Exhibit 10.35

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “Agreement”), is made as of this 28th day of
August , 2009, by and between LIFECARE MANAGEMENT SERVICES, L.L.C., a Louisiana
limited liability company (“LifeCare”), and Erik C. Pahl (“Employee”). LifeCare
and Employee are collectively referred to in this Agreement as the “Parties.”

RECITALS:

LifeCare desires to employ Employee as the General Counsel for LifeCare
Management Services, LLC, and the Parties desire to set forth the terms and
conditions of Employee’s employment with LifeCare. This agreement is intended to
supersede any prior understanding or agreements, whether written or oral,
concerning Employee’s employment with LifeCare, LifeCare Holdings, Inc.
(“Parent”), or any of their respective subsidiaries or affiliates.

AGREEMENT:

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties agree as follows:

 

1. EMPLOYMENT. LifeCare hereby employs Employee to devote his personal services
to the business and affairs of LifeCare, and Employee hereby accepts such
employment, on the terms and conditions stated in this Agreement.

 

  1.1. Duties. Employee’s title and position shall be General Counsel.
Employee’s duties will be those customarily performed by persons acting in that
capacity and those that may be designated by the Chief Executive Officer or the
Board of Directors of LifeCare (the “Board”) consistent with the title and
position of a General Counsel.

 

  1.2. Full-Time Employee. Employee shall devote his full time (except for
reasonable vacation time and absence for any disability), attention, and best
efforts to the performance of his duties described in Article 1.1. Employee may,
however, engage in civic, charitable, professional or trade activities and
National Guard activities so long as those activities do not interfere with the
performance of his duties under this Agreement.

 

2. TERM. The term of Employee’s employment under this Agreement (the “Term”)
shall be as follows:

 

  2.1. Initial Term. The initial term shall commence on the date of this
Agreement and end at 11:59:59 p.m., Central Time, on the day preceding the first
anniversary of the date of this Agreement unless (i) terminated earlier pursuant
to Article 5.1 or (ii) extended pursuant to Article 2.2.

 

  2.2.

Extended Term. Upon the expiration of the initial term described in Article 2.1,
or of any subsequent extended term described in this Article 2.2, the one-year

--------------------------------------------------------------------------------

 

term shall be extended, without the need for any action by either Party, for an
additional consecutive year, unless either Party gives notice to the other, at
least 90 days before the expiration date, that the notifying Party does not wish
to extend the term. If such a notice is timely given, the Term will expire at
the end of the initial term or renewal term in effect at the time of that
notice.

 

3. COMPENSATION. As compensation for the services rendered by Employee under
this Agreement, LifeCare shall, during the Term, pay or provide Employee during
the Term the following:

 

  3.1. Base Salary. LifeCare shall pay Employee during the Term a base salary
equal to $ 225,000.00 per annum, payable in arrears, in accordance with
LifeCare’s regular and routine payroll dates, or at such intervals as may
otherwise be agreed upon by the Parties, and in accordance with any other
payroll procedures of LifeCare. Base salary shall be prorated (on a daily basis)
in accordance with applicable federal and state law for any partial payroll
period of employment under this Agreement. The amount of base salary may be
increased from time to time at the sole discretion of the Board.

 

  3.2. Bonus Compensation. During each fiscal year completed during the Term,
Employee shall be eligible to receive additional cash compensation as a bonus,
incentive or other similar payment in accordance with the Senior Vice President
position in LifeCare’s management incentive plan. The additional cash
compensation, however, is not guaranteed and is dependent upon both
(i) achieving predefined goals for the fiscal year as determined by and in the
sole discretion of the Board and (ii) the discretion of the Board in awarding
the bonus, regardless of whether the predefined goals were achieved. The amount
or amounts of cash compensation which Employee potentially may earn by that
participation will be determined by the Board (or a committee or other persons
appointed by the Board to administer that plan) and will be payable to the
Employee not later than two and one-half months following the end of the fiscal
year for which the bonus was earned. Employee must be currently employed by
LifeCare at the time that bonuses are distributed to receive any bonus
compensation. Employee will not receive a bonus following termination of
employment for any reason. To the extent that the terms and conditions of any
written bonus or retention plan in which Employee participates conflict with the
terms and provisions of this Article 3.2, the terms of such written bonus or
retention plan shall control.

