Document:

Employment Agreement between HealthSouth and Diane L. Munson

 Exhibit 10.1 
 EXECUTION VERSION 
 EMPLOYMENT AGREEMENT 
 This Employment Agreement (the “Agreement”), made and entered into on April 19, 2006, effective as of March 15, 2006 (the
“Effective Date”), is by and between HEALTHSOUTH CORPORATION, a Delaware corporation (the “Corporation”), and DIANE L. MUNSON, an individual resident of Alabama (the “Executive”). 
 RECITALS 
 The Corporation desires to
employ the Executive as its President, Outpatient Division effective as of the Effective Date, and the Executive desires to accept such employment effective as of the Effective Date, on the terms and conditions set forth herein. 
 AGREEMENT 
 The parties, intending to
be legally bound, agree as follows: 
 Section 1. Employment. The Corporation hereby employs the Executive, and the Executive
hereby accepts employment, all on the terms and conditions herein. 
 Section 2. Services; Extent of Services. 
 (a) Duties and Responsibilities. The Executive is hereby employed as President, Outpatient Division, the authority, duties and
responsibilities of which will be as follows: the Executive will 
 (i) manage, review and supervise the Outpatient Division
of the Corporation; 
 (ii) report to Michael D. Snow, Chief Operating Officer of the Corporation; 
 (iii) have the powers and duties determined or directed by the Board of Directors, the Chief Executive Officer and the Chief Operating
Officer of the Corporation; and 
 (iv) comply with the various policies, procedures and codes of conduct of the Corporation
in effect from time to time which apply to other employees and executive officers. 
 (b) Full Business Attention. The
Executive will devote her full business attention and energies to the business of the Corporation during the Term (as defined below) and will physically report and will render all the Executive’s services contemplated hereunder to the
Corporation at its offices in Birmingham, Alabama or at 

  

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any other location in which the Corporation is headquartered; provided, however, that the foregoing requirement to render services in
Birmingham, Alabama shall not apply when the Executive is traveling on company business. 
 (c) Other Activities.
Notwithstanding anything to the contrary contained in Section 2(b), the Executive will be permitted to engage in the following activities, provided that such activities do not materially interfere or conflict with the Executive’s duties
and responsibilities to the Corporation: 
 (i) the Executive may serve on the governing boards of, or otherwise participate
in, a reasonable number of trade associations and charitable organizations whose purposes are not inconsistent with the activities and the image of the Corporation; 
 (ii) the Executive may engage in a reasonable amount of charitable activities and community affairs; and 
 (iii) subject to the prior approval of the Nominating / Corporate Governance Committee of the Board of Directors of the Corporation, the
Executive may serve on the board of directors of up to one (1) business corporations or other for-profit entities, provided that they do not compete, directly or indirectly, with the Corporation. 
 Section 3. Compensation. 
 (a) Base Salary. In consideration of the services provided hereunder, the Corporation shall pay the Executive during the Term a salary of Three Hundred Forty-Five Thousand Fifty and No/100 Dollars ($345,050.00) per year (the
“Base Salary”). The Corporation shall pay the Base Salary in arrears in equal installments in accordance with the Corporation’s payroll policy in effect from time to time for other similarly-situated officers of the Corporation.

 (b) Bonus. During the Term, the Executive will earn a cash bonus in an amount per year targeted at 60% of the amount
of the Base Salary in accordance with the senior management bonus plan, which is currently being developed for fiscal year 2006. 
 (c) Benefits. During the Term, the Executive will be entitled to the following benefits: 
 (i) Employee
Benefit Plans. The Executive will be entitled to participate in all employee benefit plans of the Corporation (including incentive or equity compensation plans) on such terms as are offered for the general benefit of other similarly-situated
officers of the Corporation, subject to the provisions of such plans as may be in effect from time to time. 
  

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 (ii) Vacation; Sick Leave. The Executive will be entitled to vacation and sick
leave on such terms as are offered for the benefit of other similarly-situated officers of the Corporation. 
 (d) Expense
Reimbursement. The Corporation shall reimburse the Executive, in accordance with the Corporation’s policies, for all reasonable business expenses incurred by the Executive in connection with the performance of the Executive’s
obligations hereunder. 
 (e) Taxes. All payments made by the Corporation under this Agreement will be subject to
withholding of such amounts as is required pursuant to any applicable law or regulation. 
 (f) Equity Incentives. The
Corporation agrees to provide the Executive with equity incentives commensurate with the Executive’s position and responsibilities with the Corporation. 
 Section 4. Term. The term of this Agreement will commence on the Effective Date and will continue for a term of two (2) years following the Effective Date (the “Original Term”), unless
earlier terminated pursuant to the provisions of Section 5 below. The Executive’s employment by the Corporation will automatically be extended by twelve (12) additional months at the end of the Original Term (the “Extended
Term”) and each annual anniversary of the end of the then-current Extended Term thereafter unless either party provides written notice to the other party no less than ninety (90) days prior to the date of any such scheduled extension of
its or her intention not to extend the term of the Executive’s employment. In the event that the Corporation chooses not to extend the term of the Executive’s employment, the Executive shall be entitled receive a severance package similar
to those being paid to other similarly-situated officers of the Corporation whose employment term is not being extended by the Corporation. The Executive acknowledges that the Corporation currently does not have a severance policy applicable in such
situations; however, in the event that the Corporation develops such a plan, the Executive will participate in such plan to the same extent as other similarly-situated officers of the Corporation. The Original Term plus any Extended Term is
hereinafter referred to as the “Term.” 
 Section 5. Termination of Employment. 
 (a) Termination by Corporation for Cause. The Executive’s employment by the Corporation will terminate immediately upon
written notice to the Executive if the Corporation elects to discharge the Executive for Cause (as hereinafter defined). For purposes hereof, “Cause” means: 
 (i) the Executive’s act of fraud, misappropriation of funds, or embezzlement with respect to the Corporation; 
 (ii) the Executive’s indictment for, conviction of, or plea of guilt or no contest to, any felony (other than a minor traffic
violation); 
  

