Exhibit 10.2 SETTLEMENT AGREEMENT AND POLICY RELEASE --------------------------------------- This Settlement Agreement and Policy Release (the "Agreement") is entered into by and between (i) HealthSouth Corporation ("HealthSouth"), (ii) Betsy S....

Exhibit 10.2

SETTLEMENT AGREEMENT AND POLICY RELEASE
---------------------------------------

This Settlement Agreement and Policy Release (the "Agreement") is
entered into by and between (i) HealthSouth Corporation ("HealthSouth"), (ii)
Xxxxx X. Xxxxxx, Xxxxx X. Xxxxxxx, P. Xxxxx Xxxxx, Xxxxxx X. Xxxxxx, Xxxxxxx X.
Xxxxxxx, Xxxx X. Xxxxxxxxxx, Xxxxx X. Xxxxxxxx, Xxxxxxx Xxxx III, Xxxxxxx X.
Xxxxxx, X. Xxxx Xxxxxx, Xxxx X. Xxxxxx, Xxxxxxx X. Xxxx, Xxx X. Xxxxxx, Xxx X.
Xxxxxxx, Xxxxxxx X. Xxxxxx, Xxxxx X. House, Xxx X. Xxxxx, Xxxxx X. Xxxxx,
Xxxxxxx X. Xxxxxx, Xxxxxx X. May, Xxxxxxxx XxXxxxxxx, Xxxxxxx Xxxx, Xxxxxxx X.
Xxxxxxx III, Xxxxx Xxxxxxx, Xxxxxx X. Xxxxxxx, Xxxxxxx Xxxxx, Xxxxxx X. Xxxxxxx,
Xxxxx X. Xxxxxxxx, Xx., Xxxxxx X. Xxxxxx, Xxxxxxx X. Xxxxxx, Xxxxx X. Xxxxxx,
Xxxxxx X. Xxxxxxx, Xxxxxx Xxxx and Xxxxxxx X. Xxxxxxx (the "Settling Individual
Defendants"), and (iii) Federal Insurance Company, Executive Risk Indemnity
Inc., St. Xxxx Mercury Insurance Company, Zurich American Insurance Co., Certain
Underwriters at Lloyd's who subscribed severally and not jointly to Policy No.
823/XX0000000, Certain Underwriters at Lloyd's who subscribed severally and not
jointly to Policy No. 823/FD9900985, Certain Underwriters at Lloyd's who
subscribed severally and not jointly to Policy No. 823/FD010065, Certain
Underwriters at Lloyd's who subscribed severally and not jointly to Policy No.
823/FD0100668, Royal Indemnity Company as successor in interest to Royal
Insurance Company of America, Greenwich Insurance Company, XL Specialty
Insurance Company, Travelers Indemnity Company, successor in interest to Gulf
Insurance Company, Great Lakes Reinsurance (UK) PLC, Twin City Fire Insurance
Company, Continental Casualty Company, Royal Indemnity Company, ACE American
Insurance Company, Starr Excess Liability, AIG Europe (UK) Limited as agents for
New Hampshire Insurance Company, Arch Insurance Company, Clarendon America
Insurance Co. and Lumbermens Mutual Casualty Company (the "Settling Carriers").
HealthSouth, the Settling Individual Defendants, and the Settling Carriers are
referred to collectively as the "Parties."

W I T N E S S E T H

WHEREAS, the Settling Carriers issued to HealthSouth the insurance
policies identified in Exhibit A (the "Policies"), in addition to other
insurance policies that are not identified in Exhibit A; and

WHEREAS, Houston Casualty Insurance, and Axis Specialty Insurance
("Non-Settling Carriers") also issued insurance policies to HealthSouth but are
not parties to this Agreement; and

WHEREAS, HealthSouth and certain of its present and former officers and
directors are named as defendants in a shareholder and bondholder class action
pending in the United States District Court for the Northern District of Alabama
under the caption In re

HealthSouth Securities Litigation, Master File No. CV-03-1500-S, Consolidated
Case Nos. CV-03-BE-1501-S and CV-03-BE-1502-S (N.D. Al.) (the "Federal
Securities Action"); and

WHEREAS, certain of HealthSouth's present and former officers and
directors are named as defendants in shareholder derivative suits pending in
federal and state courts in Alabama and Delaware under the captions Xxxxxx x.
Xxxxxxx, et al., XX-00-0000 (Xxxxxxx Xxxxx xx Xxxxxxxxx Xxxxxx, Xxxxxxx), Xxxxxx
Family Trust v. HealthSouth Corp., XX-00-0000 (Xxxxxxx Xxxxx xx Xxxxxxxxx
Xxxxxx, Xxxxxxx), Teachers' Retirement System of Louisiana v. Scrushy, et al.,
C.A. No. 20529 (Del. Ch.), and In re HealthSouth Corp. Derivative Litigation, CV
02-BE-2565 (N.D. Al.) (collectively, the "Derivative Action"); and

WHEREAS, HealthSouth and certain of its present and former officers and
directors are named as defendants or otherwise involved in the matters
identified in Exhibit B ("Other Matters"); and

WHEREAS, the Federal Securities Action, the Derivative Action, and the
Other Matters are referred to collectively as the "Underlying Litigation"; and

WHEREAS, Xxxxxxx Xxxxxxx, Xxxxxx Xxxxx, Xxxxx Xxxx, Xxxxxxx Xxxxx,
Xxxxx Xxxxx, Xxxxx Xxxxxxx, Xxxxxxxxx Xxxxxx, Xxxxx Xxxxxx, Xxxx Xxxxx, Xxxxxxx
Xxxxxxx, Xxxxxxx Xxxxxx, Xxxxxxx XxXxx, Xxxxxxx Xxxxxx, Xxxxxxx Xxxxx, Xxxxxx
Xxxxx, and Xxxxxxxx Xxxxxxxxx are named as defendants in one or more of the
lawsuits that comprise the Underlying Litigation but are not parties to this
Agreement (the "Non-Settling Defendants"); and

WHEREAS, HealthSouth and certain of its present and former officers and
directors have asserted requests for coverage under the Policies for attorneys'
fees and costs, expenses and settlements purportedly incurred or to be incurred
by HealthSouth and certain of its present and former officers and directors in
connection with the Underlying Litigation; and

WHEREAS, the Settling Carriers have contested coverage for the
Underlying Litigation and/or have provided HealthSouth, the Settling Individual
Defendants, and the Non-Settling Defendants with notices of rescission relating
to, among other things, the Policies; and

WHEREAS, the rescission of, among other things, the Policies and the
existence and extent of any coverage for the Underlying Litigation are at issue
in litigation pending in state and federal court under the captions In re
HealthSouth Corporation Insurance Litigation, Consolidated Case No.
CV-03-BE-1139-S (United States District Court for the Northern District of
Alabama, Southern Division); HealthSouth Corporation x. Xxxxx Excess Liability
Insurance Co., Ltd., XX-00-0000 (Xxxxxxx Xxxxx xx Xxxxxxxxx Xxxxxx, Xxxxxxx),
removed to federal court under CV-05-1620 (United States District Court for the
Northern District of Alabama, Southern Division); Federal Insurance Company, et
al. v. HealthSouth Corporation, et al., CV-03-2420 AEH (Circuit Court of
Jefferson County, Alabama), Greenwich Insurance Company v. HealthSouth
Corporation, et al., CV-03-3522 AEH (Circuit Court of Jefferson County,
Alabama),

Clarendon American Insurance Company, et al. v. HealthSouth Corporation, et al.,
CV-03-6975 AEH (Circuit Court of Jefferson County, Alabama), and Certain
Underwriters at Lloyd's v. HealthSouth Corporation, et al., CV-04-5791 AEH
(Circuit Court of Jefferson County, Alabama) (collectively, the "Coverage
Litigation"); and

WHEREAS, HealthSouth, the Settling Individual Defendants and the
Settling Carriers have entered into a Memorandum of Understanding (the
"Insurance MOU"), which concerns the proposed settlement of the claims asserted
against HealthSouth and the Settling Individual Defendants in the Federal
Securities Action and the Derivative Action as reflected in (i) a Memorandum of
Understanding among the Derivative Plaintiffs, HealthSouth Corporation, and the
Settling Individual Defendants (the "Derivative MOU"), (ii) a Memorandum of
Understanding among the Stockholder and Bondholder Lead Plaintiffs and the
Individual Settling Defendants ("Securities MOU"), and (iii) an Amended and
Restated Memorandum of Understanding among the Stockholder and Bondholder Lead
Plaintiffs and HealthSouth Corporation (the "Amended and Restated Securities
MOU"). The Derivative MOU, the Securities MOU, and the Amended and Restated
Securities MOU are referred to collectively as the "Preliminary Settlement
Agreements"; and

WHEREAS, pursuant to the Insurance MOU, the Settling Carriers have
paid, subject to the fulfillment of certain terms and conditions, a total of
$230,000,000 (the "Settlement Amount") into an interest-bearing escrow account
under the direction and control of the Settling Carriers (the "First Escrow");
and

WHEREAS, pursuant to the Insurance MOU, the Settling Carriers have
agreed, subject to certain terms and conditions, that the Settlement Amount may
be transferred into an interest-bearing escrow account controlled by lead
counsel for the lead plaintiffs in the Federal Securities Action and subject to
the oversight of the United States District Court for the Northern District of
Alabama ("Second Escrow"); and

WHEREAS, pursuant to the Insurance MOU, the Settling Carriers have
agreed, subject to certain terms and conditions, that the funds in the First
Escrow may be used in connection with the settlements of the Federal Securities
Action and the Derivative Action as reflected in the Preliminary Settlement
Agreements; and

WHEREAS, HealthSouth, the Settling Individual Defendants, and the
Settling Carriers enter into this Agreement pursuant to and in furtherance of
the Insurance MOU;

NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants, considerations, releases, indemnities and representations set
forth below, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound
hereby, HealthSouth, the Settling Individual Defendants and the Settling
Carriers mutually agree as follows:

1. Payment by Settling Carriers.

Within five (5) business days after the last to occur of (i) the entry
of an order by the United States District Court for the Northern District of
Alabama (the "Federal Court") preliminarily approving a stipulation of
settlement of the Federal Securities Action (the "Federal Securities Action
Stipulation of Settlement") that is satisfactory to the Settling Carriers, (ii)
the entry of an order by the Circuit Court of Jefferson County, Alabama (the
"State Court") preliminarily approving a stipulation of settlement of the
Derivative Action (the "Derivative Action Stipulation of Settlement") that is
satisfactory to the Settling Carriers, and (iii) the entry of orders by the
Federal Court and the State Court preliminarily approving this Agreement, the
Settling Carriers shall direct that the funds in the First Escrow, which
includes the $100 million referenced in paragraph 1 of the Derivative Action
Stipulation of Settlement, together with any accrued interest and/or investment
proceeds and net of any fees imposed by the escrow agent, any penalties or other
charges relating to the funds in the first escrow being disinvested from
ninety-day T-bills or their reasonable equivalent, and any applicable taxes, be
deposited into the Second Escrow.

2. Release by HealthSouth and the Settling Individual Defendants.

In exchange for the consideration set forth in this Agreement and
effective upon this Agreement becoming Final pursuant to Section 9, HealthSouth,
on its own behalf and, to the fullest extent permitted by law, on behalf of its
present, former and future directors, officers, employees, shareholders,
parents, divisions, subsidiaries, affiliates, associates, representatives,
predecessors, successors, owners, assigns, administrators, agents, partners,
principals, trustees, insurers and reinsurers in their capacity as such, and
attorneys, and their present, former and future directors, officers, employees,
shareholders, parents, divisions, subsidiaries, affiliates, associates,
representatives, predecessors, successors, owners, assigns, administrators,
agents, partners, principals, trustees, insurers and reinsurers in their
capacity as such, and attorneys, and all persons acting by, through, under or in
concert with them or any of them (collectively, the "HealthSouth Releasors") and
the Settling Individual Defendants, on their own behalf and, to the fullest
extent permitted by law, on behalf of their present, former and future agents,
associates, representatives, predecessors, successors, heirs, assigns,
executors, spouses, administrators, insurers and reinsurers in their capacity as
such, and attorneys, and all persons acting by, through, under or in concert
with them or any of them, (collectively, the "Settling Individual Defendant
Releasors"), but not including the Non-Settling Defendants, do hereby release
and forever discharge the Settling Carriers and their present, former or future
directors, officers, employees, shareholders, parents, divisions, subsidiaries,
affiliates, associates, representatives, predecessors, successors, owners,
assigns, administrators, agents, partners, principals, trustees, insurers and
reinsurers in their capacity as such, and attorneys, and their present, former
and future directors, officers, employees, shareholders, parents, divisions,
subsidiaries, affiliates, associates, representatives, predecessors, successors,
owners, assigns, administrators, agents, partners, principals, trustees,
insurers and reinsurers in their capacity as such, and attorneys, and all

persons acting by, through, under or in concert with them or any of them
(collectively, the "Settling Carrier Releasees"), but not including the
Non-Settling Carriers (and any other person or entity in their capacity as a
successor in interest to the Non-Settling Carriers with respect to the insurance
policy or policies they issued to HealthSouth and/or the Individual Settling
Defendants), from any and all manner of action or actions, cause or causes of
action, suits, debts, liens, contracts, agreements, promises, liabilities,
claims, rights, demands, damages, losses, costs, charges or expenses, of any
nature whatsoever, in law or in equity, known or unknown, suspected or
unsuspected, fixed or contingent, that are based upon, in consequence of, arise
out of or relate in any way, whether in whole or in part, to (i) the Policies
(ii) the Coverage Litigation, (iii) the Underlying Litigation, (iv) the
litigation, defense, and settlement of the Coverage Litigation and the
Underlying Litigation, and/or (v) any of the facts, circumstances, situations,
and events underlying or alleged in the Coverage Litigation and the Underlying
Litigation. This includes, without limitation, claims for "bad faith" or unfair
claims handling practices; common law claims for "bad faith" insurance practices
or breach of the implied covenant of good faith and fair dealing; and all rights
and claims which HealthSouth and the Settling Individual Defendants may have
arising out of, relating to or in connection with the Policies pursuant to any
applicable statute and/or case law for any alleged failure to effectuate prompt,
fair and equitable settlement of the Underlying Litigation; provided, however,
that nothing in this paragraph shall be construed to release any of the Settling
Carrier Releasees from their respective obligations under this Agreement.