Sign-On Bonus. A $25,000.00 sign-on bonus shall be due and payable to Employee
after completing one year of employment with LifeCare

 

  3.3. Savings and Retirement Plans. Employee shall be eligible to participate
in any executive savings, deferred compensation, retirement or pension, or death
benefit plan adopted by LifeCare for its executives having positions similar to
Employee’s position and in effect during the Term. The extent to which Employee
may participate in any such plan will be determined by the Board (or a committee
or other persons appointed by the Board to administer that plan) in its sole
discretion.

 

EMPLOYMENT AGREEMENT    2   

--------------------------------------------------------------------------------

  3.4. Welfare Benefit Plans. Employee shall be eligible to participate in any
life insurance, medical, dental, and hospitalization insurance, disability
insurance benefit, or other similar employee welfare benefit plan or program
adopted by LifeCare covering its employees generally or its executives having
positions similar to Employee’s position and in effect during the Term.

 

  3.5. Paid Time Off. Employee shall be entitled to paid vacation or time off
(“EPTO”) per fiscal year of LifeCare, in accordance with LifeCare’s EPTO
policies, practices, and procedures. Such EPTO shall, however, be prorated in
any fiscal year during which Employee is employed under this Agreement for less
than the entire fiscal year, in accordance with the number of days in that
fiscal year during which Employee is so employed.

 

  3.6. Tax Withholding. LifeCare may deduct from any compensation or other
amount payable to Employee under this Agreement (including under Article 5)
social security (FICA) taxes and all federal, state, municipal, and other taxes
or governmental charges as may, in LifeCare’s judgment, be required.

 

  3.7. Participation in Compensation and Benefit Plans. Employee’s participation
during the Term in any or all of the plans or programs adopted by LifeCare
described in Articles 3.2 through 3.5 (“Compensation and Benefit Plans”) will be
subject to the terms and conditions of those Compensation and Benefit Plans as
they now exist or may hereafter be adopted, amended, restated, or discontinued
by LifeCare, including the satisfaction of all applicable eligibility
requirements and vesting provisions of those Compensation and Benefit Plans.
LifeCare shall have no obligation under this Agreement to continue any or all of
the Compensation and Benefit Plans that now exist or are hereafter adopted. To
the extent that Employee is eligible to participate in any Compensation and
Benefit Plan existing on the date of this Agreement for which a plan description
or plan materials are available, LifeCare has provided to Employee, and Employee
hereby acknowledges receipt of, a copy of the correct and complete written plan
description or plan materials distributed to participants or prospective
participants.

 

4. EXPENSE REIMBURSEMENT. During the Term, Employee may incur, and shall be
reimbursed by LifeCare for, reasonable, ordinary and necessary, and documented
business expenses to the extent that Employee complies with, and reimbursement
is permitted by, LifeCare’s policies, practices, and procedures. Any such
reimbursement that would constitute nonqualified deferred compensation subject
to Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”)
shall be made, if at all, not later than the end of the calendar year following
the calendar year in which the expense was incurred.

 

5. EXPIRATION OR TERMINATION. The Parties’ respective rights and obligations
upon termination of employment are, as follows:

 

EMPLOYMENT AGREEMENT    3   

--------------------------------------------------------------------------------

  5.1. Expiration or Termination Generally. Upon the expiration of the Term, or
if Employee’s employment under this Agreement terminates for any reason,
LifeCare shall pay or provide Employee the following:

 

  5.1.1. Any base salary earned by, but not yet paid to, Employee through the
effective date of termination of employment (the “Termination Date”);

 

  5.1.2. All benefits, or (at LifeCare’s option) the cash equivalent of all
benefits, that have been earned by or vested in, and are payable to, Employee
under, and subject to the terms (including all eligibility requirements) of, the
Compensation and Benefit Plans in which Employee participated through the
Termination Date;

 

  5.1.3. All reimbursable expenses due, but not yet paid, to Employee as of the
Termination Date under Article 4; and

The amount of base salary due under Article 5.1.1 shall be paid no later than
the thirty (30) business days after the Termination Date or as otherwise
required by law; the amounts or benefits due under Article 5.1.2 shall be paid
or provided in accordance with the terms of the Compensation and Benefit Plans
under which such amounts or benefits are due to Employee; and the amounts due
under Article 5.1.3 shall be paid in accordance with the terms of LifeCare’s
policies, practices, and procedures regarding reimbursable expenses. Except as
expressly provided below in this Article 5, upon paying or providing Employee
the preceding amounts or benefits, LifeCare shall have no further obligation or
liability under this Agreement for base salary or any other cash compensation or
for any benefits under any of the Compensation and Benefit Plans.

