UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (date of earliest event reported): June 30, 2022

Enhabit, Inc.
(Exact name of Registrant as specified in its Charter)

Delaware
(State or Other Jurisdiction of Incorporation)

001-41406
47-2409192
(Commission File Number)
(IRS Employer Identification No.)

6688 N. Central Expressway, Suite 1300, Dallas, Texas 75206
(Address of Principal Executive Offices, Including Zip Code)

(214) 239-6500
(Registrant’s Telephone Number, Including Area Code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐
Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
   
☐
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
   
☐
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
   
☐
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934.          Emerging growth company        ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Securities registered pursuant to Section 12(b) of the Act:

Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, par value $0.01 per share
EHAB
New York Stock Exchange

Item 1.01. Entry into a Material Definitive Agreement.

Separation Agreements

On July 1, 2022, Encompass Health Corporation (“Encompass”) completed the previously announced separation of its home health and hospice business through the distribution (the “Distribution”) of all of the outstanding shares of common stock, par value $0.01 per share, of Enhabit, Inc. (the “Company”) to the stockholders of record of Encompass as of the close of business on June 24, 2022 (the “Record Date”). The Distribution was effective at 12:01 a.m., Eastern Time, on July 1, 2022 (the “Effective Time”). As a result of the Distribution, the Company is now an independent public company, and its common stock is listed under the symbol “EHAB” on the New York Stock Exchange.

In connection with the Distribution, on June 30, 2022, the Company entered into several agreements with Encompass that govern the relationship of the parties following the Distribution, including a Separation and Distribution Agreement, a Transition Services Agreement, a Tax Matters Agreement and an Employee Matters Agreement.

A summary of the material terms of these agreements can be found in the Company’s information statement, dated June 21, 2022 (the “Information Statement”), which is included as Exhibit 99.1 to this Current Report on Form 8-K, under the section entitled “Certain Relationships and Related Party Transactions”. These summaries are incorporated by reference into this Item 1.01. The description of the Separation and Distribution Agreement, the Transition Services Agreement, the Tax Matters Agreement and the Employee Matters Agreement set forth under this Item 1.01 is qualified in its entirety by reference to the complete terms of those agreements, which are included as Exhibits 2.1, 2.2, 2.3 and 2.4, respectively, to this Current Report on Form 8-K, each of which is incorporated by reference into this Item 1.01.

Item 2.03.  Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

Credit Agreement

As previously disclosed, on June 1, 2022, the Company entered into a Credit Agreement (the “Credit Agreement”) with Wells Fargo Bank, National Association, as administrative agent, collateral agent and swingline lender, and various other lenders, consisting of a $400 million term loan A facility (the “Term Loan A Facility”) and a $350 million revolving credit facility (the “Revolving Credit Facility” and, together with the Term Loan A Facility, the “Credit Facilities”).

On June 30, 2022, in connection with the Distribution, the Company borrowed $400 million under the Term Loan A Facility and $170 million under the Revolving Credit Facility. The Company used the proceeds to finance a cash payment of $566.6 million to Encompass in connection with the Distribution and to pay certain fees and expenses related to the Credit Facilities and related transactions.

A summary of the material terms of the Credit Agreement and the Credit Facilities can be found in the Information Statement included as Exhibit 99.1 to this Current Report on Form 8-K, under the section entitled “Description of Certain Material Indebtedness,” which summary is incorporated by reference into this Item 2.03.
Item 5.01. Changes in Control of Registrant.
 
The Company was a wholly-owned subsidiary of Encompass immediately prior to the Distribution. On July 1, 2022, Encompass completed the Distribution of 100% of the outstanding common stock of the Company to holders of the common stock of Encompass on the Record Date. Encompass stockholders of record received one share of the Company’s common stock for every two shares of Encompass common stock. Following completion of the Distribution, the Company became an independent, publicly-traded company, and Encompass retains no ownership interest in the Company. The description of the Distribution included under Item 1.01 of this Current Report on Form 8-K is incorporated herein by reference.

Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

Independent Director Appointments

The Board of Directors (the “Board”) of the Company previously expanded its size from eight directors to nine directors, effective immediately prior to the Effective Time. Each of Jeffrey W. Bolton, Erin P. Hoeflinger, and Gregory S. Rush was elected as a director of the Board of the Company as of immediately prior to the Effective Time. On June 30, 2022, effective at the Effective Time, the Board further expanded its size from nine to eleven directors. Each of Tina L. Brown-Stevenson and Susan A. La Monica was appointed as a director of the Board of the Company as of the Effective Time. Leo I. Higdon, Jr., Barbara A. Jacobsmeyer, Yvonne M. Curl, Charles M. Elson, John E. Maupin, Jr. and L. Edward Shaw, Jr., who had previously been appointed to the Board, continue to serve as directors on the Board following the Distribution. Biographical information and compensation information for each of Jeffrey W. Bolton, Erin P. Hoeflinger and Gregory S. Rush, as well as the six directors who were previously appointed to the Board, can be found in the Company’s Information Statement included as Exhibit 99.1 to this Current Report on Form 8-K under the section entitled “Directors,” which is incorporated by reference into this Item 5.02.

As of the Effective Time:

•
Gregory S. Rush was appointed to serve as a member of the Audit Committee of the Board. Leo I. Higdon, Jr., Charles M. Elson and John E. Maupin, Jr. had previously been appointed to serve as members of the Audit Committee of the Board effective as of 12:01 a.m., Eastern Time, on June 23, 2022, and will continue to serve in those capacities following the Distribution, with Leo I. Higdon, Jr. serving as chair of the Audit Committee;

•
Yvonne M. Curl, Leo I. Higdon, Jr., Erin P. Hoeflinger and L. Edward Shaw, Jr. were appointed to serve as members of the Compensation and Human Capital Committee of the Board, and Yvonne M. Curl was appointed to serve as chair of the Compensation and Human Capital Committee;

•
L. Edward Shaw, Jr., Jeffrey W. Bolton, Charles M. Elson and Yvonne M. Curl were appointed to serve as members of the Nominating/Corporate Governance Committee of the Board, and L. Edward Shaw, Jr. was appointed to serve as chair of the Nominating/Corporate Governance Committee;

•
John E. Maupin, Jr., Jeffrey W. Bolton, Yvonne M. Curl and Erin P. Hoeflinger were appointed to serve as members of the Compliance/Quality of Care Committee of the Board, and John E. Maupin, Jr. was appointed to serve as chair of the Compliance/Quality of Care Committee;

•
Charles M. Elson, John E. Maupin, Jr., Gregory S. Rush and L. Edward Shaw, Jr. were appointed to serve as members of the Finance Committee of the Board, and Charles M. Elson was appointed to serve as chair of the Finance Committee; and

•
Leo I. Higdon, Jr. was appointed Chairman of the Board.
Tina L. Brown-Stevenson and Susan A. La Monica have not yet been appointed to any committees of the Board.

There are no arrangements or understandings between any of Jeffrey W. Bolton, Erin P. Hoeflinger, Gregory S. Rush, Tina L. Brown-Stevenson or Susan A. La Monica and any other persons pursuant to which any such newly appointed director was selected as a director of the Company. Jeffrey W. Bolton, Erin P. Hoeflinger, Gregory S. Rush, Tina L. Brown-Stevenson and Susan A. La Monica have not been parties to any transactions required to be reported under Item 404(a) of Regulation S-K in this Current Report on Form 8-K. Each of Jeffrey W. Bolton, Erin P. Hoeflinger, Gregory S. Rush, Tina L. Brown-Stevenson and Susan A. La Monica will receive compensation consistent with the Company’s compensation program for non-employee directors which is further described in the Information Statement included as Exhibit 99.1 to this Current Report on Form 8-K, under the section entitled “Directors—Nonemployee Director Compensation” which is incorporated by reference in this Item 5.02.

Compensation Plans

The Company adopted the Enhabit, Inc. 2022 Omnibus Performance Incentive Plan, the Enhabit, Inc. Change in Control Benefits Plan and the Enhabit, Inc. Executive Severance Plan, effective as of July 1, 2022. A summary of the Enhabit, Inc. Omnibus Performance Incentive Plan, the Enhabit, Inc. Change in Control Benefits Plan, and the Enhabit, Inc. Executive Severance Plan can be found in the Information Statement in the sections entitled “Enhabit 2022 Omnibus Performance Incentive Plan” and “Compensation Discussion and Analysis―Severance Arrangements”. Such descriptions are incorporated by reference in this Item 5.02.