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 (iii) the suspension or debarment of the Executive or of the Corporation or any of its
affiliated companies or entities as a direct result of any act or omission of the Executive in connection with her employment with the Corporation from participation in any Federal or state health care program; 
 (iv) the Executive’s admission of liability of, or finding of liability for, the violation of any “Securities Laws” (as
hereinafter defined) (excluding any technical violations of the Securities Laws which are not criminal in nature). As used herein, the term “Securities Laws” means any Federal or state law, rule or regulation governing the issuance or
exchange of securities, including without limitation the Securities Act of 1933, the Securities Exchange Act of 1934 and the rules and regulations promulgated thereunder; 
 (v) a formal indication from any agency or instrumentality of any state or the United States of America, including but not limited to the
United States Department of Justice, the United States Securities and Exchange Commission or any committee of the United States Congress that the Executive is a target or subject of any investigation or proceeding into the actions or inactions of
the Executive (collectively, the “Investigations”); 
 (vi) the Executive’s failure after reasonable prior
written notice to comply with any valid and legal directive of the Chief Executive Officer, the Chief Operating Officer or the Board of Directors of the Corporation; or 
 (vii) other than as provided in Sections 5(a)(i) – (vi) above, the Executive’s material breach of any material provision of this
Agreement that is not remedied within fifteen (15) days of the Executive being provided written notice thereof from the Corporation. 
 Repeated breaches of a similar nature, such as the failure to report to work, perform duties, or follow directions, all as provided herein, shall not require additional notices as provided Section 5(a)(vi) or (vii). 
 (b) Termination by Corporation Without Cause. The Corporation may terminate this Agreement Without Cause upon at least thirty
(30) days prior written notice to the Executive. Any termination of this Agreement by the Corporation for a reason other than for Cause shall be considered a termination Without Cause. If, in connection with the divestiture of the Outpatient
Division, the Executive is not offered a position with acquiring entity or related entities subsidiaries such that the Executive’s duties, authority or responsibilities are not substantially diminished and the Corporation does not offer the
Executive acceptable employment following the divestiture of the Outpatient Division, this Agreement shall be deemed to have been terminated Without Cause. 
  

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 (c) Death or Disability. The Executive’s employment by the Corporation will
immediately terminate upon the Executive’s death and, at the option of either the Executive or the Corporation, exercisable upon written notice to the other party, may terminate upon the Executive’s Disability (as hereinafter defined). For
purposes of this Agreement, “Disability” will occur if (i) the Executive becomes eligible for full benefits under a long-term disability policy provided by the Corporation, if any, or (ii) the Executive has been unable,
due to physical or mental illness or incapacity, to perform the essential duties of her employment with reasonable accommodation for a continuous period of ninety (90) days or an aggregate of one-hundred eighty (180) days during the Term.

 (d) Termination by the Executive for Good Reason. The Executive may terminate this Agreement at any time upon thirty
(30) days’ prior written notice to the Corporation and the Corporation fails to cure such event within such thirty-day period (any such termination referenced in clauses (i)-(iii) below, constituting termination for “Good
Reason”): 
 (i) if the Corporation fails to make all or any portion of any payment, or offer all or any portion of any
benefits, required by Section 3 hereof when such payments or benefits are due; 
 (ii) if the Corporation materially
modifies the senior management bonus plan or equity incentive plan such that the targeted cash bonus levels and targeted incentive compensation levels applicable to the Executive are materially lower than those levels of other similarly-situated
executive officers of the Corporation; 
 (iii) if the Corporation relocates its corporate offices to a location that is
greater than fifty (50) miles from its current location; and 
 (iv) except as otherwise set forth in clause (i),
(ii) or (iii) above, if the Corporation materially breaches any of its other duties or obligations hereunder (including, without limitation, a material diminution in the Executive’s duties, authority or responsibilities). 

(e) Termination by the Executive without Good Reason. The Executive may terminate this Agreement without Good Reason upon at
least thirty (30) days prior written notice to the Corporation. 
 (f) Change in Control. The Executive shall,
during the term of this Agreement, participate in the Corporation’s Change in Control Benefits Plan, which was adopted by the Corporation on November 4, 2005. 
  

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 Section 6. Effect of Termination. 
 (a) Termination by the Corporation for Cause; Termination by the Executive Without Good Reason. Upon termination of this Agreement
(i) by the Corporation for Cause pursuant to Section 5(a) above, or (ii) by the Executive Without Good Reason pursuant to Section 5(e) above, the Executive will be entitled to receive (i) Base Salary and bonus payments,
payments in respect of accrued but unpaid vacation and reimbursement for business expenses, but only to the extent due, accrued or payable as of the date of such termination, and (ii) such vested stock options and other benefits as the
Executive may be entitled to receive under any stock option or other employee benefit plan, but will not be entitled to receive the Severance Payment (as defined in Section 6(c) below). Upon termination under this Section 6(a) Executive
shall not be entitled to any other unpaid portion of the Base Salary except as set forth in this Section 6(a). 
 (b)
Other Termination. Upon termination of this Agreement (i) by the Corporation Without Cause pursuant to Section 5(b) above (including termination Without Cause following a Change in Control), (ii) by the Executive within sixty
(60) days following a Change in Control pursuant to Section 5(f) above, (iii) by the Corporation or the Executive as the result of the death or Disability of the Executive pursuant to Section 5(c) above, or (iv) by the
Executive for Good Reason pursuant to Section 5(d) above, the Executive will be entitled to receive (1) Base Salary and any outstanding bonus payments, payments in respect of accrued but unpaid vacation and reimbursement for business
expenses, but only to the extent due, accrued or payable as of the date of such termination), (2) such vested stock options and other benefits as Executive may be entitled to receive under any equity incentive plan or any other stock option or
other employee benefit plan and (3) the Severance Payment (as determined pursuant to Section 6(c) below), which Severance Payment will be payable as set forth below. Upon termination under this Section 6(b) Executive shall not be
entitled to any other unpaid portion of the Base Salary except as set forth in this Section 6(b). 
 (c) Severance
Payment. For purposes of this Agreement, “Severance Payment” means: 
 (i) in the event of any termination by
the Corporation Without Cause pursuant to Section 5(b) above (including termination Without Cause following a Change in Control), for a period of twenty-four (24) months following the date of termination, an amount equal to the sum of
(A) one-twelfth (1/12) of the Executive’s Annual Salary (as hereinafter defined) in the year preceding the termination date plus (B) the cost of maintaining, pursuant to the provisions of COBRA (as hereinafter
defined), the health insurance benefits that were supplied by the Corporation to the Executive (and the Executive’s eligible dependents, if applicable) immediately prior to the termination of her employment relationship with the Corporation
(the “Cost of Health Benefits”). As used herein, the term “COBRA” means the Consolidated Omnibus Budget Reconciliation Act and the term “Annual Salary” shall mean the base salary paid to the Executive immediately prior
to the Executive’s termination date on an annual basis 