In this Agreement, the “Termination Date” shall be (i) the date of expiration of
the Term, (ii) the date of Employee’s death, (iii) the third business day after
the date on which LifeCare gives notice of termination because of Disability, or
(iv) the date of termination specified in any other notice of termination,
whether for Cause (as defined below) or without Cause, or if not specified in
the notice of termination, the date that notice of termination is given.

In this Agreement, “Disability” means Employee’s permanent and total disability,
which shall be deemed to exist if he is unable reasonably to perform his duties
under this Agreement because of any medically determinable physical or mental
impairment which can be expected to result in imminent death or which has lasted
or can be expected to last for at least 90 consecutive days. Any disability
shall be determined in good faith by the Board or an authorized committee or
representative thereof (“Representative”), in its sole and absolute discretion,
upon receipt of competent medical advice from a qualified physician selected by
or acceptable to the Board or its Representative. Employee shall, if there is
any question about his Disability, submit to a physical examination by a
qualified physician selected by the Board or its Representative and with respect
to whom Employee has no reasonable material objection.

 

EMPLOYMENT AGREEMENT    4   

--------------------------------------------------------------------------------

In this Agreement, “Cause” means any of the following: (i) Employee’s failure to
substantially perform his duties under this Agreement, other than any such
failure resulting from his Disability; (ii) Employee’s engaging in any action
which, or omitting to engage in any action the omission of which, has been, is,
or can reasonably expected to be substantially injurious (monetarily or
otherwise) to LifeCare or its business or reputation; (iii) Employee’s
performance of any act or omission constituting dishonesty that results,
directly or indirectly, in gain or enrichment of Employee or his family or
affiliates at the expense of LifeCare; or (iv) any breach by Employee of any
obligation under any of Articles 6, 7, 8, and 9. Whether an event or
circumstance constituting Cause exists will be determined in good faith by the
Board or its Representative.

 

  5.2. Termination Without Cause, Upon Death or Disability, or Upon Expiration
of the Term Resulting from Nonrenewal by LifeCare. If (i) Employee’s employment
is terminated by death; by LifeCare because of Disability; or by LifeCare
without Cause or (ii) the Term of this Agreement expires pursuant to a notice
sent from LifeCare to Employee in accordance with Article 2.2 indicating that
LifeCare does not wish the Term of this Agreement to be extended, then Employee
(or his legal representative, estate or heirs) shall be entitled to receive from
LifeCare, as liquidated damages, the continued payment of Employee’s base
salary, at the annual rate in effect at the Termination Date, for the six
(6) consecutive months immediately after the Termination Date (the “Severance
Payments”). The Severance Payments shall be (i) paid at LifeCare’s regular and
routine payroll dates, or at such intervals as may otherwise be agreed upon by
the Parties, and in accordance with any other payroll procedures of LifeCare,
and (ii) in addition to the amounts or benefits to which Employee is entitled
under Article 5.1 and any rights or remedies Employee may have under the
Compensation and Benefit Plans. The Severance Payments will commence on
LifeCare’s next regular payday that is at least five (5) business days following
the later of the effective date of the Release Agreement (as defined below) and
the date LifeCare receives the executed Release Agreement, and the first
Severance Payment shall be retroactive to the day following the Termination
Agreement. The Severance Payments shall not be deemed the continuation of
Employee’s employment for any purpose.

 

  5.3. Conditions to Severance Payments. Except as provided below in this
Article 5.3, none of the Severance Payments will be subject to reduction as the
result of future compensation earned or received by Employee (including by
self-employment), and Employee shall have no duty to mitigate his damages. The
Severance Payments shall, however, be conditioned upon:

 

  5.3.1. LifeCare’s receipt of a timely and effective Release of Claims executed
and performed by Employee (or his legal representative, estate or heirs) ins
substantially the form of Exhibit A to this Agreement (the “Release Agreement”)
following termination of employment hereunder and by the deadline specified
therein, and returning it to LifeCare within thirty (30) calendar days of the
date of termination of employment; and

 

EMPLOYMENT AGREEMENT    5   

--------------------------------------------------------------------------------

  5.3.2. The compliance by Employee (or his legal representative, estate, or
heirs) with Articles 6, 7, 8, and 9 after the Termination Date as specified in
those Articles, as well as with the Release Agreement. For purposes of Articles
6, 7, 8 and 9, the term “LifeCare” shall be deemed to include LifeCare, LifeCare
Holdings, Inc. and any of their respective subsidiaries or affiliates.

