the  then-outstanding  shares of\n          the common  stock of the Company or the  combined  voting power of the\n          Company's   then-outstanding   voting  securities   entitled  to  vote\n          generally in the election of directors; or\n\n               (ii) individuals who, as of date hereof, constitute the Board (as\n          of  such  date,  the  'Incumbent  Board')  cease  for  any  reason  to\n          constitute at least a majority of the Board;  provided,  however, that\n          any person becoming a director subsequent to such date whose election,\n          or  nomination  for  election,  was  approved  by a vote of at least a\n          majority of the directors then constituting the Incumbent Board (other\n          than  an  election  or  nomination  of  an  individual  whose  initial\n          assumption  of office is in  connection  with an actual or  threatened\n          election contest relating to the election of directors of the Company)\n          shall be, for purposes of this Section 9(b)(ii),  considered as though\n          such person were a member of the Incumbent Board; or\n\n               (iii)  approval  by  the   stockholders   of  the  Company  of  a\n          reorganization,  merger, consolidation or share exchange, in each case\n          with respect to which persons who were the stockholders of the Company\n          immediately  prior to such  reorganization,  merger,  consolidation or\n          share exchange do not,  immediately  thereafter,  own more than 75% of\n          the combined  voting power  entitled to vote generally in the election\n          of  directors  of  the  reorganized,  merged,  consolidated  or  other\n          surviving   entity's   then-outstanding   voting   securities,   or  a\n          liquidation  or  dissolution  of the  Company  or the  sale  of all or\n          substantially all of the assets of the Company.\n\n\n\n                                        9\n\n\n\n\n\n\n     10.  PARACHUTE TAX INDEMNITY\n\n               (a) If it shall be determined  that any amount paid,  distributed\nor  treated as paid or  distributed  by the  Company  to or for the  Executive's\nbenefit (whether paid or payable or distributed or distributable pursuant to the\nterms of this  Agreement or  otherwise,  but  determined  without  regard to any\nadditional  payments  required  under this  Section 10) (a  'Payment')  would be\nsubject to the excise tax imposed by Section 4999 of the Code or any interest or\npenalties  are incurred by the  Executive  with respect to such excise tax (such\nexcise tax,  together with any such interest and  penalties,  being  hereinafter\ncollectively  referred  to as the 'Excise  Tax'),  then the  Executive  shall be\nentitled to receive an  additional  payment (a 'Gross-Up  Payment') in an amount\nsuch that after payment by the  Executive of all federal,  state and local taxes\n(including  any  interest or  penalties  imposed  with  respect to such  taxes),\nincluding,  without limitation, any income taxes (and any interest and penalties\nimposed with respect thereto) and Excise Tax imposed upon the Gross-Up  Payment,\nthe Executive  retains an amount of the Gross-Up Payment equal to the Excise Tax\nimposed upon the Payments.\n\n               (b) All determinations required to be made under this Section 10,\nincluding whether and when a Gross-Up Payment is required and the amount of such\nGross-Up  Payment  and  the  assumptions  to be  utilized  in  arriving  at such\ndetermination,  shall be made by a nationally  recognized accounting firm as may\nbe  designated  by the  Executive  (the  'Accounting  Firm') which shall provide\ndetailed supporting calculations both to the Company and the Executive within 15\nbusiness days of the receipt of notice from the Executive  that there has been a\nPayment,  or such earlier time as is requested by the Company. In the event that\nthe  Accounting  Firm is serving as  accountant  or auditor for the  individual,\nentity or group  effecting the Change in Control,  the  Executive  shall appoint\nanother  nationally  recognized  accounting  firm  to  make  the  determinations\nrequired  hereunder  (which  accounting  firm shall then be  referred  to as the\nAccounting Firm  hereunder).  All fees and expenses of the Accounting Firm shall\nbe borne by the Company.  Any Gross-Up Payment,  as determined  pursuant to this\nSection 10,  shall be paid by the Company to the  Executive  within five days of\nthe receipt of the Accounting  Firm's  determination.  Any  determination by the\nAccounting Firm shall be binding upon the Company and the Executive. As a result\nof the uncertainty in the application of Section 4999 of the Code at the time of\nthe initial determination by the Accounting Firm hereunder,  it is possible that\nGross-Up  Payments which will not have been made by the Company should have been\nmade  ('Underpayment'),  consistent  with the  calculations  required to be made\nhereunder.  In the event that the Company exhausts its remedies pursuant to this\nSection 10 and the  Executive  thereafter  is  required to make a payment of any\nExcise Tax, the Accounting Firm shall  determine the amount of the  Underpayment\nthat has  occurred  and any such  Underpayment  shall  be  promptly  paid by the\nCompany to or for the Executive's benefit.