3. Release by the Settling Carriers.

In exchange for the consideration set forth in this Agreement and
effective upon this Agreement becoming Final pursuant to Section 9, the Settling
Carriers, on their own behalf and, to the fullest extent permitted by law, on
behalf of their present, former and future directors, officers, employees,
shareholders, parents, divisions, subsidiaries, affiliates, associates,
representatives, predecessors, successors, owners, assigns, administrators,
agents, partners, principals, trustees, insurers and reinsurers in their
capacity as such, and attorneys, and their present, former and future directors,
officers, employees, shareholders, parents, divisions, subsidiaries, affiliates,
associates, representatives, predecessors, successors, owners, assigns,
administrators, agents, partners, principals, trustees, insurers and reinsurers
in their capacity as such, and attorneys, and all persons acting by, through,
under or in concert with them or any of them (collectively, the "Settling
Carrier Releasors"), but not including the Non-Settling Carriers, do hereby
release and forever discharge HealthSouth and its present, former or future
directors, officers, employees, shareholders, parents, divisions, subsidiaries,
affiliates, associates, representatives, predecessors, successors, owners,
assigns, administrators, agents, partners, principals, trustees, insurers and
reinsurers in their capacity as such, and attorneys, and their present, former
and future directors, officers, employees, shareholders, parents, divisions,
subsidiaries, affiliates, associates, representatives, predecessors, successors,
owners, assigns, administrators, agents, partners, principals, trustees,
insurers and reinsurers in their capacity as such, and attorneys, and all
persons acting by, through, under or in concert with them or any of them
(collectively, the "HealthSouth Releasees") and the Settling Individual
Defendants and their present, former and future agents, associates,
representatives, predecessors, successors, heirs, assigns, executors, spouses,
administrators, insurers and reinsurers in their capacity as such, and
attorneys, and all persons acting by, through, under or in concert with them or
any of

them, (collectively, the "Settling Individual Defendant Releasees"), but not
including the Non-Settling Defendants, from any and all manner of action or
actions, cause or causes of action, suits, debts, liens, contracts, agreements,
promises, liabilities, claims, rights, demands, damages, losses, costs, charges
or expenses, of any nature whatsoever, in law or in equity, known or unknown,
suspected or unsuspected, fixed or contingent, that are based upon, in
consequence of, arise out of or relate in any way, whether in whole or in part,
to (i) the Policies (ii) the Coverage Litigation, (iii) the Underlying
Litigation, (iv) the litigation, defense, and settlement of the Coverage
Litigation and the Underlying Litigation, and/or (v) any of the facts,
circumstances, situations, and events underlying or alleged in the Coverage
Litigation and the Underlying Litigation. This includes, without limitation,
claims for breach of the implied covenant of good faith and fair dealing and any
purported failure to cooperate and any subrogation claims the Settling Carriers
may have under the Policies and state or federal law; provided, however, that
nothing in this paragraph shall be construed to release any of the HealthSouth
Releasees and the Settling Individual Defendant Releasees from their respective
obligations under this Agreement.

4. Covenant and Agreement Not to Xxx.

(a) The matters described in Sections 2 and 3 are collectively referred
to as "Released Claims."

(b) In exchange for the consideration set forth in this Agreement and
effective upon the deposit of funds into the Second Escrow pursuant to Section
1, the HealthSouth Releasors and the Settling Individual Defendant Releasors
covenant and agree not to xxx or to assert or to prosecute, institute or
cooperate in the institution, commencement, filing, or prosecution of any suit
or proceeding against any Settling Carrier Releasee, in any forum, that is based
upon, in consequence of, arises out of or relates in any way in whole or in part
to any Released Claims.

(c) In exchange for the consideration set forth in this Agreement and
effective upon the deposit of funds into the Second Escrow pursuant to Section
1, the Settling Carrier Releasors covenant and agree not to xxx or to assert or
to prosecute, institute or cooperate in the institution, commencement, filing,
or prosecution of any suit or proceeding against any HealthSouth Releasee or
Settling Individual Defendant Releasee, in any forum, that is based upon, in
consequence of, arises out of or relates in any way in whole or in part to any
Released Claims.

(d) The Parties agree that, with respect to any claim not brought by
reason of the provisions of this Section 4, any defense based on the passage of
time including, but not limited to any applicable statute of limitations,
statutes of repose, or theory of laches, estoppel or

waiver under any federal or state statutory or common law or otherwise by virtue
of the passage of time, shall be tolled for the period beginning on September
25, 2006 and ending on the date the Settling Carriers request the return of
funds from the Second Escrow pursuant to paragraph 9(c)(i); provided, however,
that nothing in this Agreement shall apply to extend any statutes of limitations
or other time periods which may have expired prior to the beginning of such
period.

5. HealthSouth's Indemnity Obligations to the Settling Carriers.

(a) In exchange for the consideration set forth in this Agreement and
effective upon the deposit of funds into the Second Escrow pursuant to Section 1
of this Agreement, HealthSouth shall, to the fullest extent permitted by law,
indemnify and hold harmless the Settling Carrier Releasees in the manner
specified in this Section 5:

(i) for any and all amounts the Settling Carrier Releasees are
legally obligated to pay, or become legally obligated to pay to
any Barred Person with respect to any Barred Claim at any time
after this Agreement is fully-executed by the Settling Carriers,
regardless of whether such legal obligation arises as the result
of a judgment, a settlement, or otherwise;

(ii) for any and all fees and costs the Settling Carrier Releasees
reasonably incur to any third party at any time after this
Agreement is fully-executed by the Settling Carriers in
responding to any request, claim, demand, action, cause of
action, lawsuit, or arbitration brought or made by any Barred
Person with respect to any Barred Claim; provided, however, that
such fees and costs shall not include fees and costs incurred
relating to the approval of the settlements contemplated herein
or appeals therefrom;

(iii) for any and all amounts the Settling Carrier Releasees are
legally obligated to pay, or become legally obligated to pay
under the Policies at any time after this Agreement is
fully-executed by the Settling Carriers, regardless of whether
such legal obligation arises as the result of a judgment, a
settlement, or otherwise; and

(iv) for any and all fees and costs the Settling Carrier Releasees
reasonably incur to any third party at any time after this
Agreement is fully-executed by the Settling Carriers in
responding to any request, claim, demand, action, cause of
action, lawsuit, or arbitration relating to any payment under
the Policies; provided, however, that such fees and costs shall
not include fees and costs incurred relating to the approval of
the settlements contemplated herein or appeals therefrom.

(b) Without limiting the obligations of HealthSouth to indemnify and
hold the Settling Carrier Releasees harmless pursuant to this Section 5,
HealthSouth and the Settling

Carriers agree that such obligations include the
obligation to indemnify and hold harmless the Settling Carrier Releasees with
respect to the following amounts, to the fullest extent permitted by law:

(i) Attorneys' fees and costs and expert witness fees and costs
incurred by a Barred Person in the Underlying Litigation, to the
extent that the Settling Carrier Releasees are legally obligated
to pay, regardless of whether such legal obligation arises as
the result of a judgment, a settlement, or otherwise;

(ii) Settlement costs incurred by a Barred Person in the Underlying
Litigation, to the extent that the Settling Carrier Releasees
are legally obligated to pay, regardless of whether such legal
obligation arises as the result of a judgment, a settlement, or
otherwise;

(iii) Judgment costs incurred by a Barred Person in the Underlying
Litigation, to the extent that the Settling Carrier Releasees
are legally obligated to pay, regardless of whether such legal
obligation arises as the result of a judgment, a settlement, or
otherwise;

(iv) Attorneys' fees and costs and expert witness fees and costs
incurred by a Barred Person in the litigation of a Barred Claim
with a Settling Carrier, to the extent that the Settling Carrier
Releasees are legally obligated to pay, regardless of whether
such legal obligation arises as the result of a judgment, a
settlement, or otherwise;

(v) Contractual damages awarded to a Barred Person in the litigation
of a Barred Claim with a Settling Carrier;

(vi) Extra-contractual, punitive, and bad faith damages awarded to a
Barred Person in the litigation of a Barred Claim with a
Settling Carrier Releasee;

(vii) Amounts the Settling Carriers pay under the Policies, to the
extent that the Settling Carrier Releasees are legally obligated
to pay, regardless of whether such legal obligation arises as
the result of a judgment, a settlement, or otherwise;

(viii) Reasonable attorneys' fees and costs and expert witness fees and
costs the Settling Carrier Releasees incur in the litigation of
a Barred Claim with a Barred Person;

(ix) Reasonable attorneys' fees and costs and expert witness fees and
costs the Settling Carrier Releasees pay as a result of any
request, claim, demand, action, cause of action, lawsuit, or
arbitration relating to the Policies; and

(x) Reasonable costs incurred in the review of invoices in the
Underlying Litigation by third party experts and consultants.

(c) For purposes of Section 5 of this Agreement, "Barred Person" means
any person or entity who is insured by the Settling Carriers or asserts that he,
she or it is insured by the Settling Carriers under the Policies, including but
not limited to HealthSouth, the Settling Individual Defendants, and the
Non-Settling Defendants, and "Barred Claims" means any and all manner of action
or actions, cause or causes of action, suits, debts, liens, contracts,
agreements, promises, liabilities, claims, rights, demands, damages, losses,
costs, charges or expenses, of any nature whatsoever, in law or in equity, known
or unknown, suspected or unsuspected, fixed or contingent, that are based upon,
in consequence of, arise out of or relate in any way, whether in whole or in
part, to (i) the Policies (ii) the Coverage Litigation, (iii) the Underlying
Litigation, (iv) the litigation, defense, and settlement of the Coverage
Litigation and the Underlying Litigation, and/or (v) any of the facts,
circumstances, and situations underlying or alleged in the Coverage Litigation
and the Underlying Litigation.

(d) HealthSouth represents and warrants that it is not aware of any
directly applicable state or federal case law, including but not limited to case
law interpreting 8 Del. C. ss. 145, that would directly prohibit HealthSouth
from indemnifying and holding harmless the Settling Carrier Releasees pursuant
to this Section 5 in exchange for the consideration provided by the Settling
Carriers in this Agreement. Except as provided for in Section 5(e), HealthSouth
and the Settling Individual Defendants agree that they shall not initiate,
pursue, or cause to be initiated or pursued, directly or indirectly, any
judicial proceeding seeking a judgment, holding or declaration that a payment
required to be made to the Settling Carrier Releasees pursuant to this Section 5
is, was, or would be illegal; provided, however, that nothing in this Section 5
shall be construed to bar a derivative action brought without HealthSouth's
assistance or participation. Nothing in this paragraph is intended to expand the
obligation of HealthSouth as set forth in this Section 5 to indemnify the
Settling Carrier Releasees.

(e) HealthSouth agrees and covenants that if it becomes aware of a
directly applicable legal authority that comes into existence after the date of
this Agreement, and which HealthSouth believes directly prohibits HealthSouth
from indemnifying and holding harmless the Settling Carrier Releasees pursuant
to this Section 5, HealthSouth shall so inform the Settling Carrier Releasees.
If the Settling Carrier Releasees disagree that the legal authority identified
by HealthSouth is directly applicable and directly prohibits HealthSouth from
indemnifying and holding harmless the Settling Carrier Releasees pursuant to
this Section 5, HealthSouth agrees and covenants not to file a lawsuit seeking a
declaration that it is prohibited from indemnifying and holding harmless the
Settling Carrier Releasees pursuant to this Section 5 unless a neutral
arbitrator, jointly selected by HealthSouth and the Settling Carrier Releasees,
determines that

HealthSouth has a good-faith basis for interpreting the legal authority
identified by HealthSouth as directly applicable and directly prohibiting
HealthSouth from indemnifying and holding harmless the Settling Carrier
Releasees pursuant to this Section 5.

(f) HealthSouth agrees and covenants that if it becomes aware of any
lawsuit or other proceeding that seeks any declaration that the law imposes any
limitations on its ability and obligation to indemnify the Settling Carrier
Releasees pursuant to this Section 5, it will promptly provide the Settling
Carriers with written notice of the existence of such lawsuit or other
proceeding and that it will not oppose any motion by the Settling Carrier
Releasees to intervene and participate in such lawsuit or proceeding.
HealthSouth agrees and covenants that it will vigorously defend and oppose any
such lawsuit or other proceeding and provide reasonable cooperation to the
Settling Carriers to ensure that no declaration imposing any limitations on its
ability and obligation to indemnify the Settling Carrier Releasees pursuant to
this Section 5 is entered; provided, however, that if HealthSouth believes in
good faith that a directly applicable legal authority has come into existence
after the date of this Agreement and directly prohibits HealthSouth from
indemnifying and holding harmless the Settling Carrier Releasees pursuant to
this Section 5, HealthSouth shall be permitted to assert that position in
responding to the lawsuit or other proceeding, and shall be under no obligation
to prevent such a declaration from being entered.

(g) Unless expressly prohibited from doing so by an order of a court of
competent jurisdiction, and subject to the provisions of Section 5(j),
HealthSouth shall pay any amounts due under Section 5(a) within ten (10)
business days of receiving written notice from one or more of the Settling
Carrier Releasees that they have paid or become legally obligated to pay such
amount(s). Such notice shall specify the precise amount(s) that HealthSouth is
obligated to pay to or on behalf of the Settling Carrier Releasee(s) and the
circumstances under which the Settling Carrier Releasee(s) became legally
obligated to pay or incurred such amount(s).

(h) In the event that (i) HealthSouth makes any payment to or on behalf
of one or more of the Settling Carrier Releasees pursuant to Section 5(a), and
(ii) it subsequently is finally determined by a court of competent jurisdiction
that HealthSouth was not obligated to make such payment for any reason,
including but not limited to such payment being prohibited by law, then the
Settling Carrier Releasee(s) to or on behalf of which such payment was made
shall promptly return such payment to HealthSouth. This paragraph 5(h) shall not
apply to require the reimbursement by any Settling Carrier Releasee of any
payment by HealthSouth pursuant to section 6.

(i) In the event that any Settling Carrier Releasee is served with or
otherwise receives any request, claim, demand, action, cause of action, lawsuit,
or arbitration (i) brought or made by any Barred Person with respect to any
Barred Claim or (ii) relating to any payment under the Policies (collectively,
"Settling Carrier Releasee Indemnified Claims"), such Settling Carrier
Releasee(s) shall promptly notify HealthSouth in writing of such Settling
Carrier

Releasee Indemnified Claim(s). The Parties agree that the claims asserted by the
Settling Carriers in the Coverage Litigation against the Non-Settling Defendants
constitute Settling Carrier Releasee Indemnified Claims. Settling Carrier
Releasee Indemnified Claims also shall include any future proceeding that seeks
declaratory relief initiated by any Settling Carrier against any Barred Person
with respect to any Barred Claims or any person requesting any payment under the
Policies if such proceeding is commenced with the consent of HealthSouth, such
consent not to be unreasonably withheld. The Settling Carriers agree that they
will not oppose a request by HealthSouth to intervene in any Settling Carrier
Releasee Indemnified Claim.