 

  5.4 (a) the compensation, benefits, and other payment described in this
Agreement are intended to comply with the requirements of Code Section 409A and
the treasury regulations and other guidance issued thereunder, as in effect from
time to time, to the extent they are subject to Code Section 409A, or to be
exempt from such requirements, regulations and guidance (where an exemption is
available), and shall be construed accordingly. For purposes of Code
Section 409A, all references herein to termination of employment or similar
terms, when used in a context that bears upon the payment or timing of payment
of any amounts or benefits that constitute or could constitute “nonqualified
deferred compensation” within the meaning of Code Section 409A, shall be
construed to require a “separation from service” (as that term is defined in
Treasury Regulation Section 1.409A-1(h), from LifeCare and from all other
corporations and trades or businesses, if any, that would be treated as a single
“service recipient” with LifeCare under Treasury Regulation
Section 1.409A-1(h)(3). LifeCare may, but need not, elect in writing, subject to
the applicable limitations under Code Section 409A, any of the special elective
rules prescribed in Treasury Regulation Section 1.409A-1(h) for purposes of
determining whether a “separation of service” has occurred. Any such written
election shall be deemed part of this Agreement. In addition, each payment made
under this Agreement shall be treated as a separate payment and the right to a
series of installment payments under this Agreement is to be treated as a right
to a series of separate payments. In no event may Employee, directly or
indirectly, designate the calendar year of payment

(b) Notwithstanding any provision of this Agreement to the contrary, if, at the
time of the Employee’s termination of employment with LifeCare the Employee is a
“specified employee” (as hereinafter defined), any and all amounts payable in
connection with such separation from service that constitute “nonqualified
deferred compensation” subject to Code Section 409A, as determined by LifeCare
in its sole discretion, and that would (but for this sentence) be payable within
six months following such separation from service, shall instead be paid a lump
sum on the first payroll date after the date that follows the Employee’s
separation from service by six (6) months, or, if the Employee dies before such
payment, within sixty (60) days after Employee’s death. For purposes of this
Section, “specified employee” means an individual determined by LifeCare to be a
specified employee as defined in subsection (a)(2)(B)(i) of Code Section 409A.
LifeCare may, but need not elect in writing, subject to the applicable

 

EMPLOYMENT AGREEMENT    6   

--------------------------------------------------------------------------------

limitations under Code Section 409A, any of the special elective rules
prescribed in Treasury Regulation Section 1.409A-1(i) for purposes of
determining “specified employee” status. Any such written election shall be
deemed part of this Agreement.

LifeCare may reduce the amount of or discontinue the Severance Payments to be
made to Employee (or his legal representative, estate, or heirs) if, and
LifeCare shall be entitled to a return of amounts of the Severance Payments made
to the extent that, there is or has been any violation of any of Articles 6, 7,
8, and 9 or of the Release Agreement.

 

6. CONFIDENTIAL INFORMATION. LifeCare shall provide to Employee, during the
Term, access to various trade secrets, confidential information, and proprietary
information of LifeCare (which, in this Article 6 as well as in Articles 7, 8,
and 9, shall include LifeCare’s subsidiaries and affiliates) which are valuable
and unique to LifeCare (“Confidential Information”). Employee shall not, either
while in the employ of LifeCare or at any time thereafter, (i) use any of the
Confidential Information, or (ii) disclose any of the Confidential Information
to any person not an employee of LifeCare or not engaged to render services to
LifeCare, except (in either case) to perform his duties under this Agreement or
otherwise with LifeCare’s prior written consent. Nothing in this Article 6 shall
preclude Employee from the use or disclosure of information generally known to
the public or not considered confidential by LifeCare or from any disclosure to
the extent required by law or court order (though Employee must give LifeCare
prior notice of any such required disclosure and must cooperate with any
reasonable requests of LifeCare to obtain a protective order regarding, or to
narrow the scope of, the Confidential Information required to be disclosed). All
files, records, documents, information, data, and similar items relating to the
business or affairs of LifeCare, whether prepared by Employee or otherwise
coming into his possession, shall remain the exclusive property of LifeCare and
shall not be removed from the premises from LifeCare, except in the ordinary
course of business as part of Employee’s performance of his duties under this
Agreement, and (in any event) shall be promptly returned or delivered to
LifeCare (without Employee’s retaining any copies) upon the expiration of the
Term or termination of employment under this Agreement.