  

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exclusive of any bonus payments or additional payments under any benefit plan. 
 (ii) in the event of any termination by the Executive for Good Reason pursuant to Section 5(d), or in the event of a termination by
Executive within sixty (60) days following a Change in Control, for a period of twenty-four (24) months following the date of termination, an amount equal to the sum of (A) one-twelfth (1/12) of the Executive’s Annual Salary
(as hereinafter defined) in the year preceding the termination date plus (B) the Cost of Health Benefits; 
 (iii) in the event of any termination by the Corporation or the Executive as the result of the death of the Executive pursuant to Section 5(c) above, an amount equal to the Executive’s Base Salary for a period equal to three
(3) full months; and 
 (iv) in the event of any termination by the Corporation or the Executive as the result of the
Disability of the Executive pursuant to Section 5(c) above, an amount equal to the Executive’s Annual Salary for the period beginning on the termination date and ending on the earlier of (A) the date the Executive becomes eligible to
receive Disability benefits under the Corporation’s long-term disability benefit policy and (B) the termination date of this Agreement, plus payment for a period of six (6) months following the date of termination of an amount equal
to the cost of maintaining for the Executive and the Executive’s dependents the medical, dental and life insurance coverages and all pension and welfare benefit plans and programs in which the Executive and her eligible dependents were
participating immediately prior to the date of termination of her employment relationship with the Corporation. 
 Notwithstanding any provision of this Agreement to the contrary, the Severance Payment is subject to forfeiture for material violations of Sections 8, 9 or 10 of this Agreement. The amount of Severance Payment to be forfeited shall be
prorated based upon the date of the violation. As a condition to receipt of any Severance Payment under this Agreement, the Executive must enter into a Non-Solicitation, Non-Disclosure, Non-Disparagement and Release Agreement with the Corporation,
in a form acceptable to the Corporation; provided, however, that any provisions relating to non-solicitation and non-competition shall be no broader in scope than those contained in this Agreement. 
 (d) No Mitigation or Offset. In no event shall the Executive be obligated to seek other employment or take any other action by way
of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement, and such amounts shall not be reduced whether or not the Executive obtains other employment. 
 (e) Six Month Delay in Payments. Notwithstanding any other provision of this Agreement, if the Executive is a “specified
employee” within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), no payments may be made hereunder before the date which is six months after the Executive’s separation from service
within the meaning of Section 409A of the Code with the Corporation or, if 

  

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earlier, the date of death of the Executive, to the extent necessary to comply with Section 409A of the Code. Payments to which the Executive would
otherwise be entitled during the first six months following separation from service will be accumulated, without interest, and paid in one lump sum of cash on the first day of the seventh month following the date of the Executive’s separation
from service. Additionally, this Agreement is intended to comply with the applicable requirements of Section 409A of the Code, and any provision of the Agreement which is inconsistent with Section 409A shall be void and without effect.

 Section 7. Miscellaneous. 
 (a) Notices. All notices, consents, waivers, and other communications under this Agreement must be in writing and will be deemed to have been duly given when (i) delivered by hand (with written
confirmation of receipt), (ii) sent by facsimile with confirmation of transmission by the transmitting equipment, (iii) received by the addressee, if sent by certified mail, return receipt requested, or (iv) received by the addressee,
if sent by a nationally recognized overnight delivery service, return receipt requested, in each case to the appropriate addresses, or facsimile numbers set forth below (or to such other addresses, or facsimile numbers as a party may designate by
notice to the other parties): 
  

			
	 the Executive:
	  	At the most recent address and fax number on file at the Corporation
		
	 the Corporation:
	  	 HealthSouth Corporation
 One HealthSouth
Parkway
 Birmingham Alabama 35243
 Attention: Chief Executive
Officer
 Fax: (205) 969-4620

		
	 with a copy to:
	  	 HealthSouth Corporation
 One HealthSouth
Parkway
 Birmingham Alabama 35243
 Attention: General
Counsel
 Fax: (205)970-5917

 (b) Power and Authority. Each party warrants and represents that it has full
power and authority to enter into and perform this Agreement, and the person signing this Agreement on behalf of such party has been properly authorized and empowered to enter into this Agreement. 
 (c) Remedies. The rights and remedies of the parties to this Agreement are cumulative and not alternative. 
 (d) Waiver. No failure to exercise, and no delay in exercising, on the part of either party, any privilege, any power or any right
hereunder will operate as a waiver 
  