The descriptions of the foregoing plans contained in the Information Statement are intended to provide a general description only. These descriptions are subject to the detailed terms and conditions of and are qualified in their entirety by reference to the full text of those agreements, which are attached hereto as Exhibits 10.1, 10.2, and 10.3 and incorporated herein by reference to this Item 5.02.

Item 5.03. Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.
 
In connection with the Distribution, the Company filed a certificate of amendment to the Certificate of Incorporation (the “Split Amendment”) with the Secretary of State of the State of Delaware on June 30, 2022. The Split Amendment increased the number of authorized shares of the common stock of the Company and effected a stock split of the outstanding shares of the common stock of the Company, which stock split became effective as of 11:59 p.m., Eastern Time, on June 30, 2022.

In addition, the Company also filed an amended and restated Certificate of Incorporation (the “Amended and Restated Certificate of Incorporation”) with the Secretary of State of the State of Delaware on June 30, 2022, which became effective as of 12:00 a.m., Eastern Time, on July 1, 2022, and amended and restated its Bylaws (the “Amended and Restated Bylaws”) effective immediately thereafter. A description of the material provisions of the Amended and Restated Certificate of Incorporation and the Amended and Restated Bylaws can be found in the Information Statement under the section entitled “Description of Capital Stock,” which is incorporated by reference into this Item 5.03.

The foregoing descriptions of the Split Amendment, the Amended and Restated Certificate of Incorporation and the Amended and Restated Bylaws are not complete and are subject to, and qualified in their entirety by reference to, the complete text of the Split Amendment, the Amended and Restated Certificate of Incorporation and the Amended and Restated Bylaws, which are filed with this Current Report on Form 8-K as Exhibits 3.1, 3.2 and 3.3, respectively, each of which is incorporated by reference into this Item 5.03.
Item 5.05. Amendments to the Registrant’s Code of Ethics, or Waiver of a Provision of the Code of Ethics.

In connection with the Distribution, the Board adopted a Standards of Business Ethics and Conduct policy effective as of July 1, 2022. A copy of the Company’s Standards of Business Ethics and Conduct policy is available on the Company’s website at www.ehab.com. The information on the Company’s website does not constitute part of this Current Report on Form 8-K and is not incorporated by reference herein.

Item 8.01. Other Events.

On July 1, 2022, the Company issued a press release announcing the completion of the Distribution, which is attached hereto as Exhibit 99.2 and is incorporated herein by reference in this Item 8.01.

Forward-Looking Statements

The information contained herein and in the information statement attached as Exhibit 99.1 hereto include certain estimates, projections, and other forward-looking statements that involve known and unknown risks and relate to, among other things, future events, including the timing and effects, such as the tax-free treatment and the incremental costs, of the Distribution and rebranding of the home health and hospice business and its impact on the business models of the Company and Encompass, outlook and guidance, the expected impact of the COVID-19 pandemic on the Company’s and Encompass’s business and financial assumptions, business strategy, financial plans, dividend strategies or payments, effective income tax rates, plans to repurchase its debt or equity securities, future financial performance, projected business results or model, ability to return value to shareholders, projected capital expenditures, leverage ratio, acquisition opportunities, and the impact of future legislation or regulation. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “targets,” “potential,” or “continue” or the negative of these terms or other comparable terminology. These estimates, projections, and other forward-looking statements are based on assumptions the Company believes, as of the date hereof, are reasonable. Inevitably, there will be differences between such estimates and actual results, and those differences may be material.

There can be no assurance that any estimates, projections, or forward-looking statements will be realized.

All such estimates, projections, and forward-looking statements speak only as of the date hereof. The Company undertakes no duty to publicly update or revise that information.

You are cautioned not to place undue reliance on the estimates, projections, and other forward-looking statements in this report and the information statement attached hereto as Exhibit 99.1 as they are based on current expectations and general assumptions and are subject to various risks, uncertainties, and other factors, including those set forth in the Information Statement and Encompass’s Annual Report on Form 10‑K for the year ended December 31, 2021 and Form 10‑Q for the three months ended March 31, 2022, and the Company’s Registration Statement on Form 10. These factors may cause actual results to differ materially from the views, beliefs, and estimates expressed herein.
Item 9.01. Financial Statements and Exhibits.

(d)          Exhibits.