 

7.

NONCOMPETITION. Employee acknowledges that, in addition to his access to and
possession of Confidential Information, during the Term he will acquire valuable
experience and special training regarding LifeCare’s business and that the
knowledge, experience, and training he will acquire would enable him to injure
LifeCare if he were to engage in any business that is competitive with the
business of LifeCare. LifeCare agrees, in consideration of the Employee’s
acceptance of the restrictions set forth in this Agreement, to grant the
Employee access to trade secret and other Confidential Information of LifeCare
and to LifeCare’s valuable business relations and goodwill. Therefore, Employee
shall not, at any time during the Term and for the twelve (12) consecutive
months immediately after the Termination Date, directly or indirectly (as an
employee, employer, consultant, agent, principal, partner, shareholder, officer,
director, or manager or in any other individual or representative capacity),
engage, invest, or participate in (i) any long-term acute care hospital business
that is in direct competition with the business of LifeCare within a thirty
(30) mile radius of any long-term acute care

 

EMPLOYMENT AGREEMENT    7   

--------------------------------------------------------------------------------

 

hospital facility operated by LifeCare or its affiliates, subsidiaries or
operating entities, or (ii) within 30 miles of any other healthcare business
operated by LifeCare at the time of Employee’s Termination Date. (Employee shall
not be prohibited, however, from owning, as a passive investor, less than five
percent of the publicly traded stock of any corporation engaged in a business
competitive with that of LifeCare.) Employee represents that the enforcement of
the restriction in this Article 7 would not be unduly burdensome to Employee and
that, in order to induce LifeCare to enter into this Agreement (which contains
various benefits to Employee and obligations of LifeCare with respect to
Employee’s employment), Employee is willing and able to compete after the
Termination Date in other geographical areas not prohibited by this Article 7.
The Parties agree that the restrictions in this Article 7 regarding scope of
activity, duration, and geographic area are reasonable; however, if any court
should determine that any of those restrictions is unenforceable, that
restriction shall not thereby be terminated, but shall be deemed amended to the
extent required to render it enforceable.

 

8. NONSOLICITATION. Employee shall not, at any time within the twelve
(12) consecutive months immediately after the Termination Date, either directly
or indirectly:

 

  8.1. Disclose Contact Information. Make known to any person the names and
addresses, or other contact information, of any of the customers, suppliers, or
other persons having significant business relationships with LifeCare within the
health care industry, so that such person could affect, or attempt to affect,
any of those relationships to the detriment of LifeCare; or

 

  8.2. Solicit Employees. Directly or indirectly solicit, recruit, or hire, or
attempt to solicit, recruit, or hire, any individual who was an employee or
consultant of LifeCare during the last six (6) months of Employee’s employment,
or in any other manner attempt to induce any individual who was an employee or
consultant of LifeCare during the last six (6) months of Employee’s employment
to leave the employ of LifeCare or cease his or her consulting or similar
business relationship with LifeCare.

 

9. DEVELOPMENTS. Employee shall promptly disclose to LifeCare all inventions,
discoveries, improvements, processes, formulas, ideas, know-how, methods,
research, compositions, and other developments, whether or not patentable or
copyrightable, that Employee, by himself or in conjunction with any other
person, conceives, makes, develops, or acquires during the Term which (i) are or
relate to the properties, assets, or existing or contemplated business or
research activities of LifeCare, (ii) are suggested by, arise out of, or result
from, directly or indirectly, Employee’s association with LifeCare, or
(iii) arise out of or result from, directly or indirectly, the use of LifeCare’s
time, labor, materials, facilities, or other resources (“Developments”).

