HEALTHSOUTH CORPORATION NONQUALIFIED 401(K) PLAN As Amended and Restated December 31, 2008

Purpose of Plan.  The objective and purpose of this Plan is to attract and retain competent officers and key executives by providing flexible compensation opportunities to officers and key executives of the Company and its affiliates to offer them an opportunity to build an estate or supplement income for use after retirement.  In addition to this Plan, the Company sponsors certain broad-based employee benefit plans covering its employees.

Nature of Plan.  Through this Plan, the Company intends to permit the deferral of compensation and to provide additional benefits to a select group of management or highly compensated employees.  Accordingly, it is intended that this Plan will not constitute a "qualified plan" subject to the limitations of section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code"), nor will it constitute a "funded plan", for purposes of such requirements.  It is also intended that this Plan will be exempt from the participation and vesting requirements of Part 2 of Title I of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), the funding requirements of Part 3 of Title I of ERISA, and the fiduciary requirements of Part 4 of Title I of ERISA b y reason of the exclusions afforded plans which are unfunded and maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees.

Definitions.  When a word or phrase will appear in this Plan with the initial letter capitalized, and the word or phrase does not commence a sentence, the word or phrase will generally be a term defined in this Section 2.1.  The following words and phrases with the initial letter capitalized will have the meaning set forth in this Section 2.1, unless a different meaning is required by the context in which the word or phrase is used.

(a)  

"Account" means one or more of the bookkeeping accounts maintained by the Company or its agent on behalf of a Participant, as described in more detail in Section 4.5.

(b)  

"Affiliate" means a corporation that is (i) a member of a controlled group of corporations (as defined in section 414(b) of the Code) which includes the Company, (ii) any trade or business (whether or not incorporated) which is in common control (as defined in section 414(c) of the Code) with the Company, or (iii) any entity that is a member of the same affiliated service group (as defined in section 414(m) of the Code) as the Company.  In addition, the term Affiliate will also include any related entity (regardless of whether in the Company's controlled group of corporations, as defined above) that the Company has designated for participation in the Plan.

(c)  

"Beneficiary" means the person designated by the Participant to receive a distribution of his benefits under the Plan upon the death of the Participant.  In the event that a Participant fails to designate a Beneficiary, or if the Participant's Beneficiary does not survive the Participant, the Participant's Beneficiary will be his surviving spouse, if any, or if the Participant does not have a surviving spouse, his estate.  The term "Beneficiary" also will mean a Participant's spouse or former spouse who is entitled to all or a portion of a Participant's benefit pursuant to Section 6.2.

(d)  

"Benefits Committee" means the administrative committee responsible for the administration of the Plan in accordance with Article VIII.

(e)  

"Board" means the Board of Directors of the Company.

(f)  

"Claimant" means a Participant or Beneficiary who files a claim for benefits pursuant to Section 8.5.

(g)  

"Code" means the Internal Revenue Code of 1986, as amended from time to time, and any regulations or rulings issued thereunder.

(h)  

"Company" means HealthSouth Corporation or any successor thereto.

(i)  

"Compensation" means the total of all amounts paid by the Employer to or for the benefit of an Employee for services rendered or labor performed for the Employer while a Participant and while an Employee, which are required to be reported on the Employee's Federal Wage and Tax Statement, Form W-2 or its successor; provided, however, that Compensation will not include: (i) mileage reimbursements; (ii) severance pay; (iii) termination vacation payouts; (iv) termination paid time-off payouts; (v) relocation reimbursements; (vi) income from the exercise or award of any stock options or stock grants; (vii) imputed income from life insurance; (viii) car allowances; (ix) club dues; (x) housing allowances; and (xi) any stock purchase plan match monies.  Further, Compensation excludes:

(i)  

elective contributions made on the Employee's behalf by the Employer that are not includible in income under sections 125, 132(f)(4), 402(e)(3), 402(h), or 403(b) of the Code;

(ii)  

compensation deferred under an eligible deferred compensation plan within the meaning of section 457(b) of the Code; and

(iii)  

employee contributions described in section 414(h) of the Code that are picked up by the employing unit and treated as employer contributions.

(j)  

"Compensation Committee" means the Compensation Committee of the Board of Directors of the Company.

(k)  

"Compensation Deferral" means the deferral described in Section 4.1 made by a Participant who has elected to defer all or a portion of his Compensation under the Plan including a deferral of Compensation classified as a bonus that is subject to a separate and distinct deferral election.

(l)  

“Daily Administrator” means the individuals, entity or department designated by the Compensation Committee or the Benefits Committee to handle the day to day administration of the Plan and to make initial claim determinations pursuant to Section 8.5.  In the event the Compensation Committee or the Benefits Committee fails to appoint a Daily Administrator, the Benefits Committee will be the Daily Administrator.

