Exhibit 10.41

Securities Purchase Agreement

HealthSouth Corporation

One HealthSouth Parkway

Birmingham, Alabama 35243

Ladies and Gentlemen:

Each of the undersigned (each, an “Investor” and together, the “Investors”)
hereby confirms its agreement with you as follows:

1. This Securities Purchase Agreement (the “Agreement”) is made as of
February 28, 2006, between HealthSouth Corporation, a Delaware corporation (the
“Company”), and the Investors listed on the signature pages hereto.

2. The Company has authorized the sale and issuance to the Investors (the
“Offering”) of shares of its Convertible Perpetual Preferred Stock, par value
$0.10 per share (the “Securities”), which are convertible into shares of the
Company’s common stock, par value $0.01 per share (the “Common Stock”), and
shall have the rights, powers and preferences set forth in the Certificate of
Designations (the “Certificate of Designations”) of Convertible Perpetual
Preferred Stock, a copy of which is attached hereto as Exhibit A. The Securities
are being offered to qualified institutional buyers (“QIBs”) within the meaning
of Rule 144A under the Securities Act of 1933, as amended (the “Securities
Act”), pursuant to a private placement exemption from registration under the
Securities Act.

3. The Company and the Investors agree that each Investor will purchase from the
Company and the Company will issue and sell to such Investor up to the aggregate
number of Securities set forth below on such Investor’s signature page for the
aggregate purchase price of $1,000 per share; provided that if the Company sells
and the Investor buys an amount of Securities less than the aggregate number of
Securities set forth below on such Investor’s signature page, the total
aggregate purchase price of such Securities will be reduced proportionately. The
Securities shall be purchased pursuant to the Terms and Conditions for Purchase
of Securities attached hereto as Annex I and incorporated herein by reference as
if fully set forth herein. The Securities purchased by the Investors will be
delivered by electronic book-entry through the facilities of The Depository
Trust Company (“DTC”), to an account specified by each Investor on its signature
page and will be released by Mellon Investor Services (the “Escrow Agent”) to
such Investor at the Closing (as defined in Section 3 of Annex I hereto).

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Maximum Number of Securities: $30,000,000

Please confirm that the foregoing correctly sets forth the agreement between us
by signing in the space provided below for that purpose.

 

Name of Investor: Advent Capital Management By:   /s/ ROBERT WHITE Print Name:
Robert White Title:  Chief Financial Officer Address: 1065 Avenue of the
Americas, 31st Floor New York, NY 10018 Tax ID No.:  13-4168510 Contact Name:
Robert White Telephone:  212-479-0675 Back office contact:  Desmond Singh
212-479-0636   

Number of Securities Allocated to Investor: 20,000

Aggregate Purchase Price: $20,000,000

AGREED AND ACCEPTED:

 

HealthSouth Corporation,

a Delaware corporation

By:   /s/ JOHN WORKMAN   Name:   John Workman   Title:   Executive Vice
President and    

Chief Financial Officer

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Maximum Number of Securities:

Please confirm that the foregoing correctly sets forth the agreement between us
by signing in the space provided below for that purpose.

 

Name of Investor: AM Investment Partners, LLC By:   /s/ MARK FRIEDMAN Print
Name:  Mark Friedman Title:  Principal Address:  350 Park Avenue, 4th Floor New
York, NY 10022 Tax ID No.:  74-3006802 Contact Name:  Mark Friedman Telephone: 
212-508-8909 Back office contact:  Craig Cohen 212-508-8908   

Number of Securities Allocated to Investor: 7,000

Aggregate Purchase Price: $7,000,000

AGREED AND ACCEPTED:

 

HealthSouth Corporation,

a Delaware corporation

By:   /s/ JOHN WORKMAN   Name:   John Workman   Title:   Executive Vice
President and    

Chief Financial Officer

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Maximum Number of Securities: 50,000

Please confirm that the foregoing correctly sets forth the agreement between us
by signing in the space provided below for that purpose.

 

Name of Investor: Amaranth LLC, By Amaranth Advisors, LLC, its Trading Advisor
By:   /s/ KARL J. WACHTER Print Name:  Karl J. Wachter Title:  Authorized
Signatory Address:  c/o Dundee Leeds Management Services (Cayman) Ltd.

Waterfront Centre 28 N. Church Street, Georgetown, Grand Cayman

Cayman Islands, B.W.I.

Address for legal notices: c/o Amaranth Advisors LLC One America Lane,
Greenwich, CT 06831, Attn:  General Counsel Tax ID No.:  98-0385841 Contact
Name: General Counsel Telephone:  203-422-3340

Back office contact:  Sean Foronjy

203-422-3315

  

Number of Securities Allocated to Investor: 20,000

Aggregate Purchase Price: $20,000,000

AGREED AND ACCEPTED:

 

HealthSouth Corporation,

a Delaware corporation

By:   /s/ JOHN WORKMAN   Name:   John Workman   Title:   Executive Vice
President and    

Chief Financial Officer

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Maximum Number of Securities: 30,000 shares/$30,000,000

Please confirm that the foregoing correctly sets forth the agreement between us
by signing in the space provided below for that purpose.

 

Name of Investor: AG Offshore Convertibles, Ltd.,

By:   Angelo Gordon & Co., L.P. Its: Investment Manager By:   /s/ JOHN M. ANGELO
Print Name:  John M. Angelo Title:  Chief Executive Officer Address:  245 Park
Avenue, 26th Floor New York, NY 10169 Tax ID No.:  N/A Contact Name:  Gary I.
Wolf Telephone:  212-692-2058 Back office contact:  George Fink      

Number of Securities Allocated to Investor: 3,000

Aggregate Purchase Price: $3,000,000

AGREED AND ACCEPTED:

 

HealthSouth Corporation,

a Delaware corporation

By:   /s/ JOHN WORKMAN   Name:   John Workman   Title:   Executive Vice
President and    

Chief Financial Officer

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Maximum Number of Securities:

Please confirm that the foregoing correctly sets forth the agreement between us
by signing in the space provided below for that purpose.

Name of Investor: CNH CA Master Account, L.P.

By:

 

/s/ BRADLEY ASNESS

Print Name: Bradley Asness

Title: Secretary, Principal

Address: Two Greenwich Plaza

Greenwich, CT 06830

Tax ID No.: 42-1571441

Contact Name: Gildo Niutta

Telephone: 203-742-3686

Back office contact:                                                      

     

Number of Securities Allocated to Investor: 12,000

Aggregate Purchase Price: $12,000,000

 

AGREED AND ACCEPTED:

 

HealthSouth Corporation,

a Delaware corporation

By:

 

/s/ JOHN WORKMAN

  Name: John Workman  

Title:  Executive Vice President and

           Chief Financial Officer

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Maximum Number of Securities: 30,000 shares/$30,000,000

Please confirm that the foregoing correctly sets forth the agreement between us
by signing in the space provided below for that purpose.

Name of Investor: Argent Funds Group LLC

By:

 

/s/ BOBBY RICHARDSON

Print Name: Bobby Richardson

Title: Managing Director

Address: 55 Vilcom Circle

Chapel Hill, NC 27514

Tax ID No.: 06-1584984

Contact Name: Rich Godfrey

Telephone: 919-869-8669

Back office contact: Rich Godfrey

     

Number of Securities Allocated to Investor: 9,000

Aggregate Purchase Price: $9,000,000

 

AGREED AND ACCEPTED:

 

HealthSouth Corporation,

a Delaware corporation

By:

 

/s/ JOHN WORKMAN

  Name: John Workman  

Title:  Executive Vice President and

           Chief Financial Officer

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Maximum Number of Securities: $30,000,000

Please confirm that the foregoing correctly sets forth the agreement between us
by signing in the space provided below for that purpose.

Name of Investor: Aristeia International Limited/Aristeia Partners LP

By:

 

/s/ ANTHONY FRASCELLA

Print Name: Anthony Frascella Title: Principal Address: 136 Madison Avenue, 3rd
Floor New York, NY 10016 Tax ID No.: 13-3953126 Contact Name: Michael Meraldo
Telephone: 212-842-8888 Back office contact: David Courtemnache 212-842-8881   

Number of Securities Allocated to Investor: 10,000

Aggregate Purchase Price: $10,000,000

 

AGREED AND ACCEPTED:

 

HealthSouth Corporation,

a Delaware corporation

By:

 

/s/ JOHN WORKMAN

  Name: John Workman  

Title:  Executive Vice President and

           Chief Financial Officer

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Maximum Number of Securities: 30,000 shares, $30,000,000 principal amount

Please confirm that the foregoing correctly sets forth the agreement between us
by signing in the space provided below for that purpose.

Name of Investor: BASSO Capital Management, LP on behalf of 3-4 Basso Funds to
be determined

By:

 

/s/ JOHN LEPORE

Print Name: John Lepore

Title: Authorized Signatory

Address: 1266 East Main St.

Stamford, CT 06902

Tax ID No.:                             

Contact Name: Marc Seidenberg/John Lepore

Telephone: 203-352-6154

Back office contact: Joe Schultz

203-352-6157

  

Number of Securities Allocated to Investor: 7,500

Aggregate Purchase Price: $7,500,000

 

AGREED AND ACCEPTED:

 

HealthSouth Corporation,

a Delaware corporation

By:

 

/s/ JOHN WORKMAN

  Name: John Workman  

Title: Executive Vice President and

          Chief Financial Officer

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Maximum Number of Securities: 30,000,000 face

Please confirm that the foregoing correctly sets forth the agreement between us
by signing in the space provided below for that purpose.

Name of Investor: Camden Asset Management

By:

 

/s/ ALEXANDER A. LACH

Print Name: Alexander A. Lach Title: Partner Address: 2049 Century Park East,
Suite #330 Century City, CA 90067 Tax ID No.: 95-4319164 Contact Name: Alex Lach
Telephone: 310-785-1630 Back office contact: Anthony Reyes 310-785-9755   

Number of Securities Allocated to Investor: 9,000

Aggregate Purchase Price: $9,000,000

 

AGREED AND ACCEPTED:

 

HealthSouth Corporation,

a Delaware corporation

By:

 

/s/ JOHN WORKMAN

  Name: John Workman  

Title: Executive Vice President and

          Chief Financial Officer

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Maximum Number of Securities: 7,500

Please confirm that the foregoing correctly sets forth the agreement between us
by signing in the space provided below for that purpose.

Name of Investor: CQS Convertible and Quantitative Strategies Master Fund
Limited

By:

 

/s/ MICHAEL HINTZ

Print Name: Michael Hintz

Title: Director

Address: PO Box 309GT, Ugland House, Souith Church Street

Georgetown, Grand Cayman, Cayman Islands

Tax ID No.:                                                  

Contact Name: Paul Casey

Telephone: 44-207 201 6973

Back office contact: Tim Dalgamo

44-207-201-6880

  

Number of Securities Allocated to Investor: 5,000

Aggregate Purchase Price: $5,000,000

 

AGREED AND ACCEPTED:

 

HealthSouth Corporation,

a Delaware corporation

By:

 

/s/ JOHN WORKMAN

 

Name: John Workman

 

Title: Executive Vice President and

          Chief Financial Officer

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Maximum Number of Securities:

Please confirm that the foregoing correctly sets forth the agreement between us
by signing in the space provided below for that purpose.