\n\n\n                                       10\n\n\n\n\n\n\n               (c) The  Executive  shall  notify  the  Company in writing of any\nclaim by the Internal  Revenue  Service that, if  successful,  would require the\npayment by the Company of the Gross-Up Payment. Such notification shall be given\nas soon as  practicable  but no later then ten business days after the Executive\nis informed in writing of such claim and shall apprise the Company of the nature\nof such  claim and the date on which  such claim is  requested  to be paid.  The\nExecutive  shall not pay such claim prior to the expiration of the 30-day period\nfollowing the date on which it gives such notice to the Company (or such shorter\nperiod  ending on the date that any payment of taxes with  respect to such claim\nis  due).  If the  Company  notifies  the  Executive  in  writing  prior  to the\nexpiration  of such period that it desires to contest such claim,  the Executive\nshall:\n\n                    (i) give the Company any information reasonably requested by\n               the Company relating to such claim,\n\n                    (ii) take such action in  connection  with  contesting  such\n               claim as the Company  shall  reasonably  request in writing  from\n               time to time,  including,  without  limitation,  accepting  legal\n               representation   with  respect  to  such  claim  by  an  attorney\n               reasonably selected by the Company,\n\n                    (iii)  cooperate  with the Company in good faith in order to\n               effectively contest such claim, and\n\n                    (iv) permit the  Company to  participate  in any  proceeding\n               relating to such claim;\n\nprovided,  however,  that the Company  shall bear and pay directly all costs and\nexpenses  (including  additional  interest and penalties) incurred in connection\nwith such contest and shall  indemnify  and hold the Executive  harmless,  on an\nafter-tax  basis,  from any  Excise Tax or income tax  (including  interest  and\npenalties with respect thereto) imposed as a result of such  representation  and\npayment of costs and expense.  Without limitation on the foregoing provisions of\nthis Section 10, the Company shall control all  proceedings  taken in connection\nwith such  contest  and,  at its sole  option,  may pursue or forego any and all\nadministrative  appeals,  proceedings,  hearings and conferences with the taxing\nauthority  in respect of such claim and may, at its sole option,  either  direct\nthe  Executive  to pay the tax claimed and sue for a refund or contest the claim\nin any permissible manner, and the Executive agrees to prosecute such contest to\na  determination  before  any  administrative  tribunal,  in a court of  initial\njurisdiction  and  in  one or  more  appellate  courts,  as  the  Company  shall\ndetermine;  provided,  however, that if the Company directs the Executive to pay\nsuch claim and sue for a refund,  the Company  shall  advance the amount of such\npayment to the Executive,  on an  interest-free  basis,  and shall indemnify and\nhold the  Executive  harmless,  on an  after-tax  basis,  from any Excise Tax or\nincome tax (including  interest or penalties with respect  thereto) imposed with\nrespect to such  advance or with  respect to any imputed  income with respect to\nsuch  advance;  and  further  provided  that any  extension  of the  statute  of\nlimitations  relating to payment of taxes for the Executive's  taxable year with\nrespect to which such contested amount is claimed to be due is limited solely to\nsuch contested amount.  Furthermore,  the Company's control of the contest shall\nbe limited to issues with respect to which a Gross-Up  Payment  would be payable\nhereunder and the Executive shall be entitled to settle or contest,  as the case\nmay be, any other  issue  raised by the  Internal  Revenue  Service or any other\ntaxing authority.\n\n\n                                       11\n\n\n\n\n\n\n               (d) If, after the  Executive's  receipt of an amount  advanced by\nthe Company  pursuant  to this  Section 10, the  Executive  becomes  entitled to\nreceive any refund with respect to such claim,  the Executive  shall (subject to\nthe Company's  complying with the  requirements of this Section 10) promptly pay\nto the Company the amount of such refund  (together  with any  interest  paid or\ncredited  thereon after taxes  applicable  thereto).  If, after the  Executive's\nreceipt of an amount  advanced  by the Company  pursuant  to this  Section 10, a\ndetermination  is made that the  Executive  shall not be  entitled to any refund\nwith  respect to such claim and the  Company  does not notify the  Executive  in\nwriting of its intent to contest such denial of refund  prior to the  expiration\nof 30 days after such  determination,  then such  advance  shall be forgiven and\nshall not be required to be repaid and the amount of such advance  shall offset,\nto the extent thereof, the amount of Gross-Up Payment required to be paid.\n\n     11.  