(m)  

"Disability" means that due to a physical or mental condition, the Participant has been determined to be totally and permanently disabled by the Social Security Administration and is eligible to receive Social Security disability benefits.

(n)  

"Effective Date" means December 31, 2008, except as expressly provided otherwise herein.

(o)  

"Election Process" means the written forms or on-line processes provided by the Daily Administrator, or delegate thereof, pursuant to which the Participant consents to participation in the Plan, elects to defer Compensation as a Compensation Deferral and specifies the time and form in which such Compensation Deferrals will be paid as provided in Article V.  Such Participant consent and elections may be done either in writing or on-line through an electronic signature as determine by the Daily Administrator.

(p)  

"Eligible Employee" means each Employee who holds the position of an Executive Officer, Senior Vice President, Vice President or Director and, effective January 1, 2009, the Chief Executive Officer and Chief Financial Officer of each of the Company's hospitals; provided, however, that each such individual must earn more than the compensation limit set forth in section 414(q) of the Code (i.e., one hundred five thousand dollars ($105,000) for 2008 and one hundred ten thousand dollars ($110,000) for 2009).

(q)  

"Employee" means any person employed by the Employer in the capacity of a common law employee.  Each such Employee who is currently employed by the Employer or an Affiliate will be referred to herein as an "Active Employee" and each such Employee who is no longer employed by the Employer or an Affiliate but has an Account balance under the Plan will be referred to herein as an "Inactive Employee."

(r)  

"Employer" means the Company and any other Affiliate which adopts the Plan.  An Affiliate may evidence its adoption of the Plan either by a formal action of its governing body or by commencing deferrals and taking other administrative actions with respect to this Plan on behalf of its employees.

(s)  

"Employer Discretionary Contribution" means discretionary profit sharing contributions made to the Plan on behalf of a Participant.

(t)  

"Employer Matching Contribution" means the matching contributions made to the Plan on behalf of a Participant.

(u)  

"ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any regulations or rulings issued thereunder.

(v)  

"Hour of Service" means each hour for which an Employee is directly or indirectly paid, or is entitled to payment, by the Employer (including any predecessor business of an Employer conducted as a corporation, partnership or proprietorship) or Affiliate for the performance of duties or reasons other than the performance of duties, including but not limited to vacation, holidays, sickness, disability, paid layoff, jury duty, military duty, leave of absence and similar paid periods of nonworking time.  An Hour of Service also includes each hour, not credited above, for which back pay, irrespective of mitigation of damages, has been either awarded or agreed to by the Employer or an Affiliate.  For all purposes of the Plan, Hours of Service will be credited for any individual cons idered to be a Leased Employee and for any individual considered an Employee under section 414(o) of the Code and the final regulations thereunder.

(i)  

Acquired Entities.  Service or employment completed by an Employee of an acquired facility or an acquired employee group before such facility became an Affiliate or before the employees of such employee group become Employees will not be credited except to the extent provided in the acquisition agreement, a resolution by the Board of Directors or other governing body of the Employer.  Any such prior vesting service credit will be described in Appendix A attached hereto.  Appendix A may be revised from time-to-time by the Daily Administrator without the need for a formal amendment to the Plan.

(ii)  

Licensed Professionals.  Service or employment completed by licensed professionals on behalf of professional corporations for which the Company provides payroll services who become Employees will be taken into account for purposes of determining Hours of Service under this Plan.

(w)  

"Investment Options" means the investment options used under the Plan to measure the investment returns attributable to each Participant's Account.  As of the Effective Date, any investment fund offered through the Charles Schwab Trust Company may be selected as an Investment Option under the Plan.  The Benefits Committee may revise the Investment Options provided under the Plan from time to time without the need for a formal Plan amendment, in which case the new Investment Options will be communicated to Participants.

(x)  

"Key Employee" means a key employee within the meaning of section 416(i) of the Code.  Specifically, an individual who is:

(i)  

an officer of the Company or an Affiliate having compensation of greater than one hundred thirty thousand dollars ($130,000) (as adjusted under section 416(i)(1) of the Code) (i.e., one hundred fifty thousand dollars ($150,000) for 2008);

(ii)  

a five percent (5%) owner of the Company or an Affiliate as defined in section 416 of the Code; or

(iii)  

a one percent (1%) owner of the Company or an Affiliate as defined in section 416 of the Code having compensation of more than one hundred fifty thousand dollars ($150,000).

(y)  

"Normal Retirement Age" means the date the Participant reaches age sixty-five (65).