Name of Investor: Credit Suisse

By:

  /s/ ONU ODIM Print Name: Onu Odim Title: Managing Director Address: 11 Madison
Avenue, 7th Floor New York, NY 10010 Tax ID No.: N/A Contact Name: Onu Odim
Telephone: 212-325-3622 Back office contact: Ross Jorsky 212-325-3188

Number of Securities Allocated to Investor: 6,500

Aggregate Purchase Price: $6,500,000

 

AGREED AND ACCEPTED:

 

HealthSouth Corporation,

a Delaware corporation

By:

  /s/ JOHN WORKMAN   Name: John Workman  

Title: Executive Vice President and

            Chief Financial Officer

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

Maximum Number of Securities:

Please confirm that the foregoing correctly sets forth the agreement between us
by signing in the space provided below for that purpose.

Name of Investor: D.E. Shaw Valence Portfolios, L.L.C

By:

 

D.E. Shaw & Co. L.P., as managing member

By:

  /s/ JOE PRIOR Print Name: Joe Prior Title: Authorized Signatory Address: 120
W. 45th St. 39th Floor New York, NY 10036 Tax ID No.: 13-4046559 Contact Name:
Joe Prior Telephone: 212-478-0000 Back office contact: Kara Loe 212-478-0000   

Number of Securities Allocated to Investor: 18,000

Aggregate Purchase Price: $18,000,000

 

AGREED AND ACCEPTED:

 

HealthSouth Corporation,

a Delaware corporation

By:

  /s/ JOHN WORKMAN   Name: John Workman  

Title: Executive Vice President and

          Chief Financial Officer

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

Maximum Number of Securities:

Please confirm that the foregoing correctly sets forth the agreement between us
by signing in the space provided below for that purpose.

Name of Investor: Deerfield Management Company, L.P.

By:

  /s/ DARREN LEVINE Print Name: Darren Levine Title: Chief Financial Officer
Address: 780 3rd Avenue, 37th Floor New York, NY 10017 Tax ID No.: 13-3738772
Contact Name: Darren Levine Telephone: 212-551-1600 Back office contact: Darren
Levine      

Number of Securities Allocated to Investor: 9,000

Aggregate Purchase Price: $9,000,000

 

AGREED AND ACCEPTED:

 

HealthSouth Corporation,

a Delaware corporation

By:

  /s/ JOHN WORKMAN   Name: John Workman  

Title: Executive Vice President and

          Chief Financial Officer

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

Maximum Number of Securities: $20,000,000

Please confirm that the foregoing correctly sets forth the agreement between us
by signing in the space provided below for that purpose.

Name of Investor: DRW Securities, LLC

By:

  /s/ DONALD WILSON, JR. Print Name: Donald Wilson, Jr. Title: Manager Address:
10 S. Riverside Plaza, 21st Floor Chicago, IL 60606 Tax ID No.: 36-4202848
Contact Name: Ilan Huberman Telephone: 312-542-1110 Back office contact: Jim
Lange 312-541-1011   

Number of Securities Allocated to Investor: 5,000

Aggregate Purchase Price: $5,000,000

 

AGREED AND ACCEPTED:

 

HealthSouth Corporation,

a Delaware corporation

By:

 

/s/ JOHN WORKMAN

  Name: John Workman  

Title: Executive Vice President and

          Chief Financial Officer

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

Maximum Number of Securities:

Please confirm that the foregoing correctly sets forth the agreement between us
by signing in the space provided below for that purpose.

 

Name of Investor: Empyrean Capital Partners, LP By:   /s/ ANTHONY THIMES Print
Name: Anthony Thimes Title: Chief Financial Officer Address: 10250 Constellation
Blvd, Suite 2950 Los Angeles, CA 92660 Tax ID No.:                      Contact
Name: Tony Hynes Telephone: 310-843-3060 Back office contact:
                                                           

Number of Securities Allocated to Investor: 5,000

Aggregate Purchase Price: $5,000,000

 

AGREED AND ACCEPTED:

HealthSouth Corporation,

a Delaware corporation

By:   /s/ JOHN WORKMAN  

Name: John Workman

Title: Executive Vice President and

          Chief Financial Officer

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

Maximum Number of Securities:

Please confirm that the foregoing correctly sets forth the agreement between us
by signing in the space provided below for that purpose.

 

Name of Investor: Forest Investment Management By:   /s/ JOHN McDONALD Print
Name: John McDonald Title: Partner Address: 53 Forest Avenune Old Greenwich, CT
06870 Tax ID No.: 06-1354491 Contact Name: Jingyan Wang Telephone: 203-637-7773
Back office contact: Larry Diamond 203-637-6020   

Number of Securities Allocated to Investor: 6,500

Aggregate Purchase Price: $6,500,000

 

AGREED AND ACCEPTED:

HealthSouth Corporation,

a Delaware corporation

By:   /s/ JOHN WORKMAN   Name: John Workman  

Title: Executive Vice President and

          Chief Financial Officer

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

Maximum Number of Securities: $30,000,000 of securities

Please confirm that the foregoing correctly sets forth the agreement between us
by signing in the space provided below for that purpose.

 

Name of Investor: GLG Partners LP By:   /s/ STEVE ROTH Print Name: Steve Roth
Title: Portfolio Manager Address: 2 Curzon Street London W1J5HB, UK Tax ID No.:
N/A Contact Name: Allistair Ling Telephone: 44 2070167057 Back office contact:
Antonio Dos 44 2070167302   

Number of Securities Allocated to Investor: 9,000

Aggregate Purchase Price: $9,000,000

 

AGREED AND ACCEPTED:

HealthSouth Corporation,

a Delaware corporation

By:   /s/ JOHN WORKMAN   Name: John Workman  

Title: Executive Vice President and

          Chief Financial Officer

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

Maximum Number of Securities: 30,000

Please confirm that the foregoing correctly sets forth the agreement between us
by signing in the space provided below for that purpose.

Name of Investor: President and Fellows of Harvard College

By:   /s/ CRAIG SZEMAN Print Name: Craig Szeman Title: Vice President Address:
600 Atlantic Avenue Boston, MA 02210-2203 Tax ID No.: 042103580 Contact Name:
                                              Telephone:
                                                      Back office contact:
Sharon Legge 617-720-6713   

Number of Securities Allocated to Investor: 5,000

Aggregate Purchase Price: $5,000,000

 

AGREED AND ACCEPTED:

HealthSouth Corporation,

a Delaware corporation

By:   /s/ JOHN WORKMAN   Name: John Workman  

Title: Executive Vice President and

          Chief Financial Officer

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

Maximum Number of Securities: 30,000 ($30,000,000)

Please confirm that the foregoing correctly sets forth the agreement between us
by signing in the space provided below for that purpose.

Name of Investor: HBK Master Fund L.P.

By: HBK Investments L.P. By:   /s/ J. BAKER GENTRY, JR. Print Name: J. Baker
Gentry, Jr. Title: Authorized Signatory

Address: c/o Ugland House, South Church Street

P.O. Box 309, Georgetown, Grand Cayman, Cayman Islands

Notice Address: c/o HBK Investments, LP, 300 Crescent Court

Suite 700, Dallas Texas 75201

Tax ID No.: 98-0215929

Contact Name: Legal Department

Telephone: 214-758-6107

Back office contact: Sterling Abbott

214-758-6421

  

Number of Securities Allocated to Investor: 6,500

Aggregate Purchase Price: $6,500,000

 

AGREED AND ACCEPTED:

HealthSouth Corporation,

a Delaware corporation

By:   /s/ JOHN WORKMAN  

Name: John Workman

 

Title: Executive Vice President and

          Chief Financial Officer

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

Maximum Number of Securities: 30,000

Please confirm that the foregoing correctly sets forth the agreement between us
by signing in the space provided below for that purpose.

Name of Investor: Highbridge International LLC

 

By: Highbridge Capital Management LLC By:   /s/ RICHARD POTAPCHUK Print Name:
Richard Potapchuk Title: Managing Director Address: 9 West 57th Street, 27th
Floor New York, NY 10019 Tax ID No.: N/A Contact Name:
                                                          Telephone:
212-287-4910 Back office contact: Chris Edele      

Number of Securities Allocated to Investor: 18,000

Aggregate Purchase Price: $18,000,000

 

AGREED AND ACCEPTED:

HealthSouth Corporation,

a Delaware corporation

By:   /s/ JOHN WORKMAN   Name: John Workman  

Title: Executive Vice President and

          Chief Financial Officer

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

Maximum Number of Securities: 3,965

Please confirm that the foregoing correctly sets forth the agreement between us
by signing in the space provided below for that purpose.

 

Name of Investor: Highfields Capital I LP By:   /s/ JENNIFER L. STIER Print
Name: Jennifer L. Stier Title: Chief Operating Officer Address: John Hancock
Tower, 200 Clarendon St. 51st Floor Boston, MA 02116 Tax ID No.: 04-3419486
Contact Name: Joseph Mazzellan Telephone: 617-850-7500 Back office contact:
Brian Quinn 617-850-7564   

Number of Securities Allocated to Investor: 1,586

Aggregate Purchase Price: $1,586,000

 

AGREED AND ACCEPTED:

HealthSouth Corporation,

a Delaware corporation

By:

 

/s/ JOHN WORKMAN

 

Name: John Workman

 

Title: Executive Vice President and

          Chief Financial Officer

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

Maximum Number of Securities: 9,585

Please confirm that the foregoing correctly sets forth the agreement between us
by signing in the space provided below for that purpose.

 

Name of Investor: Highfields Capital II LP By:  

/s/ JENNIFER L. STIER

Print Name: Jennifer L. Stier Title: Chief Operating Officer Address: John
Hancock Tower, 200 Clarendon St. 51st Floor Boston, MA 02116 Tax ID No.:
04-3419488 Contact Name: Joseph Mazzellan Telephone: 617-850-7500 Back office
contact: Brian Quinn 617-850-7564   

Number of Securities Allocated to Investor: 3,834

Aggregate Purchase Price: $3,834,000

 

AGREED AND ACCEPTED:

HealthSouth Corporation,

a Delaware corporation

By:   /s/ JOHN WORKMAN   Name: John Workman  

Title: Executive Vice President and

          Chief Financial Officer

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

Maximum Number of Securities: 36,450

Please confirm that the foregoing correctly sets forth the agreement between us
by signing in the space provided below for that purpose.

 

Name of Investor: Highfields Capital Ltd. By:   /s/ JENNIFER L. STIER Print
Name: Jennifer L. Stier Title: Chief Operating Officer Address: c/o Goldman
Sachs (Cayman) Trust Ltd., Harbour Centre, 2nd Floor P.O. Box 896, Georgetown,
Grand Cayman, Cayman Islands, B.W.I. Tax ID No.: N/A Contact Name:
                                                          Telephone:
345-914-8011 Back office contact:

Number of Securities Allocated to Investor: 14,580

Aggregate Purchase Price: $14,580,000

 

AGREED AND ACCEPTED:

HealthSouth Corporation,

a Delaware corporation

By:   /s/ JOHN WORKMAN   Name: John Workman  

Title: Executive Vice President and

          Chief Financial Officer

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

Maximum Number of Securities: 30,000,000

Please confirm that the foregoing correctly sets forth the agreement between us
by signing in the space provided below for that purpose.

 

Name of Investor: JD Capital Management By:   /s/ ANDREW BARNARD Print Name:
Andrew Barnard Title: Portfolio Manager

Address: 2 Greenwich Plaza 2nd Floor

Greenwich, CT 06830

Tax ID No.:                                                          

Contact Name: Don McCarthy, CFO

Telephone: 203-485-8820

Back office contact: Michael Owens

203-485-8823

  

Number of Securities Allocated to Investor: 6,500

Aggregate Purchase Price: $6,500,000

 

AGREED AND ACCEPTED:

HealthSouth Corporation,

a Delaware corporation

By:   /s/ JOHN WORKMAN   Name: John Workman  

Title: Executive Vice President and

          Chief Financial Officer

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

Maximum Number of Securities:

Please confirm that the foregoing correctly sets forth the agreement between us
by signing in the space provided below for that purpose.