Exhibit
Number
  
Description
 
Separation and Distribution Agreement, dated as of June 30, 2022, by and between Encompass Health Corporation and Enhabit, Inc.
 
Transition Services Agreement, dated as of June 30, 2022, by and between Encompass Health Corporation and Enhabit, Inc.
 
Tax Matters Agreement, dated as of June 30, 2022, by and between Encompass Health Corporation and Enhabit, Inc.
 
Employee Matters Agreement, dated as of June 30, 2022, by and between Encompass Health Corporation and Enhabit, Inc.
 
Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Enhabit, Inc.
 
Amended and Restated Certificate of Incorporation of Enhabit, Inc.
 
Amended and Restated Bylaws of Enhabit, Inc.
 
Enhabit, Inc. 2022 Omnibus Performance Incentive Plan
 
Enhabit, Inc. Change in Control Benefits Plan
 
Enhabit, Inc. Executive Severance Plan
 
Information Statement of Enhabit, Inc., dated June 21, 2022 (incorporated by reference to Exhibit 99.1 to Enhabit, Inc.'s Current Report on Form 8-K filed on June 21, 2022)
 
Press release issued by Enhabit, Inc, dated July 1, 2022
104
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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.

 
ENHABIT, INC.
Dated: July 5, 2022
  
   
 
By:
/s/ Barbara A. Jacobsmeyer
   
Name:
Barbara A. Jacobsmeyer
   
Title:
President and Chief Executive Officer

Exhibit 2.1




SEPARATION AND DISTRIBUTION AGREEMENT

BY AND BETWEEN

ENCOMPASS HEALTH CORPORATION

AND

ENHABIT, INC.

_________________

Dated as of June 30, 2022


TABLE OF CONTENTS

   
Page
SCHEDULES
iii
EXHIBITS
iii
ARTICLE I DEFINITIONS
2
ARTICLE II THE SEPARATION
13
2.1
Transfer of Assets and Assumption of Liabilities
13
2.2
Enhabit Assets; Encompass Assets
16
2.3
Enhabit Liabilities; Encompass Liabilities
18
2.4
Approvals and Notifications
19
2.5
Assignment and Novation of Liabilities
22
2.6
Release of Guarantees
23
2.7
Termination of Agreements
24
2.8
Treatment of Shared Contracts
25
2.9
Bank Accounts; Cash Balances
26
2.10
Ancillary Agreements
26
2.11
Disclaimer of Representations and Warranties
27
2.12
Enhabit Financing Arrangements; Enhabit Debt Incurrence
27
2.13
Financial Information Certifications
27
ARTICLE III THE DISTRIBUTION
28
3.1
Sole and Absolute Discretion; Cooperation
28
3.2
Actions Prior to the Distribution
28
3.3
Conditions to the Distribution.
29
3.4
The Distribution.
30
ARTICLE IV MUTUAL RELEASES; INDEMNIFICATION
31
4.1
Release of Pre-Distribution Claims
31
4.2
Indemnification by Enhabit
33
4.3
Indemnification by Encompass
33
4.4
Indemnification Obligations Net of Insurance Proceeds and Other Amounts
34
4.5
Procedures for Indemnification of Third-Party Claims
35
4.6
Additional Matters
36
4.7
Right of Contribution
37
4.8
Covenant Not to Sue
37
4.9
Remedies Cumulative
37
4.10
Survival of Indemnities
37
ARTICLE V CERTAIN OTHER MATTERS
38
5.1
Names Following the Effective Time
38
5.2
Insurance Matters
39
5.3
Late Payments
41
5.4
Inducement
41
5.5
Post-Effective Time Conduct
41