(z)  

"Participant" means each Eligible Employee who has elected to participate in the Plan by timely completing the Election Process and whose participation in this Plan has not terminated.  Each such Participant who is currently employed by the Employer will be referred to herein as an "Active Participant" and each such Employee who is no longer employed by the Employer or is employed by an Affiliate who has not adopted the Plan but has an Account balance under the Plan will be referred to herein as an "Inactive Participant."

(aa)  

"Plan" means the HealthSouth Corporation Nonqualified 401(k) Plan, as described in this document, and as it may hereafter be amended.

(bb)  

"Plan Year" means the fiscal year of this Plan, which will commence on January 1 each year and end on December 31 of such year, except that the initial Plan Year will commence on March 1 and end on December 31.

(cc)  

"Rabbi Trust" means the grantor trust established by the Company to assist with the payment of benefits under the Plan.  The Rabbi Trust will be unfunded within the meaning of ERISA and its assets will be subject to the claims of the Employer's and Affiliate's general creditors.  Such Rabbi Trust and its assets will conform to the terms of the model trust, as described in Revenue Procedure 92-64.

(dd)  

"Scheduled In-Service Withdrawal" means a distribution elected by the Participant pursuant to Section 5.1 for an in-service withdrawal of amounts of Compensation Deferrals made in a given Plan Year, and earnings or losses attributable thereto, as set forth in the Election Process for such Plan Year.

(ee)  

"Scheduled In-Service Withdrawal Date" means the distribution date elected by the Participant for a Scheduled In-Service Withdrawal.

(ff)  

"Termination of Employment" means the date that such Employee ceases performing services for the Employer and its Affiliates in the capacity of an Employee.  For this purpose an Employee who is on a leave of absence that exceeds six (6) months and who does not have statutory or contractual reemployment rights with respect to such leave, will be deemed to have incurred a Termination of Employment on the first day of the seventh (7th) month of such leave.  An Employee who transfers employment from an Employer to an Affiliate, regardless of whether such Affiliate has adopted the Plan as a participating employer, will not incur a Termination of Employment.

(gg)  

"Trustee" means the individual or entity appointed to serve as trustee of any trust established as a possible source of funds for the payment of benefits under the Plan as provided in Section 7.1.

(hh)  

"Unforeseeable Emergency" means a severe financial hardship to the Participant resulting from (i) an illness or accident of the Participant, his spouse, his beneficiary, or his dependent (as defined under section 152(a) of the Code), (ii) a loss of the Participant's property due to casualty, or (iii) any other similar extraordinary and unforeseeable loss arising from events beyond the control of the Participant, as determined by the Daily Administrator in its sole and absolute discretion in accordance with the requirements of section 409A of the Code.

(ii)  

“Year of Vesting Service” means a Plan year in which an Employee is credited with no less than one thousand (1,000) Hours of Service.

Construction.  If any provision of this Plan is determined to be for any reason invalid or unenforceable, the remaining provisions of this Plan will continue in full force and effect.  All of the provisions of this Plan will be construed and enforced in accordance with the laws of the State of Alabama and will be administered according to the laws of such state, except as otherwise required by ERISA, the Code or other applicable federal law.  Headings and subheadings are for the purpose of reference only and are not to be considered in the construction of the Plan.  The masculine gender, where appearing in this Plan, will include the feminine gender, the singular may include the plural; and vice versa, unless the context clearly indicates to the contrary.

409A Compliance.  The provisions of the Plan will be construed and administered in a manner that enables the Plan to comply with the provisions of section 409A of the Code.

Eligibility and Participation.  An Employee who is an Eligible Employee as of March 1, 2008, will become a Participant as of such date if such Eligible Employee has timely completed the required Election Process pursuant to Section 4.1.  An Employee who becomes an Eligible Employee during a Plan Year, or an Employee hired during a Plan Year who is an Eligible Employee as of his hire date, will become a Participant as of the January 1st of the Plan Year following his initial eligibility to participate in the Plan if such Eligible Employee has timely completed the required Election Process prior to the beginning of such Plan Year.  Prior to the beginning of each subsequent Plan Year, each Eligible Employee may elect to defer portions of his Compensation by completing t he required Election Process prior to the beginning of the Plan Year.

Continued Eligibility and Participation.  Any Eligible Employee who does not elect to make Compensation Deferrals when he is first eligible, may elect to do so in a subsequent Plan Year by completing the required Election Process prior to the beginning of the Plan Year.  Such Eligible Employee will become a Participant as of January 1st of the Plan Year for which he first elects to make Compensation Deferrals.  Eligibility to become a Participant for any Plan Year will not entitle an Eligible Person to continue as an Active Participant for any subsequent Plan Year.