 

Name of Investor: JMG Capital Partners LP

By:

 

/s/ JONATHAN GLASS

Print Name: Jonathan Glass

Title: Manager of the GP

Address: 11601 Wilshire Blvd., Suite 2180

Los Angeles, CA 90025

Tax ID No.: 68-0271606

Contact Name: Noelle Newton

Telephone: 310-601-2825

Back office contact:                                                      

     

Number of Securities Allocated to Investor: 8,500

Aggregate Purchase Price: $8,500,000

 

AGREED AND ACCEPTED:

HealthSouth Corporation,

a Delaware corporation

By:

 

/s/ JOHN WORKMAN

 

Name: John Workman

 

Title: Executive Vice President and

          Chief Financial Officer

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

Maximum Number of Securities: 30,000 ($30 million notional)

Please confirm that the foregoing correctly sets forth the agreement between us
by signing in the space provided below for that purpose.

Name of Investor: Kamunting Street Master Fund, Ltd.

By:

 

/s/ GREGOR DANNALHER

Print Name: Gregor Dannalher

Title: Senior Analyst

Address: 140 East 45th Street, 15th Floor

New York, NY 10017

Tax ID No.: 98-0427034

Contact Name: Christopher Falsetta

Telephone: 212-490-4343

Back office contact: Jason Abrams

212-490-4355

  

Number of Securities Allocated to Investor: 10,000

Aggregate Purchase Price: $10,000,000

 

AGREED AND ACCEPTED:

HealthSouth Corporation, a Delaware corporation

By:

 

/s/ JOHN WORKMAN

 

Name: John Workman

 

Title: Executive Vice President and

          Chief Financial Officer

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

Maximum Number of Securities:

Please confirm that the foregoing correctly sets forth the agreement between us
by signing in the space provided below for that purpose.

Name of Investor: KBC Financial Products Cayman Islands Ltd.

By:

 

/s/ JASON CUEVAS

Print Name: Jason Cuevas

Title: Managing Director

Address: 140 East 45th Street, 42nd Floor

New York, NY 10017

Tax ID No.: 061556254

Contact Name: Ann Difilppo

Telephone: 212-845-2833

Back office contact: Ben Locascio

212-845-2916

  

Number of Securities Allocated to Investor: 12,000

Aggregate Purchase Price: $12,000,000

 

AGREED AND ACCEPTED:

HealthSouth Corporation, a Delaware corporation

By:

 

/s/ JOHN WORKMAN

 

Name: John Workman

 

Title: Executive Vice President and

          Chief Financial Officer

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

Maximum Number of Securities:

Please confirm that the foregoing correctly sets forth the agreement between us
by signing in the space provided below for that purpose.

 

Name of Investor: LibertyView Funds, L.P.

By:

 

/s/ STEVEN S. ROGERS

Print Name: Steven S. Rogers

Title: Authorized Signatory

Address: LibertyView Capital Management, Attn: Spencer Kornreich

111 River Street – Suite 1000, Hoboken, NJ 07030

Tax ID No.:                                                          

Contact Name: Spencer Kornreich

Telephone: 201-595-2992

Back office contact: Robert Olsen

201-216-8606

  

Number of Securities Allocated to Investor: 5,000

Aggregate Purchase Price: $5,000,000

 

AGREED AND ACCEPTED:

HealthSouth Corporation, a Delaware corporation

By:

 

/s/ JOHN WORKMAN

 

Name: John Workman

 

Title: Executive Vice President and

          Chief Financial Officer

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

Maximum Number of Securities: 30,000 shares

Please confirm that the foregoing correctly sets forth the agreement between us
by signing in the space provided below for that purpose.

 

Name of Investor: Linden Capital L.P.

By:

 

/s/ CRAIG JARVIS

Print Name: Craig Jarvis

Title: Authorized Signatory

Address: 18 Church Street, Skando House

Hamilton, HM11, Bermuda

Tax ID No.: 98-0430338

Contact Name: Craig Jarvis

Telephone: 646-840-3510 or 3500

Back office contact: Peter Greenberg

646-840-3539

  

Number of Securities Allocated to Investor: 8,500

Aggregate Purchase Price: $8,500,000

 

AGREED AND ACCEPTED:

HealthSouth Corporation, a Delaware corporation

By:

 

/s/ JOHN WORKMAN

 

Name: John Workman

 

Title: Executive Vice President and

          Chief Financial Officer

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

Maximum Number of Securities: 20,000 shares ($20 million of notional)

Please confirm that the foregoing correctly sets forth the agreement between us
by signing in the space provided below for that purpose.

 

Name of Investor: Marathon Global Convertible Master Fund, Ltd.

By:   /s/ CHRISTOPHE THOMAS Print Name: Christophe Thomas Title: Managing
Director Address: 461 Fifth Avenue, 10th Floor New York, NY 10017 Tax ID No.:
N/A Contact Name: Christophe Thomas Telephone: 212-381-4421 Back office contact:
David Hazan 212-381-4487   

Number of Securities Allocated to Investor: 6,500

Aggregate Purchase Price: $6,500,000

 

AGREED AND ACCEPTED:

HealthSouth Corporation,

a Delaware corporation

By:  

/s/ JOHN WORKMAN

 

Name: John Workman

 

Title: Executive Vice President and

          Chief Financial Officer

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

Maximum Number of Securities: 15,000

Please confirm that the foregoing correctly sets forth the agreement between us
by signing in the space provided below for that purpose.

 

Name of Investor: OZ Master Fund, Ltd.

By:   /s/ JOEL FRANK Print Name: Joel Frank Title: Chief Financial Officer
Address: 9 West 57th St., 39th Floor New York, NY 10019 Tax ID No.: 13-3982250
Contact Name: Joel M. Frank Telephone: 212-790-0160 Back office contact: Sean
Rhatigan 212-790-0166   

Number of Securities Allocated to Investor: 10,000

Aggregate Purchase Price: $10,000,000

 

AGREED AND ACCEPTED:

HealthSouth Corporation,

a Delaware corporation

By:  

/s/ JOHN WORKMAN

 

Name: John Workman

 

Title: Executive Vice President and

          Chief Financial Officer

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

Maximum Number of Securities: 30,000 shares

Please confirm that the foregoing correctly sets forth the agreement between us
by signing in the space provided below for that purpose.

Name of Investor: Parabolic Parners Cap. Mgt LLC, as investment advisor of
Parabolic Partners Master Fund, Ltd.

By:   /s/ A. PAUL BOWYER Print Name: A. Paul Bowyer Title: Managing Member
Address: 396 Springfield Ave. Summet, NJ 07901 Tax ID No.: 98-0462853 Contact
Name: Paul Bowyer Telephone: 908-918-0118 Back office contact: Sophie Chen
908-918-0118   

Number of Securities Allocated to Investor: 6,500

Aggregate Purchase Price: $6,500,000

 

AGREED AND ACCEPTED:

HealthSouth Corporation,

a Delaware corporation

By:  

/s/ JOHN WORKMAN

 

Name: John Workman

 

Title: Executive Vice President and

          Chief Financial Officer

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

Maximum Number of Securities: 30,000

Please confirm that the foregoing correctly sets forth the agreement between us
by signing in the space provided below for that purpose.

Name of Investor: Polygon Global Opportunities Master Fund

By:   Polygon Investment Partners LP By:   /s/ WILLIAM W. HOBAN Print Name:
William W. Hoban Title: Portfolio Manager Address: 598 Madison Ave. 14th Floor
New York, NY 10022 Tax ID No.: 98-0397839 Contact Name: William W. Hoban
Telephone: 212-359-7487 Back office contact: James Piachard 212-359-7336   

Number of Securities Allocated to Investor: 6,500

Aggregate Purchase Price: $6,500,000

 

AGREED AND ACCEPTED:

HealthSouth Corporation,

a Delaware corporation

By:  

/s/ JOHN WORKMAN

 

Name: John Workman

 

Title: Executive Vice President and

          Chief Financial Officer

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

Maximum Number of Securities:

Please confirm that the foregoing correctly sets forth the agreement between us
by signing in the space provided below for that purpose.

Name of Investor: Ramius Capital Group for Ramius Master Fund LTD (tax ID:
98-0395643) And RCG Latitude Master Fund LTD (tax ID: 98-0223347)

By:   /s/ MORGAN STARK Print Name: Morgan Stark Title: Managing Partner Address:
616 Third Avenue, 26th Floor New York, NY 10017 Tax ID
No.:                                                  Contact Name: Robert Ryon
Telephone: 212-845-7924 Back office contact: James Wilk      

Number of Securities Allocated to Investor: 5,000

Aggregate Purchase Price: $5,000,000

 

AGREED AND ACCEPTED:

HealthSouth Corporation,

a Delaware corporation

By:  

/s/ JOHN WORKMAN

 

Name: John Workman

 

Title: Executive Vice President and

          Chief Financial Officer

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

Maximum Number of Securities:

Please confirm that the foregoing correctly sets forth the agreement between us
by signing in the space provided below for that purpose.

Name of Investor: Radcliffe SPC Ltd. For and on behalf of the Class A
Convertible Crossover Segregated Portfolio,

By: RG Capital Management, L.P., By: RGC Management Company LLC

By:  

/s/ GERALD STAHLECKER

Print Name: Gerald F. Stahlecker

Title: Managing Director

Address: 3 Bala Plaza East, Suite 501

Bala Cynwyd, PA 19004-3481

Tax ID No.: 98-0381209

Contact Name: Gerald F. Stahlecker

Telephone: 610-617-5900

Back office contact: Mike Campbell

610-617-5900

  

Number of Securities Allocated to Investor: 15,000

Aggregate Purchase Price: $15,000,000

AGREED AND ACCEPTED:

 

HealthSouth Corporation,

a Delaware corporation

By:  

/s/ JOHN WORKMAN

 

Name: John Workman

 

Title: Executive Vice President and

            Chief Financial Officer

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

Maximum Number of Securities: 30,000 shares [purchase price = $30 million]

Please confirm that the foregoing correctly sets forth the agreement between us
by signing in the space provided below for that purpose.

Name of Investor: Funds Managed by Rumson Capital LLC

By:  

/s/ JOHN BURKE

Print Name: John Burke

Title: Managing Partner

Address: The Galleria, Bldg. Three, 2 Bridge Ave.

Red Bank, NJ 07701

Tax ID No.: XAVEX: 300245670, ZURICH: 13-4147177, NAVESINK: 98-0346624, ALPHA:
13-4129748, MSS:

(Cayman Islands)

Contact Name: Bill Brennan

Telephone: 732-450-7410

Back office contact: Mitch Gordon

732-450-7408

_____________________________________________

Number of Securities Allocated to Investor: 6,500

Aggregate Purchase Price: $6,500,000

AGREED AND ACCEPTED:

 

HealthSouth Corporation,

a Delaware corporation

By:  

/s/ JOHN WORKMAN

 

Name: John Workman

 

Title: Executive Vice President and

            Chief Financial Officer

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

Maximum Number of Securities: 30,000 ($30,000,000)

Please confirm that the foregoing correctly sets forth the agreement between us
by signing in the space provided below for that purpose.