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thereof, nor will any single or partial exercise of any privilege, right or power hereunder preclude further exercise of any other privilege, right or power
hereunder. 
 (e) Entire Agreement and Modification. This Agreement constitutes the entire agreement between the
parties with respect to the subject matter of this Agreement and supersedes a 11 prior agreements, whether written or oral, between the parties with respect to its subject matter and constitutes a complete and exclusive statement of the terms of the
agreement between the parties with respect to its subject matter. This Agreement may not be amended except by a written agreement signed by the party to be charged with the amendment. 
 (f) Assignment. This Agreement may not be assigned by any party hereto without the prior written consent of the non-assigning
party; provided, however, that the Corporation may assign this Agreement without the consent of the Executive in connection with any transaction which constitutes a Change of Control. Subject to the foregoing, this Agreement will be
binding upon and shall inure to the benefit of (i) in the case of the Executive, her heirs, executors, administrators and legal representatives, and (ii) in the case of the Corporation, its permitted successors and assigns. 
 (g) Severability. If any provision of this Agreement is held invalid or unenforceable by any court of competent jurisdiction, the
other provisions of this Agreement will remain in full force and effect. The parties further agree that if any provision contained herein is, to any extent, held invalid or unenforceable in any respect under the laws governing this Agreement, they
shall take any actions necessary to render the remaining provisions of this Agreement valid and enforceable to the fullest extent permitted by law and, to the extent necessary, shall amend or otherwise modify this Agreement to replace any provision
contained herein that is held invalid or unenforceable with a valid and enforceable provision giving effect to the intent of the parties. 
 (h) Section Headings, Construction. The headings of Sections in this Agreement are provided for convenience only and will not affect its construction or interpretation. All references to “Section” or
“Sections” refer to the corresponding Section or Sections of this Agreement unless otherwise specified. All words used in this Agreement will be construed to be of such gender or number as the circumstances require. Unless otherwise
expressly provided, the word “including” does not limit the preceding words or terms. The language used in the Agreement will be construed, in all cases, according to its fair meaning, and not for or against any party hereto. The parties
acknowledge that each party has reviewed this Agreement and that rules of construction to the effect that any ambiguities are to be resolved against the drafting party will not be available in the interpretation of this Agreement. 
 (i) Governing Law. This Agreement will be governed by and construed in accordance with the laws of the State of Alabama, without
regard to the conflict of law provisions thereof. 
  

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 (j) Counterparts. This Agreement may be executed in one or more counterparts, each
of which will be deemed to be an original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement. 
 (k) Attorneys’ Fees. The parties agree that in the event it becomes necessary to seek judicial remedies for the breach or
threatened breach of this Agreement, the prevailing party will be entitled, in addition to all other remedies, to recover from the non-prevailing party all costs of such judicial action, including but not limited to, costs of investigation and
defense and reasonable attorneys’ fees and expenses, and also including all such expenses related to any appeal. 
 (l)
Further Assurances. Each party hereto shall perform such further acts and execute and deliver such further documents as may be reasonably necessary to carry out the provisions of this Agreement. 
 (m) No Third Party Beneficiary. This Agreement shall not confer any rights or remedies upon any person or entity other than the
parties hereto and their respective successors and assigns. 
 (n) Other Payments. Any amounts payable under this
Agreement shall be in lieu of and not in addition to any other severance or termination payment under any other plan or agreement with the Corporation, other than the Change in Control Benefits Plan referred to in Section 5(f) above. As a
condition to receipt of any payment under this Agreement, the Executive shall waive any entitlement to any other severance or termination payment by the Corporation, other than the Change in Control Benefits Plan referred to in Section 5(f)
above. The Corporation shall not be required to establish any special or separate fund or make any other segregation of funds or assets to assure the payment of any benefit hereunder. The right of the Executive to receive the benefits provided for
herein shall be an unsecured obligation against the general assets of the Corporation. 
 Section 8. Limitation of Benefits.

 (a) If any payment or distribution by the Corporation or any related entity to or for the benefit of the Executive, whether paid or
payable or distributed or distributable pursuant to the terms of this Agreement or otherwise pursuant to or by reason of any other agreement, policy, plan, program or arrangement, including without limitation any stock option, stock appreciation
right or similar right, or the lapse or termination of any restriction on or the vesting or exercisability of any of the foregoing (a “Payment”), would be subject to the excise tax imposed by Section 4999 of the Code or to any similar
tax imposed by state or local law, or any interest or penalties with respect to such tax (such tax or taxes, together with any such interest and penalties, being hereafter collectively referred to as the “Excise Tax”), then the benefits
payable upon termination of this Agreement (the “Termination Benefits”) payable or provided under this Agreement (or other Payments as described below) must be reduced (but not below the amount of the Termination Benefits) to the largest
amount that will result in no portion of 

  

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any such Payment being subject to the Excise Tax. 
 (b) The Accounting Firm will first determine the amount of any Parachute Payments that are payable to the Executive. The Accounting Firm also will determine the Excise Tax attributable to the Executive’s total Parachute Payments.

 (c) The Accounting Firm will next determine the largest amount of payments that may be made to the Executive without subjecting the
Executive to the Excise Tax (the “Capped Payments”). 
 (d) The Executive then will receive the total Capped Payments but in no
event will any such reductions imposed under this Section 7 be in excess of the amount of Termination Benefits payable or provided under this Agreement. In that case, the total Parachute Payments will be adjusted by first reducing the amount of
any noncash benefits under this Agreement or any other plan, agreement or arrangement (with the source of the reduction to be directed by the Executive) and then by reducing the amount of any cash benefits under this Agreement or any other plan,
agreement or arrangement (with the source of the reduction to be directed by the Executive). The Accounting Firm will notify the Executive and the Corporation if it determines that the Parachute Payments must be reduced to the Capped Payments and
will send the Executive and the Corporation a copy of its detailed calculations supporting that determination. 
 (e) As a result of the
uncertainty in the application of Code Sections 280G and 4999 at the time that the Accounting Firm makes its determinations under this Section 7, it is possible that amounts will have been paid or distributed to the Executive that should not
have been paid or distributed under this Section 7 (“Overpayments”), or that additional amounts should be paid or distributed to the Executive under this Section 7 (“Underpayments”). If the Accounting Firm determines,
based on either the assertion of a deficiency by the Internal Revenue Service against the Corporation or the Executive, which assertion the Accounting Firm believes has a high probability of success or controlling precedent or substantial authority,
that an Overpayment has been made, that Overpayment will be treated for all purposes as a loan ab initio that the Executive must repay to the Corporation together with interest at the applicable Federal rate under Code Section 7872; provided,
however, that no loan will be deemed to have been made and no amount will be payable by the Executive to the Corporation unless, and then only to the extent that, the deemed loan and payment would either reduce the amount on which the Executive is
subject to tax under Code Section 4999 or generate a refund of tax imposed under Code Section 4999. If the Accounting Firm determines, based upon controlling precedent or substantial authority, that an Underpayment has occurred, the
Accounting Firm will notify the Executive and the Corporation of that determination and the amount of that Underpayment will be paid to the Executive promptly by the Corporation. Additionally, this Agreement is intended to comply with the applicable
requirements of Section 409A of the Code, and any provision of the Agreement which is inconsistent with Section 409A shall be void and without effect; provided, however, that at in such event, the Corporation shall endeavor diligently and
in good faith to restructure Executive’s compensation and/or amend the terms of this Agreement to ensure that Executive receives the economic equivalent of the compensation and benefits anticipated by Executive hereunder. 
  