Cessation of Participation.  A Participant will cease to be a Participant as of the earlier of:

(a)  

the date on which the Plan terminates, or

(b)  

the date on which he receives a distribution of all amounts credited to his Account.

Deferral Elections.  An Eligible Employee may become a Participant by electing to defer Compensation pursuant to the required Election Process.  Such Election Process will be completed prior to the first day of the Plan Year for which the election is effective.  A Participant's deferral election will only be effective with respect to a single Plan Year and will be irrevocable for the duration of such Plan Year, except as provided in Article V regarding Unforeseeable Emergency distributions.  Deferral elections for each subsequent Plan Year of participation will be made pursuant to a new election for such Plan Year.

Company Contributions.

(a)  

Employer Matching Contribution.  Each Plan Year, the Employer will make an Employer Matching Contribution to the Plan for each Participant who makes Compensation Deferrals pursuant to Section 4.1 above.  Such Employer Matching Contribution will equal fifty percent (50%) of the first six percent (6%) of the Participant's Compensation contributed to the Plan as a Compensation Deferral offset by any Employer Matching Contributions made to the HealthSouth Corporation Retirement Investment Plan (the “Retirement Plan”) on behalf of such Participant (i.e., the total of Employer Matching Contributions that a Participant may receive between this Plan and the Retirement Plan will equal fifty percent (50%) of the first six percent (6%) of the Participant’s Compensation contributed to both this Plan as Compensation Deferrals and the Retirement Plan as Salary Deferral Contributions (as defined in the Retirement Plan).

(b)  

Employer Discretionary Contribution.  The Employer may elect to make an Employer Discretionary Contribution to the Plan at such time and in such amount as may be determined by the Compensation Committee.

Vesting.

(a)  

Participant Deferrals.  A Participant will be one hundred percent (100%) vested in the Compensation Deferrals credited to his Account, including the earnings and losses thereon.

(b)  

Employer Matching Contributions.  A Participant will become vested in Employer Matching Contributions made on his behalf to the Plan in accordance with the following schedule:

2 or fewer years

0%

3 or more years

100%

(c)  

Employer Discretionary Contributions.  Each Employer Discretionary Contribution may be subject to a vesting schedule, as determined by the Compensation Committee, in its sole discretion, at the time such Employer Discretionary Compensation is elected to be made to the Plan.

Plan Benefits.  The benefits to which a Participant and, if applicable, his Beneficiary are entitled under the Plan will consist of the Compensation Deferrals, Employer Matching Contributions and Employer Discretionary Contributions credited to such Participant's Account, plus earnings thereon and less losses allocable thereto, if any, attributable to the investment of such amounts pursuant to Section 4.5(c) hereof.  Distribution of benefits attributable to a Participant's Account(s) will be made pursuant to the provisions of Article V.

Accounting for Deferred Compensation.

(a)  

Establishment of Accounts.  The Daily Administrator will establish and maintain an individual Account under the name of each Participant under the Plan.  Further, in the sole discretion of the Daily Administrator, additional Accounts may be established for each Participant to facilitate record keeping convenience and accuracy.  Each such Account will be credited and adjusted as provided in this Plan.  Such Account will be maintained until all amounts credited to such Account have been distributed in accordance with the terms and provisions of this Plan.  The establishment and maintenance of a separate Account or Accounts for each Participant will not be construed as giving any person any interest in assets of the Company or an Affiliate, or a righ t to payment other than as provided hereunder.  Amounts credited to such Accounts will be held with the general assets of the Employer.

(b)  

Crediting Accounts.  All amounts deferred under the Plan as Compensation Deferrals will be credited to the Participant's Account at the end of the pay period during which such Compensation would have otherwise been paid to the Participant.  The amount of Employer Matching Contributions to be contributed to the Plan on the Participant’s behalf will be computed on the last day of each month and will be contributed as soon as administratively practicable after such computation.  Any Employer Discretionary Contributions made to the Plan will be credited to the Participant’s Account at the time such contributions are made.

(c)  

Adjustment of Accounts.  Each Account will be adjusted on each business day that the New York Stock Exchange is open to reflect the Compensation Deferrals, Employer Matching Contributions or Employer Discretionary Contributions made to the Plan, any earnings credited on such Compensation Deferrals, Employer Matching Contributions or Employer Discretionary Contributions pursuant to this Section 4.5(c), and any payment of such Compensation Deferrals, Employer Matching Contributions and Employer Discretionary Contributions under the Plan.