Name of Investor: Sandelman Partners

By:  

/s/ MICHAEL J. PASCULTI

Print Name: Michael J. Pasculti

Title: Partner

Address: 500 Park Avenue

New York, NY 10022

Tax ID No.: 980456839

Contact Name: Chris Zabark

Telephone: 212-299-7604

Back office contact: Eric Roppa

212-299-7607

  

Number of Securities Allocated to Investor: 6,500

Aggregate Purchase Price: $6,500,000

AGREED AND ACCEPTED:

 

HealthSouth Corporation,

a Delaware corporation

By:  

/s/ JOHN WORKMAN

 

Name: John Workman

 

Title: Executive Vice President and

            Chief Financial Officer

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

Maximum Number of Securities: 50,000 shares ($50,000,000 liquidation preference)

Please confirm that the foregoing correctly sets forth the agreement between us
by signing in the space provided below for that purpose.

Name of Investor: Satellite Credit Opportunities Fund, Ltd.

By: Satellite Management, L.P., its Investment Manager By:  

/s/ SIMON RAYKHER

Print Name: Simon Raykher

Title: General Counsel

Address: 623 Fifth Avenue, 19th floor

New York, NY 10022

Tax ID No.: N/A

Contact Name: Gene Gaeta

Telephone: 212-209-2045

Back office contact: Heather Campbell

212-209-2018

  

Number of Securities Allocated to Investor: 2,500

Aggregate Purchase Price: $2,500,000

AGREED AND ACCEPTED:

 

HealthSouth Corporation,

a Delaware corporation

By:  

/s/ JOHN WORKMAN

 

Name: John Workman

 

Title: Executive Vice President and

            Chief Financial Officer

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

Maximum Number of Securities: 50,000 shares ($50,000,000 liquidation preference)

Please confirm that the foregoing correctly sets forth the agreement between us
by signing in the space provided below for that purpose.

Name of Investor: Satellite Convertible Arbitrage Master Fund LLC

By: Satellite Management, L.P., its Investment Manager By:  

/s/ SIMON RAYKHER

Print Name: Simon Raykher

Title: General Counsel

Address: 623 Fifth Avenue, 19th floor

New York, NY 10022

Tax ID No.: 98-0399374

Contact Name: Ramin Mozaffarian

Telephone: 212-209-2093

Back office contact: Heather Campbell

212-209-2018

  

Number of Securities Allocated to Investor: 2,500

Aggregate Purchase Price: $2,500,000

AGREED AND ACCEPTED:

 

HealthSouth Corporation,

a Delaware corporation

By:  

/s/ JOHN WORKMAN

 

Name: John Workman

 

Title: Executive Vice President and

            Chief Financial Officer

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

Maximum Number of Securities: 24,000

Please confirm that the foregoing correctly sets forth the agreement between us
by signing in the space provided below for that purpose.

Name of Investor: Shephred Investments International, Ltd.

By:

 

/s/ MICHAEL A. ROTH

Print Name: Michael A. Roth

Title: Managing Member of its Investment Manager

Address: c/o Stark Offshore Management LLC

3600 South Lake Drive, St. Francis, WI 53235

Tax ID No.: 30-0044149

Contact Name: Robert Prellwitz

Telephone: 414-294-7000

Back office contact: James Rittenhouse

414-294-7000

  

Number of Securities Allocated to Investor: 8,000

Aggregate Purchase Price: $8,000,000

 

AGREED AND ACCEPTED:

 

HealthSouth Corporation,

a Delaware corporation

By:

 

/s/ JOHN WORKMAN

 

Name: John Workman

 

Title: Executive Vice President and

          Chief Financial Officer

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

Maximum Number of Securities: 6,000

Please confirm that the foregoing correctly sets forth the agreement between us
by signing in the space provided below for that purpose.

 

Name of Investor: Stark Trading

By:

 

/s/ MICHAEL A. ROTH

Print Name: Michael A. Roth

Title: Managing Member of its Managing General Partner

Address: 3600 South Lake Drive

St. Francis, WI 53235

Tax ID No.: 98-0148910

Contact Name: Robert Prellwitz

Telephone: 414-294-7000

Back office contact: James Rittenhouse

414-294-7000

  

Number of Securities Allocated to Investor: 2,000

Aggregate Purchase Price: $2,000,000

 

AGREED AND ACCEPTED:

 

HealthSouth Corporation,

a Delaware corporation

By:

 

/s/ JOHN WORKMAN

 

Name: John Workman

 

Title: Executive Vice President and

          Chief Financial Officer

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

Maximum Number of Securities: $20,000,000.00

Please confirm that the foregoing correctly sets forth the agreement between us
by signing in the space provided below for that purpose.

 

Name of Investor: Susquehanna Capital Group

By:

 

/s/ JACK GREENBERG

Print Name: Jack Greenberg Title: Managing Director Address: 401 City Ave. Bala
Cynwyd, PA 19004 Tax ID No.: 23-2795205 Contact Name: Michael Ferry Telephone:
610-617-2802 Back office contact: John Riccardi 610-617-2826   

Number of Securities Allocated to Investor: 12,000

Aggregate Purchase Price: $12,000,000

 

AGREED AND ACCEPTED:

 

HealthSouth Corporation,

a Delaware corporation

By:

 

/s/ JOHN WORKMAN

 

Name: John Workman

 

Title: Executive Vice President and

          Chief Financial Officer

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

Maximum Number of Securities: 50,000 shares

Please confirm that the foregoing correctly sets forth the agreement between us
by signing in the space provided below for that purpose.

 

Name of Investor: SuttonBrook Capital Portfolio LP

By:

 

/s/ BRETT SPECTOR

Print Name: Brett Spector Title: Authorized Person Address: 598 Madison Ave. 6th
Floor New York, NY 10022 Tax ID No.: 98-0367010 Contact Name: Brett Spector
Telephone: 212-588-6622 Back office contact: Brett Spector 212-588-6622   

Number of Securities Allocated to Investor: 12,000

Aggregate Purchase Price: $12,000,000

 

AGREED AND ACCEPTED:

 

HealthSouth Corporation,

a Delaware corporation

By:

 

/s/ JOHN WORKMAN

 

Name: John Workman

 

Title: Executive Vice President and

          Chief Financial Officer

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

Maximum Number of Securities: 440,000

Please confirm that the foregoing correctly sets forth the agreement between us
by signing in the space provided below for that purpose.

 

Name of Investor: TQA Investors LLC

By:

 

/s/ DARREN J. LONGIS

Print Name: Darren J. Longis Title: Principal Address: 333 Ludlow St. Stamford,
CT 06902 Tax ID No.: 98-0220992 Contact Name: Bart Tesoriero Telephone:
203-653-3020 Back office contact: Aaron Warun      

Number of Securities Allocated to Investor: 9,000

Aggregate Purchase Price: $9,000,000

 

AGREED AND ACCEPTED:

 

HealthSouth Corporation,

a Delaware corporation

By:

 

/s/ JOHN WORKMAN

 

Name: John Workman

 

Title: Executive Vice President and

          Chief Financial Officer

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

Maximum Number of Securities:

Please confirm that the foregoing correctly sets forth the agreement between us
by signing in the space provided below for that purpose.

 

Name of Investor: UBS A.G. (London Branch) By:   /s/ RICHARD SIMPSON Print Name:
Richard Simpson Title: Managing Director Address: 1285 6th Ave., 9th FLoor New
York, NY 10019 Tax ID No.: 13-3873456 Contact Name:
_________________________________ Telephone: 203-719-8581 Back office contact:
Rosmarie Mancuso      

Number of Securities Allocated to Investor: 6,500

Aggregate Purchase Price: $6,500,000

 

AGREED AND ACCEPTED:

HealthSouth Corporation,

a Delaware corporation

By:   /s/ JOHN WORKMAN   Name: John Workman  

Title: Executive Vice President and

          Chief Financial Officer

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

Maximum Number of Securities: $25,000,000

Please confirm that the foregoing correctly sets forth the agreement between us
by signing in the space provided below for that purpose.

Name of Investor: Whitebox Advisors, LLC – investment manager to: Whitebox
Convertible Arbitrage Partners LP, Whitebox Diversified Convertible Arbitrage
Partners, L.P., HFR RVA Combined Master Trust, Guggenheim Portfolio XXXI, LLC

 

By:   /s/ ANDREW REDLEAF Print Name: Andrew Redleaf Title: Managing Member of
the General Partner Address: 3033 Excelsior Blvd, Suite 300 Minneapolis, MN
55416 Tax ID No.: N/A Contact Name: Rob Vogel Telephone: 612-253-6028 Back
office contact: Andrea Schroeder 612-253-6060   

Number of Securities Allocated to Investor: 6,500

Aggregate Purchase Price: $6,500,000

 

AGREED AND ACCEPTED:

HealthSouth Corporation,

a Delaware corporation

By:   /s/ JOHN WORKMAN   Name: John Workman  

Title: Executive Vice President and

          Chief Financial Officer

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

Maximum Number of Securities: 40,000 shares or $40,000,000

Please confirm that the foregoing correctly sets forth the agreement between us
by signing in the space provided below for that purpose.

Name of Investor: Zazove Associates, LLC, as investment advisor with
discretionary authority

 

By:   /s/ STEVE KLIEMAN Print Name: Steve Klieman Title: COO Address: 940
Southwood, Suite 200 Incline Village, NV 89451 Tax ID No.: 36-3984373 Contact
Name: Steve Klieman Telephone: 847-239-7100 Back office contact: Tami Kuha
775-832-6250   

Number of Securities Allocated to Investor: 15,000

Aggregate Purchase Price: $15,000,000

 

AGREED AND ACCEPTED:

HealthSouth Corporation,

a Delaware corporation

By:   /s/ JOHN WORKMAN   Name: John Workman  

Title: Executive Vice President and

          Chief Financial Officer

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

INSTRUCTION SHEET FOR INVESTOR

(to be read in conjunction with the entire Agreement)

Complete the following items in the Agreement:

1. Provide the information regarding the Investor requested on page 2. The
Agreement must be executed by an individual authorized to bind the Investor.

2. Return the signed Agreement to:

Citigroup Global Markets Inc.

390 Greenwich St., 5th Floor

New York, NY 10013

Attn: Equity Syndicate

Phone: 212-723-7300

Fax: 646-843-3922

An executed original signature page to the Agreement or a facsimile transmission
thereof must be received by 12:00 noon New York time on February 28, 2006.
Investors who send a facsimile transmission prior to such deadline must also
submit an original via courier as soon thereafter as practicable.

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

ANNEX I TO THE SECURITIES PURCHASE AGREEMENT

TERMS AND CONDITIONS FOR PURCHASE OF SECURITIES

 

1. Authorization and Sale of Securities. The Company has authorized the sale of
up to 400,000 Securities. The Company reserves the right to increase or decrease
this number.

 

2. Agreement to Sell and Purchase the Securities; Placement Agents.

 

  2.1.  Upon the terms and subject to the conditions hereinafter set forth, at
the Closing (as defined in Section 3), the Company will sell to each Investor,
and each Investor will purchase from the Company, up to the aggregate number of
Securities set forth on each Investor’s signature page hereto at the purchase
price of $1,000 per share; provided that, if the Company sells and the Investor
buys an amount of Securities less than the aggregate number of Securities set
forth on such Investor’s signature page hereto, the total aggregate purchase
price of such Securities will be reduced proportionately.