Employee hereby assigns, transfers, and conveys to LifeCare, and hereby agrees
to assign, transfer, and convey to LifeCare during or after the Term, all of his
right and title to and interest in all Developments. Employee shall, from time
to time upon the request of LifeCare during or after the Term, execute and
deliver any and all instruments and documents and take any and all other actions
which, in the judgment of LifeCare or its

 

EMPLOYMENT AGREEMENT    8   

--------------------------------------------------------------------------------

counsel, are or may be necessary or desirable to document any such assignment,
transfer, and conveyance to LifeCare or to enable LifeCare to file and process
applications for, and to acquire, maintain, and enforce, any and all patents,
trademarks, registrations, or copyrights with respect to any of the
Developments, or to obtain any extension, validation, re-issue, continuance, or
renewal of any such patent, trademark, registration, or copyright. LifeCare will
be responsible for the preparation of any such instrument or document and for
the implementation of any such proceedings and will reimburse Employee for all
reasonable expenses incurred by him in complying with this Article 9.

 

10. CERTAIN REMEDIES. Any breach or violation by Employee of any of Articles 6,
7, 8, and 9 shall entitle LifeCare, as a matter of right, to an injunction
issued by any court of competent jurisdiction, restraining any further or
continued breach or violation, or to specific performance requiring the
compliance with Employee’s covenants. This right to an injunction or other
equitable relief shall be in addition to, and not in lieu of, any other remedies
to which LifeCare may be entitled. The existence of any claim or cause of action
of Employee against LifeCare, or any subsidiary or affiliate of LifeCare,
whether based on this Agreement or otherwise, shall not constitute a defense to
the enforcement by LifeCare of Employee’s covenants in any of Articles 6, 7, 8,
and 9. The covenants in Articles 6, 7, 8, and 9 and in this Article 10 shall
survive the expiration or termination of Employee’s employment under this
Agreement.

 

11. AMENDMENT. This Agreement may be amended only by an instrument in writing
signed by both parties. Such signed instruments shall state the effective date
of the amendment.

 

12. BINDING AGREEMENT; SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon, and shall inure to the benefit of, LifeCare and Employee and their
respective legal representatives, heirs, executors, administrators, and
successors and assigns (as permitted by this Article 12), including any
successor to LifeCare by merger, consolidation, or reorganization and any other
person that acquires all or substantially all of the business and assets of
LifeCare. LifeCare shall have the right, without the need for any consent from
Employee, to assign its rights, benefits, remedies, and obligations under this
Agreement to one or more other persons. The rights, benefits, remedies, and
obligations of Employee under this Agreement are personal to Employee, however,
and may not be assigned or delegated by him; except that this shall not preclude
(i) Employee from designating one or more beneficiaries to receive any amount or
benefit that may be paid or provided after Employee’s death or (ii) the legal
representative of Employee’s estate from assigning any right or benefit under
this Agreement to the person or persons entitled thereto under Employee’s will
or the laws of intestacy applicable to Employee’s estate, as the case may be.

 

13. CERTAIN DEFINED TERMS. In this Agreement, (i) “person” means an individual
or any corporation, partnership, trust, unincorporated association, limited
liability company, or other legal entity, whether acting in an individual,
fiduciary, or other capacity, and any government, court, or governmental agency,
(ii) “include” and “including” do not signify any limitation, (iii) “Article”
means any Article of this Agreement, unless otherwise indicated, (iv) an
“affiliate” means any other person or entity directly or indirectly controlling,
controlled by, or under common control with that person, and (v) “business day”
means any Monday through Friday, other than any such weekday on which the
executive offices of LifeCare are closed.

 

EMPLOYMENT AGREEMENT    9   

--------------------------------------------------------------------------------

14. CODE OF CONDUCT. Employee shall adhere to, and conduct all of its activities
pursuant to this Agreement in accordance with, LifeCare’s Code of Conduct (a
copy of which has been provided to, and reviewed by, Employee), which is a part
of LifeCare’s Corporate Compliance Program. Employee agrees that all information
related to LifeCare’s Corporate Compliance Program constitutes confidential
information and Employee shall protect, to the extent permitted by law, the
confidential nature of such information.