(i)  

Participant Investment Recommendations.  For purposes of measuring the investment returns of the Participant's Account(s), the Participant may select the Investment Options in which all or part of his Account(s) will be deemed to be invested.  The Participant will make his initial investment designation in the Enrollment Process and such an investment designation will remain effective until it is subsequently changed by the Participant pursuant to this Section 4.5(c).  The Participant may change his investment designation each Plan Year at the time and manner specified by the Daily Administrator.  The Participant may change the investment allocation of his existing Account(s) at the time and manner specified by the Daily Administrator.  During the Plan Year, a Participant may elect to make transfers of his Account(s) among the Investment Options by written, telephonic or electronic means at the time and manner specified by the Daily Administrator.

(ii)  

Benefits Committee Investment Designation.  Notwithstanding the foregoing, the Benefits Committee in its sole and absolute discretion may direct the Daily Administrator to disregard the Participant's investment designation and determine that all interests in the Account(s) will be deemed to be invested in one particular or a mixture of the Investment Options.  Likewise, if a Participant fails to make any investment recommendations, the Daily Administrator will invest the Participant’s Account(s) in any default investment fund established under the Plan by the Benefits Committee or in such other manner as the Benefits Committee deems appropriate in its sole and absolute discretion.

General Rule Regarding Payment of Account.  Subject to Section 5.6, Compensation Deferrals made in accordance with Section 4.1 will be distributed to a Participant (i) upon the Participant's Termination of Employment or (ii) in a future year in which the Participant is still employed by the Employer and that is at least three (3) calendar years after the end of the Plan Year in which the Compensation would have otherwise been paid, but within forty (40) calendar years of the first day of the Plan Year in which such Compensation would have otherwise been paid (i.e., as a Scheduled In-Service Withdrawal, subject to the provisions of Section 5.2).  Employer Matching Contributions and Employer Discretionary Contributions will be distributed upon the Participant's Termination of Em ployment in accordance with Section 5.6.  Amounts paid by reason of a Termination of Employment will be subject to the six (6) month delay applicable to Key Employees under Section 5.6.

Subsequent Deferral of Scheduled In-Service Withdrawals.  A Participant who elects a Scheduled In-Service Withdrawal pursuant to Section 5.1 may subsequently elect to delay such distribution beyond the date specified in his initial deferral election, provided that:

(a)  

such distribution is deferred for a period of at least five (5) years from the date such amounts would otherwise be paid,

(b)  

such distribution election does not defer such distribution more than forty (40) calendar years from the first day of the Plan Year in which such Compensation would have otherwise been paid, and

(c)  

the Participant makes such subsequent deferral election at least twelve (12) months before the date such amounts would otherwise be paid (i.e., before the date certain and not more than thirty-five (35) years after the first day of the Plan Year in which such Compensation would have otherwise been paid).

Distributions on Death.  In the event of a Participant's death prior to the distribution of all amounts credited to his Account, the Participant's Account balance will be paid in a single lump sum to his Beneficiary within ninety (90) days following the date of the Participant's death.  If the Participant had been receiving annual installments from amounts credited to his Account under the Plan, the remainder of such annual installments will continue to be paid to the Participant's Beneficiary.  This six (6) month restriction applicable to Key Employees under Section 5.6 will not apply, or will cease to apply, with respect to a distribution to a Participant’s Beneficiary by reason of the death of the Participant.

Distributions on Disability.  In the event of the Participant's Disability prior to the receipt of his entire Account, he will receive amounts credited to such Account in accordance with the terms of Section 5.1 (i.e., at Termination of Employment or as a Scheduled In-Service Withdrawal).  Alternatively, if the Participant elects, he may apply to the Daily Administrator for an Unforeseeable Emergency distribution pursuant to Section 5.5 of the Plan.

Unforeseeable Emergency.  A Participant who is an Active Employee or who has incurred a Disability may submit a written application to the Daily Administrator for an earlier distribution of amounts credited to his Account on account of an Unforeseeable Emergency.  The existence of an Unforeseeable Emergency will be determined by the Daily Administrator in its sole and absolute discretion.  In the event that the Daily Administrator determines an Unforeseeable Emergency exists, it may permit the Participant to receive a distribution of all or a portion of his Account as necessary to satisfy such Unforeseeable Emergency as provided under the final regulations issued under section 409A.  Specifically, the amount distributable on account of an Unforeseeable Emer gency must be limited to the amount reasonably necessary to satisfy the emergency need (which may include amounts necessary to pay any Federal, state or local income taxes or penalties reasonably anticipated to result from the distribution).  The determination of an Unforeseeable Emergency must take into account any additional compensation that is available by reason of the cessation of the Participant's Compensation Deferrals to the Plan pursuant to this Section 5.5.  However, such determination is not required to take into account additional compensation that could be paid to the Participant, but which has not actually been paid, under any other nonqualified deferred compensation plan in which the Participant is a member or pursuant to the provisions of Article V of this Plan.  An Unforeseeable Emergency distribution to an Active Employee will result in the suspension of his Compensation Deferrals to the Plan for the remainder of the Plan Year in which the Unforeseeable Emerge ncy distribution occurs.