 

  2.2.  Each Investor acknowledges that the Company intends to pay Citigroup
Global Markets Inc., J.P. Morgan Securities Inc., Merrill Lynch, Pierce, Fenner
and Smith Incorporated, Deutsche Bank Securities Inc., Goldman Sachs & Co. and
Wachovia Capital Markets, LLC (collectively, the “Placement Agents”) a fee in
respect of the sale of Securities to the Investors.

 

3. Closings and Delivery of Securities and Funds.

 

  3.1.  The completion of the purchase and sale of the Securities (the
“Closing”) shall occur at the offices of the Company’s counsel on March 7, 2006
(the “Scheduled Closing Date”), unless the Closing is delayed by the Company
pursuant to Section 3.2 hereof (the date on which the Closing occurs being the
“Closing Date”). At the Closing, (i) the Company shall cause the Escrow Agent to
deliver to the Investors the Accepted Securities (as defined below) registered
in the name of the applicable Investors, and (ii) the aggregate purchase price
for the Accepted Securities (as defined below) shall be delivered by or on
behalf of the Investors to the Company.

 

  3.2.  The Closing shall occur on the Scheduled Closing Date (i) if the
aggregate amount of funds deposited by the Investors with the Escrow Agent is at
least $150,000,000 on such date and (ii) the conditions set forth in Section 6
are satisfied. If the aggregate amount of funds deposited by the Investors with
the Escrow Agent is less than $150,000,000 on the Schedule Closing Date, the
Company may either (a) proceed with the Closing on such date or (b) delay the
Closing until a date that is no later than March 9, 2006 (the “Delayed Closing
Date”), at which time the Closing shall occur if, at such time, at least
$150,000,000 in aggregate amount of funds shall have been deposited by the
Investors with the Escrow Agent. If the Closing is delayed pursuant to clause
(b) above and the aggregate amount of funds deposited by the Investors with the
Escrow Agent remains less than $150,000,000 on the Delayed Closing Date, the
Company may either (x) proceed with the Closing on the Delayed Closing Date or
(y) terminate this Agreement on the Delayed Closing Date without liability on
the part of the non-defaulting Investors or on the part of the Company, except
for the Company’s obligation to pay Investor’s fees and expenses in accordance
with Section 5.11. Nothing contained herein shall relieve a defaulting Investor
of any liability it may have to the Company or any non-defaulting Investor for
damages caused by its default.

 

  3.3.  If, (i) on the Scheduled Closing Date or (ii) on the Delayed Closing
Date, any Investor defaults on its obligation to purchase the Accepted
Securities that it has agreed to purchase, the Company and the non-defaulting
Investors may in their discretion arrange for the purchase of such Accepted
Securities by any Investor on the terms contained in this Agreement, which
purchase shall occur (a) if the Closing occurs on the Scheduled Closing Date, on
the Scheduled Closing Date or at any time thereafter until the Delayed Closing
Date or (b) if the Closing occurs on the Delayed Closing Date, on the Delayed
Closing Date, or (c) with respect to defaults that occur on the Delayed Closing
Date, as soon as practicable after the Delayed Closing Date.

 

  3.4. 

If the Company accepts the Investors’ offer to buy Securities in whole or in
part, the Company or its representatives shall notify each Investor at the
telephone number provided on such Investor’s

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

 

signature page hereto of the number of Securities (the “Accepted Securities”)
that the Company shall sell to such Investor and such Investor shall buy.
Payment by an Investor for the Accepted Securities shall be made by wire
transfer of immediately available funds to the Escrow Agent in accordance with
Section 3.6 below. If the Escrow Agent determines that the conditions to the
Closing are satisfied (which determination may be made based upon delivery of an
officers’ certificate of the Company pursuant to Section 6.2(b) hereof), it
shall deliver each Investor’s payment to the Company and the corresponding
Accepted Securities to the DTC account specified in the Investor signature pages
hereto. If such conditions to the Closing are not satisfied, the Escrow Agent
shall return each Investor’s funds to the applicable Investor.

 

  3.5.  Subject to the provisions of Sections 3.2 and 3.3, the Company’s
obligation to issue and sell the Accepted Securities to the Investors shall be
subject only to the accuracy of the representations and warranties made by the
Investors and the fulfillment of those undertakings of the Investors to be
fulfilled prior to the Closing. The Investors’ respective obligations to
purchase the Accepted Securities shall be subject to the conditions set forth in
Section 6 hereof.

 

  3.6.  Promptly after the Company notifies each Investor of the Accepted
Securities that the Company shall sell to such Investor, but in any event no
later than one business day prior to the Closing Date, such Investor shall remit
by wire transfer the amount of funds equal to the aggregate purchase price for
the Accepted Securities being purchased by such Investor to the following
account designated by the Company pursuant to the terms of the Escrow Agreement
(the “Escrow Agreement”) a copy of which is attached hereto as Exhibit B
relating to the offering of the Securities and entered into by and among the
Company and the Escrow Agent:

 

Bank Name:    JP MorganChase New York, NY Bank ABA:    021-000-021 BNF Acct.:   
323-161413 BNF Acct Name:    Mellon Investor Services LLC Re:    HealthSouth
Corporation Attn:    Vivian Gibson Tel. No.:    (201) 680-3306

Such funds shall be held in escrow until the Closing and delivered by the Escrow
Agent on behalf of the Investors to the Company upon the satisfaction of the
conditions to the obligations of the Investors set forth in Section 6 hereof. If
the Investor does not remit the necessary funds to purchase its Accepted
Securities on or prior to the Closing Date as specified above, the Investor
shall as soon as practicable following the Closing Date purchase such Accepted
Securities from the Company as required by this Agreement at a price per
Accepted Security that shall include accumulated and unpaid dividends on the
Accepted Securities from and including the Closing Date to but excluding the
date of payment, computed on the basis of a 360-day year consisting of twelve
30-day months.

 

  3.7.  Prior to or promptly after the execution of this Agreement by the
Investors and the Company, each Investor shall direct the broker-dealer at which
the account or accounts to be credited with its Securities are maintained (which
broker/dealer shall be a DTC participant) to set up a Deposit/Withdrawal at
Custodian (“DWAC”) instructing the Escrow Agent to credit such account or
accounts with the Securities by means of an electronic book-entry delivery. Such
DWAC shall indicate the settlement date for the deposit of the Securities, which
date shall be provided to the Investors by the Placement Agents. Simultaneously
with the delivery to the Company by the Escrow Agent of the funds held in escrow
pursuant to Section 3.6 above, the Company shall direct the Escrow Agent to
credit each Investor’s account or accounts with the Securities pursuant to the
information contained in the DWAC.

 

4. Representations, Warranties and Covenants of the Company. The Company hereby
represents and warrants to, and covenants with, each Investor, that:

 

  4.1. 

The Company has full right, power, authority and capacity to enter into this
Agreement, to issue and sell the Securities and to consummate the other
transactions contemplated hereby, and has taken all

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

 

necessary action to authorize the execution, delivery and performance of this
Agreement. This Agreement is a legally valid and binding obligation of the
Company enforceable against the Company in accordance with its terms, subject to
laws of general application relating to bankruptcy, insolvency and the relief of
debtors and other laws of general application affecting enforcement of
creditors’ rights generally, rules of law governing specific performance,
injunctive relief and equitable remedies. The Securities will be, as of the
Closing Date, duly authorized by the Company and, when issued, delivered to and
paid for by the Investors in accordance with this Agreement, will be validly
issued, fully paid and non-assessable and entitled to the rights, privileges and
preferences set forth in the Certificate of Designations and will be free of
restrictions on transfer, other than restrictions of transfer under this
Agreement and under applicable state and federal securities laws. Neither the
issuance, sale or delivery of the Securities nor, upon the conversion thereof,
the issuance or delivery of the Common Stock is subject to any preemptive right
of stockholders of the Company arising under law or the restated certificate of
incorporation or by-laws of the Company, or to any contractual right of first
refusal or other right in favor of any person.

 

  4.2.  As of December 31, 2005, the Company’s authorized capital stock
consisted of 600,000,000 shares of Common Stock, 397,708,468 of which are
outstanding, and 1,500,000 shares of preferred stock, none of which are
outstanding.

 

  4.3.  Neither the Company nor any of its subsidiaries is, or after giving
effect to the offering and sale of the Securities and upon application of the
proceeds as described in the private placement memorandum dated February 28,
2006, relating to the offering and sale of the Securities (including any
documents incorporated by reference therein and as supplemented or amended prior
to the Closing Date, the “Private Placement Memorandum”) will be, an “investment
company” or a company “controlled” by an “investment company” within the meaning
of the Investment Company Act of 1940, as amended.

 

  4.4.  Both the preliminary copy and the final copy of the Private Placement
Memorandum, as of their respective dates and (in the case of the final copy of
the Private Placement Memorandum) as of the Closing Date, in each case taken
together with the Company’s Exchange Act Filings (as defined below) that are
publicly filed on or prior to such date, did not and will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements made therein, in
light of the circumstances under which they were made, not misleading. The
Company notes that as of the date hereof, it has not filed, and does not intend
to file, its quarterly reports with the Securities and Exchange Commission
(“Commission”) for its fiscal quarters ending March 31, 2005, June 30, 2005 and
September 30, 2005, and in connection with the purchase of the Securities the
Investors will not have access to the information that would have been contained
therein.

 

  4.5.  Assuming the accuracy of the representations and warranties made by the
Investors contained in this Agreement, the issuance and sale to the Investors of
the Securities in the manner contemplated by this Agreement are exempt from the
registration requirements of the Securities Act. No form of general solicitation
or general advertising within the meaning of Regulation D was used by the
Company or, to the best of the Company’s knowledge, any of its representatives
in connection with the offer and sale of the Securities.

 

  4.6.  The Company has been duly organized and is validly existing and in good
standing under the laws of the State of Delaware and has been duly qualified to
do business and is in good standing as a foreign entity in each jurisdiction in
which its ownership or lease of property or the conduct of its business requires
such qualification (except such failures to qualify as are not, either
individually or in the aggregate, material to the Company and its subsidiaries
taken as a whole and except for jurisdictions not recognizing the legal concept
of good standing), and has all power and authority necessary to own or hold its
properties and to conduct its business.

 

  4.7. 

As of December 31, 2005, all of the issued shares of capital stock of the
Company have been duly authorized and validly issued and are fully paid and
non-assessable. The shares of Common Stock initially issuable upon conversion of
the Securities have been duly authorized and reserved for issuance or delivery
out of treasury upon such conversion and, when issued and delivered or delivered

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

 

out of treasury in accordance with the provisions of the restated certificate of
incorporation of the Company, will be validly issued, fully paid and
non-assessable. All of the issued shares of capital stock of each subsidiary of
the Company have been duly and validly authorized and issued and are fully paid
and non-assessable and (except (i) for directors’ qualifying shares or foreign
national qualifying capital stock, if applicable, (ii) as otherwise set forth in
the Company’s public filings on Forms 10-K, 10-Q and 8-K, including any
amendments thereto (collectively, the “Exchange Act Filings”), and (iii) as
pledged to secure indebtedness of the Company and/or its subsidiaries pursuant
to credit facilities, indentures and other instruments evidencing indebtedness
as contemplated by the Company’s Exchange Act Filings and existing or to be
entered into on the Closing Date) are owned directly or indirectly by the
Company, free and clear of all liens, encumbrances, equities or claims (except
where such failures to own are not, either individually or in the aggregate,
material to the Company and its subsidiaries taken as a whole).