NO MITIGATION OR OFFSET\n\n          The  Executive  shall not be required to seek other  employment  or to\nreduce any severance benefit payable to him under Sections 7, 8 or 9 hereof, and\nno such  severance  benefit  shall be reduced  on  account  of any  compensation\nreceived by the Executive from other employment. The Company's obligation to pay\nseverance  benefits under this Agreement shall not be reduced by any amount owed\nby the Executive to the Company.\n\n     12.  TAX WITHHOLDING; METHOD OF PAYMENT\n\n          All compensation payable pursuant to this Agreement,  shall be subject\nto reduction by all applicable  withholding,  social security and other federal,\nstate and local taxes and  deductions.  Any  lump-sum  payments  provided for in\nSections 7 or 9 hereof shall be made in a cash payment,  net of any required tax\nwithholding, no later than the fifth business day following the Executive's date\nof  termination.  Any payment  required to be made to the  Executive  under this\nAgreement  that is not  made in a  timely  manner  shall  bear  interest  at the\nApplicable Rate until the date of payment.\n\n     13.  RESTRICTIVE COVENANTS\n\n               (a) Confidential Information. During the Employment Period and at\nall times  thereafter,  the Executive  agrees that he will not divulge to anyone\n(other than the Company or any persons  employed or  designated  by the Company)\nany knowledge or information of a confidential  nature  relating to the business\nof the Company or any of its  subsidiaries  or  affiliates,  including,  without\nlimitation, all types of trade secrets (unless readily ascertainable from public\nor  published   information  or  trade  sources)  and  confidential   commercial\ninformation,  and the Executive further agrees not to disclose,  publish or make\nuse of any such knowledge or information without the consent of the Company.\n\n               (b)  Noncompetition.  During the  Employment  Period  and, in the\nevent of a  resignation  by the Executive for any reason other than Good Reason,\nfor the 24 month period  following the termination of employment,  the Executive\nshall not,  without  the prior  written  consent of the  Company,  engage in the\ncomprehensive  rehabilitative and related healthcare services business on behalf\nof any person,  firm or corporation  within any  geographical  area in which the\nCompany  transacts  such  business,  and the  Executive  shall not  acquire  any\nfinancial interest (except for an\n\n\n\n                                       12\n\n\n\n\n\n\nequity  interest  in  publicly-held  companies  that  do  not  exceed  5% of any\noutstanding  class of equity of that  company),  in any business that engages in\nthe comprehensive rehabilitative and related healthcare services business within\nany   geographical   area  in  which  the  Company   transacts   such  business.\nNotwithstanding  the  foregoing,  upon the  occurrence  of a Change  in  Control\n(whether  before  or  after  the  termination  of the  Employment  Period),  the\nrestrictions of this Section 13(b) shall cease to apply to the Executive for any\nperiod following his termination of employment hereunder.\n\n               (c)  Enforcement.  The  Company  shall  be  entitled  to  seek  a\nrestraining  order or  injunction  in any  court of  competent  jurisdiction  to\nprevent any continuation of any violation of the provisions of this Section 13.\n\n     14.  SUCCESSORS\n\n               (a) This  Agreement  shall be binding upon and shall inure to the\nbenefit of the  Company,  its  successors  and  assigns  and any  person,  firm,\ncorporation  or other entity which succeeds to all or  substantially  all of the\nbusiness,  assets or  property of the  Company.  The  Company  will  require any\nsuccessor  (whether direct or indirect,  by purchase,  merger,  consolidation or\notherwise) to all or  substantially  all of the business,  assets or property of\nthe Company, to expressly assume and agree to perform this Agreement in the same\nmanner and to the same extent  that the Company  would be required to perform it\nif no such succession had taken place. As used in this Agreement,  the 'Company'\nshall  mean  the  Company  as  hereinbefore  defined  and any  successor  to its\nbusiness,  assets or  property  as  aforesaid  which  executes  and  delivers an\nagreement  provided for in this Section 14 or which  otherwise  becomes bound by\nall the terms and provisions of this Agreement by operation of law.\n\n               (b) This  Agreement  and all  rights of the  Executive  hereunder\nshall inure to the benefit of and be enforceable by the Executive's  personal or\nlegal   representatives,    executors,   administrators,    successors,   heirs,\ndistributees,  devisees  and  legatees.  If the  Executive  should die while any\namounts are due and payable to him hereunder, all such amounts, unless otherwise\nprovided herein, shall be paid to the Executive's  designated beneficiary or, if\nthere be no such designated  beneficiary,  to the legal  representatives  of the\nExecutive's estate.\n\n     15.  NO ASSIGNMENT\n\n          Except  as to  withholding  of any tax  under  the laws of the  United\nStates or any other country,  state or locality,  neither this Agreement nor any\nright or interest  hereunder nor any amount payable at any time hereunder  shall\nbe subject in any manner to  alienation,  sale,  transfer,  assignment,  pledge,\nattachment,  or other legal process, or encumbrance of any kind by the Executive\nor the  beneficiaries of the Executive or by his legal  representatives  without\nthe Company's prior written consent,  nor shall there be any right of set-off or\ncounterclaim  in  respect  of any debts or  liabilities  of the  Executive,  his\nbeneficiaries or legal representatives;  provided, however, that nothing in this\nSection shall preclude the Executive  from  designating a beneficiary to receive\nany benefit payable on his death, or the legal  representatives of the Executive\nfrom assigning any rights  hereunder to the person or persons  entitled  thereto\nunder his will or, in case of  intestacy,  to the  person  or  persons  entitled\nthereto under the laws of intestacy applicable to his estate.\n\n\n\n                                       13\n\n\n\n\n\n\n\n     16.  ENTIRE AGREEMENT\n\n          This Agreement  contains the entire  understanding of the parties with\nrespect to the  subject  matter  hereof  and,  except as  specifically  provided\nherein,  cancels and supersedes any and all other agreements between the parties\nwith respect to the subject matter hereof, including,  without limitation,  that\ncertain employment  agreement dated July 23, 1986, as amended.  Any amendment or\nmodification of this Agreement shall not be binding unless in writing and signed\nby the Company and the Executive.\n\n     17.  SEVERABILITY\n\n          In the event that any provision of this  Agreement is determined to be\ninvalid or  unenforceable,  the remaining terms and conditions of this Agreement\nshall be  unaffected  and shall  remain in full force and  effect,  and any such\ndetermination of invalidity or unenforceability shall not affect the validity or\nenforceability of any other provision of this Agreement.\n\n     18.  NOTICES\n\n          All notices which may be necessary or proper for either the Company or\nthe Executive to give to the other shall be in writing and shall be delivered by\nhand or sent by registered or certified mail,  return receipt  requested,  or by\nair courier, to the Executive at:\n\n                        Mr. Richard M. Scrushy\n                        2406 Longleaf Street\n                        Birmingham, Alabama  35243\n\nwith a copy to:\n\n                        Frederick W. Kanner, Esq.\n                        Dewey Ballantine LLP\n                        1301 Avenue of the Americas\n                        New York, New York  10019\n\nand shall be sent in the manner  described above to the Secretary of the Company\nat the  Company's  principal  executives  offices  at One  HealthSouth  Parkway,\nBirmingham, Alabama 35243, or delivered by hand to the Secretary of the Company,\nand shall be deemed given when sent,  provided  that any notice  required  under\nSection 6 hereof or notice  given  pursuant to Section 2 hereof  shall be deemed\ngiven only when received. Any party may by like notice to the other party change\nthe address at which he or they are to receive notices hereunder.\n\n     19.  GOVERNING LAW\n\n          This Agreement shall be governed by and enforceable in accordance with\nthe laws of the State of Alabama,  without  giving  effect to the  principles of\nconflict of laws thereof.\n\n\n                                       14\n\n\n\n\n\n\n     20.  ARBITRATION\n\n          Any  controversy  or  claim  arising  out  of,  or  related  to,  this\nAgreement, or the breach thereof, shall be settled by binding arbitration in the\nCity of Birmingham,  Alabama, in accordance with the rules then obtaining of the\nAmerican Arbitration Association, and the arbitrator's decision shall be binding\nand final,  and  judgment  upon the award  rendered  may be entered in any court\nhaving jurisdiction thereof.\n\n     21.  LEGAL FEES AND EXPENSES\n\n          To induce the  Executive to execute this  Agreement and to provide the\nExecutive with reasonable assurance that the purposes of this Agreement will not\nbe frustrated by the cost of its enforcement  should the Company fail to perform\nits  obligations  under this Agreement or should the Company or any  subsidiary,\naffiliate or stockholder of the Company  contest the validity or  enforceability\nof this  Agreement,  the  Company  shall pay and be solely  responsible  for any\nattorneys'  fees and  expenses  and court costs  incurred by the  Executive as a\nresult of a claim that the Company has breached or  otherwise  failed to perform\nthis  Agreement or any  provision  hereof to be performed by the Company or as a\nresult of the Company or any subsidiary, affiliate or stockholder of the Company\ncontesting  the validity or  enforceability  of this  Agreement or any provision\nhereof to be performed by the Company,  in each case  regardless of which party,\nif any, prevails in the contest.\n\n     22.  CONVERSION TO CHAIRMAN-ONLY STATUS\n\n          The  Executive may elect at any time during the  Employment  Period to\nresign his position as Chief  Executive  Officer and serve the Company solely as\nthe  Chairman of the Board  ('Chairman-Only  Status')  for the  remainder of the\nEmployment  Period  under the terms and  conditions  hereof.  In the event of an\nelection by the Executive to maintain  Chairman-Only Status, (i) the Base Salary\ndescribed  in Section  5(a)  hereof and the Annual  Target  Bonus  described  in\nSection  5(b)  hereof  shall  be  reduced  to an  amount  equal  to 50% of their\nthen-current level (subject to possible merit increases at the discretion of the\nBoard)  at the  time of such  election  and (ii) all  other  provisions  of this\nAgreement,  including the compensation and benefits  provisions of Sections 5(c)\nthrough 5(f) hereof,  shall remain in full force and effect for the remainder of\nthe  Agreement  Term.  An election by the  Executive  to maintain  Chairman-Only\nStatus,  and the related  reduction  in his Base Salary and Annual  Target Bonus\nthereof,  shall not constitute a violation of the Executive's  obligations under\nSection 3 hereof,  nor shall it  constitute  a  termination  of the  Executive's\nemployment  for any purpose under Section 6 hereof.  As used in this  Agreement,\nthe term  'employment'  and similar terms shall be deemed to include  service to\nthe Company while maintaining Chairman-Only Status.\n\n\n                                       15\n\n\n\n\n\n\n\n         IN WITNESS  WHEREOF,  the Company and the Executive  have executed this\nAgreement as of the date first above written.\n\n                                    EXECUTIVE\n\n                                    \/s Richard M. Scrushy\/\n                                    --------------------------------\n                                    Richard M. Scrushy\n\n                                    HEALTHSOUTH CORPORATION\n\n                                    By \/s\/ Anthony J. Tanner\n                                      ------------------------------\n                                      Name:  Anthony J. Tanner\n                                      Title: Executive Vice President -\n                                             Administration and Secretary\n\n\n\n\n\n                                        16\n\n\n\n\n                                                                       EXHIBIT A\n\n\n                             HEALTHSOUTH CORPORATION\n                            EXECUTIVE RETIREMENT PLAN\n                             FOR RICHARD M. SCRUSHY\n\n                                  Summary of Terms\n\nBenefit Formula:                  Annual retirement benefit equal to 60% of Base\n                                  Compensation at Normal Retirement Age\n\nBase Compensation:                Average base salary of Executive in 3 highest\n                                  consecutive calendar years of service with\n                                  HEALTHSOUTH\n\nVesting:                          Fully vested at all times\nNormal Retirement Age:            Age 60\n\nEarly Retirement:                 Benefit is fully vested and  accrued if termi-\n                                  nation for any  reason  prior to age  60,  but\n                                  earliest  benefit commencement date is age 55\n                                  (with actuarial reduction)\n\nForms of Payment:                 Executive's choice of alternative forms:\n                                  Single Life Annuity\n\n                                  Single Life Annuity with 10 year\n                                  guarantee   Joint  and  Survivor\n                                  Annuity (50% or 100%) Lump Sum\n\nDeath Benefit:                    For death prior to  benefit commencement date,\n                                  spouse receives 50%  survivor  annuity payable\n                                  at later of date of death or 55th birthday\n\nActuarial Assumptions:            Pre-age 60 commencement and alternative forms\n                                  of payment adjusted on an actuarial equivalent\n                                  basis:\n\n                                  interest rate - 30-year Treasury rate\n                                  mortality assumption - 1983 GAM Table\n\nUnfunded Status:                  Plan  is  an unfunded, unsecured obligation of\n                                  HEALTHSOUTH, but HEALTHSOUTH may elect to fund\n                                  on a tax-neutral basis to Executive\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":[9539,9544],"class_list":["post-39229","corporate_contracts","type-corporate_contracts","status-publish","hentry","corporate_contracts_companies-healthsouth-corp","corporate_contracts_industries-health__misc","corporate_contracts_types-compensation","corporate_contracts_types-compensation__employment"],"acf":[],"_links":{"self":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts\/39229","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=39229"}],"wp:term":[{"taxonomy":"corporate_contracts_companies","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_companies?post=39229"},{"taxonomy":"corporate_contracts_industries","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_industries?post=39229"},{"taxonomy":"corporate_contracts_types","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_types?post=39229"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}