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 (f) For purposes of this Section 7, the following terms shall have their respective following
meanings: 
 (i) “Accounting Firm” means the independent accounting firm engaged by the Corporation in the
Corporation’s sole discretion; and 
 (ii) “Parachute Payment” means a payment that is described in Code
Section 280G(b)(2), determined in accordance with Code Section 280G and the regulations promulgated or proposed thereunder. 
 (g)
The fees and expenses of the Accounting Firm for its services in connection with the determinations and calculations contemplated by the preceding subsections shall be borne by the Corporation. If such fees and expenses are initially paid by the
Executive, the Corporation shall reimburse the Executive the full amount of such fees and expenses within five business days after receipt from the Executive of a statement therefore and reasonable evidence of the Executive’s payment thereof.

 (h) The Corporation and Executive shall each provide the Accounting Firm access to and copies of any books, records and documents in the
possession of the Corporation or the Executive, as the case may be, reasonably requested by the Accounting Firm, and otherwise cooperate with the Accounting Firm in connection with the preparation and issuance of the determinations and calculations
contemplated by the preceding subsections. Any determination by the Accounting Firm shall be binding upon the Corporation and the Executive. 
 (i) The federal, state and local income or other tax returns filed by the Executive shall be prepared and filed on a consistent basis with the determination of the Accounting Firm with respect to the Excise Tax payable by Executive. The
Executive, at the request of the Corporation, shall provide the Corporation true and correct copies (with any amendments) of Executive’s federal income tax return as filed with the Internal Revenue Service and corresponding state and local tax
returns, if relevant, as filed with the applicable taxing authority, and such other documents reasonably requested by the Corporation, evidencing such conformity. 
 Section 9. Non-Competition. 
 (a) The Executive acknowledges and recognizes the
highly-competitive nature of the business conducted by the Corporation and its subsidiaries and affiliates and accordingly agrees that, in consideration of this Agreement and the premises contained herein, she shall not, for her own benefit or for
the benefit of any other person or entity other than the Corporation, during the period commencing on the Effective Date hereof and terminating on the first anniversary of the expiration or termination of the Term hereof for any reason whatsoever
(subject to Section 9): 
 (i) actively engage in contacting, soliciting or servicing, for the purpose of competing with
the Outpatient Division of the Corporation, any person or entity that was a customer or prospective customer of the Corporation or any of its subsidiaries or affiliates at any time during the Term hereof (a prospective customer being one to which
the Corporation had made a written financial 

  

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proposal within twelve (12) months prior to the time of the termination of the Term (except that licensed health plans are not considered customers or
prospective customers for purposes of defining competitors)); or 
 (ii) hire, retain or engage as a director, officer,
employee, consultant, agent or in any other capacity any person or persons who are employed by the Corporation or who were at any time (within a period of six (6) months immediately prior to the date of the termination of the Term) employed by
the Corporation or otherwise interfere with the relationship between such persons and the Corporation. Notwithstanding the foregoing, no action by another person or entity in engaging in such hiring, retention or engagement as described in the
preceding sentence shall be deemed to be a breach of this provision by the Executive unless the Executive assisted, encouraged or otherwise counseled such director, officer, employee, consultant, agent or other person to engage in such activity.

 (b) The Executive understands that the foregoing restrictions may limit her ability to earn a similar amount of money in a
business similar to the business of the Corporation or its subsidiaries or affiliates, but she nevertheless believes that she has received and will receive sufficient consideration and other benefits as an employee of the Corporation and as
otherwise provided hereunder to clearly justify such restrictions which, in any event (given her education, skills and ability), the Executive does not believe would prevent her from earning a living. 
 (c) It is agreed that the Executive’s services hereunder are special, unique, unusual and extraordinary giving them peculiar value,
the loss of which cannot be reasonably or adequately compensated for by damages, and in the event of the Executive’s breach of this Section, the Corporation shall be entitled to equitable relief by way of injunction or otherwise. If the period
of time or area herein specified should be adjudged unreasonable in any court proceeding, then the period of time shall be reduced by such number of months or the area shall be reduced by elimination of such portion thereof as deemed unreasonable,
so that this covenant may be enforced during such period of time and in such areas as is adjudged to be reasonable. 
 Section 10.
Confidential Information. 
 (a) The Executive acknowledges that during the Term she will have access to and may
obtain, develop, or learn of Confidential Information (as defined below). 
 (b) The Executive agrees that she shall hold such
Confidential Information in strictest confidence and that the Executive shall not at any time, during or at any time during the twenty-four (24) month period following the end of the Term, in any manner, either directly or indirectly, use (for
her own benefit or otherwise), divulge, disclose or communicate to any unauthorized person or entity in any manner whatsoever any Confidential Information. 
  