 

  4.8.  The Certificate of Designations has been duly authorized by the Company.
Upon issuance and delivery of the Securities in accordance with this Agreement,
the Securities will be convertible at the option of the holder thereof into the
Common Stock in accordance with the terms of the Certificate of Designations.

 

  4.9.  The Company has all requisite corporate power and authority to enter
into the Registration Rights Agreement to be entered into with the Investors on
the Closing Date (the “Registration Rights Agreement”). The Registration Rights
Agreement has been duly authorized by the Company and, when executed and
delivered by the Company, will be validly executed and delivered and (assuming
the due authorization, execution and delivery thereof by the Investors) will be
the legally valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms subject to laws of general application
relating to bankruptcy, insolvency and the relief of debtors and other laws of
general application affecting enforcement of creditors’ rights generally, rules
of law governing specific performance, injunctive relief and equitable remedies.

 

  4.10.  (a) The issue and sale of the Securities, the compliance by the Company
with all of the provisions of the Securities, the authorization, execution and
delivery and compliance by the Company with all of the provisions of and
performance of the Certificate of Designations, the Registration Rights
Agreement and this Agreement, the use of the proceeds from the sale of the
Securities and the consummation of the other transactions contemplated hereby
and thereby (i) will not conflict with or result in a breach or violation of any
of the terms or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement, lease or other agreement or instrument
to which the Company or any of its subsidiaries is a party or by which the
Company or any of its subsidiaries is bound or to which any of the property or
assets of the Company or any of its subsidiaries is subject, (ii) will not
result in any violation of the provisions of the restated certificate of
incorporation or by-laws of the Company and (iii) will not violate any statute
or any order, rule or regulation of any court or governmental agency or body
having jurisdiction over the Company or any of its subsidiaries or any of their
properties or assets; and (b) no consent, approval, authorization or order of,
or filing, registration or qualification with, any court or governmental agency
or body having jurisdiction over the Company or any of its subsidiaries or any
of their properties or assets is required for the issue and sale of the
Securities, the consummation by the Company of the transactions contemplated by
the Registration Rights Agreement or this Agreement (including, without
limitation, the use of the proceeds from the sale of the Securities), except
(w) in the cases of clauses (a)(i) and (iii) only, for such conflicts, breaches,
defaults and violations as would not reasonably be expected to have, either
individually or in the aggregate, a material adverse change, or any development
involving a prospective material adverse change, in or affecting the management,
condition (financial or otherwise), stockholders’ equity, results of operations,
business or prospects of the Company and its subsidiaries, taken as a whole (a
“Material Adverse Effect”); (x) for such consent, approvals, authorizations,
orders, filings, registrations or qualifications that have been obtained; and
(y) for the filing of a registration statement by the Company with the
Commission pursuant to the Securities Act as required by the Registration Rights
Agreement.

 

  4.11. 

Except as described in the Company’s Exchange Act Filings, there are no
contracts, agreements or understandings between the Company and any person
granting such person the right to require the

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Company to file a registration statement under the Securities Act with respect
to any securities of the Company owned or to be owned by such person or to
require the Company to include such securities in the securities registered
pursuant to the Registration Rights Agreement or in any securities being
registered pursuant to any other registration statement filed by the Company
under the Securities Act.

 

  4.12.  During the six-month period preceding the date of the Private Placement
Memorandum and from the date of the Private Placement Memorandum through the
Closing Date, none of the Company or any other person acting on behalf of the
Company has offered or sold to any person any Securities, or any securities of
the same or a similar class as the Securities, other than Securities offered or
sold to the Investors pursuant to this Agreement.

 

  4.13.  The Company’s financial statements included in its Annual Report on
Form 10-K for the fiscal year ended December 31, 2004 filed with the Commission
on December 2, 2005, present fairly the consolidated financial position, results
of operations and cash flows of the Company and its subsidiaries as of and for
the dates thereof and the results of operations and cash flows for the periods
then ended; such financial statements and related schedules and notes have been
prepared in accordance with U.S. generally accepted accounting principles
(“GAAP”) consistently applied throughout the periods involved, except as
disclosed therein.

 

  4.14.  Neither the Company nor any of its subsidiaries has sustained, since
the date of the latest audited financial statements of the Company, any material
loss or interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor dispute or
court or governmental action, order or decree, otherwise than as set forth or
contemplated in the Company’s Exchange Act Filings and, since such date, there
has not been any material change in the stockholders’ equity or long-term debt
of the Company or any of its subsidiaries or any Material Adverse Effect, either
individually or in the aggregate, otherwise than as set forth in the Company’s
Exchange Act Filings.

 

  4.15.  The Company and each of its subsidiaries has good and marketable title
in fee simple to all real property and good and marketable title to all personal
property owned by them, in each case free and clear of all liens, encumbrances
and defects (“Encumbrances”), except (i) for liens for taxes not yet due or
payable, (ii) as are described in the Exchange Act Filings and (iii) as would
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect; and all real property and buildings held under lease by the
Company or any of its subsidiaries are held by them under valid, subsisting and
enforceable leases, except as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.

 

  4.16.  Each of the Company and its subsidiaries holds and is operating in
compliance (in all material respects) with all material franchises, grants,
authorizations, licenses, permits, easements, consents, certificates and orders
of any governmental or self-regulatory body required for the conduct of its
business, and all of such are valid and in full force and effect, and each of
the Company and its subsidiaries is in compliance in all material respects with
all laws, regulations, orders and decrees applicable to it which have a material
effect on its business, properties or assets.

 

  4.17.  To the best of the Company’s knowledge after reasonable investigation,
neither the Company nor any subsidiary, nor any employee or agent thereof, has
made any payment of funds of the Company or any subsidiary or received or
retained any funds in violation of any law, rule or regulation, which violation
could have, either individually or in the aggregate, a Material Adverse Effect.

 

  4.18.  The Company and each of its subsidiaries carry, or are covered by,
insurance in such amounts and covering such risks as is adequate for the conduct
of their respective businesses and the value of their respective properties and
as is customary for companies engaged in similar businesses in similar
industries, except as would not reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect.

 

  4.19. 

The Company and each of its subsidiaries (i) own or possess adequate rights to
use all patents, patent applications, trademarks, service marks, trade names,
trademark registrations, service mark registrations, copyrights and licenses
necessary for the conduct of their respective businesses and

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

 

(ii) have no reason to believe that the conduct of their respective businesses
will conflict with, and have not received any written notice of any claim of
conflict with, any such rights of others, except with respect to clauses (i) and
(ii) as would not reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect.

 

  4.20.  Except as described in the Company’s Exchange Act Filings, there are no
legal or governmental proceedings pending to which the Company or any of its
subsidiaries is a party or to which any property or assets of the Company or any
of its subsidiaries is the subject that, if determined adversely to the Company
or any of its subsidiaries, could have, either individually or in the aggregate,
a Material Adverse Effect, and to the best of the Company’s knowledge, no such
proceedings are threatened by governmental authorities or threatened by others.

 

  4.21.  The Company is in compliance in all material respects with all
presently applicable provisions of the Employee Retirement Income Security Act
of 1974, as amended, including the regulations and published interpretations
thereunder (“ERISA”); no “reportable event” (as defined in ERISA) has occurred
with respect to any “pension plan” (as defined in ERISA) for which the Company
would have any liability; the Company has not incurred and does not expect to
incur liability under Title IV of ERISA with respect to termination of, or
withdrawal from, any such “pension plan”; no such “pension plan” for which the
Company would have any liability has incurred an “accumulated funding
deficiency” as defined in Section 412 of the Internal Revenue Code of 1986, as
amended, including the regulations and published interpretations thereunder (the
“Code”), as of the last day of the most recent fiscal year of such plan ended
before the date hereof, nor does the Company have or expect to incur liability
for a tax under Section 4971 of the Code; and each such “pension plan” for which
the Company would have any liability that is intended to be qualified under
Section 401(a) of the Code is so qualified in all material respects and nothing
has occurred, whether by action or by failure to act, which would cause the loss
of such qualification.

 

  4.22.  The Company has filed within the time prescribed by law (including
extensions of time approved by the appropriate taxing authority) all federal,
state and local income and franchise tax returns required to be filed through
the date hereof, except where the failure to file would not, individually or in
the aggregate, have a Material Adverse Effect and has paid all taxes shown as
due thereon other than those taxes contested in good faith and where the failure
to pay would not, individually or in the aggregate, have a Material Adverse
Effect, and no tax deficiency has been determined adversely to the Company or
any of its subsidiaries that has had (nor does the Company have any knowledge of
any tax deficiency that, if determined adversely to the Company or any of its
subsidiaries, might have) or could reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect.

 

  4.23.  Except as disclosed in the Company’s Exchange Act Filings there are not
currently, and will not be as a result of the offering of the Securities, any
outstanding subscriptions, rights, warrants, calls, commitments of sales or
options to acquire, or instruments convertible into or exchangeable for, any
capital stock or equity interest of the Company or any of its subsidiaries.

 

  4.24.  Except as disclosed in Company’s Exchange Act Filings and except in the
case of clause (i), but only with respect to subsidiaries of the Company, and
clauses (ii) and (iii) for such violations and defaults that would not,
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect, neither the Company nor any of its subsidiaries (i) is in
violation of its charter, by-laws or applicable organizational documents,
(ii) is in default, and no event has occurred that, with notice or lapse of time
or both, would constitute such a default, in the due performance or observance
of any term, covenant, condition or other obligation contained in any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to
which it is a party or by which it is bound or to which any of its properties or
assets is subject or (iii) is in violation of any law, ordinance, governmental
rule, regulation or court decree to which it or its property or assets may be
subject or has failed to obtain or maintain any license, permit, certificate,
franchise or other governmental authorization or permit necessary to the
ownership of its property or to the conduct of its business.

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

  4.25.  Except as disclosed in Company’s Exchange Act Filings, and except for
such matters as would not, individually or in the aggregate, result in a
Material Adverse Effect, the Company and its subsidiaries (1) are conducting and
have conducted their businesses, operations and facilities in compliance with
Environmental Laws (as defined below); (2) have not received any written notice
from a governmental authority or any other third party alleging any violation of
Environmental Law or liability thereunder (including, without limitation,
liability as a “potentially responsible party” and/or for costs of investigating
or remediating sites containing Hazardous Substances (as defined below) and/or
damages to natural resources); (3) are not subject to any pending or, to the
knowledge of the Company or any of its subsidiaries, threatened claim or other
legal proceeding under any Environmental Laws against the Company or its
subsidiaries; and (4) do not have any knowledge of any pending Environmental Law
or any release of Hazardous Substances that, individually or in the aggregate,
would reasonably be expected to form the basis of any such claim or legal
proceeding under any Environmental Law against the Company or its subsidiaries
or to require any material capital expenditures to maintain the Company’s or the
subsidiaries’ compliance with Environmental Law. As used in this paragraph,
“Environmental Laws” means any and all applicable federal, state, local, and
foreign laws, statutes, ordinances, rules, regulations, enforceable requirements
and common law, or any enforceable administrative or judicial interpretation,
order, consent, decree or judgment thereof, relating to pollution or the
protection of human health or the environment, including, without limitation,
those relating to, regulating or imposing liability or standards of conduct
concerning (i) noise or odor; (ii) emissions, discharges, releases or threatened
releases of Hazardous Substances into ambient air, surface water, groundwater or
land; (iii) the generation, manufacture, processing, distribution, use,
treatment, storage, disposal, release, transport or handling of, or exposure to,
Hazardous Substances; or (iv) the investigation, remediation or cleanup of any
Hazardous Substances. As used in this paragraph, “Hazardous Substances” means
pollutants, contaminants or hazardous, dangerous, toxic, biohazardous or
infectious substances, materials, constituents or wastes or toxins, petroleum,
petroleum products and their breakdown constituents, or any other hazardous or
toxic chemical substance regulated under Environmental Laws or exhibiting a
hazardous waste characteristic including, but not limited to, corrosivity,
ignitability, toxicity or reactivity, whether solid, gaseous or liquid in
nature.