Time and Form of Payment.  Any Scheduled In-Service Withdrawal distribution will be paid in the form of a single lump sum in March of the year specified by the Participant in accordance with Section 5.1.  Upon Termination of Employment, the Participant's entire Account balance will be distributed in the form of either (i) a single lump sum or (ii) in a series of between two (2) and fifteen (15) equal annual installments with the final payment being a distribution of one hundred percent (100%) of the Account balance, as elected by the Participant in accordance with Section 4.1 and Section 5.1.  The Participant may not modify his election as to the form of distribution upon Termination of Employment.

Payment Due an Incompetent.  If a person entitled to any payment under this Plan is, in the sole judgment of the Daily Administrator, under a legal disability, or is otherwise unable to apply such payment to his own interest and advantage, the Daily Administrator, in the exercise of its discretion, may direct the Employer or payor of the benefit to make any such payment in any one (1) or more of the following ways:

(a)  

Directly to such person;

(b)  

To his legal guardian or conservator; or

(c)  

To his spouse or to any person charged with the duty of his support, to be expended for his benefit and/or that of his dependents.

Nonalienation of Benefits.  To the extent permitted by law, benefits payable under this Plan will not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, charge, garnishment, execution, or levy of any kind, either voluntary or involuntary except that the Plan will recognize the division of benefits between the Participant and his spouse in connection with a divorce.  However, no benefit awarded to the spouse pursuant to such divorce will be payable to such spouse until the time the Participant is entitled to receive a distribution of benefits from the Plan.  The benefit payable to the spouse will be paid in the form of a lump sum cash payment as soon as practicable following the event entitling the Participant to a d istribution but in no event more than ninety (90) days after such distribution event.

Funding.  Benefits under the Plan will constitute general unfunded obligations of the Employer in accordance with the terms of the Plan.  No amounts in respect of such benefits will be set aside or held in trust, and no recipient of any benefit under this Plan will have any right to have the benefit paid out of any particular assets of the Employer; provided, however, that the Company may establish a Rabbi Trust to assist with the payment of benefits under the Plan.  The assets of any such Rabbi Trust will be subject to the claims of the Employer's and the Affiliate's general creditors.  Such Rabbi Trust and its assets will conform to the terms of the model trust, as described in Revenue Procedure 92-64.

Creditor Status.  Participants have the status of general unsecured creditors of the Employer and this Plan constitutes the Employer's promise to make benefit payments as described herein.  It is the intention of the parties to this Plan and any companion Rabbi Trust that benefits under this Plan be unfunded for tax purposes and for purposes of Title I of ERISA.

Appointment of Benefits Committee.  Responsibility for administration of this Plan will be with the Benefits Committee who will be the named Plan Administrator.  The Benefits Committee will be appointed by the Compensation Committee.  If the Compensation Committee fails to appoint a Benefits Committee, it will serve as the Benefits Committee.  The members of the Benefits Committee will not receive compensation with respect to their services for the Benefits Committee.  The members of the Benefits Committee will serve without bond or security for the performance of their duties under the Plan unless the applicable law makes the furnishing of such bond or security mandatory or unless required by the Compensation Committee.

Committee Powers and Duties.  The Benefits Committee will have sole and absolute discretion regarding the exercise of its powers and duties under this Plan.  Such powers and duties will include, but not be limited to, the following powers and duties as may be necessary to discharge its responsibilities under the Plan:

(a)  

to appoint a Daily Administrator to handle the day-to-day administration of the Plan pursuant to Section 8.3, and, if applicable, to appoint the Trustee of the Rabbi Trust;

(b)  

to construe and interpret the Plan, decide all questions of eligibility, determine the amount, manner and time of payment of any benefits under the Plan and make final determinations regarding all benefit claims;

(c)  

to prescribe rules for the operation of the Plan;

(d)  

to receive from the Employer and from Employees such information as will be necessary for the proper administration of the Plan;

(e)  

to make any necessary filings with the appropriate government agency;

(f)  

to furnish any Employee or Beneficiary, who requests in writing, statements indicating such Employee's or Beneficiary's total Account balances;

(g)  

to maintain all records necessary for the administration of the Plan;

(h)  

to select the Investment Options under the Plan;

(i)  

to report to the Trustee of the Rabbi Trust all available information regarding the amount of benefits payable to each Employee, the computations with respect to the allocation of assets, and any other information which the Trustee may require;

(j)  

to delegate to one or more of the members of the Benefits Committee the right to act in its behalf in all matters connected with the administration of the Plan and Rabbi Trust;

(k)  

to delegate to any individual such of the powers and duties as the Benefits Committee deems appropriate; and

(l)  

to appoint or employ for the Plan any agents it deems advisable, including, but not limited to, legal counsel.