(j) Settling Carrier Releasee Indemnified Claims shall be investigated,
responded to, litigated, and defended in the following manner:

(i) The Settling Carrier Releasees shall have the right to retain
one law firm of their choice and, if necessary, one law firm to
serve as resident local counsel, to represent all of the
Settling Carrier Releasees with respect to any Settling Carrier
Releasee Indemnified Claims (collectively, the "Settling Carrier
Releasees Law Firm").

(ii) If at any time any Settling Carrier Releasee reasonably
believes, taking account of the HealthSouth indemnity, that the
Settling Carrier Releasees Law Firm cannot represent it in the
prosecution or defense of any Settling Carrier Releasee
Indemnified Claims with respect to any position reasonably
necessary to protect such Settling Carrier Releasees' interests
because (i) there are conflict(s) of interest between one or
more Settling Carrier Releasees with respect to one or more
issues or (ii) the Setting Carrier Releasees Law Firm cannot
fully and fairly advance on behalf of such Settling Carrier a
position(s), argument(s), or other matter(s) for any reason,
such Settling Carrier Releasee shall so inform HealthSouth in
writing. If HealthSouth agrees that a conflict(s) of interest
exists or that the Settling Carrier Releasees Law Firm cannot
fully and fairly advance a position(s), argument(s), or other
matter(s) on behalf of the Settling Carrier Releasee, the
Settling Carrier Releasee shall have the right to retain, at
HealthSouth's expense, one law firm of its choice and, if
necessary, one law firm to serve as resident local counsel, to
represent it with respect to the matter(s) subject to the
conflict or to advance the position(s), argument(s), or other
matter(s) that cannot be fully and fairly advanced by the
Settling Carrier Releasees Law Firm (collectively, a "Settling
Carrier Releasee Additional Law Firm"). If HealthSouth does not
agree that a conflict(s) of interest exists or that the Settling
Carrier Releasees Law Firm cannot fully and fairly advance the
position(s), argument(s), or other matter(s) on behalf of the
Settling Carrier Releasee, the Settling Carrier Releasee may
commence an arbitration proceeding in

front of a neutral arbitrator agreed upon by the Settling
Carrier Releasee and HealthSouth to determine if (i) a
conflict(s) of interest exists that would not permit the
Settling Carrier Releasees Law Firm to represent it in all or
part of the prosecution or defense of the Settling Carrier
Releasee Indemnified Claim; or (ii) the Settling Carrier
Releasee Law Firm cannot fully and fairly advance a position(s),
argument(s), or other matter(s) on behalf of the Settling
Carrier Releasee. Unless otherwise agreed to by HealthSouth and
the Settling Carrier Releasee, such arbitration shall be
conducted by the Settling Carrier Releasee providing the
arbitrator and HealthSouth one brief not to exceed twenty (20)
pages, and HealthSouth providing to the arbitrator and the
Settling Carrier Releasee within seven (7) business days of
receipt of the Settling Carrier Releasee's opening brief, a
response brief not to exceed twenty (20) pages; there also shall
be no more than one (1) hour of oral argument before the
arbitrator. If the Settling Carrier Releasee prevails in the
arbitration it shall have the right to retain a Settling Carrier
Releasee Additional Law Firm. If HealthSouth prevails in the
arbitration, any additional representation of the Settling
Carrier Releasee with respect to the matter(s) at issue in the
arbitration shall be at the Settling Carrier Releasee's expense.
The party prevailing in such arbitration shall be entitled to
the reimbursement by the losing party of its reasonable fees and
costs associated with the arbitration. The fact that such
Settling Carrier Releasee may have been represented by its own
law firm in the Coverage Litigation prior to the execution of
this Agreement shall not, by itself, be a basis for an
arbitrator to find that (i) there are conflict(s) of interest
between one or more Settling Carrier Releasees with respect to
one or more issues or (ii) the Setting Carrier Releasees Law
Firm cannot fully and fairly advance on behalf of such Settling
Carrier Releasee a position(s), argument(s), or other matter(s).

(iii) The Settling Carrier Releasees agree that (a) there are no
conflicts of interest between the Settling Carrier Releasees
with respect to the issue of whether the orders to be entered
pursuant to Sections 9(a)(iii) and 9(a)(iv) ("Bar Orders") bar a
Settling Carrier Releasee Indemnified Claim and (b) the Settling
Carrier Releasees Law Firm can fully and fairly advance on
behalf of all Settling Carrier Releases the argument and
position that the Bar Orders bar a Settling Carrier Releasee
Indemnified Claim.

(iv) At any time, a Settling Carrier Releasee can retain, at its own
expense, a law firm(s) to represent it with respect to asserting
any argument, position or other matter, including but not
limited to any argument or position with respect to the Bar
Orders.

(v) HealthSouth agrees to pay reasonable fees and costs incurred by
the Settling Carrier Releasees Law Firm and any Settling Carrier
Releasee Additional Law Firm(s) in connection with the
prosecution or defense of any Settling Carrier Releasee
Indemnified Claim. The Settling Carrier Releasees agree to
timely provide HealthSouth with the Settling Carrier Releasees
Law Firm and any Settling Carrier Releasee Additional Law
Firm(s)'s invoices, and HealthSouth agrees to pay the Settling
Carrier Releasees Law Firm and any Settling Carrier Releasee
Additional Law Firm(s) directly.

(vi) HealthSouth shall have the right to comment or make suggestions
in the selection of the Settling Carrier Releasees Law Firm and
any Settling Carrier Releasee Additional Law Firm(s), but shall
have no power to veto the Settling Carrier Releasees'
selection(s). The hourly rates of the Settling Carrier Releasees
Law Firm and the Settling Carrier Releasee Additional Law
Firm(s) shall be subject to HealthSouth's prior written consent,
which shall not be unreasonably withheld. HealthSouth agrees
that the current hourly rates paid by the Settling Carriers to
their attorneys in the Coverage Litigation are reasonable.

(vii) The Settling Carrier Releasees shall oppose and litigate to the
extent necessary any Settling Carrier Releasee Indemnified
Claims and shall use diligence and prudence in the
investigation, prosecution, defense, negotiation of settlement
and settlement of any such claims; provided however, that the
Settling Carrier Releasees shall have no obligation to take any
action that they believe to be inconsistent with the facts and
the law or inconsistent with any obligations of good faith and
fair dealing the Settling Carrier Releasees may have.

(viii) HealthSouth shall have the right to associate, at its own
expense, in the investigation, prosecution, defense, negotiation
and settlement of any Settling Carrier Releasees Indemnified
Claims.

(ix) With respect to each Settling Carrier Releasee Indemnified
Claim, the Settling Carrier Releasees will provide HealthSouth
with all information that they may reasonably request and notice
and opportunity to participate in and provide timely input
regarding litigation strategy and settlement negotiations;
provided, however, that the Settling Carrier Releasees shall
have no obligation to provide HealthSouth with proprietary
information or information protected by the attorney-client
privilege, work product doctrine, or any other privilege or
doctrine.

(x) The Settling Carrier Releasees will not make any settlement
offer, agree to any settlement or payment, admit any liability,
or stipulate to any judgment that would affect HealthSouth's
rights and/or duties under this Section 5 without the express
written approval of HealthSouth, which approval shall not be
unreasonably withheld. If HealthSouth does not respond to a
written request for approval of a recommended settlement within
ten (10) business days after receiving the request, HealthSouth
shall be deemed to have accepted and approved such settlement.

6. HealthSouth's Advancement and Indemnity Obligations to the
Non-Settling Defendants.

(a) In exchange for the consideration set forth in this Agreement and
effective upon the Federal Court's order finally approving the Federal
Securities Action Stipulation of Settlement and the State Court's order finally
approving the Derivative Action Stipulation of Settlement, HealthSouth shall
indemnify and advance to Non-Settling Defendants in the manner specified in this
Section 6.

(b) In the event that any Non-Settling Defendant is barred and enjoined
from asserting against any Settling Carrier any claim for defense costs by any
Bar Order, HealthSouth shall, to the fullest extent permitted by law, indemnify
for and advance to such Non-Settling Defendant any defense costs that any
Settling Carrier would have been obligated to pay under the Policies, but only
to the extent that such Settling Carrier would have been obligated to pay such
defense costs if there had been no Bar Order.

(c) In the event that any Non-Settling Defendant is barred and enjoined
by any Bar Order from asserting against any Settling Carrier any claim other
than for defense costs in any action in which such Non-Settling Defendant does
not or would not receive the benefit of the judgment reduction credit and
insurance credit created by the Bar Orders, HealthSouth shall, to the fullest
extent permitted by law, indemnify such Non-Settling Defendant for such claim
that any Settling Carrier would have been obligated to pay under the Policies,
but only to the extent that such Settling Carrier would have been obligated to
pay such claim if there had been no Bar Order.

(d) In no event shall HealthSouth pay indemnification to a Non-Settling
Defendant to the extent such payment would be in violation of 8 Del. C. ss. 145
or the federal securities laws.

(e) In no event shall HealthSouth pay indemnification or advancement to
a Non-Settling Defendant to the extent such payment would cause the sum of (i)
all amounts paid or credited to Non-Settling Defendants pursuant to this
paragraph 6, (ii) all amounts paid to the Non-Settling Defendants under the
Policies, and (iii) all insurance credits applied for the benefit of
Non-Settling Defendants pursuant to paragraph 12 of Exhibit C and paragraph 12
of Exhibit D,

to exceed the amount of coverage, if any, a court determines (based on jury
findings as and if required by law) would have been payable on behalf of such
Non-Settling Defendant but for a Bar Order.

(f) HealthSouth represents and warrants that it is not aware of any
directly applicable state or federal case law, including but not limited to case
law interpreting 8 Del. C. ss. 145 or the federal securities laws, that would
directly prohibit HealthSouth from advancing defense costs to Non-Settling
Defendants pursuant to paragraph 6(b).

(g) HealthSouth agrees and covenants that if it becomes aware of any
lawsuit or other proceeding that seeks any declaration that the law imposes any
limitations on its ability and obligation to indemnify or advance to the
Non-Settling Defendants pursuant to this Section 6, it will promptly provide the
Settling Carriers with written notice of the existence of such lawsuit or other
proceeding and that it will not oppose any motion by the Settling Carrier
Releasees to intervene and participate in such lawsuit or proceeding. Except as
provided for in Section 6(h), HealthSouth and the Settling Individual Defendants
shall not initiate, pursue, or cause to be initiated or pursued, directly or
indirectly, any judicial proceeding seeking a judgment, holding or declaration
that the law imposes any limitations on HealthSouth's ability and obligation to
indemnify or advance to the Non-Settling Defendants pursuant to this Section 6;
provided, however, that nothing in this Section 6 shall be construed to bar a
derivative action brought without HealthSouth's assistance or participation; and
provided further that HealthSouth shall be permitted to assert that it does not
have an obligation to indemnify a Non-Settling Defendant pursuant to paragraph
6(c) in any lawsuit or proceeding brought against it or its directors or
officers if it believes in good faith that such an obligation is prohibited by
law.

(h) HealthSouth agrees and covenants that if it becomes aware of a
directly applicable legal authority that comes into existence after the date of
this Agreement, and which directly prohibits HealthSouth from advancing to the
Non-Settling Defendants pursuant to paragraph 6(b), HealthSouth shall so inform
the Settling Carrier Releasees. If the Settling Carrier Releasees disagree that
the legal authority identified by HealthSouth is directly applicable and
directly prohibits HealthSouth from advancing to the Non-Settling Defendants
pursuant to paragraph 6(b), HealthSouth agrees and covenants not to file a
lawsuit seeking a declaration that it is prohibited from advancing to the
Non-Settling Defendants pursuant to paragraph 6(b) unless a neutral arbitrator,
jointly selected by HealthSouth and the Settling Carriers, determines that
HealthSouth has a good-faith basis for interpreting the legal authority
identified by HealthSouth as directly applicable and directly prohibiting
HealthSouth from advancing to the Non-Settling Defendants pursuant to paragraph
6(b).

(i) HealthSouth agrees and covenants that if it becomes aware of any
lawsuit or other proceeding that seeks any declaration that the law imposes any
limitations on its ability and obligation to advance to the Non-Settling
Defendants pursuant to paragraph 6(b), it will promptly provide the Settling
Carriers with written notice of the existence of such lawsuit or other
proceeding and it will not oppose any motion by the Settling Carrier Releasees
to intervene

and participate in such lawsuit or proceeding. HealthSouth agrees and covenants
that it will vigorously defend and oppose any such lawsuit or other proceeding
and provide reasonable cooperation to the Settling Carriers to ensure that no
such declaration is entered; provided, however, that if HealthSouth believes in
good faith that a directly applicable legal authority has come into existence
after the date of this Agreement and directly prohibits HealthSouth from
advancing to the Non-Settling Defendants pursuant to paragraph 6(b), HealthSouth
shall be permitted to assert that position in responding to the lawsuit or other
proceeding, and shall be under no obligation to prevent such a declaration from
being entered.

(j) HealthSouth and the Settling Carriers agree that HealthSouth's
obligation to indemnify or advance to Non-Settling Defendants pursuant to this
Section 6 may be enforced in an action brought by one or more Non-Settling
Defendants against HealthSouth in the Federal Court or the State Court.

(k) In the event that HealthSouth makes any payment to or on behalf of
one or more of the Non-Settling Defendants pursuant to this Section 6 and it
subsequently is finally determined by a court of competent jurisdiction
(including any and all appeals) that HealthSouth was not obligated to make such
payment for any reason, including but not limited to such payment being
prohibited by law, then HealthSouth shall have the right to seek the return of
such payment from the Non-Settling Defendant to or on behalf of whom such
payment was made. In no event shall HealthSouth have the right to seek the
return from the Settling Individual Defendants or the Settling Carriers of such
payment to a Non-Settling Defendant.

(l) HealthSouth's obligations to indemnify or advance to the
Non-Settling Defendants pursuant to this Section 6 are in addition to, and shall
not limit, any other obligations HealthSouth may have to indemnify and/or
advance to the Non-Settling Defendants and/or the Settling Defendants under
state or federal law, HealthSouth's certificate of incorporation and by-laws,
other corporate documents, indemnity agreements, letter agreements, contracts or
otherwise.

7. Additional Release.

In exchange for the consideration set forth in this Agreement,
HealthSouth covenants and agrees that as a condition to any future settlement
between HealthSouth and any Non-Settling Defendant relating to the Underlying
Litigation, such Non-Settling Defendant shall agree to release and forever
discharge the Settling Carrier Releasees from the Released Claims.

8. Return of Premiums to Settling Carriers.

Upon the deposit of funds into the Second Escrow pursuant to Section 1,
any insurance policy premiums paid by the Settling Carriers into the registry or
Clerk of the Court of the Federal Court and the State Court in connection with
the Coverage Litigation or tendered or returned by the Settling Carriers to
HealthSouth, plus any accrued interest, shall be returned to

the Settling Carriers to the extent such premiums and interest have not already
been returned to the Settling Carriers. To the extent the return of insurance
policy premiums to the Settling Carriers as set forth in the preceding sentence
requires action by the Federal Court and the State Court, the Settling Carriers
shall promptly file a request for the return of such premiums with the Federal
Court and the State Court, and HealthSouth shall, at its own expense, support
such request to the extent necessary to effectuate the return of premiums. The
Settling Individual Defendants shall not oppose such request(s). In the event
that this Agreement does not become Final, the return of insurance policy
proceeds to the Settling Carriers shall be without prejudice to the Settling
Carriers' positions with respect to rescission of the Policies, coverage of the
Underlying Litigation, and the Coverage Litigation.

9. Finality of Agreement.

(a) This Agreement shall become Final when the last of the following
events occurs:

(i) HealthSouth, the Settling Individual Defendants, and the Federal
Securities Plaintiffs have entered into the Federal Securities
Action Stipulation of Settlement in a form that is satisfactory
to the Settling Carriers, consistent with the Preliminary
Settlement Agreements, and contains the terms and conditions
identified in Exhibit C, and further contains a provision that
as a condition to any future settlement between the Federal
Securities Plaintiffs and any Non-Settling Defendant, such
Non-Settling Defendant shall agree to release and forever
discharge the Settling Carrier Releasees from the Released
Claims;

(ii) HealthSouth, the Settling Individual Defendants, and the
Derivative Plaintiffs have entered into the Derivative Action
Stipulation of Settlement in a form that is satisfactory to the
Settling Carriers, consistent with the Preliminary Settlement
Agreements, and contains the terms and conditions identified in
Exhibit D and further contains a provision that as a condition
to any future settlement between the Derivative Plaintiffs and
any Non-Settling Defendant, such Non-Settling Defendant shall
agree to release and forever discharge the Settling Carrier
Releasees from the Released Claims;

(iii) The Federal Court has issued an order finally approving the
Federal Securities Action Stipulation of Settlement and
containing the terms and conditions identified in Exhibit C and
such order has become final by passage of time or on appeal;

(iv) The State Court has issued an order finally approving the
Derivative Action Stipulation of Settlement and containing the
terms and conditions identified in Exhibit D and such order has
become final by passage of time or on appeal;

(v) The Federal Court has issued an order finally approving this
Agreement and ruling it was not illegal for HealthSouth to agree
to the indemnification obligations in Section 5 and the
advancement obligations in Section 6 and such order has become
final by passage of time or on appeal;

(vi) The State Court has issued an order finally approving this
Agreement and ruling it was not illegal for HealthSouth to agree
to the indemnification obligations in Sections 5 and the
advancement obligations in Section 6 and such order has become
final by passage of time or on appeal; and

(vii) All insurance policy premiums paid into the registry of the
Federal Court and the State Court in connection with the
Coverage Litigation or tendered or returned by the Settling
Carriers to HealthSouth have been returned to the Settling
Carriers pursuant to Section 8.

(b) Except as specified in Section 9(c) and Section 10, the funds in
the Second Escrow shall not be distributed or otherwise removed from the Second
Escrow for any reason until five (5) business days after the date on which this
Agreement becomes Final.

(i) The funds in the Second Escrow shall be returned to the Settling
Carriers, net of any escrow fees and applicable taxes (if any),
in proportion to their contributions to the First Escrow;

(ii) The indemnities and covenants provided in this Agreement shall
be rendered void and of no effect and any person or entity to
whom or on whose behalf an indemnity payment was made shall
return such payment to the person or entity who made it; and

(iii) The facts and terms of this Agreement shall not be admissible
for any purpose.

10. Additional Obligation to Return Consideration from Second Escrow to
Settling Carriers.

The funds in the Second Escrow shall be returned to the Settling
Carriers, net of any escrow fees and applicable taxes (if any), in proportion to
their contributions to the First Escrow if the Federal Securities Action
Stipulation of Settlement and the Derivative Action Stipulation of Settlement
are not presented to the State Court and the Federal Courts for fairness
hearings within one hundred and twenty (120) calendar days of the entry of
orders preliminarily approving the Federal Securities Action Stipulation of
Settlement and the Derivative Action Stipulation of Settlement, but in no event
may the Settling Carriers receive funds from the Second Escrow without prior
court approval. If the Settlement Amount is returned to the Settling Carriers:
(i) the releases and indemnity agreements provided herein by HealthSouth and the
releases provided by HealthSouth, the Settling Individual Defendants, and the
Settling Carriers shall be null and void and without prejudice to any party
hereto; (ii) all amounts paid to the Settling Carriers by HealthSouth pursuant
to this Agreement shall be promptly returned to HealthSouth; (iii) HealthSouth
shall have the right to seek the return of any amounts paid to a Non-Settling
Defendant pursuant to this Agreement from such Non-Settling Defendant; and (iv)
the Parties shall be restored to the same position they were in prior to the
execution of this Agreement.

11. Motions to Vacate Orders in Coverage Litigation.

HealthSouth and the Settling Individual Defendants agree that the
Settling Carriers may request that the Federal Court and the State Court vacate
orders entered in the Coverage Litigation, respectively dated March 16, 2004 and
April 27, 2004, upon final approval of this Agreement by the Federal Court and
the State Court and HealthSouth and the Settling Individual Defendants will not
oppose those motions. The Settling Carriers agree that if the settlement by the
Parties dissolves for any reason and the Coverage Litigation resumes, the
Settling Carriers will not oppose any request to the Federal Court and the State
Court by HealthSouth and/or the Settling Individual Defendants to re-instate the
respective orders. This provision is not intended to affect the rights of the
Settling Carriers to seek reversal of either order by an appellate court.

12. No Admission of Liability or Wrongdoing.

The provisions contained in this Agreement memorialize a compromise of
disputed claims, and nothing in this Agreement shall be deemed a presumption,
concession or admission by any of the Parties hereto of any breach of duty,
liability, default or wrongdoing as to any facts or claims alleged or asserted
by any of the other Parties, nor shall this Agreement be an admission of, or
constitute a finding of, coverage under the Policies. Neither the payment of any
sum of money nor the execution of this Agreement shall constitute, be construed
as, or be offered or received into evidence as, an admission of any wrongdoing
by, or liability or obligation of, any Party hereto. This Agreement is entered
into for the sole purpose of resolving contested claims and disputes as well as
avoiding the substantial costs, expenses, and uncertainties associated with such
disputes. It is also expressly agreed and acknowledged that all Parties to this
Agreement have acted in good faith with respect thereto and that neither this

Agreement, its execution, the performance of any of its terms nor any of its
contents shall constitute or be construed or offered as evidence in any
proceeding as an admission of any liability or of any insurance coverage or of
any fact or any indication that any of the claims which were or could have been
asserted by the Parties has any merit.

13. Ownership of Claims Released.

HealthSouth and the Settling Individual Defendants each represent and
warrant that they are the owners of and have not assigned or transferred any of
the claims, demands, actions and/or causes of action which are released by each
of them herein. If, contrary to this representation and warranty, HealthSouth
and/or any Settling Individual Defendant assigns or has assigned such rights to
any other person or entity, that Party shall defend, indemnify, and hold
harmless the other Parties with respect to any claim or action brought by an
assignee of any interest assigned contrary to this representation and warranty.

14. Good Faith.

Each Settling Carrier represents and warrants to HealthSouth and the
Individual Settling Defendants that it: (i) has not admitted in writing that it
has acted in bad faith in performing its duties and obligations to any party
claiming a right to coverage under any of the Policies; (ii) has not been
advised by its counsel that it has acted in bad faith in performing its duties
and obligations to any party claiming a right to coverage under any of the
Policies; and (iii) has not concluded in writing that it has acted in bad faith
in performing its duties and obligations to any party claiming a right to
coverage under any of the Policies. The Parties agree that the representations
and warranties contained in this paragraph do not waive the attorney/client
privilege, the work-product doctrine, or any other applicable privileges.

15. Authority to Execute Agreement.

Each signatory to this Agreement who signs on behalf of another hereby
warrants that he or she has the authority to sign on behalf of said person or
entity, that the appropriate corporate resolutions or other consents have been
passed and/or obtained, and that this Agreement shall be binding on that Party.

16. Representation by Counsel.

Each Party represents and warrants that he or it has been represented
by, and has consulted with, the counsel of his or its choice regarding the
provisions, obligations, rights, risks, and legal effects of this Agreement and
has been given the opportunity to review independently this Agreement with such
legal counsel and agree to the particular language of the provisions herein. It
is further agreed that this Agreement shall be construed without regard to the
identity or affiliation of its drafters and as if this Agreement was jointly
prepared and that, in the event of

ambiguity or dispute regarding the interpretation of this Agreement, the
Agreement will be interpreted as if each Party hereto participated in the
drafting hereof.

17. Entire Agreement, No Modification Unless in Writing.

This Agreement constitutes the entire agreement between the Parties as
to the subject matter hereof and supersedes any prior or contemporaneous written
or oral agreements or understandings between the parties as to the subject
matter hereof, including without limitation the Insurance MOU; provided,
however, that nothing contained herein shall release, alter, change, limit,
affect, dilute, eliminate, or in any way, impair or undermine existing or future
indemnification and advancement rights, and/or existing or future
indemnification and advancement claims, if any, of the Individual Settling
Defendants against HealthSouth, whether arising out of any corporate governance
provision, Certificate of Incorporation, by-laws, as in effect at any time,
other corporate documents, indemnity agreements, letter agreements, severance
agreements, contract, law, or otherwise. No modification or amendment of this
Agreement shall be valid unless made in writing and signed by or on behalf of
each Party affected by such change.

18. Choice of Law and Jurisdiction over Disputes.

This Agreement shall be interpreted, enforced and governed by and under
the laws of the State of Alabama as they exist on the date of this Agreement
without regard to Alabama's conflicts of laws provisions. Any disputes arising
out of or relating to this Agreement shall be brought in the same court in which
the Settling Carrier at issue in the dispute is or was a party in connection
with the Coverage Litigation.

19. Multiple Counterparts.

This Agreement may be executed in multiple counterparts, each
of which shall be an original, and such counterparts together shall constitute
one and the same instrument. Facsimile or .pdf copies of this Agreement in
counterpart or otherwise bearing signatures of the Parties may be treated as
executed originals.

20. Notices.

All notices required or permitted under or pertaining to this Agreement
shall be in writing and delivered by any method providing proof of delivery. Any
notice shall be deemed to have been given on the date of receipt. Notices shall
be delivered to the Parties at the addresses in Exhibit E until a different
address has been designated by notice to the other Party:

21. Full and Final Settlement.

The Parties intend that the execution and performance of this Agreement
shall, as provided above, be effective as a full and final settlement of, and as
a bar to, the claims released pursuant to Sections 2 and 3 (collectively, the
"Released Claims"). The Parties hereto covenant and agree that if they hereafter
discover facts different from or in addition to the facts that they now know or
believe to be true with respect to the subject matter of this Agreement, it is
nevertheless their intent hereby to settle and release fully and finally the
Released Claims. In furtherance of such intention, the releases herein shall be
and will remain in effect as releases notwithstanding the discovery of any such
different or additional facts. It is expressly understood and agreed by the
Parties that the Released Claims may encompass claims or matters the nature of
which have not yet been discovered, and it is understood and agreed that to the
extent they may be alleged to be applicable, all protections under California
Civil Code ss. 1542, which reads, "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS
WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE
TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY
AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR," or any similar provision of the
statutory or nonstatutory law of any other jurisdiction, are hereby waived.

22. Further Actions to Effectuate Agreement.

Each Party agrees to execute and deliver such other documents, mutual
dismissals, and instruments and to take such further action as may be reasonably
necessary to fully carry out the intent and purposes of this Agreement.

23. Limitations on Waiver and Amendment.

No breach of any provision hereof can be waived unless done in writing.
Waiver of any one breach shall not be deemed a waiver of any other breach of the
same or other provisions hereof.

24. No Precedential Value.

The Parties agree and acknowledge that this Agreement carries no
precedential value and should not be relied upon by any person as evidence of
any obligation of any Settling Carrier under identical or similar policies.

25. Headings.

Any headings contained herein are for informational purposes only and
do not constitute a substantive part of the Agreement. In the event of a dispute
concerning the terms and conditions of the Agreement, the headings shall be
disregarded.

26. Agreement Binding on Parties.

This Agreement shall be binding upon and inure to the benefit of the
Parties hereto and their respective heirs, executors, administrators,
successors, and assigns.

27. Illegality.

If any provision of this Agreement shall be held to be illegal or
unenforceable, such holding shall not affect the validity or enforceability of
the other provisions of this Agreement.

28. Effectiveness of Agreement.

This Agreement shall be deemed effective as of the date below when it
has been executed by or on behalf of all Parties and facsimile or .pdf copies of
this Agreement in counterpart or otherwise bearing signatures of the Parties
have been delivered to the persons identified in Section 20, either by
electronic transmittal, facsimile, overnight delivery service, or U.S. mail.

AGREED AS OF THIS 25th day of September, 2006.

Federal Insurance Company HealthSouth Corporation
and Executive Risk Indemnity Inc.

By: /s/ Xxxxx X.Xxxxx By: /s/ Xxxx Xxxxxxxxxxx
--------------------------------- ---------------------------------
Xxxxx X. Xxxxx HEALTHSOUTH Corporation
XXXXX & XXXXXXX L.L.P. Xxx XxxxxxXxxxx Xxxxxxx
Xxxxxxxxxx, Xxxxxxx 00000

St. Xxxx Mercury Insurance Company Xxxxxxx X. Xxxxxx

By: Its Attorney In Fact, Xxxxxxx By: /s/ Xxxxxxx X. Xxxxxxx III
Keeley /s/ Xxxxxxx Xxxxxx ---------------------------------
--------------------------------- Xxxxxxx X. Xxxxxxx III
XXXXXXXXXXX & PRICE, LLP XXXXXXXXX, XXXXXXXX & WHITE, LLC

Zurich American Insurance Company Xxxxx X. Xxxxxx, P. Xxxxx Xxxxx,
Xxxxxxx X. Xxxxxxx, Xxxxxxx X. Xxxx
III, Xxxxxxx X. Xxxxxx, Xxxxxxx X.
Xxxx, Xxxxxxx X. Xxxxxx, Xxxxx X.
House, Xxx X. Xxxxx, Xxxxxxx X.
Xxxxxx, Xxxxxxxx XxXxxxxxx, Xxxxxxx
Xxxx, Xxxxx Xxxxxxx, Xxxxxx X.
Xxxxxxx, Xxxxxxx Xxxxx, Xxxxx X.
Xxxxxx, Xxxxxx Xxxx and Xxxxxxx X.
Xxxxxxx

By: /s/ Xxxxx X. Xxxxxx By: /s/ Xxxxx X. Xxxxx III
--------------------------------- ---------------------------------
Xxxxx X. Xxxxxx Xxxxx X. Xxxxx III
XXXX, XXXXX & XXXX, LLP XXXXXXX XXXXXX & XXXX, LLP

Certain Underwriters at Lloyd's who Xxxxxx X. Xxxxxxx
subscribed, severally and not jointly,
to Policy Number 823/XX0000000

By: /s/ Xxxx Xxxxxxxx By: /s/ Xxx X. Xxxxx
--------------------------------- ---------------------------------
Xxxx Xxxxxxxx Xxx X. Xxxxx
XXXXXX XXXXXX XXXXXXXX LLP LAW OFFICE OF XXXXXX X. XXXXX

Certain Underwriters at Lloyd's who
subscribed, severally and not jointly,
to Policy Number 823/FD9900985

By: /s/ Xxxx Xxxxxxxx
---------------------------------
Xxxx Xxxxxxxx
XXXXXX XXXXXX XXXXXXXX LLP
Certain Underwriters at Lloyd's, who ACE American Insurance Company
subscribed, severally and not jointly,
to Policy Number 823.FD0100668

By: /s/ Xxxxxx XxXxxxxxxx By: /s/ Xxxxxxx X. Xxxxxxx
--------------------------------- ---------------------------------
Xxxxxx XxXxxxxxxx Xxxxxxx X. Xxxxxxx
Xxxxxx Xxxxx XXXXXX XXXXX XXXXXXXX & XXXXXXX LLP
FIELDS XXXXXX XXXXXX & XXXXXXXXXX LLP
(Counsel for 2001 Lloyd's syndicate
numbers 861, 1209, 1411 and 2488)

Starr Excess Liability Arch Insurance Company
and
AIG Europe (UK) Limited as agents for
New Hampshire Insurance Company

By: /s/ Xxxxxx Xxxxxx By: /s/ Xxx Xxxxxx
--------------------------------- ---------------------------------
Xxxxxx Xxxxxx Xxx Xxxxxx
BOWRON LATTA & XXXXXX, P.C. XXXXXX XXXXXXXXX LLC

Xxxxxxxxx Xxxxxxx Insurance Company Lumbermens Mutual Casualty Company

By: /s/ Xxxxxxx Xxxxxx By: /s/ Xxxxxxx Xxxxxxxx
--------------------------------- ---------------------------------
Xxxxxxx Xxxxxx Xxxxxxx Xxxxxxxx
DRINKER XXXXXX DLA Piper US LLP

Royal Indemnity Company Xxxxxx X. Xxxxxxx

By: /s/ Xxxxxxx Xxxxxx By: /s/ Xxxxxxx X. Xxxxxxx by J. Xxxx
--------------------------------- Xxxx with express permission
Xxxxxxx Xxxxxx ---------------------------------
XXXXX XXXXXX & XXXXXX LLP Xxxxxxx X. Xxxxxxx, Esq.
CHRISTIAN SMALL, LLP

Xxxxx X. Xxxxxxxx Certain Underwriters to Lloyds, who
subscribed, severally and not
jointly, to Policy Number
823.FD0100668

By: /s/ Xxxxxxx X. Xxxxxx By: /s/ Xxxxxxx Xxxxxx
--------------------------------- ---------------------------------
Xxxxxxx X. Xxxxxx, Esq. Xxxxxxx Xxxxxx
XXXXXXX & XXXXXXXX LLP DRINKER XXXXXX
(Counsel for 2001 Lloyd's WNM
Syndicate 250)

Xxx X. Xxxxxxx, Xxx X. Xxxxxx Xxxxxx X. Xxxxxx
and Xxxxxx X. May

By: /s/ Xxxxxx X. Xxxxxx by J. Xxxx By: /s/ Xxxxxx X. Xxxxx
Xxxx by express permission ---------------------------------
--------------------------------- Xxxxxx X. Xxxxx, Esq.
Xxxxxx X. Xxxxxx, Esq. FAWAL & XXXXX
XXXXXXXXXX XXXXXXXXXX & XXXX

Xxxxx X. Xxxxxxx Xxxxx X. Xxxxx

By: /s/ Xxx X. Xxxx by J. Xxxx Xxxx By: /s/ Xxxxxxx X. Xxxxxxx w/express
with express permission prermission, Xxxxx X. Xxxxxxx
--------------------------------- ---------------------------------
Xxx X. Xxxx, Esq. Xxxxxxx X. Xxxxxxx, Esq.
XXXXXXXX XXXXXX XXXXXXX & XXXXXX LLP XXXXXX XXXXXXX DAUPHIN XxXXXXXX &
XXXXXXXX

Travelers Indemnity Company, successor Great Lakes Reinsurance (UK) PLC
in interest to Gulf Insurance Company

By: /s/ Xxx Xxxxxx By: /s/ Ommid X. Xxxxxxxxx
--------------------------------- ---------------------------------
Xxx Xxxxxx Ommid X. Xxxxxxxxx
X'XXXXX & XXXXX XXXXX & XXXXX LLP

Twin City Fire Insurance Company Continental Casualty Company

By: /s/ Xxxxxxx X. Xxxxxxxx By: /s/ Xxxxxx X. Xxxxxxxx III
--------------------------------- ---------------------------------
Xxxxxxx X. Xxxxxxxx Xxxxxx X. Xxxxxxxx III
XXXXX XXXXXX, LLP DLA Piper US LLP

Sage X. Xxxxxx, Xxxxxx X. Xxxxxx, Xxxxxxx Greenwich Insurance Company and XL
X. Xxxxxxx, III,Xxxx X. Xxxxxxxxxx, Xxxx Specialty Insurance Company
X. Xxxxxx and Xxxxx X. Xxxxxxxx,Xx.

By: /s/ J. Xxxx Xxxx By: /s/ Xxxx X. Xxxxx (MER)
--------------------------------- ---------------------------------
J. Xxxx Xxxx Xxxx X. Xxxxx
J. XXXX XXXX, P.C. XXXX XXXXX & XXXX, LLP

Royal Indemnity Company, as successor
in interest to Royal Insurance Company
of America

By: /s/ Xxxxxxx Xxxx
---------------------------------
Xxxxxxx Xxxx
Xxxxxxxx Xxxxxx
XXXXXX XXXXX XXXXXXXXX XXXXXXX & XXXXXX LLP

EXHIBIT A
---------

========================================= ====================================== =======================================
1998 to 1999 2001 to 2002 2002 to 2003
----------------------------------------- -------------------------------------- ---------------------------------------
Carrier Limit / Excess of Carrier Limit / Excess of Carrier Limit / Excess of
------------------- --------------------- ----------------- -------------------- ----------------- ---------------------

Federal $10 mm / Federal $10 mm / Royal $10 mm /
primary primary Indemnity primary ($10
8142-03-89B-EPP 8142-03-89C-BHM Co. mm deductible)

R2HP611468
------------------- --------------------- ----------------- -------------------- ----------------- ---------------------

St. Xxxx Mercury $10 mm / $10 mm St. Xxxx $10 mm / $10
Mercury mm
501CM0017
568CM01153
------------------- --------------------- ----------------- -------------------- ----------------- ---------------------

Federal $10 mm / $20 mm Federal $10 mm / $20 XL Specialty $25 mm / $20 mm
mm
8142-04-72A 8142-04-72B-BHM ELU 81603-02
------------------- --------------------- ----------------- -------------------- ----------------- ---------------------

Royal $10 mm / $30 mm Royal $10 mm / $30 ACE American $10 mm / $45 mm
mm
PSF00617 PSF00617 D0XG21644985001
------------------- --------------------- ----------------- -------------------- ----------------- ---------------------

Zurich American $10 mm / $40 mm Zurich American $10 mm / $40 St. Xxxx $10 mm / $55 mm
mm Mercury
DOC 0000-000-00 DOC 0000-000-00
568CM1645
------------------- --------------------- ----------------- -------------------- ----------------- ---------------------
Clarendon
ERII $10 mm / $50 mm $10 mm / $50 Twin City Fire $10 mm / $65 mm
mm Ins.
000-000000-00 MAG0410003910000
DA0212436-02

AIG Europe UK
Ltd.
------------------- --------------------- ----------------- -------------------- ----------------- ---------------------

St. Xxxx Mercury $ 5 mm / $60 mm St. Xxxx $ 5 mm / $60 Lumbermens $10 mm / $75 mm
Mercury mm
501CM0018 3DY02109500
568CM1152
(through
02/17/03)
------------------- --------------------- ----------------- -------------------- ----------------- ---------------------

Royal $10 mm / $65 mm Royal $10 mm / $65 Starr Excess $ 5 mm / $85 mm
mm
XXX000000 XXX000000 6457794
------------------- --------------------- ----------------- -------------------- ----------------- ---------------------

Federal $10 mm / $75 mm Greenwich $10 mm / $75 Arch Insurance $ 5 mm / $90 mm
mm
8152-85-78 ELU 82663-01 11DOX0521000
------------------- --------------------- ----------------- -------------------- ----------------- ---------------------

ERII $15 mm / $85 mm Gulf $15 mm / $85 Continental $ 5 mm / $95 mm
mm Casualty
000-000000-00 GA 2846151
169914082
------------------- --------------------- ----------------- -------------------- ================= =====================

Lloyds $25 mm / $100 Clarendon $17.5 / $100
mm mm
823/XX0000000 MAG0410004010000

823/FD9900985 Lloyd's
823/FD0100668

Lloyd's WNM

Lloyd's AGM

Lloyd's XXX

Xxxxx'x SUT

New Hampshire
Insurance Company
(per AIG Europe
UK Ltd.)
------------------- --------------------- ----------------- --------------------
ERII $25 mm / $125 Great Lakes UK $15 / $117.5
mm mm
000-000000-00
01-UK-PX-
0000030-00
=================== ===================== ----------------- --------------------
Twin City $10 / $132.5
(Hartford) mm

NDA-0201674-01
----------------- --------------------
Lumbermens $17.5 /
(Xxxxxx) $142.5 mm

3DY-001211-01
----------------- --------------------
Greenwich $40 mm /
$160 mm
ELU 81603-00
================== ===================

================== ===================
ERII $10mm

8167-1518
================== ===================

EXHIBIT B
---------

Amalgamated Gadget, L.P. v HealthSouth Corp., No. 4-04CV-198-A (N.D. Tex.)

Xxxxx Xxxxxxx v. Xxxxxxx X. Xxxxxxx, et al., No. 19968-NC (Del. Chancery)

Xxxxxx, et al. v. Scrushy, et al., No. CA-19896 (Del. Ch. Ct.)

Xxxxxxxxx & Xxxxxx, L.L.C. v. HealthSouth, Case No. 03-2393 (Circuit Court,
Jefferson County, Alabama)

Brookwood HealthServices, Inc., d/b/a Brookwood Medical Center v. Alabama State
Health Planning and Development Agency, No. CV0102475 (Circuit Court, Jefferson
County, Alabama)

Xxxxx v. HealthSouth Corp., et al., No. 04-B-2451 (Colo.)

Xxxxx v. HealthSouth Corp., et al., Case No. 05-998 (N.D. Ala.)

Xxxx X. Xxxxxxxx x. Xxxxxxx, et al., No. CV0406985 (Ala. Cir. Ct., Jefferson
County)

CLA Architecture, Inc. v. HealthSouth Corp., cv-03-2644 (?)

Crooks v. Xxxxxxx X. Xxxxxxx, et al., No. 00-0000 (Xxxxxxx Xxxxx, Xxxxxxxxx
Xxxxxx, Xxxxxxx)

Ernst &Young v. HealthSouth, 00-0000 (Xxxxxxx Xxxxx, Xxxxxxxxx Xxxxxx, Ala.)

Formal Order of Investigation by the United States Securities and Exchange
Commission styled In the Matter of HealthSouth Corp., File No. MA-02772, and
related subpoena dated September 17, 2002

Xxxxxxx x. Xxxxxxx X. Xxxxxxx, et al., No. XX-00-0000 (Xxxxxxx Xxxxx, Xxxxxxxxx
Xxxxxx, Ala.)

General Electric Capital Corporation v. HealthSouth Leasing Company, L.L.C.,
Case No. 03-2115 (Circuit Court, Jefferson County, Alabama)

General Medicine v. HealthSouth, 04-958 (?)

Grand Jury Subpoena issued to HealthSouth Corporation, dated February 5, 2003
(N.D. Ala.)

HealthSouth Corporation v. Benchmark Medical, 04-0479 (_______)

HealthSouth Corp. v. HSBC Bank USA, et al., No. XX-00-0000 (Xxx. Xxx. Xx.,
Xxxxxxxxx Xxxxxx)

Hervey v. HealthSouth Corp. et al., No. CV-03-8031 (Ala. Cir. Ct.)

Xxxxxxx x. Xxxxx & Xxxxx, et al., No. CV-03-7790 (Ala. Cir. Ct.)

In re Sealed, (Cal.)

In re Xxxxxxx Xxxxxx, No. CV03-5378 (Circuit Court, Jefferson County, Alabama)

In re HealthSouth Corporation ERISA Consolidated Litig., No. CV-03-BE-1700-S
(N.D. Ala.)

Xxxxx v. Xxxx Xxxxxxxxxxx, et al., Xx. XX00 0000 (Xxxxxxx Xxxxx, Xxxxxxxxx
Xxxxxx, Xxxxxxx)

Kosseff v. XxxxxxXxxxx, Xxxxx, Xxxx Xx. 00-0000

Xxxxxxxx v. Xxxxxxx Xxxxxxx, et al., Xx. XX00 0000 (Xxxxxxx Xxxxx, Xxxxxxxxx
Xxxxxx, Xxxxxxx)

Xxxxxx X. XxXxxxxxxx, Xx. v. Xxxxxxx X. Xxxxx, No. CV-03-846 (Circuit Court,
Xxxxxxxxxx County, Ala.)

Sellers x. Xxxxx Healthcare Corp., No. CV-03-0457 (N.D. Al.)

Senior Housing Properties Trust and HRES Properties v. HealthSouth Corp., No.
284182 (Land Court Suffolk Co., Mass.)

Siemens One, Inc., No. CV-03-4228 (___)

Xxxxxx X. Xxxxxxx et al. v. HealthSouth Corp., Xx. XX-00-0000 (Xxxxxxx Xxxxx,
Xxxxx Judicial Cir. Ala.)

Xxxxx X. Xxxxxxxx v. HealthSouth Corp. No. __________ (Circuit Court, Jefferson
County, Alabama)

Neostar Sports and Entertainment, Inc. v. Mandalay Sports Action Entertainment,
LLC, Xxxx Xx. XX000000 (Xxx. Superior Court)

Scrushy x. Xxxxxx, Case No. 20375 (Delaware Chancery Court)

Scrushy v. HealthSouth Corp., No. 03C-05-115 CHT (Delaware Superior Court)

Xxxxxxx X. Xxxxxxx v. HealthSouth Corporation, Case No. CV-2005-07364, (Cir. Ct.
of Jefferson Co., Ala.)

Scrushy v. HealthSouth Corp., No. 20357-nc (Delaware Chancery Court)

Scrushy v. HealthSouth Corp., No. CR-03-BE-530-S (N.D. Ala.)

S.E.C. x. Xxxxxx, No. CV-03-J-0715-S (N.D. Ala.)

S.E.C. v. HealthSouth Corporation et al., No. CV-03-J-0615-S (N.D. Ala.)

S.E.C. x. Xxxxxxx, et al., No. CV-03-S-0758-S (N.D. Ala.)

SEC x. Xxxxxx, et al., No. CV-03-C-02424 (N.D. Ala.)

S.E.C. x. Xxxxx, et al., No. CV-03-C-0720-S (N.D. Ala.)

Senior Housing Properties Trust and HRES Properties Trust v. HealthSouth, Case
Xx. 000000 (Xxxx Xxxxx, Xxxx.)

The State of Tennessee, on the Relation of Fayetteville Imaging Associates, Inc.
v. National Imaging Affiliates of Fayetteville, Inc., Case No. 157919-1
(Chancery Ct., Xxxx County, Tennessee)

Tanner v. HealthSouth, 04-7715 (___________)

Teachers' Retirement System of La. et al. v. HealthSouth Corp., No. 20062
(Delaware Chancery Court 2002)

Teachers' Retirement System of La. et al. v. HealthSouth Corp., No. 20524-nc
(Delaware Chancery Court 2002)

Teachers Retirement System of Louisiana et al. v. Scrushy et al., Xx. 00000
(Xxxxxxxx Xxxxxxxx Xxxxx 0000)

Xxxxxx Xxxxxx x. Xxxxx, et al., No. CR-03-C-0183-S (N.D. Ala.)

United States v. Xxxx, Xx. XX-00-000 (X.X. Xxx.)

Xxxxxx Xxxxxx x. Xxxxxxx, 00-000 (X.X. Xxx.)

Xxxxxx Xxxxxx x. Xxxxx, CR-03-C-0374 (N.D. Ala.)

United States x. Xxxxx, No. CR-03-0338-S (N.D. Ala.)

Xxxxxx Xxxxxx x. Xxxxxx, Xx. XX-00-X-000-X (X.X. Xxx.)

Xxxxxx Xxxxxx x. Xxxxxx, Xx. XX-00-X-0000-X (X.X. Xxx.)

Xxxxxx Xxxxxx x. Xxxxx, CR-03-PT-0375-S (N.D. Ala.)

United States x. Xxxxxxx, No. CR-03-C-0182-S (N.D. Ala.)

United States x. Xxxxxx, Xx. XX-00-X-0000-X (X.X. Xxx.)

Xxxxxx Xxxxxx x. XxXxx, Xx. XX-00-000 (X.X. Xxx.)

Xxxxxx Xxxxxx x. Xxxxx, Xx. XX-00-X-0000-X (X.X. Xxx.)

Xxxxxx Xxxxxx v. Xxxxxxx, Xx. XX-00-XX-0000-X (X.X. Xxx.)

Xxxxxx Xxxxxx v. Xxxxxxxxx, Xx. XX-00-000 (X.X. Xxx.)

Xxxxxx Xxxxxx x. Xxxxx, No. CR-03-PT-0126-S (N.D. Ala.)

United States of America ex rel. Xxxxx X. Xxxxxx vs. HealthSouth Corp., et al.,
No. SA-98-EA-0372-FV (W.D. Tex.)

United States of America ex rel. Xxxx Xxxxxx vs. HealthSouth Corp., et al., No.
97-cv-3206 (N.D. Ala.)

Xxxx and CAW Imaging, P.C. v. HealthSouth, Civ. 03-1564-L (W.D. Ok.)

Xxxxxx x. HealthSouth Corp. et al., No. XX-00-000 (Xxxxxxx Xxxxx, Xxxxxxxxxx
Xxxxxx, Ala.)

EXHIBIT C
---------

The following paragraphs shall be included in the Federal Securities Action
Stipulation of Settlement and the Federal Court's Order finally approving the
Federal Securities Action Stipulation of Settlement:

1. "Released Parties" means, with respect to each Settling Defendant,
the family members, heirs, executors, administrators, successors, assigns,
present and former employees, officers, directors, attorneys, legal
representatives, and agents of each of them, and any person or entity which is
or was related to or affiliated with any Settling Defendant or in which any
Settling Defendant has or had a controlling interest and the present and former
parents, subsidiaries, divisions, affiliates, predecessors, successors,
employees, officers, directors, attorneys, assigns, and agents of each of them.
The Released Parties shall also include the Insurers who issued the Insurance
Policies and are contributing to the Settlement Amount (the "Settling Insurers")
and the present and former parents, subsidiaries, divisions, affiliates,
predecessors, successors, employees, officers, directors, attorneys, assigns,
and agents of each of them. Notwithstanding anything in this paragraph, Released
Parties shall not include any Non-Settling Defendant, defined as a Defendant in
the Securities Action that is not a party to this Settlement, including but not
limited to Ernst & Young LLP, UBS AG, UBS Warburg LLC, PaineWebber, Inc. now
d/b/a UBS Financial Services, Inc. (subsidiary of UBS AG), Citigroup, Inc.,
Xxxxx Xxxxxx, Inc. (subsidiary of Citigroup), Salomon Brothers, Inc. now d/b/a
Citigroup Global Markets (subsidiary of Citigroup), Xxxxxxx Xxxxx Xxxxxx now
d/b/a Citigroup Global Markets (subsidiary of Citigroup), X.X. Xxxxxx
Securities, Inc. (subsidiary of X.X. Xxxxxx Xxxxx & Co.), Chase Securities, Inc.
now d/b/a X.X. Xxxxxx Securities, Inc. (subsidiary of X.X. Xxxxxx Chase & Co.),
Bear Xxxxxxx & Co., Xxxxx & Company now d/b/a Xxxxx Securities Corporation,
Credit Suisse First Boston Corporation, Xxxxxx Xxxxxxx & Co. Inc., Xxxxxxx,
Sachs & Co., Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx, Inc. (a subsidiary of
Xxxxxxx Xxxxx & Co., Inc.), Deutsche Bank Securities, Inc. (subsidiary of
Deutsche Bank AG), Deutsche Bank Alex. Xxxxx, Inc. (division of Deutsche Bank
Securities, Inc. (subsidiary of Deutsche Bank AG)), First Union Securities now
d/b/a Wachovia Securities, Inc., Scotia Capital Markets (USA), Inc. (division of
Scotia Capital Inc.), Xxxxxxxxx & Company, Inc., Xxxxxx Brothers, Inc., BNY
Capital Markets, Inc., Fleet Securities, Inc. (wholly owned subsidiary of
FleetBoston Financial Corp.), NatCity Investments, Inc., Banc of America
Securities, LLC (subsidiary of Bank of America Corp.), NationsBanc Xxxxxxxxxx
Securities, LLC now d/b/a Banc of America Securities, LLC (subsidiary of Bank of
America Corp.), Xxxxxxxx X. Xxxxxxx, Xxxxxxx X. XxXxxxx, Xxxxxx Xxxxx, Xxxxxxx
Xxxxxxx, Xxxxxxx X. Xxxxx, Xxxxxx X. Xxxxx, Xxxxxxx X. Xxxxxx, Xxxxx Xxxx, Xx.,
Xxxxxx X. XxXxx, Xxxxx X. Xxxxxx, Xxxxxx Xxxxx, Xxxxxxx Xxxxxxx, Xxxxx X.
Xxxxxxx, Xxxxxxx Xxx Xxxxxx, Xxxxxxxx X. Xxxxxxxxx, Xxxxxxx X. Xxxxx, Xxxx
Xxxxx, Xxxxx X. Xxxxx, and Xxxxxxxxx Xxxxxx.

2. "Released Claims" means all claims and causes of action of every
nature and description, whether known or unknown, whether arising under federal,
state, common or foreign

law, whether brought directly or derivatively, that Plaintiffs or any member of
the Class in the Action asserted in the Complaint, or could have asserted as a
result of purchases, acquisitions, sales, or exercises made during the Class
Period in securities issued by HealthSouth (including, without limitation, all
claims arising out of or relating to any disclosures, public filings,
registration statements or other statements by HealthSouth or any Defendant in
the Action), based upon or arising out of any facts, allegations or claims set
forth in the Complaint. In addition, with respect to the Settling Insurers and
the present and former parents, subsidiaries, divisions, affiliates,
predecessors, successors, employees, officers, directors, attorneys, assigns,
and agents of each of them, Released Claims means all claims and causes of
action of every nature and description, whether known or unknown, whether
arising under federal, state, common or foreign law, whether brought directly or
derivatively, that are based upon, in consequence of, arise out of or relate in
any way, whether in whole or in part, to (i) the Insurance Policies, (ii) the
Coverage Litigation, (iii) the Underlying Litigation, (iv) the litigation,
defense, and settlement of the Coverage Litigation and the Underlying
Litigation, and/or (v) any of the facts, circumstances, and situations
underlying or alleged in the Coverage Litigation and the Underlying Litigation.

3. Insurance Policies means the insurance policies issued by the
Settling Insurers to HealthSouth that are identified in Exhibit A to the
Settlement Agreement and Policy Release between the Settling Defendants and the
Settling Insurers.

4. Coverage Litigation shall have the meaning given to that term in the
Settlement Agreement and Policy Release between the Settling Defendants and the
Settling Insurers.

5. Underlying Litigation shall have the meaning given to that term in
the Settlement Agreement and Policy Release between the Settling Defendants and
the Settling Insurers.

6. Plaintiffs, all members of the Class, the successors and assigns of
any of them and anyone claiming through or on behalf of any of them, are hereby
permanently BARRED, ENJOINED and RESTRAINED from instituting, commencing or
prosecuting in this Litigation or any other action or proceeding any Released
Claims against any of the Released Parties. The Released Claims against each and
all of the Released Parties shall be released and dismissed with prejudice and
on the merits. Nothing in this paragraph shall release the Released Claims
against the Released Parties of any Person who submitted a timely, signed
request for exclusion from the Class and did not submit a timely, signed request
to revoke the prior request for exclusion ("Opt-Out Plaintiffs").

7. (a) The Non-Settling Defendants and all other persons, including but
not limited to any other person or entity later named as a defendant
in this Litigation, are hereby permanently BARRED, ENJOINED and
RESTRAINED from commencing, prosecuting, or asserting any claim for
contribution (whether contractual or otherwise) against the Released
Parties or any other claim against the Released Parties where the
injury to the entity/individual is any person's

actual or threatened liability to the Lead Plaintiff, Named
Plaintiffs and other Class Members or any costs or expenses
(including attorneys' fees) incurred in connection with this
Litigation; provided, however, that the Bar Order stated in this
paragraph shall not apply to claims that may be asserted by any
Opt-Out Plaintiff, or between and/or among any defendants in cases
brought by Opt-Out Plaintiffs (but only to the extent such a claim
between and/or among defendants is based upon the defendant's actual
or threatened liability solely to the Opt-Out Plaintiffs or the
costs and expenses incurred solely in connection with a claim
asserted by an Opt-Out Plaintiff).

(b) The Non-Settling Defendants and all other persons, including but
not limited to any other person or entity later named as a defendant
in this Litigation, are hereby permanently BARRED, ENJOINED and
RESTRAINED from commencing, prosecuting, or asserting against the
Settling Insurers and the present and former parents, subsidiaries,
divisions, affiliates, predecessors, successors, employees,
officers, directors, attorneys, assigns, and agents of each of them
any and all manner of action or actions, cause or causes of action,
suits, debts, liens, contracts, agreements, promises, liabilities,
claims, rights, demands, damages, losses, costs, charges or
expenses, of any nature whatsoever, in law or in equity, known or
unknown, suspected or unsuspected, fixed or contingent, that are
based upon, in consequence of, arise out of or relate in any way,
whether in whole or in part, to (i) the Insurance Policies, (ii) the
Coverage Litigation, (iii) the Underlying Litigation, (iv) the
litigation, defense, and settlement of the Coverage Litigation and
the Underlying Litigation, and/or (v) any of the facts,
circumstances, and situations underlying or alleged in the Coverage
Litigation and the Underlying Litigation.

(c) For purposes of this Bar Order, Barred Person shall be defined
as any Person who is barred and/or enjoined by paragraph 7(a) and
7(b).

8. All Settling Parties are hereby permanently BARRED, ENJOINED and
RESTRAINED from commencing, prosecuting or asserting any actions or claims
against the Settling Insurers and the present and former parents, subsidiaries,
divisions, affiliates, predecessors, successors, employees, officers, directors,
attorneys, assigns, and agents of each of them that are based upon, in
consequence of, arise out of or relate in any way, whether in whole or in part,
to (i) the Insurance Policies, (ii) the Coverage Litigation, (iii) the
Underlying Litigation, (iv) the litigation, defense, and settlement of the
Coverage Litigation and the Underlying Litigation, and/or (v) any of the facts,
circumstances, and situations underlying or alleged in the Coverage Litigation
and the Underlying Litigation.

9. All Settling Insurers and the present and former parents,
subsidiaries, divisions, affiliates, predecessors, successors, employees,
officers, directors, attorneys, assigns, and agents of each of them are hereby
permanently BARRED, ENJOINED and RESTRAINED from

commencing, prosecuting or asserting any actions or claims against the Settling
Parties that are based upon, in consequence of, arise out of or relate in any
way, whether in whole or in part, to (i) the Insurance Policies, (ii) the
Coverage Litigation, (iii) the Underlying Litigation, (iv) the litigation,
defense, and settlement of the Coverage Litigation and the Underlying
Litigation, and/or (v) any of the facts, circumstances, and situations
underlying or alleged in the Coverage Litigation and the Underlying Litigation.

10. Barred Persons shall be entitled to a judgment credit (i.e., a
reduction to the total amount of the judgment for each claim entered in the
Action) in an amount that is the greater of: (i) that part of the Settlement
Amount paid by the Settling Parties and the Settling Insurers that is allocated
to claims for which contribution would be sought; or (ii) for each such claim,
the proportionate share of the Settling Defendants' fault as determined at
trial.

11. (a) The Settling Defendants and Settling Insurers are hereby
permanently BARRED, ENJOINED and RESTRAINED from commencing,
prosecuting, or asserting any claim for contribution (whether
contractual or otherwise) against the Barred Persons or any other
claim against the Barred Persons where the injury to the Settling
Defendant or the Insurer is any person's actual or threatened
liability to the Lead Plaintiff, Named Plaintiffs and other Class
Members or any costs or expenses (including attorneys' fees)
incurred in connection with this Litigation; and provided, however,
that the Bar Order stated in this paragraph shall not apply to
claims that may be asserted by the Settling Defendants in any case
brought by an Opt-Out Plaintiff (but only to the extent such a claim
by a Settling Defendant is based upon such Person's actual or
threatened liability solely to the Opt-Out Plaintiffs or the costs
and expenses incurred solely in connection with a claim asserted by
an Opt-Out Plaintiff).

(b) The Settling Insurers and the present and former parents,
subsidiaries, divisions, affiliates, predecessors, successors,
employees, officers, directors, attorneys, assigns, and agents of
each of them are hereby permanently BARRED, ENJOINED and RESTRAINED
from commencing, prosecuting, or asserting against the Barred
Persons any and all manner of action or actions, cause or causes of
action, suits, debts, liens, contracts, agreements, promises,
liabilities, claims, rights, demands, damages, losses, costs,
charges or expenses, of any nature whatsoever, in law or in equity,
known or unknown, suspected or unsuspected, fixed or contingent,
that are based upon, in consequence of, arise out of or relate in
any way, whether in whole or in part, to (i) the Insurance Policies,
(ii) the Coverage Litigation, (iii) the Underlying Litigation, (iv)
the litigation, defense, and settlement of the Coverage Litigation
and the Underlying Litigation, and/or (v) any of the facts,
circumstances, and situations underlying or alleged in the Coverage
Litigation and the Underlying Litigation.

12. In the event that (i) a judgment (net of any judgment credit
required under the

PSLRA or paragraph 10 herein) is entered against any Non-Settling Defendant, and
(ii) a court determines that such Non-Settling Defendant would have been
entitled to coverage for such judgment under the Insurance Policies but for the
Federal Securities Action Stipulation of Settlement and the Order finally
approving same, then such Non-Settling Defendant shall have the judgment reduced
by the amount of coverage, if any, such court determines (based on jury findings
as and if required by law) is payable on behalf of such Non-Settling Defendant,
but only to the extent such a reduction has not already been made with respect
to another judgment. In connection with the judicial determination of insurance
coverage referred to in the preceding sentence, the Federal Plaintiffs shall
have the right to defend all claims of coverage asserted by any Non-Settling
Defendant and to assert all defenses to coverage that may have been available to
the Insurers, and the Settling Insurers and the Settling Defendants shall
cooperate fully in the defense of all such claims.

13. The provisions in this Bar Order are reciprocal and in the event
that any person asserts and is legally not barred by the Bar Order from bringing
any claim, action or actions, cause or causes of action, suits, debts, liens,
contracts, agreements, promises, liabilities, claims, rights, demands, damages,
losses, costs, charges or expenses falling within the scope of this Bar Order
(the "First Person") against any other person (the "Second Person"), this Bar
Order shall not bar, enjoin or restrain the Second Person from asserting or
bringing any claim, action or actions, cause or causes of action, suits, debts,
liens, contracts, agreements, promises, liabilities, claims, rights, demands,
damages, losses, costs, charges or expenses falling within the scope this Bar
Order against the First Person.

14. The Court retains exclusive jurisdiction to enforce the provisions
of this Bar Order.

EXHIBIT D
---------

A hearing having been held before this Court (the "Court") on
________________, 2006, pursuant to the Court's Order of __________________,
2006 (the "Scheduling Order"), upon a Stipulation of Settlement with certain
defendants, filed on ____________________, 2006 (the "Stipulation"), of the
above-captioned action (the "Action"), which is incorporated herein by
reference; it appearing that due notice of said hearing has been given in
accordance with the aforesaid Scheduling Order; the respective parties having
appeared by their attorneys of record; the Court having heard and considered
evidence in support of the proposed Settlement; the attorneys for the respective
parties having been heard; an opportunity to be heard having been given to all
other persons requesting to be heard in accordance with the Scheduling Order;
and the entire matter of the proposed Settlement having been heard and
considered by the Court;

IT IS HEREBY ORDERED, ADJUDGED AND DECREED, this _____ day of
__________________, 2006, that:

1. Unless otherwise defined herein, all defined terms shall have the
meaning set forth in the Stipulation.

2. The form and manner of notice given to HealthSouth's stockholders is
hereby determined to have been the best notice practicable under the
circumstances and to have been given in full compliance with the requirements of
due process, and Rule 23.1 of the Rules of this Court and applicable law.

3. The Stipulation, the Settlement, and the Insurance Settlement
Agreement are approved as fair, reasonable, adequate and in the best interests
of HealthSouth, and it was not

illegal for HealthSouth to agree to the indemnification obligations in Section 5
and the advancement obligations in Section 6 of the Insurance Settlement
Agreement. The Settlement and the Insurance Settlement Agreement shall be
consummated in accordance with the terms and conditions of the Stipulation and
the Insurance Settlement Agreement.

4. Any and all claims, demands, rights, actions or causes of action,
liabilities, damages, losses, attorneys' fees, costs, expenses, obligations,
duties, judgments, suits, proceedings, debts, dues, sums of money, accounts,
bonds, bills, covenants, contracts, controversies, agreements, promises,
variances, executions, matters and issues of any kind or nature whatsoever,
whether in law, admiralty, or equity, and whether based on any federal, state,
local, statutory or common law, or any other rule or regulation, foreseen or
unforeseen, matured or unmatured, known or unknown, accrued or not accrued,
contingent or absolute, apparent or unapparent, suspected or unsuspected,
disclosed or undisclosed, liquidated or unliquidated, whether or not asserted,
that have been or could have been asserted in this Action by or on behalf of
HealthSouth or any of its affiliates, predecessors, successors, assigns, past or
present officers, directors, debt or equity securities holders, general or
limited partners or partnerships, trustees, employees, representatives, agents,
advisors, parents, or subsidiaries, or by or on behalf of any stockholder of
HealthSouth acting or purporting to act on behalf of HealthSouth, whether
directly, indirectly, representatively, derivatively or in any other capacity,
against any of the Individual Settling Defendants or their respective family
members, heirs, executors, administrators, successors, assigns, present and
former employees, officers, directors, attorneys, legal representatives, and
agents of each of them, and any person or entity in which any

Individual Settling Defendant has or had a controlling interest and the present
and former parents, subsidiaries, divisions, affiliates, predecessors,
successors, employees, officers, directors, attorneys, assigns, and agents of
each of them, and the Settling Insurers, and the present and former parents,
subsidiaries, divisions, affiliates, predecessors, successors, employees,
officers, directors, attorneys, assigns, and agents of each of them, and any
other current or former directors, officers, or employees of HealthSouth other
than the Non-Settling Defendants, regardless of whether such person was served
with process and appeared in this Action (collectively, the "Released Parties"),
which have or could have arisen or arise at any time, and relate in any manner
to the allegations, facts, events, transactions, acts, occurrences, statements,
representations, misrepresentations, omissions, acts or failures to act, course
of conduct, or any other matter, thing or cause whatsoever, or any series
thereof, embraced, involved, set forth or otherwise related, directly or
indirectly, to the facts and circumstances alleged or that could have been
alleged in the Complaint; and, with respect to the Settling Insurers, and the
present and former parents, subsidiaries, divisions, affiliates, predecessors,
successors, employees, officers, directors, attorneys, assigns, and agents of
each of them, all claims and causes of action of every nature and description,
whether known or unknown, whether arising under any federal, state, local,
statutory or common law, whether brought directly or derivatively, that are
based upon, in consequence of, arise out of or relate in any way, whether in
whole or in part, to (i) the Insurance Policies, (ii) the Coverage Litigation
(iii) the Underlying Litigation, (iv) the litigation, defense, and settlement of
the Coverage Litigation and the Underlying Litigation, and/or (v) any of the
facts, circumstances, and situations underlying or alleged in the Coverage
Litigation and the

Underlying Litigation (collectively, the "Released Claims") are hereby fully,
finally, and forever compromised, settled, discharged, dismissed with prejudice
and released with full preclusive effect as to each of the Released Parties.
Notwithstanding any other provision in this Paragraph 4 or elsewhere in this
Order, "Released Parties" shall not be deemed to include (a) Xxxxxxx X. Xxxxxxx,
or (b) any person who agreed to plead guilty or otherwise have been convicted of
crimes in connection with HealthSouth's former financial reporting activities,
or (c) any third party entities who are defendants in the Action including Ernst
& Young LLP, UBS Securities, LLC, Source Medical Solutions, Inc., Capstone
Capital Corporation, Xxxxxxxxxxxxxxx.xxx, and G.G. Enterprises, or (d) any other
Non-Settling Individual Defendants or Non-Settling Defendant Entities, or (e)
any Non-Settling Insurers (and any other person or entity in their capacity as a
successor in interest to the Non-Settling Insurers with respect to the insurance
policy or policies they issued to HealthSouth and/or the Individual Settling
Defendants). This Order shall not operate to release or reduce the judgment
entered against Xxxxxxx Xxxxxxx based upon the claim of unjust enrichment for
approximately $47.8 million entered on January 3, 2006 in favor of Xxxx Xxxxxx,
derivatively on behalf of HealthSouth. This Release shall not operate to release
in whole or in part any claim asserted against any of the Non-Settling
Individual Defendants or Non-Settling Defendant Entities.

5. Plaintiff, HealthSouth (and its affiliates, predecessors,
successors, assigns, parents, subsidiaries, stockholders, and any person acting
or purporting to act on behalf of HealthSouth), or any of them, are hereby
permanently BARRED, ENJOINED and RESTRAINED from instituting, commencing or
prosecuting in this Action or any other action or proceeding any

Released Claims against any of the Released Parties. The Released Claims against
each and all of the Released Parties shall be released and dismissed with
prejudice and on the merits with full preclusive effect as to each of the
Released Parties.

6. Consistent with Paragraph 9 of the Stipulation and in accordance
with 10 Del. C. ss.6304(b) or any similar, comparable or equivalent provision of
law:

(a) The Non-Settling Defendants and all other persons, including but
not limited to any other person or entity later named as a defendant
in this Action, are hereby permanently BARRED, ENJOINED and
RESTRAINED to the fullest extent permitted under applicable law from
commencing, prosecuting, or asserting any action, proceeding or
claim against the Released Parties involving, related to or arising
out of the facts and events that are the subject of the Released
Claims, including but not limited to claims for contribution
(whether contractual or otherwise), indemnification (whether
contractual or otherwise) or similar claims.

(b) The Non-Settling Defendants and all other persons, including but
not limited to any other person or entity later named as a defendant
in this Action, are hereby permanently BARRED, ENJOINED and
RESTRAINED from commencing, prosecuting, or asserting against the
Settling Insurers and the present and former parents, subsidiaries,
divisions, affiliates, predecessors, successors, employees,
officers, directors, attorneys, assigns, and agents of each of them
any and all manner of action or actions, cause or causes of action,
suits, debts, liens, contracts, agreements, promises, liabilities,
claims, rights, demands, damages, losses, costs, charges or
expenses, of any nature whatsoever, in law or in equity, known or
unknown, suspected or unsuspected, fixed or contingent, that are
based upon, in consequence of, arise out of or relate in any way,
whether in whole or in part, to (i) the Insurance Policies, (ii) the
Coverage Litigation, (iii) the Underlying Litigation, (iv) the
litigation, defense, and settlement of the Coverage Litigation and
the Underlying Litigation, and/or (v) any of the facts,
circumstances, and situations underlying or alleged in the Coverage
Litigation and the Underlying Litigation.

(c) For purposes of this Order, Barred Person shall be defined as
any person or entity other than HealthSouth that is barred and/or
enjoined by paragraph 6(a) and 6(b).

7. HealthSouth and the Individual Settling Defendants are hereby
permanently BARRED, ENJOINED and RESTRAINED from commencing, prosecuting or
asserting any actions or claims against the Settling Insurers and the present
and former parents, subsidiaries, divisions, affiliates, predecessors,
successors, employees, officers, directors, attorneys, assigns, and agents of
each of them that are based upon, in consequence of, arise out of or relate in
any way, whether in whole or in part, to (i) the Insurance Policies, (ii) the
Coverage Litigation, (iii) the Underlying Litigation, (iv) the litigation,
defense, and settlement of the Coverage Litigation and the Underlying
Litigation, and/or (v) any of the facts, circumstances, and situations
underlying or alleged in the Coverage Litigation and the Underlying Litigation.

8. All Settling Insurers and the present and former parents,
subsidiaries, divisions, affiliates, predecessors, successors, employees,
officers, directors, attorneys, assigns, and agents of each of them are hereby
permanently BARRED, ENJOINED and RESTRAINED from commencing, prosecuting or
asserting any actions or claims against HealthSouth and/or the Individual
Settling Defendants that are based upon, in consequence of, arise out of or
relate in any way, whether in whole or in part, to (i) the Insurance Policies,
(ii) the Coverage Litigation, (iii) the Underlying Litigation, (iv) the
litigation, defense, and settlement of the Coverage Litigation and the
Underlying Litigation, and/or (v) any of the facts, circumstances, and
situations underlying or alleged in the Coverage Litigation and the Underlying
Litigation.

9. Barred Persons shall be entitled to a judgment credit (i.e., a
reduction to the total amount of the judgment for each claim entered in the
Action) in an amount that is the greater of: (i) that part of the Settlement
Amount paid by the settling parties and the Settling Insurers that is

allocated to claims for which contribution would otherwise be available; or (ii)
for each such claim, the proportionate share of the Individual Settling
Defendants' fault as determined at trial; or (iii) the value of any contribution
claim (whether contractual or otherwise), indemnification claim (whether
contractual or otherwise) or similar claim that the Court determines would have
been available but for this Settlement. The credit referred to herein is not
effective or applicable until final approval of this Settlement. Notwithstanding
any other provision in this Order, nothing shall operate to release or reduce
the judgment entered against Xxxxxxx Xxxxxxx based upon the claim of unjust
enrichment for approximately $47.8 million entered on January 3, 2006 in favor
of Xxxx Xxxxxx, derivatively on behalf of HealthSouth.