 

  4.26.  The Securities will satisfy, as of the date of the Private Placement
Memorandum and as of the Closing Date, the eligibility requirements of Rule
144A(d)(3) under the Securities Act.

 

  4.27.  The Company shall have obtained all necessary Blue Sky law permits and
qualifications, or have the availability of exemptions therefrom, required by
any state for the offer and sale of the Securities.

 

  4.28.  With respect to Securities that are no longer “restricted securities”
within the meaning of Rule 144(a)(3) under the Securities Act on a conversion
date (as such term is defined in the Certificate of Designation), either as a
result of a resale of the Securities pursuant to a registration statement or
otherwise, all shares of Common Stock distributed upon conversion will be freely
transferable without restriction under the Securities Act, other than by
affiliates of the Company.

 

  4.29.  Each significant subsidiary of the Company, as defined in accordance
with regulation S-X promulgated under the Securities Act of 1933, (1) has been
duly organized and is validly existing and in good standing under the laws of
the jurisdiction of its incorporation and has all power and authority necessary
to own or hold its properties and to conduct its business, except those the
absence of which would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect; and (2) has been duly qualified to
do business and is in good standing as a foreign entity in each jurisdiction in
which its ownership or lease of property or the conduct of its business requires
such qualification, except for those failures to be so qualified which would
not, either individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect and except for jurisdictions not recognizing the legal
concept of good standing.

 

5. Further Agreements of the Company. The Company further covenants with each
Investor that:

 

  5.1. 

For so long as any of the Securities remain outstanding and are “restricted
securities” within the meaning of Rule 144(a)(3) under the Securities Act, the
Company will make available at its expense, upon request, to any holder of such
Securities and any prospective purchasers thereof the information

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

 

specified in Rule 144A(d)(4) under the Securities Act, unless the Company is
then subject to Section 13 or 15(d) of the Exchange Act.

 

  5.2.  The Company shall reserve and keep available at all times, free of
preemptive rights, shares of Common Stock for the purpose of enabling the
Company to satisfy any obligation to issue shares of its Common Stock upon
conversion of the Securities.

 

  5.3.  The Company will take such steps as shall be necessary to ensure that
neither the Company nor any of its subsidiaries becomes an “investment company”
or a company “controlled” by an “investment company” within the meaning the
Investment Company Act of 1940, as amended.

 

  5.4.  The Company will comply, in all material respects, with all applicable
securities and other applicable laws, rules and regulations, including, without
limitation, the Sarbanes Oxley Act, and to use its best efforts to cause the
Company’s directors and officers, in their capacities as such, to comply with
such laws, rules and regulations, including, without limitation, the provisions
of the Sarbanes Oxley Act.

 

  5.5.  For a period of two years (calculated in accordance with paragraph
(d) of Rule 144 under the Securities Act) following the date any Securities are
acquired by the Company or any of its affiliates (as defined in Rule 144A under
the Securities Act), none of the Company or any of its affiliates will sell any
such Securities.

 

  5.6.  The Company will use all commercially reasonable efforts to (i) cause
the Securities to be designated as PORTAL-eligible securities in accordance with
the rules and regulations adopted by the NASD relating to trading in the NASD’s
Portal Market and (ii) cause the Securities to be eligible for clearance and
settlement through The Depository Trust Company.

 

  5.7.  The Company has not taken, and will not take, directly or indirectly,
any action designed to or that would constitute or that might reasonably be
expected to cause or result in, under the Exchange Act or otherwise,
stabilization or manipulation of the price of any security of the Company.

 

  5.8.  The Company will take reasonable precautions to ensure that any offer or
sale, direct or indirect, in the United States or to any U.S. person (as defined
in Rule 902 under the Securities Act), of any Securities or any substantially
similar security issued by the Company, within six months subsequent to the date
on which the distribution of the Securities has been completed, is made under
restrictions and other circumstances reasonably designed not to affect the
status of the offer and sale of the Securities in the United States and to U.S.
persons contemplated by this Agreement as transactions exempt from the
registration provisions of the Securities Act, including any sales pursuant to
Rule 144A under, or Regulation D or S of, the Securities Act.

 

  5.9. 

Without the prior written consent of Citigroup Global Markets Inc., J.P. Morgan
Securities Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated, for a
period of 90 days from the date of the Private Placement Memorandum, the Company
agrees not to (a) offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, lend or otherwise transfer or dispose of, directly
or indirectly, any equity securities of the Company or any securities
convertible into or exercisable or exchangeable for equity securities of the
Company or (b) enter into any swap or other arrangement that transfers to
another, in whole or in part, any of the economic consequences of ownership of
the equity securities of the Company, whether any such transaction described in
clause (a) or (b) above is to be settled by delivery of equity securities or
such other securities, in cash or otherwise, other than (i) the Securities,
(ii) the shares of Common Stock issuable upon conversion of the Securities,
(iii) the issuance by the Company of shares of Common Stock upon the exercise of
an option or a warrant or the conversion of a security, in each case outstanding
on the date of the Private Placement Memorandum, (iv) the grant by the Company
of employee, officer or director stock options and the issuance by the Company
of any shares of Common Stock upon the exercise of any option (regardless of
when issued) under any employee, officer or director stock option or similar
benefit plan, (v) the issuance by the Company of shares of Common Stock, stock
appreciation rights or common stock equivalents or warrants, rights or options
to purchase any of the foregoing, pursuant to any employee, officer or director
stock option, stock purchase or similar benefit plans and (vi) the issuance by
the Company of any shares of

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Common Stock, warrants or other securities or any securities issuable upon
conversion of such warrants or other securities in connection with the Company’s
previously announced preliminary agreement in principle to settle litigation
filed against the Company, certain of its former directors and officers and
certain other parties in the United States District Court for the Northern
District of Alabama and the Circuit Court in Jefferson County, Alabama.

 

  5.10.  The Company will cooperate with the Investors and their counsel to
qualify the Securities and the Common Stock or any other Securities into which
it is Convertible for offer and sale under the securities or “Blue Sky” laws of
such jurisdictions as any Investor shall reasonably request and will continue
such qualifications in effect so long as required for the offering and resale of
the Securities; provided that the Company shall not be required to (i) qualify
as a foreign corporation or other entity or as a dealer in securities in any
such jurisdiction where it would not otherwise be required to so qualify,
(ii) take any action that would subject it to general service of process in any
such jurisdiction or (iii) take any action that would subject itself to taxation
in any such jurisdiction if it is not otherwise so subject.

 

  5.11.  The Company agrees to pay the costs and expenses relating to the
following matters: (i) the preparation, printing or reproduction of the Private
Placement Memorandum and each amendment or supplement thereto; (ii) the printing
(or reproduction) and delivery (including postage, air freight charges and
charges for counting and packaging) of such copies of the Private Placement
Memorandum and all amendments or supplements thereto, as may, in each case, be
reasonably requested for use in connection with the offering and sale of the
Securities; (iii) the preparation, printing, authentication, issuance and
delivery of certificates for the Securities, including any stamp or transfer
taxes in connection with the original issuance and sale of the Securities;
(iv) the printing (or reproduction) and delivery of this Agreement, the closing
documents and all other agreements or documents printed (or reproduced) and
delivered in connection with the offering of the Securities; (vi) the
transportation and other expenses incurred by or on behalf of Company
representatives in connection with presentations to prospective purchasers of
the Securities; (vi) the fees and expenses of the Company’s accountants and the
fees and expenses of counsel (including local and special counsel) for the
Company; (vii) the fees and expenses of Debevoise & Plimpton LLP, special
counsel to the Investors; (viii) the fees and disbursements of any transfer
agent or registrar for the Securities; and (ix) all other costs and reasonable
expenses incident to the performance by the Company of its obligations
hereunder.

 

  5.12.  The Company agrees that neither it nor any other person acting on its
behalf will provide any Investor or its agents or counsel with any information
that the Company believes constitutes material non-public information, unless
prior thereto such Investor shall have executed a written agreement regarding
the confidentiality and use of such information. The Company understands and
confirms that each Investor shall be relying on the foregoing representations in
effecting transactions in securities of the Company. Notwithstanding the
requirements in this Section 5.12, in the event of a breach of the foregoing
agreement by the Company, any of its subsidiaries, or any of its or their
respective officers, directors, employees and agents, in addition to any other
remedy provided herein, any Investor shall have the right to make a public
disclosure, in the form of a press release, public advertisement or otherwise,
of such material, non-public information without the prior approval by the
Company, its subsidiaries, or any of its or their respective officers,
directors, employees or agents. No Investor shall have any liability to the
Company, its subsidiaries, or any of its or their respective officers,
directors, employees, stockholders or agents for any such disclosure.

 

6. Conditions of Investors’ Obligations. The obligation of each Investor to
purchase Securities on the Closing Date is subject to the following conditions:

 

  6.1.  On the Closing Date the Company shall have delivered to Debevoise &
Plimpton LLP (the “Designated Investor Counsel”), for the benefit of the
Investors, the opinion, dated the Closing Date and addressed to the Investors,
of Skadden, Arps, Slate, Meagher & Flom LLP, counsel for the Company,
substantially in the form set forth in Exhibit C to this Agreement.

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  6.2.  (a) (i) The representations and warranties of the Company contained in
this Agreement shall be true and correct on and as of the date hereof and on and
as of the Closing Date as if made on and as of the Closing Date, (ii) the
statements of the Company’s officers made pursuant to any certificate delivered
in accordance with the provisions hereof shall be true and correct on and as of
the date made and on and as of the Closing Date, (iii) the Company shall have
performed all covenants and agreements and satisfied all conditions on its part
to be performed or satisfied hereunder at or prior to the Closing Date,
(iv) except as described in the Company’s Exchange Act Filings (exclusive of any
such filings after the date hereof), subsequent to December 31, 2004, there
shall have been no event or development, and no information shall have become
known, that, individually or in the aggregate, has or would be reasonably likely
to have a Material Adverse Effect, and (v) the sale of the Securities hereunder
and the use of the Private Placement Memorandum shall not be enjoined
(temporarily or permanently) on the Closing Date and (b) on the Closing Date the
Company shall have delivered to the Designated Investors Counsel, for the
benefit of the Investors, a certificate of the Company, dated the Closing Date,
signed on behalf of the Company by its Chief Financial Officer, to the effect
that the conditions set forth in clause (a) above have been satisfied in all
respects.

 

  6.3.  The Certificate of Designations shall have been duly executed and
acknowledged by the Company and filed with the Secretary of State of the State
of Delaware and shall have become effective in accordance with the provisions of
the General Corporation Law of the State of Delaware.

 

  6.4.  Citigroup Global Markets Inc., J.P. Morgan Securities Inc. and Merrill
Lynch, Pierce, Fenner & Smith Incorporated have received the “lockup” agreements
substantially in the form set forth in Exhibit D to this Agreement signed by
certain officers and directors of the Company set forth in Schedule A hereto
relating to sales and certain other dispositions of shares of the equity
securities or certain other securities of the Company, and such agreements shall
be in full force and effect on the Closing Date.