(a)  

to direct the administration of the Plan in accordance with its terms;

(b)  

to adopt rules of procedure and regulations necessary for the administration of the Plan, provided such rules are not inconsistent with the terms of the Plan;

(c)  

to determine all questions with regard to rights of Employees, Participants, and Beneficiaries under the Plan including, but not limited to, questions involving eligibility of an Employee to participate in the Plan and the value of the Participant’s vested Account;

(d)  

to enforce the terms of the Plan and any rules and regulations adopted by the Benefits Committee;

(e)  

to review and render decisions respecting an initial claim for a benefit under the Plan;

(f)  

to furnish the Employer with information which the Employer may require for tax or other purposes;

(g)  

to engage the service of counsel (who may, if appropriate, be counsel for the Employer), actuaries, and agents whom it may deem advisable to assist it with the performance of its duties;

(h)  

to prescribe procedures to be followed by distributees in obtaining benefits;

(i)  

to receive from the Employer and from Employees such information as is necessary for the proper administration of the Plan;

(j)  

to receive and review reports from the Trustee of the financial condition and receipts of disbursements from the Rabbi Trust;

(k)  

to establish and maintain, or cause to be maintained, the individual Account(s) described in Section 2.1(a);

(l)  

to create and maintain such records and forms as are required for the efficient administration of the Plan;

(m)  

to make all determinations and computations concerning the benefits, credits and debits to which any Participant, or other Beneficiary, is entitled under the Plan;

(n)  

to give the Trustee specific directions in writing with respect to:

(i)  

the making of distribution payments, giving the names of the payees, the amounts to be paid and the time or times when payments will be made; and

(ii)  

the making of any other payments which the Trustee is not by the terms of the Trustee Agreement authorized to make without a direction in writing by the Daily Administrator;

(o)  

to prepare, or cause to be prepared, an annual report for the Employer, as of the last day of each Plan Year, in such form as may be required by the Employer;

(p)  

to determine and maintain records of the age and amount of Compensation, Hours of Service, and Service of each Employee;

(q)  

to comply (or transfer responsibility for compliance to the Trustee) with all applicable Federal income tax withholding requirements for benefit distributions; and

(r)  

to construe the Plan, in its sole and absolute discretion, and make equitable adjustments for any mistakes and errors made in the administration of the Plan.

Claim Procedures.

(a)  

Initial Claim.  In the event that an Employee, Eligible Employee, Participant or his Beneficiary claims to be eligible for benefits, or claims any rights under this Plan, such Claimant must complete and submit such claim forms and supporting documentation as will be required by the Daily Administrator, in its sole and absolute discretion.  Likewise, any Participant or Beneficiary who feels unfairly treated as a result of the administration of the Plan must file a written claim, setting forth the basis of the claim, with the Daily Administrator.  In connection with the determination of a claim, or in connection with review of a denied claim, the Claimant may examine this Plan, and any other pertinent documents generally available to Participants that are specifically related to the claim.

(b)  

Request for Review.  Within ninety (90) days after receiving the notice of the Daily Administrator’s disposition of the claim, the Claimant may file with the Benefits Committee a written request for review of his claim.  In connection with the request for review, the Claimant will be entitled to be represented by counsel and will be given, upon request and free of charge, reasonable access to all pertinent documents for the preparation of his claim.  If the Claimant does not file a written request for review within ninety (90) days after receiving notice of the Daily Administrator’s disposition of the claim, the Claimant will be deemed to have accepted the Daily Administrator’s written or electronic disposition, unless the Claimant was physically or mentally incapacitated so as to be unable to request review within the ninety (90) day period.

(c)  

Decision on Review.  After receipt by the Benefits Committee of a written application for review of his claim, the Benefits Committee will review the claim taking into account all comments, documents, records and other information submitted by the Claimant regarding the claim without regard to whether such information was considered in the initial benefit determination.  The Benefits Committee will notify the Claimant of its decision by delivery or by certified or registered mail to his last known address.  A decision on review of the claim will be made by the Benefits Committee within sixty (60) days following receipt of the written application for review.  If special circumstances require an extension of the sixty (60) day period, the Benefits Committee w ill so notify the Claimant and a decision will be rendered within one hundred-twenty (120) days of receipt of the request for review.  In any event, if a claim is not determined by the Benefits Committee within one hundred-twenty (120) days of receipt of written submission for review, it will be deemed to be denied.

Benefits Committee Procedures.  The Benefits Committee may adopt such bylaws as it deems desirable.  The Benefits Committee will elect one of its members as chairman and will elect a secretary who may, but need not, be a member of the Benefits Committee.