 

15. COUNTERPARTS. This Agreement may be executed simultaneously in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

 

16. ENTIRE AGREEMENT. This Agreement (together with any exhibits attached
hereto) constitutes the entire agreement between the parties hereto pertaining
to the subject matter hereof and supersedes all prior and contemporaneous
agreements, understandings, negotiations and discussions, whether oral or
written, of the parties, and there are no warranties, representations or other
agreements between the parties in connection with the subject matter hereof
except as specifically set forth herein. No changes in or additions to this
Agreement shall be recognized unless incorporated herein by amendment, as
provided herein, such amendment(s) to become effective on the date stipulated in
such amendment(s).

 

17. FORCE MAJEURE. Neither party shall be liable or be deemed in breach of this
Agreement for any failure or delay of performance which results, directly or
indirectly, from acts of God, civil or military authority, public disturbance,
accidents, fires, or any other cause beyond the reasonable control of either
party.

 

18. GOVERNING LAW; VENUE; CONSENT TO JURISDICTION. This Agreement, and the
rights, remedies, obligations, and duties of the parties under this Agreement,
shall be governed by, construed in accordance with and enforced under the laws
of the State of Texas, without giving effect to the principles of conflict of
laws of such state. Venue for such action shall be proper in Collin County. The
parties irrevocably (i) submit to the foregoing exclusive jurisdiction,
(ii) agree that all claims in respect of such action or proceeding may be heard
and determined in such courts, (iii) waive, to the fullest extent they may
effectively do so, the defense of an inconvenient or inappropriate forum to the
maintenance of such action or proceeding, and (iv) waive any defense based on
lack of personal jurisdiction of any such purpose.

 

19. HEADINGS. The headings of this Agreement are inserted for convenience only
and are not to be considered in the interpretation of this Agreement. They shall
not in any way limit the scope or modify the substance or context of any
sections or articles of this Agreement.

 

20.

NON-DISCRIMINATION. LifeCare is an Equal Opportunity Employer. LifeCare abides
by all federal and state regulations relating to discrimination in hiring,
promotion and

 

EMPLOYMENT AGREEMENT    10   

--------------------------------------------------------------------------------

 

termination. All applicants will be considered for possible employment
regardless of race, color, creed or national origin. Promotions will be granted
based only upon the merit of the employee. No employee may be dismissed because
of race, color, creed, age or discriminatory reason.

 

21. NO RULE OF CONSTRUCTION. The parties acknowledge that this Agreement was
initially prepared by LifeCare solely as a convenience and that all parties and
their counsel hereto have read and fully negotiated all the language used in
this Agreement. The parties acknowledge that because all parties had an
opportunity for their counsel to participate in negotiating and drafting this
Agreement, no rule of construction shall apply to this Agreement that construes
ambiguous or unclear language in favor of or against any party.

 

22. NOTICES. Any notice, consent, or other communication to be given under this
Agreement by any party to any other party shall be in writing and shall be
either (i) personally delivered, (ii) mailed by registered or certified mail,
postage prepaid with return receipt requested, or (iii) delivered by overnight
express delivery service or same-day local courier service or at such other
address as may be designated by the parties from time to time in accordance with
this Article 22. Notices delivered personally, by overnight express delivery
service or by local courier service shall be deemed given as of actual receipt.
Mailed notices shall be deemed given three (3) business days after mailing.

 

If to Employee:   Erik C. Pahl   [Address]   If to LifeCare:   LifeCare
Management Services, L.L.C.   5560 Tennyson Parkway   Plano, Texas 75024  
Attention: CEO   Telecopy: 469-241-2199

 

23. NUMBER AND GENDER. When required by the context, each number, singular and
plural, shall include all numbers, and each gender shall include the feminine,
masculine and neuter.

 

24. SEVERABILITY. If any provision of this Agreement is found to be invalid or
unenforceable for any reason, then (i) that provision shall be severed from this
Agreement, (ii) this Agreement shall be construed and enforced as if that
invalid or unenforceable provision never constituted a part of this Agreement,
and (iii) the remaining provisions of this Agreement shall be unaffected thereby
and shall remain in full force and effect to the fullest extent permitted by
applicable law. Further, in lieu of that invalid or unenforceable provision,
there shall be added to this Agreement a provision as similar in its terms to
that invalid or unenforceable provision as may be possible and be valid and
enforceable.