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 (c) Under this Agreement, the term “Confidential Information” shall include,
but not be limited to, any of the following information relating to the Corporation or its affiliates learned by the Executive during the Term or as a result of her employment with the Corporation: 
 (i) information regarding the Corporation’s business proposals, manner of the Corporation’s operations, and methods of selling
or pricing any products or services; 
 (ii) the identity of persons or entities (including physicians and vendors) actually
conducting or considering conducting business with the Corporation, and any information in any form relating to such persons or entities and their relationship or dealings with the Corporation or its affiliates; 
 (iii) any trade secret or confidential information of or concerning any business operation or business relationship; 
 (iv) computer databases, software programs and information relating to the nature of the hardware or software and how said hardware or
software are used in combination or alone; and 
 (v) any other trade secret or information of a confidential or proprietary
nature. 
 (d) During the Term, the Executive shall use, divulge, disclose or communicate Confidential Information only in the
scope of her employment with the Corporation and only as expressly directed or permitted by the Corporation. The Executive shall not, at any time following the expiration or termination of this Agreement for any reason whatsoever, use, divulge,
disclose or communicate for any purpose any Confidential Information. The Executive shall not make or use any notes or memoranda relating to any Confidential Information except for the benefit of the Corporation, and will, at the Corporation’s
request, return each original and every copy of any and all notes, memoranda, correspondence, diagrams or other records, in written or other form, that she may at any time have within her possession or control that contain any Confidential
Information. 
 (e) Except as provided for herein below, the Executive agrees that she will treat the terms of this Agreement
as confidential, and shall not directly or indirectly disclose them in any manner except: (i) as mutually agreed upon in writing by the parties to this Agreement; (ii) in legal documents filed with the court or any arbitrator in any action
to enforce the terms of this Agreement; (iii) pursuant to a valid order or regulation; (iv) as otherwise required by law or regulation; or (v) to her attorney, financial advisors, accountant, and/or spouse, provided that prior to any
such disclosure, that individual must agree to treat as confidential all information disclosed. Notwithstanding the foregoing, the Executive may disclose to any future employer the provisions of this Agreement 
  

 14 

 
contained in Section 8, which provisions relate to the Executive’s obligations with respect to non-competition and non-solicitation. 
 (f) It is agreed that in the event of the Executive’s breach of this Section, the Corporation shall be entitled to equitable relief
by way of injunction or otherwise. 
 (g) Notwithstanding the foregoing, Confidential Information shall not include
information which has come within the public domain through no fault of or action by the Executive or which has become rightfully available to the Executive on a non- confidential basis from any third party, the disclosure of which to the Executive
does not violate any contractual or legal obligation such third party has to the Corporation or its affiliates with respect to such Confidential Information. 
 Section 11. Proprietary Developments. 
 (a) Any and all inventions, products,
discoveries, improvements, processes, methods, computer software programs, models, techniques, or formulae (collectively, hereinafter referred to as “Developments”), made, developed, or created by the Executive (alone or in conjunction
with others, during regular work hours or otherwise) during the Term, which may be directly or indirectly useful in, or relate to, the business conducted or to be conducted by the Corporation will be promptly disclosed by the Executive to the
Corporation and shall be the Corporation’s exclusive property. The term “Developments” shall not be deemed to include inventions, products, discoveries, improvements, processes, methods, computer software programs, models, techniques,
or formulae which were in the possession of the Executive prior to the Term. The Executive hereby transfers and assigns to the Corporation all proprietary rights which the Executive may have or acquire in any Developments and the Executive waives
any other special right which the Executive may have or accrue therein. The Executive agrees to execute any documents and to take any actions that may be required, in the reasonable determination of the Corporation’s counsel, to effect and
confirm such assignment, transfer and waiver. 
 (b) The Executive will execute any documents necessary or advisable, in the
reasonable determination of the Corporation’s counsel, to direct the issuance of patents, trademarks, or copyrights to the Corporation with respect to such Developments as are to be the Corporation’s exclusive property or to vest in the
Corporation title to such Developments; provided, however, that the expense of securing any patent, trademark or copyright shall be borne by the Corporation. 
 (c) The parties agree that Developments shall constitute Confidential Information. 
 [SIGNATURES APPEAR ON THE FOLLOWING PAGE(S)] 
  

 15 

 IN WITNESS WHEREOF, the undersigned parties have caused this Agreement to be executed by
themselves or by their duly authorized representatives as of the day and date first written above. 
  

			
	 THE CORPORATION:

	HEALTHSOUTH CORPORATION
		
	 By:
	 	 /s/ Gregory L. Doody

	 Name:
	 	 Gregory L. Doody

	 Its:
	 	 Executive Vice President, General

	 Counsel and Secretary

  
  

	
	 THE EXECUTIVE:

	
	 /s/ Diane L. Munson

	DIANE L. MUNSON

  

 16Non-Prosecution Agreement

 Exhibit 10.2 
 May 17, 2006 
 Robert S. Bennett,
Esq. 
 Skadden, Arps, Slate, Meagher & Flom LLP 
 1440
New York Avenue, N.W. 
 Washington, D.C. 20005-2111 
  

	 	Re:	Healthsouth Corporation  

 Dear
Mr. Bennett: 
 This letter sets forth the agreement (the “Agreement”) between the United States Attorney’s Office for
the Northern District of Alabama, and the Fraud Section, Criminal Division, U.S. Department of Justice (together, the “Department”), and HealthSouth Corporation (“HealthSouth” or the “Company”). 
 Introduction 
  

	1.	The Department, with the assistance of the Federal Bureau of Investigation, Internal Revenue Service Criminal Investigations and the United States Postal Inspection Service, has
conducted a criminal investigation involving accounting and financial fraud at HealthSouth (“the Unlawful Practices”). During the course of the investigation the Department notified HealthSouth that, in the Department’s view,
HealthSouth acting through some of its employees, has violated federal criminal law. Among other things, 17 former HealthSouth employees, including five former Chief Financial Officers, have pled guilty to securities fraud and/or related
charges1 

  

	2.	HealthSouth acknowledges that the Department has developed evidence during its investigation that HealthSouth, through some of its employees, has violated federal criminal law.
HealthSouth accepts responsibility for the 

	1	The investigation relates to the falsification of HealthSouth’s financial statements,
false and misleading disclosures in HealthSouth’s SEC filings, public statements during the time period 1996 through March 19, 2003, and violations of the Foreign Corrupt Practices Act. 

  

 1 

	 	conduct of its employees giving rise to any violation in connection with the Unlawful Practices. HealthSouth does not endorse, ratify or condone criminal conduct and, as set forth
below, has taken steps to prevent such conduct from occurring in the future. 

  

	3.	The Department acknowledges HealthSouth’s acceptance of responsibility in the preceding paragraph; the Consent and Final Judgment as to Defendant HealthSouth Corporation in the
action captioned SEC v. HealthSouth Corporation, and Richard M. Scrushy, No. CV-03-J-0615-S (N.D. Ala.) (the “SEC Settlement”); HealthSouth’s adoption of internal governance and compliance measures to date, including
those measures agreed to in the SEC Settlement; its commitment to implement and monitor all such measures; its agreement with the SEC to pay $100,000,000 pursuant to the terms of the SEC Settlement; its agreement with representatives of a class of
investors, pursuant to an Amended and Restated Memorandum of Understanding in the action captioned In re HealthSouth Corporation Securities Litigation, No. CV-03-BE-1500-S (N.D. Ala.)(the “Class Settlement”), to pay $445 million in
cash, stock, and warrants to the class, as well as 25% of HealthSouth’s future net recovery from suits brought against other defendants who are not included in the Class Settlement; its extensive cooperation in this matter; its willingness to
continue to cooperate with the Department in its investigation of matters relating to HealthSouth; and its agreement to pay $3 million by certified check or bank cashier’s check to the U.S. Postal Inspection Services Consumer Fraud Fund
immediately upon execution of this agreement. The Department, in light of the foregoing and on the understandings specified below, agrees that it will not prosecute HealthSouth for any crimes committed by its employees relating to the Unlawful
Practices.2 HealthSouth understands and agrees that if it violates this Agreement, the Department can prosecute
HealthSouth for any crimes committed by its employees. This Agreement does not provide any protection to any individual or any entity other than as set forth above. 

 Cooperation 
  

	4.	HealthSouth shall truthfully disclose to the Department all information with respect to the activities of HealthSouth, its officers and employees concerning all matters about which
the Department shall inquire, and shall continue to 

	2	The Department’s decision relates only to allegations of accounting and financial fraud
and shall not be interpreted as extending to other potential violations of federal or state law. 

  

 2 

	 	fully cooperate with the Department. This obligation of truthful disclosure includes an obligation upon HealthSouth to provide to the Department, on request, any document, record or
other tangible evidence about which the Department shall inquire of HealthSouth. This obligation of truthful disclosure includes an obligation to provide to the Department access to HealthSouth’s facilities, documents and employees. This
paragraph does not apply to any information provided to counsel after March 17, 2003 in connection with the provision of legal advice and the legal advice itself. 

  

	5.	Upon request of the Department, with respect to any issue relevant to its investigation of HealthSouth, HealthSouth shall designate knowledgeable employees, agents or attorneys to
provide information and/or materials on HealthSouth’s behalf to the Department. It is further understood that HealthSouth must at all times give complete, truthful and accurate information. 

  

	6.	With respect to any information, testimony, document, record or other tangible evidence relating to HealthSouth provided to the Department, HealthSouth consents to any and all
disclosures to Governmental entities of such materials as the Department, in its sole discretion, deems appropriate. To the extent that the Department provides privileged material pursuant to this paragraph to non-governmental parties, the
Department will provide HealthSouth with 10 days advance notice, to the extent practicable, of what materials are to be provided and to whom. 

  

	7.	HealthSouth further agrees that it will not, through its attorneys, board of directors, agents, officers or employees make any public statement, in litigation or otherwise,
contradicting HealthSouth’s acceptance of responsibility set forth above. Any such contradictory statement by HealthSouth, its attorneys, board of directors, agents, officers or employees shall constitute a breach of this Agreement, and
HealthSouth thereafter would be subject to prosecution as set forth in paragraph 3 of this Agreement. Upon the Department’s notifying HealthSouth of such a contradictory statement, HealthSouth may avoid a breach of this Agreement by publicly
repudiating such statement within 48 hours after notification by the Department. This paragraph is not intended to apply to any statement made by any HealthSouth employee who has been charged with a crime. 

  

 3 

 The Department’s Acknowledgement of HealthSouth’s Additional Remedial
Actions 
 The Department acknowledges the further remedial actions taken by HealthSouth as described below in paragraphs 8-11.

  

	8.	HealthSouth represents that its Board of Directors and current senior management have taken numerous remedial actions in response to the Unlawful Practices. These remedial actions
(the “Remedial Actions”) include, but are not limited to: 

  

	 	a.	the termination of employees at all levels of the company who engaged in the Unlawful Practices; 

  

	 	b.	the appointment of new management, including a new Chief Executive Officer, a new Chief Operating Officer, a new Chief Financial Officer, a new Chief Compliance Officer, a new
General Counsel and Secretary, a new Controller, a new Head of Internal Audit, and three new Senior Vice Presidents of finance and accounting; 

  

	 	c.	the dismissal of its former auditing firm and the retention of a new firm; 

  

	 	d.	the adoption of a transition plan resulting in the addition of nine new individuals to the Board of Directors; 

  

	 	e.	the adoption of amended Corporate Governance Guidelines and new Charters of the Nominating/Corporate Governance Committee, Audit Committee, Compensation Committee, Finance Committee
and Corporate Compliance Committee; 

  

	 	f.	the implementation of numerous new accounting and financial controls, including development and improvement of integrated financial accounting and reporting systems, upgrades to the
company’s accounting and data management processes, and the strengthening of the internal audit and month-end review process; and 

  

	 	g.	the outsourcing of a confidential hotline to provide a means for employees anonymously to report any potential violations of law or other misconduct. 

  

 4 

	9.	As a further Remedial Action, and pursuant to the SEC Settlement, HealthSouth retained a qualified consultant (“Governance Consultant”) to perform a review of the adequacy
and effectiveness of HealthSouth’s corporate governance systems, policies, plans, and practices. This review included inquiries into: 

  

	 	a.	whether HealthSouth is complying with recognized standards of “best practices” with respect to corporate governance; 

  

	 	b.	whether HealthSouth has sufficient safeguards in place to: 

  

	 	(i)	ensure that HealthSouth’s Board of Directors or any committee thereof then-currently responsible for carrying out, and duly authorized to carry out, the duties of
HealthSouth’s Board of Directors (the “Board of Directors”) and all committees of HealthSouth’s Board of Directors (including without limitation the audit committee and the compensation committee) have appropriate powers,
structure, composition and resources and 

  

	 	(ii)	prevent self-dealing by management; 

  

	 	c.	whether HealthSouth has an adequate and appropriate code of ethics and business conduct, and related compliance mechanisms; and 

  

	 	d.	whether HealthSouth has appropriate safeguards in place to prevent further violations of the federal securities laws. 