Other Plans.  Nothing contained in this Plan will prevent a Participant prior to his death, or his spouse or other Beneficiary after his death, from receiving, in addition to any payments provided for under this Plan, any payments provided for under any other plan or benefit program of the Company or an Affiliate, or which would otherwise be payable or distributable to him, his surviving spouse or Beneficiary under any plan or policy of the Company or an Affiliate or otherwise.  Nothing in this Plan will be construed as preventing the Company or any of its Affiliates from establishing any other or different plans providing for current or deferred compensation for employees.  Unless specifically provided otherwise in any plan of the Company intended to "qualify" under section 401 of the Code, Compensation deferrals made under this Plan will not constitute earnings or compensation for purposes of determining contributions or benefits under such qualified plan.

Amendment.  The Compensation Committee may, by resolution, in its absolute discretion, from time to time, amend, any or all of the provisions of the Plan.  In addition, the Benefits Committee may amend the Plan to comply with changes in the law or to implement administrative or design changes that will not materially increase the cost of the Plan to the Company. No such amendment may adversely impact the amount of benefits a Participant has accrued under the Plan at such time except to the extent required by applicable law.

Termination.  The Compensation Committee may, by resolution, in its absolute discretion, terminate the Plan in whole or part at any time; provided, that no such termination may adversely impact the amount of benefits a Participant has accrued under the Plan at such time except to the extent required by applicable law.  Any termination of the Plan will comply with the provisions of section 409A of the Code as set forth in this Section 10.2.

(a)  

Corporate Dissolution or Bankruptcy.  The Compensation Committee may terminate and liquidate the Plan within twelve (12) months of a corporate dissolution taxed under section 331 of the Code or with the approval of a bankruptcy court pursuant to 11 U.S.C. § 503(b)(1)(A), provided that the amounts deferred under the Plan are included in Participants; gross incomes in the latest of the following years (or if earlier, the taxable year in which the amount is actually or constructively received):

(i)  

The calendar year in which the Plan termination and liquidation occurs.

(ii)  

The first calendar year in which the amount is no longer subject to a substantial risk of forfeiture.

(iii)  

The first calendar year in which the payment is administratively practicable.

(b)  

Change in Control.  The Compensation Committee may terminate and liquidate the Plan within the thirty (30) days preceding or the twelve (12) months following a change in control event, as defined in Treasury Regulation section 1.409A-3(i)(5)), provided that all plans or arrangements that would be aggregated with the Plan under section 409A of the Code are also terminated and liquidated with respect to each Participant that experienced the change in control event so that under the terms of the Plan and all such arrangements the Participant is required to receive all amounts of compensation deferred under such arrangements within twelve (12) months of the termination of the Plan or arrangement, as applicable.  In the case of a change of control event which constitutes a sale of assets, the termination of the Plan pursuant to this Section 10.2(b) may be made with respect to the Employer that is primarily liable immediately after the change of control transaction for the payment of benefits under the Plan.

(c)  

Termination of Plan.  The Compensation Committee may terminate and liquidate the Plan provided that (i) the termination and liquidation does not occur by reason of a downturn of the financial health of the Company or an Employer, (ii) all plans or arrangements that would be aggregated with the Plan under section 409A of the Code are also terminated and liquidated, (iii) no payments in liquidation of the Plan are made within twelve (12) months of the date of termination of the Plan other than payments that would be made in the ordinary course operation of the Plan, (iv) all payments are made within twenty-four (24) months of the date the Plan is terminated and (v) the Company or the Employer, as applicable depending on whether the Plan is terminated with respect to such entity, do not ad opt a new plan that would be aggregated with the Plan within three (3) years of the date of the termination of the Plan.

Nonguarantee of Employment.  Nothing contained in this Plan will be construed as a contract of employment between the Employer and any Employee, or as a right of any Employee to be continued in the employment of the Employer, or as a limitation of the right of the Employer to discharge any of its Employees, with or without cause.

Indemnification.  The Company will indemnify each of its Compensation Committee members and Benefits Committee members against any and all claims, loss, damages, expense (including reasonable counsel fees), and liability arising from any action, failure to act, or other conduct in the member's official capacity, except when due to such Compensation Committee or Benefits Committee's member's own gross negligence or willful misconduct.

Withholding.  The Employer or its designee will withhold from any benefit payments made under this Plan, the required amounts of federal, state or local income or other applicable taxes.

Expenses.  The Employer will pay all costs and expenses incurred in operating and administering the Plan. Such costs and expenses will be paid by the Employer from its general assets or the Rabbi Trust.

 

HEALTHSOUTH CORPORATION