 

EMPLOYMENT AGREEMENT    11   

--------------------------------------------------------------------------------

25. SURVIVAL OF OBLIGATIONS. Termination of this Agreement shall not relieve
either party from fulfilling any obligation that, at the time of termination,
has already accrued to the other party or which thereafter may accrue with
respect to any act or omission that occurred prior to such termination.

 

26. WAIVER. No delay or omission by either party to this Agreement in the
exercise or enforcement of any of its powers or rights hereunder shall
constitute a waiver of such power or right. A waiver by either party of any
provision of this Agreement must be in writing and signed by such party, and
shall not imply subsequent waiver of that or any other provision.

 

27. INDEPENDENT REPRESENTATION. Employee has consulted with his or her own
independent counsel regarding this Agreement and the transactions contemplated
herein to the extent desired by Employee.

 

EMPLOYMENT AGREEMENT    12   

--------------------------------------------------------------------------------

In Witness Whereof, the parties hereto have executed this Agreement effective as
of the date set forth above.

 

LIFECARE:

LIFECARE MANAGEMENT SERVICES, L.L.C.,

a Louisiana limited liability company

By:  

/s/ G. Wayne McAlister

Title:  

Chief Executive Officer

Printed Name:  

G. Wayne McAlister

Employee:

/s/ Erik C. Pahl

Erik C. Pahl

 

EMPLOYMENT AGREEMENT    13   

--------------------------------------------------------------------------------

EXHIBIT A

EMPLOYEE RELEASE OF CLAIMS

FOR AND IN CONSIDERATION OF the benefits to be provided me in connection with
the termination of my employment, as set forth in the employment agreement
between me,                         , and LifeCare Management Services, L.L.C.
dated as of                          (the “Agreement”), which are conditioned on
my signing this Release of Claims and to which I am not otherwise entitled, and
for other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, I, on my own behalf and on behalf of my heirs,
executors, administrators, beneficiaries, representatives and assigns, and all
others connected with or claiming through me, hereby release and forever
discharge LifeCare and all of its affiliates (as that term is defined in the
Agreement) and all of their respective past, present and future direct and
indirect officers, directors, trustees, shareholders, employees, agents, general
and limited partners, members, managers, joint venturers, representatives,
successors and assigns, and all others connected with any of them, both
individually and in their official capacities, from any and all causes of
action, rights and claims of any type or description, known or unknown, which I
have had in the past, now have, or might now have, through the date of my
signing of this Release of Claims, in any way resulting from, arising out of or
connected with my employment by LifeCare or any of its affiliates or the
termination of that employment or pursuant to any federal, state or local law,
regulation or other requirement (including without limitation Title VII of the
Civil Rights Act of 1964, the Age Discrimination in Employment Act, the
Americans with Disabilities Act, and the fair employment practices laws of the
state or states in which I have been employed by LifeCare or any of its
affiliates, each as amended from time to time).

Excluded from the scope of this Release of Claims is any claim arising under the
terms of the Agreement after the effective date of this Release of Claim.

In signing this Release of Claims, I acknowledge my understanding that I may not
sign it prior to the termination of my employment, but that I may consider the
terms of this Release of Claims for up to twenty-one (21) days (or such longer
period as LifeCare may specify) from the later of the date my employment with
LifeCare terminates or the date I receive this Release of Claims. I also
acknowledge that I am advised by LifeCare and its affiliates to seek the advice
of an attorney prior to signing this Release of Claims; that I have had
sufficient time to consider this Release of Claims and to consult with an
attorney, if I wished to do so, or to consult with any other person of my
choosing before signing; and that I am signing this Release of Claims
voluntarily and with a full understanding of its terms.

[Remainder of Page Intentionally Left Blank]

--------------------------------------------------------------------------------

I further acknowledge that, in signing this Release of Claims, I have not relied
on any promises or representations, express or implied, that are not set forth
expressly in this Release of Claims or the Agreement. I understand that I may
revoke this Release of Claims at any time within seven (7) days of the date of
my signing by written notice to the Chair of the Board at its principal place of
business and that this Release of Claims will take effect only upon the
expiration of such seven-day revocation period and only if I have not timely
revoked it.

Intending to be legally bound, I have signed this Release of Claims under seal
as of the date written below:

[NOT EXECUTED UNLESS EMPLOYEE LEAVES LIFECARE—Not at time of signing employment
contract]

 

Signature:  

 

Name (please print):  

 

Date Signed: