Company: EHC
Filing Date: 2025-04-01
Form Type: DEF 14A
Source: 0000785161-25-000013
Chunk: 65

Company: Encompass Health Corp
Filing Date: 2025-04-01
Form: DEF 14A
Chunk 65
---
 associated restricted shares vest.

Stock Option Awards in 2024

The Committee believes nonqualified stock options also are an appropriate means to align the interests of our most senior executives with our stockholders since they provide an incentive to grow stock price. Each vested stock option permits the holder, for a period of ten years, to purchase one share of our common stock at the exercise price, which is the closing market price on the date of issuance. The 2024 options awards vest ratably in equal annual increments over three years from the award date. The number of options awarded equaled 20% of the total target equity award opportunity approved for the related officer divided by the individual option value determined using the Black-Scholes valuation model.

Equity Award Timing

Our long-standing practice is to have the independent members on our board of directors approve, based on recommendations of the Committee, equity awards for management at the February board meeting which is the first scheduled meeting each year and allows time to review and consider our prior year performance. The number of shares of common stock underlying the PSU, RSA, and stock option awards is determined using the average closing price for our common stock over the 20-day trading period preceding the February board meeting at which the awards are approved. The averaging of prices mitigates the risk of unintended consequences of using a single closing price that may reflect an anomalous price swing on that day. Of note, we customarily issue our fourth quarter earnings release well before the annual stock award grant at the February meeting of the board. The strike price for the stock option awards is set at the closing price on the second trading day after the filing of our Form 10-K, which is also the date of issuance. This timingfor the pricing and issuance of stock options allows for the exercise price to reflect a broad dissemination of our financial results from the prior year and other material nonpublic information that may be included in the Form 10-K. Other than timing the establishment of the strike price for options to follow the release of our next annual or quarterly report, our board of directors and the Committee has not taken material nonpublic information into accountin the schedule for granting awards in 2024. Likewise, in 2024, we have not timed the disclosure of material nonpublic informationfor the purpose of affecting the value of executive compensation.

#### Executive Compensation Program Changes for 2025
For Mr. Tarr, the Board approved, in recognition of his performance and an increase in the peer group median pay, an increase in base salary from $