10. Consistent with Paragraph 13 of the Stipulation and in accordance
with 10 Del. C. ss.6304(b) or any similar, comparable or equivalent provision of
law: the Released Parties are hereby permanently BARRED, ENJOINED and RESTRAINED
to the fullest extent permitted under applicable law from commencing,
prosecuting, or asserting any action, proceeding or claim against the Barred
Persons and/or HealthSouth involving, related to or arising out of the facts and
events that are the subject of the Released Claims, including but not limited to
claims for contribution (whether contractual or otherwise), indemnification
(whether contractual or otherwise) or similar claims; provided, however, that
nothing contained herein shall release, alter, change, limit, affect, dilute,
eliminate, or in any way, impair or undermine existing or future indemnification
and advancement rights, and/or existing or future indemnification and
advancement claims, if any, of the Individual Settling Defendants against
HealthSouth, whether arising out of any corporate governance provision,
Certificate of Incorporation, By-laws, as in

effect at any time, other corporate documents, indemnification agreements,
letter agreements, severance agreements, contract, law, or otherwise.

11. The Settling Insurers and the present and former parents,
subsidiaries, divisions, affiliates, predecessors, successors, employees,
officers, directors, attorneys, assigns, and agents of each of them are hereby
permanently BARRED, ENJOINED and RESTRAINED from commencing, prosecuting, or
asserting against the Barred Persons any and all manner of action or actions,
cause or causes of action, suits, debts, liens, contracts, agreements, promises,
liabilities, claims, rights, demands, damages, losses, costs, charges or
expenses, of any nature whatsoever, in law or in equity, known or unknown,
suspected or unsuspected, fixed or contingent, that are based upon, in
consequence of, arise out of or relate in any way, whether in whole or in part,
to (i) the Insurance Policies, (ii) the Coverage Litigation, (iii) the
Underlying Litigation, (iv) the litigation, defense, and settlement of the
Coverage Litigation and the Underlying Litigation, and/or (v) any of the facts,
circumstances, and situations underlying or alleged in the Coverage Litigation
and the Underlying Litigation.

12. In the event that (i) a judgment (net of any judgment credit
required under Paragraph 9 herein) is entered in this Action against any
Non-Settling Defendant, and (ii) a court determines that such Non-Settling
Defendant would have been entitled to coverage for such judgment under the
Insurance Policies but for the Stipulation, then such Non-Settling Defendant
shall have the judgment reduced by the amount of coverage, if any, such court
determines (based on jury findings as and if required by law) is payable on
behalf of such Non-Settling Defendant, but only to the extent such a reduction
has not already been made with respect to another

judgment. In connection with the judicial determination of insurance coverage
referred to in the preceding sentence, the Plaintiff shall have the right to
defend all claims of coverage asserted by any Non-Settling Defendant and to
assert all defenses to coverage that may have been available to the insurers,
and the Settling Insurers, HealthSouth and the Individual Settling Defendants
shall provide reasonable cooperation in the defense of all such claims. The
credit referred to herein is not effective or applicable until final approval of
this Settlement. Notwithstanding any other provision in this Order, nothing
shall operate to release or reduce the judgment entered against Xxxxxxx Xxxxxxx
based upon the claim of unjust enrichment for approximately $47.8 million
entered on January 3, 2006 in favor of Xxxx Xxxxxx, derivatively on behalf of
HealthSouth.

13. The provisions in this bar order are reciprocal and in the event
that any person or entity asserts and is legally not barred by the bar order
from bringing any claim, action or actions, cause or causes of action, suits,
debts, liens, contracts, agreements, promises, liabilities, claims, rights,
demands, damages, losses, costs, charges or expenses falling within the scope of
this bar order (the "First Person") against any other person (the "Second
Person"), this bar order shall not bar, enjoin or restrain the Second Person
from asserting or bringing any claim, action or actions, cause or causes of
action, suits, debts, liens, contracts, agreements, promises, liabilities,
claims, rights, demands, damages, losses, costs, charges or expenses falling
within the scope of this bar order against the First Person.

14. With respect to any and all Released Claims against Released
Parties, Plaintiff and HealthSouth have hereby waived and relinquished, and all
other parties whose claims are

being released are hereby deemed to have waived and relinquished, to the fullest
extent permitted by law, the provisions, rights and benefits of Section 1542 of
the California Civil Code, which provides:

A general release does not extend to claims which the
creditor does not know or suspect to exist in his or her
favor at the time of executing the release, which if known
by him or her must have materially affected his or her
settlement with the debtor.

Also, with respect to any and all Released Claims against Released Parties,
Plaintiff and HealthSouth have hereby waived and relinquished, and all other
parties whose claims are being released are hereby deemed to have waived and
relinquished, to the fullest extent permitted by law, any and all provisions,
rights, and benefits conferred by the law of any state or territory of the
United States or any other jurisdiction, or principle of common law, which is
similar, comparable or equivalent to Cal. Civ. Code ss. 1542.

15. Nothing contained in the Settlement or this Order shall be
interpreted as satisfying or mitigating or discharging or reducing the judgment
entered against Xxxxxxx Xxxxxxx based upon the claim of unjust enrichment for
approximately $47.8 million entered on January 3, 2006 in favor of Xxxx Xxxxxx,
derivatively on behalf of HealthSouth. Subject to the judgment credit and
insurance credit provisions of Paragraphs 9 and 12 herein, nothing in the
Settlement or this Order shall limit or otherwise inhibit continued maintenance
of the derivative claims against the Non-Settling Defendants by or on behalf of
HealthSouth (which is neither a Non-Settling Defendant, nor a Released Person,
nor a Barred Person under this Settlement).

16. Counsel for the Plaintiff is awarded attorneys' fees in the amount
of $________________ and reimbursement of expenses in the amount of
$__________________ which sums the Court finds to be fair and reasonable, to be
paid in accordance with the terms of the Stipulation.

17. Without affecting the finality of this Order and Partial Final
Judgment in any way, this Court reserves exclusive jurisdiction over all matters
relating to the administration and consummation of the Settlement.

18. Pursuant to A.R.C.P., Rule 54(b), this Court hereby certifies that
there is no just reason for delay and expressly directs entry of final judgment
forthwith as per the above.

------------------------------------
Xxxxxx X. Xxxx, III, Circuit Judge

EXHIBIT E
---------

TO HEALTHSOUTH:

HealthSouth Corporation
Xxx XxxxxxXxxxx Xxxxxxx
Xxxxxxxxxx, XX 00000
Attention: General Counsel

with a copy to:

Xxxxx Xxxx Xxxxxx
Xxxxxxx, Xxxxx, Xxxx & White LLP
One Federal Place
0000 Xxxxx Xxxxxx Xxxxx
Xxxxxxxxxx, XX 00000

TO THE INDIVIDUAL SETTLING DEFENDANTS:

Xxxxx X. Xxxxxxx:

Xxxxx X. Xxxxxxx
0000 Xxxxx Xxxx Xxxxx
Xxxxxxxx Xxxxx Xx 00000

with a copy to:

Xxxxx X. Xxxxx
Xxxxxxxx Xxxxxx Xxxxxxx and Xxxxxx LLP
0000 XxXxxxx/Xxxxxxx Xxxxx
Xxxxxxxxxx XX 00000

Xxxxxxx X. Xxxxxx:

Xxxxxxx X. Xxxxxx
0000 Xxxx Xxxx Xxxx
Xxxxxxxxxx, Xxxxxxx 00000

with a copy to:

Xxxxxxx X. Xxxxxxx III
Xxxxxxxxx, Xxxxxxxx & White, LLC
The Xxxxx Building
000 00xx Xxxxxx Xxxxx
Xxxxxxxxxx, XX 00000-0000

Xxxxx Xxxxxx, P. Xxxxx Xxxxx, Xxxxxxx X. Xxxxxxx, Xxxxxxx X. Xxxx, III, Xxxxxxx
X. Xxxxxx, Xxxxxxx X. Xxxx, Xxxxxxx X. Xxxxxx, Xxxxx X. House, Xxx X. Xxxxx,
Xxxxxxx X. Xxxxxx, Xxxxxxxx XxXxxxxxx, Xxxxxxx Xxxx, Xxxxx Xxxxxxx, Xxxxxx X.
Xxxxxxx, Xxxxxxx Xxxxx, Xxxxx X. Xxxxxx, Xxxxxx Xxxx, and Xxxxxxx X. Xxxxxxx:

Xxxxx X. Xxxxxxx
Xxxxx X. Xxxxxxx
Xxxxxx & Bird LLP
0000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxx, XX 00000

Xxxxx X. Xxxxx, III
Xxxxxxx, Xxxxxx & Xxxx, P.C.

0000 Xxxxx Xxx., Xxxxx
0000 XxXxxxx/Xxxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxx 00000

Xxxxx X. Xxxxxxxx:

Xxxxxxx X. Xxxxxx
Xxxxxxx & Xxxxxxxx LLP
000 Xxxxxxxxx Xxxxx Xxxxxxx Xxxxx
Xxxxxxxxxx, XX, 00000

X. Xxxx Xxxxxx, Xxxxxx X. Strong, Xxxxx X. Xxxxxxxx, Xx., Xxxx X. Xxxxxx, Xxxx
X. Xxxxxxxxxx or Xxxxxxx X. Xxxxxxx, III:

J. Xxxx Xxxx, Esq.
J. XXXX XXXX, P.C.
0000 Xxxx Xxxxx Tower
0000 Xxxx Xxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxx 00000

with a copy to

Xxxxxxx X. Xxxxxxx, Esq.
Xxxx X. Xxxxxxx, Esq.
XXXXXXX XXXXXXX & XXXXXXXX LLP
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000

TO THE SETTLING CARRIERS:

Federal Insurance Company and
Executive Risk Indemnity Inc.

Xxxxx Xxxxx
Xxxxx & Xxxxxxx LLP
000 00xx Xxxxxx, XX
Xxxxxxxxxx, X.X. 00000
Phone: 000-000-0000
Fax: 000-000-0000
xxxxxxx@xxxxx.xxx

Royal Indemnity Co. as successor in interest to Royal Insurance Company of
America

R. Xxxxxxx Xxxx, Xx.
Xxxxxx Xxxxx Xxxxxxxxx Xxxxxxx & Xxxxxx
0000 Xxx Xx., Xxxxx 0000
Xxxxxx, Xxxxx 00000
000-000-0000(phone)
000-000-0000(fax)
xxxxxxx.xxxx@xxxxxxxxxxx.xxx

Continental Casualty Company

Xxxxxx X. Xxxxxxxx III
DLA Piper US LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
xxxxxx.xxxxxxxxxxx@xxxxxxxx.xxx

Great Lakes Reinsurance (UK) PLC

Ommid X. Xxxxxxxxx
Xxxxx & Xxxxx LLP
000 Xxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Phone: (000) 000-0000
Fax: (000) 000-0000

xxxxxxxxxx@xxxxxxxxxx.xxx
Greenwich Insurance Company and
XL Specialty Insurance Company

Xxxx X. Xxxxx
Xxxx, Xxxxx & Xxxx, LLP
0000 X Xxxxxx, XX
Xxxxxxxxxx, XX 00000
Phone: 000-000-0000
Fax: 000-000-0000
xxxxxx@xxxxxx.xxx

Certain Underwriters at Lloyd's, who subscribed, severally and not jointly, to
Policy No. 823/XX0000000 and
Certain Underwriters at Lloyd's, who subscribed, severally and not jointly, to
Policy No. 823/FD9900985

Xxxxxxx X. Xxxx
Xxxxxx Xxxxxx Xxxxxxxx LLP
000 X. Xxxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Phone: 000.000.0000
Fax: 000.000.0000
xxxxx@xxxxxxxxxx.xxx

Certain Underwriters at Lloyd's, who subscribed, severally and not jointly, to
Policy Number 823.FD0100668

Xxxxxx XxXxxxxxxx
Fields Xxxxxx Xxxxxx & XxXxxxxxxx LLP
One Midtown Plaza
0000 Xxxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx
Phone: 000-000-0000
Fax: 000-000-0000
xxxxxxxxxxx@xxxxxxxxxxxx.xxx

Lumbermens Mutual Casualty Company

Xxxxxxx X. Xxxxxxxx
DLA Piper US LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
xxxxxxx.xxxxxxxx@xxxxxxxx.xxx

St. Xxxx Mercury Insurance Company

Xxxxxxx Xxxxxx
Xxxxxxxxxxx & Price, LLP
000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx, XX 00000
Phone: 000-000-0000
Fax: 000-000-0000
xxxxxxx.xxxxxx@xxxxxxxxxxx.xxx

Xxxxx Excess Liability
AIG Europe (UK) Limited as agents for New Hampshire Insurance Company

Xxxxxx X. Xxxxxx
Bowron, Latta & Xxxxxx, P.C.
Xxxx Xxxxxx Xxx 00000
Xxxxxx, Xx. 00000.

Twin City Fire Insurance Company

Xxxxxxx X. Xxxxxxxx
Xxxxx Xxxxxx LLP
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Phone: 000-000-0000
Fax: 000-000-0000
xxxxxxxxxx@xxxxxxxxxxx.xxx

Zurich American Insurance Company

Xxxxx Xxxxxx
Xxxx Xxxxx & Xxxx, LLP
0000 X Xxxxxx X.X.
Xxxxxxxxxx X.X. 00000-0000
000-000-0000
Fax 000-000-0000
xxxxxxx@xxxxxx.xxx

Clarendon America Insurance Company and
2001 Lloyd's WNM Syndicate 250

Xxxxxxx X. Xxxxxx
Drinker Xxxxxx & Xxxxx
0000 X Xxxxxx, XX
Xxxxxxxxxx, X.X. 00000-0000
Fax: 000-000-0000
xxxxxxx.xxxxxx@xxx.xxx

ACE American Insurance Company
c/o ACE USA
Attention: Xxxxxxx X. Xxxxxxxx
000 Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000

with a copy to:

Xxxxxx X. Xxxxxxx, Esq.
Xxxxxxx X. Xxxxxxx, Esq.
Xxxxxx Xxxxx Xxxxxxxx & Xxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000

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Exhibit 10.2 SETTLEMENT AGREEMENT AND POLICY RELEASE --------------------------------------- This Settlement Agreement and Policy Release (the "Agreement") is entered into by and between (i) HealthSouth Corporation ("HealthSouth"), (ii) Betsy S....

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