 HealthSouth provided to the Governance Consultant all documents and information within its custody or control requested by the Governance Consultant in
connection with the review. The Governance Consultant submitted to HealthSouth’s Board of Directors a report (the “Corporate Governance Report”) with respect to the corporate governance issues reviewed. The Corporate Governance Report
is attached as Exhibit A to this Agreement. 
  

	10.	 As a further Remedial Action, and as provided in the SEC Settlement, HealthSouth is providing reasonable training and education to certain of its officers and
employees to minimize the possibility of future violations of federal laws. Completion of such training is mandatory for HealthSouth officers and employees involved in its corporate level accounting and financial reporting functions; for those
officers and employees involved in financial 

  

 5 

	 	 
reporting at HealthSouth’s major divisions and subsidiaries (including, specifically, those officers and employees responsible for closing the books in
their area of responsibility at the end of a quarterly or annual reporting period); and for senior operational officers at HealthSouth’s corporate, divisional and subsidiary levels. Such training and education includes, at a minimum, components
covering the following subjects: 

  

	 	a.	the obligations imposed by the federal securities laws; proper internal accounting controls and procedures; 

  

	 	b.	recognizing indications of non-GAAP accounting practices or fraud most relevant to HealthSouth’s business endeavors; and 

  

	 	c.	the obligations incumbent upon, and the responses expected of, HealthSouth officers and employees upon learning of illegal or potentially illegal acts concerning the company’s
accounting and financial reporting. 

 HealthSouth will provide such training and education on an annual basis, for a minimum
period of three years after the date of the SEC Agreement. 
  

	11.	 As a further Remedial Action, and pursuant to the SEC Settlement, HealthSouth has agreed to create, staff and maintain the position of Inspector General within the
Company. The individual employed in that position, and all successors, shall be selected by the Audit Committee of HealthSouth’s Board of Directors (the “Audit Committee”) and shall report directly to the Audit Committee. The
compensation of the Inspector General shall be set by the Audit Committee. HealthSouth shall permit the Inspector General to hire a staff of at least five people. The compensation of such staff shall also be set by the Audit Committee. The person
appointed as Inspector General shall be licensed as a certified public accountant, and shall have unfettered access to the books and records of HealthSouth. Upon request by the Inspector General, HealthSouth’s internal audit and legal staff
shall provide to the Inspector General all reasonable assistance in the performance of his duties. HealthSouth shall devise and maintain a mechanism whereby employees of HealthSouth and others may provide information anonymously to the Inspector
General or to the Audit Committee. HealthSouth shall not retaliate against any person in any manner for providing information to the Inspector General or to the Audit Committee. HealthSouth shall implement, publish and enforce internal rules
requiring all employees of HealthSouth to apprise the Inspector General and/or the Audit Committee of all complaints and 

  

 6 

	 	 
indications of violations of law or company policies and procedures relating to the Company’s books and records and financial reporting processes.
HealthSouth will advise new HealthSouth employees of this requirement during their normal orientation process. The Inspector General shall be charged with reporting any indications of violations of law or of HealthSouth’s procedures, insofar as
they are relevant to the duties of the Audit Committee, to the Audit Committee. Copies of these reports shall be submitted to the Department for 3 years. 

  

	12.	It is further understood that should the Department, in its sole discretion, determine that HealthSouth has given deliberately false, incomplete, or misleading information under
this Agreement, or has committed any crimes, or that HealthSouth otherwise violated any provision of this Agreement, HealthSouth shall, in the Department’s sole discretion, thereafter be subject to prosecution for any federal criminal
violations of which the Department has knowledge. Any such prosecutions may be premised on information provided by HealthSouth. Moreover, HealthSouth agrees that any prosecutions relating to HealthSouth that are not time-barred by the applicable
statute of limitations on the date of this Agreement may be commenced against HealthSouth in accordance with this Agreement, notwithstanding the expiration of the statute of limitations between the signing of this Agreement and May 17, 2009. By
this Agreement HealthSouth expressly intends to and does waive any rights in this respect. 

  

	13.	It is further agreed that in the event that the Department, in its sole discretion, determines that HealthSouth has violated any provision of this Agreement; a) all statements made
by or on behalf of HealthSouth to the Department, or any testimony given by HealthSouth before a grand jury, the United States Congress, the SEC, or elsewhere, whether prior or subsequent to this Agreement, or any leads derived from such statements
or testimony, shall be admissible in evidence in any and all criminal proceedings brought by the Department against HealthSouth and b) HealthSouth shall not assert any claim under the United States Constitution, Rule 11(e)(6) of the Federal Rules of
Criminal Procedure, Rule 410 of the Federal Rules of Evidence, or any other federal rule, that statements made by or on behalf of HealthSouth prior to or subsequent to this Agreement, or any leads therefrom, should be suppressed.

  

	14.	The decision whether conduct and/or statements of any individual will be imputed to HealthSouth for the purpose of determining whether HealthSouth has violated any provision of this
Agreement shall be in the sole discretion of the Department. 

  

 7 

	15.	This Agreement expires on May 17, 2009. It is further understood that this Agreement is binding only on the Department and HealthSouth. 

  

	16.	This Agreement may not be modified except in writing signed by all the parties. 

  

					
		 		 	 Very truly yours,

			
	 HealthSouth Corporation
	 		 	 /s/ Alice H. Martin

		 		 	 Alice H. Martin

		 		 	 United States Attorney

	 /s/ Gregory Doody
	 		 	 
	 Gregory Doody
	 		 	
	 General Counsel
	 		 	
			
	 /s/ Robert S. Bennett
	 		 	 
	 Robert S. Bennett, Esq.
	 		 	
	 Charles F. Walker, Esq.
	 		 	
	 Counsel to HealthSouth Corporation
	 		 	

  

 8

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