 

  6.5.  On the Closing Date the Investors shall have received the Registration
Rights Agreement executed by the Company, and such agreement shall be in full
force and effect.

 

  6.6.  The Company shall have delivered to the Designated Investors Counsel,
for the benefit of the Investors, satisfactory evidence of the good standing of
the Company in its jurisdiction of organization and its good standing as a
foreign entity in each jurisdiction in which its ownership or lease of property
or the conduct of its businesses requires such qualification (except where the
failure to so qualify is not material to the Company and its subsidiaries taken
as a whole, and except for jurisdictions not recognizing the legal concept of
good standing), in each case in writing or any standard form of
telecommunication, from the appropriate governmental authorities of such
jurisdictions.

On or before the Closing Date, the Company shall have delivered to the
Designated Investors Counsel, for the benefit of the Investors, such further
documents, certificates, letters and schedules or instruments relating to the
business, corporate, legal and financial affairs of the Company and its
subsidiaries as the Investors shall have reasonably requested from the Company
reasonably in advance of the Closing Date so long as such further documents,
certificates, letters and schedules or instruments are reasonable and customary
for the transactions contemplated by this Agreement. Delivery of any such
documents, certificates, letters and schedules or instruments to the Designated
Investors Counsel shall be deemed to constitute delivery to the applicable
Investors for all purposes hereunder.

All such documents, opinions, certificates, letters, schedules or instruments
delivered pursuant to this Agreement will comply with the provisions hereof only
if they are reasonably satisfactory in all material respects to the Designated
Investors Counsel. The Company shall furnish to the Investors such conformed
copies of such documents, certificates, letters, schedules and instruments in
such quantities as the Investors shall reasonably request.

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7. Representations, Warranties and Covenants of the Investors. Each Investor
severally, and not jointly, hereby represents and warrants to, and covenants
with, the Company, that:

 

  7.1.  The Investor is (a) a QIB, (b) aware that the sale to it is being made
in reliance on a private placement exemption from registration under the
Securities Act and (c) acquiring the Securities for its own account or for the
account of a QIB and not with a view to the distribution thereof.

 

  7.2.  The Investor understands that the Securities and the Common Stock
issuable upon conversion of the Securities are being offered in a transaction
not involving any public offering within the meaning of the Securities Act, that
the Securities and the Common Stock issuable upon conversion of the Securities
have not been and, except as described in the Private Placement Memorandum, will
not be registered under the Securities Act and that (a) if prior to the
expiration of the applicable holding period specified in Rule 144(k) of the
Securities Act it decides to offer, resell, pledge or otherwise transfer any of
the Securities or Common Stock issued upon conversion of the Securities, such
Securities and Common Stock may be offered, resold, pledged or otherwise
transferred only (i) to a person whom the seller reasonably believes is a QIB in
a transaction meeting the requirements of Rule 144A, (ii) pursuant to an
exemption from registration under the Securities Act provided by Rule 144
thereunder (if available), (iii) pursuant to an effective registration statement
under the Securities Act or (iv) to the Company or one of its subsidiaries, in
each of cases (i) through (iv) in accordance with any applicable securities laws
of any state of the United States, and that (b) the Investor will, and each
subsequent holder of the Securities is required to, notify any subsequent
purchaser of the Securities or the Common Stock issued upon conversion of the
Securities of the resale restrictions referred to in clause (a) above and will
provide the Company and the transfer agent such certificates and other
information as they may reasonably require to confirm that the transfer by it
complies with the foregoing restrictions, if applicable.

 

  7.3.  The Investor understands that the Securities and the Common Stock
issuable upon conversion of the Securities will, until the expiration of the
applicable holding period set forth in Rule 144(k) of the Securities Act, unless
sold pursuant to a registration statement that has been declared effective under
the Securities Act or in compliance with Rule 144, bear a legend substantially
to the following effect:

THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT
FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED
(THE “SECURITIES ACT”), AND THIS SECURITY MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF
THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5
OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.

THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) THIS
SECURITY MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (I) TO A
PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER
(AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (II) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), (III)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR (IV)
TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, IN EACH OF CASES (I) THROUGH (IV) IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO,
NOTIFY ANY SUBSEQUENT PURCHASER OF THIS SECURITY FROM IT OF THE RESALE
RESTRICTIONS REFERRED TO IN CLAUSE (A) ABOVE.

 

  7.4.  The Investor (a) is able to fend for itself in the transactions
contemplated by the Private Placement Memorandum, (b) has such knowledge and
experience in financial and business matters as to be capable of evaluating the
merits and risks of its prospective investment in the Securities and (c) has the
ability to bear the economic risks of its prospective investment in the
Securities and can afford the complete loss of such investment.

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

  7.5.  The Investor has received a preliminary copy of the Private Placement
Memorandum and upon delivery by the Company prior to Closing of the final copy
of the Private Placement Memorandum will have received a final copy of the
Private Placement Memorandum and acknowledges that (a) it has conducted its own
investigation of the Company and the terms of the Securities and, in conducting
its examination, it has not relied on, and will not rely on, any Placement
Agent, any statements or other information provided by any Placement Agent
concerning the Company or the terms of this offering or any due diligence
investigation that any of the Placement Agents or their respective affiliates,
or any person acting on behalf of any of them, may conduct or may have conducted
with respect to the Securities or the Company, (b) it has had access to the
Company’s public filings with the Securities and Exchange Commission and to such
financial and other information as it deems necessary to make its decision to
purchase the Securities, acknowledging that the Company has not filed with the
Commission certain required quarterly reports and that the Company cannot assure
such Investor that such information would not have been relevant to the
Investor’s decision to purchase the Securities, (c) it has been offered the
opportunity to ask questions of the Company and, if asked questions, received
answers thereto, as it deemed necessary in connection with the decision to
purchase the Securities and (d) it is aware that there may be additional
non-public information with respect to the Securities and the Company that the
Company has made itself available to provide to the Investor upon execution by
such Investor of a confidentiality agreement, and that the Investor has either
executed such confidentiality agreement and received such additional information
that it has requested or has elected in its sole discretion not to request such
information.

 

  7.6.  The Investor, its affiliates and any of its and their directors,
officers, employees, agents, advisors and controlling persons are aware that the
U.S. securities laws prohibit any person that has material non-public
information about a company from purchasing or selling, directly or indirectly,
securities of such company (including entering into hedging transactions
involving such securities) or from communicating such information to any other
person under circumstances in which it is reasonably foreseeable that such other
person is likely to purchase or sell such securities.

 

  7.7.  The Investor understands that the Company, each Placement Agent and
others will rely upon the truth and accuracy of the foregoing representations,
acknowledgements and agreements and agrees that if any of the representations
and acknowledgements deemed to have been made by it by its purchase of the
Securities are no longer accurate, the Investor shall promptly notify the
Company and each Placement Agent. The Investor hereby consents to such reliance.
If the Investor is acquiring the Securities as a fiduciary or agent for one or
more investor accounts, it represents that it has sole investment discretion
with respect to each such account and it has full power to make the foregoing
representations, acknowledgements and agreements on behalf of such account.

 

  7.8.  The Investor has not solicited offers for, or offered or sold, and will
not solicit offers for, or offer to sell, the Securities by means of any form of
general solicitation or general advertising within the meaning of Rule 502(c) of
Regulation D under the Securities Act or in any manner involving a public
offering within the meaning of Section 4(2) of the Securities Act.

 

  7.9.  The Investor acknowledges that no action has been or will be taken in
any jurisdiction outside the United States by the Company or any Placement Agent
that would permit an offering of the Securities, or possession or distribution
of offering materials in connection with the issue of the Securities, in any
jurisdiction outside the United States where action for that purpose is
required. Each Investor outside the United States will comply with all
applicable laws and regulations in each foreign jurisdiction in which it
purchases, offers, sells or delivers Securities or has in its possession or
distributes any offering material, in all cases at its own expense.

 

  7.10.  The Investor further represents and warrants to, and covenants with,
the Company that the Investor has full right, power, authority and capacity to
enter into this Agreement and to consummate the transactions contemplated hereby
and has taken all necessary action to authorize the execution, delivery and
performance of this Agreement.

 

  7.11. 

The Investor understands that nothing in the Private Placement Memorandum, this
Agreement, the Company’s public filings with the Commission or any other
materials presented to the Investor in

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

 

connection with the purchase and sale of the Securities constitutes legal, tax
or investment advice. The Investor has consulted such legal, tax and investment
advisors and made its own assessments as it, in its sole discretion, has deemed
necessary or appropriate in connection with its purchase of Securities.

 

8. Survival of Representations, Warranties and Agreements. Notwithstanding any
investigation made by any party to this Agreement, all covenants, agreements,
representations and warranties made by the Company and the Investor herein shall
survive the execution of this Agreement, the delivery to the Investor of the
Securities being purchased and the payment therefor.

 

9. Notices. All notices, requests, consents and other communications hereunder
shall be in writing, shall be delivered (A) if within the domestic United
States, by first-class registered or certified mail, or nationally recognized
overnight express courier, postage prepaid, or by facsimile, or (B) otherwise by
International Federal Express or facsimile, and shall be deemed given (i) if
delivered by first-class registered or certified mail, three business days after
so mailed, (ii) if delivered by a nationally recognized overnight carrier, one
business day after so mailed, (iii) if delivered by International Federal
Express, two business days after so mailed and (iv) if delivered by facsimile,
upon electronic confirmation of receipt and shall be delivered as addressed as
follows:

 

(a)    if to the Company, to:

HealthSouth Corporation

One HealthSouth Parkway

Birmingham, Alabama 35243

Attention: General Counsel

Telecopy No.: (205) 970-5913

 

with a copy to:

Richard B. Aftanas, Esq.

Skadden, Arps, Slate, Meagher & Flom LLP

Four Times Square

New York NY 10036

Telecopy

   No.: (917) 777-4112

(b)    if to an Investor, at its address on the signature page hereto, or at
such other address or addresses as may have been furnished to the Company in
writing.

with a copy to:

Steven J. Slutzky, Esq.

Debevoise & Plimpton LLP

919 Third Avenue

New York NY 10022

Telecopy No.: (212) 909-6836

 

10. Persons Entitled to Benefit of Agreement. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and any controlling persons referred to herein, and the directors,
officers, employees, advisors, affiliates and agents of each Investor. Nothing
in this Agreement is intended, or shall be construed, to give any other person
any legal or equitable right, remedy or claim under or in respect of this
Agreement or any provision contained herein.

 

11. Changes. This Agreement may not be modified or amended except pursuant to an
instrument in writing signed by the Company and the Investors.

 

12. Headings. The headings of the various sections of this Agreement have been
inserted for convenience or reference only and shall not be deemed to be part of
this Agreement.

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13. Severability. In case any provision contained in this Agreement should be
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby.

 

14. Applicable Law. This Agreement will be governed by and construed in
accordance with the laws of the State of New York applicable to contracts made
and to be performed within the State of New York.

 

15. Counterparts. This Agreement may be signed in one or more counterparts, each
of which shall constitute an original and all of which together shall constitute
one and the same agreement.

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Schedule A

Officers and Directors Who Have Signed the Lockup Agreements

Steven R. Berrard

Edward A. Blechschmidt

Donald L. Correll

Yvonne M. Curl

Gregory L. Doody

Charles M. Elson

Jay Grinney

Jon F. Hanson

Leo I. Higdon, Jr.

John Markus

John E. Maupin, Jr.

L. Edward Shaw, Jr.

Michael D. Snow

John L. Workman