i



ARTICLE VI EXCHANGE OF INFORMATION; CONFIDENTIALITY
41
6.1
Agreement for Exchange of Information
41
6.2
Ownership of Information
42
6.3
Compensation for Providing Information
42
6.4
Record Retention
42
6.5
Limitations of Liability
42
6.6
Other Agreements Providing for Exchange of Information
43
6.7
Production of Witnesses; Records; Cooperation
43
6.8
Privileged Matters
44
6.9
Confidentiality
45
6.10
Protective Arrangements
46
ARTICLE VII DISPUTE RESOLUTION
47
7.1
Good-Faith Officer Negotiation
47
7.2
Good-Faith Negotiation
47
7.3
Arbitration
47
7.4
Litigation and Unilateral Commencement of Arbitration
48
7.5
Conduct During Dispute Resolution Process
48
7.6
Dispute Resolution Coordination
48
ARTICLE VIII FURTHER ASSURANCES AND ADDITIONAL COVENANTS
48
8.1
Further Assurances
48
ARTICLE IX TERMINATION
49
9.1
Termination
49
9.2
Effect of Termination
49
ARTICLE X MISCELLANEOUS
49
10.1
Counterparts; Entire Agreement; Corporate Power
49
10.2
Governing Law
50
10.3
Assignability
50
10.4
Third-Party Beneficiaries
50
10.5
Notices
51
10.6
Severability
52
10.7
Force Majeure
52
10.8
No Set-Off
52
10.9
Expenses
52
10.10
Headings
52
10.11
Survival of Covenants
52
10.12
Waivers of Default
52
10.13
Specific Performance
53
10.14
Amendments
53
10.15
Interpretation
53
10.16
Limitations of Liability
53
10.17
Performance
53
10.18
Mutual Drafting
53
10.19
Ancillary Agreements
54


ii

SCHEDULES


Schedule I
Separation Step Plan
Schedule 1.1(a)
Enhabit Business
Schedule 1.1(b)
Excluded Business
Schedule 1.2(a)
Enhabit Customer Contracts
Schedule 1.2(b)
Enhabit Vendor Contracts
Schedule 1.2(d)
Enhabit Intellectual Property Contracts
Schedule 1.2(m)
Enhabit Right to Recovery Contracts
Schedule 1.3
Enhabit Information Technology
Schedule 1.4
Excluded Enhabit Information Technology
Schedule 1.5
Enhabit Marks
Schedule 1.6(a)
Enhabit Real Property
Schedule 1.6(b)
Enhabit Leases
Schedule 1.7
Enhabit Registered IP
Schedule 1.8
Enhabit Technology
Schedule 2.1(e)(i)
Enhabit License to Certain Intellectual Property Rights
Schedule 2.2(a)(xv)
Enhabit Tangible Personal Property
Schedule 2.2(a)(xvi)
Other Enhabit Assets
Schedule 2.2(a)(xvii)
Excluded Assets
Schedule 2.2(b)(xi)
Other Encompass Assets
Schedule 2.3(a)(v)
Other Enhabit Liabilities
Schedule 2.3(a)(viii)
Enhabit Third-Party Claims
Schedule 2.3(a)(ix)
Excluded Enhabit Liabilities
Schedule 2.3(b)(iv)
Encompass Liabilities
Schedule 2.3(b)(v)
Encompass Third-Party Claims
Schedule 2.7(b)(ii)
Intercompany Agreements (Non-Termination)
Schedule 2.8
Shared Contracts
Schedule 2.12
Enhabit Financing Arrangements
Schedule 4.3(e)
Encompass Information
Schedule 4.5(b)
Shared Third-Party Claims
Schedule 5.1(b)
Time Periods for Use of Names
Schedule 6.7(f)
Litigation Cooperation
Schedule 6.8(b)
Privileged Matters
Schedule 10.9
Expense Allocation


EXHIBITS


Exhibit A
Amended and Restated Certificate of Incorporation of Enhabit
Exhibit B
Amended and Restated Bylaws of Enhabit


iii

SEPARATION AND DISTRIBUTION AGREEMENT

This SEPARATION AND DISTRIBUTION AGREEMENT, dated as of June 30, 2022 (this “Agreement”), is by and between Encompass Health Corporation, a Delaware corporation (“Encompass”), and Enhabit, Inc., a Delaware corporation and a direct wholly owned subsidiary of Encompass (“Enhabit”).  Capitalized terms used herein and not otherwise defined shall have the respective meanings assigned to them in Article I.

R E C I T A L S

WHEREAS, Enhabit is a direct, wholly-owned Subsidiary of Encompass;

WHEREAS, the board of directors of Encompass (the “Encompass Board”) has determined that it is in the best interests of Encompass and its stockholders for Enhabit to operate the Enhabit Business as a separate, publicly traded company;

WHEREAS, the Encompass Board has determined that it is appropriate and desirable to separate the Enhabit Business from the other businesses conducted by Encompass (the “Separation”) and, following the Separation, make a distribution, on a pro rata basis, to holders of Encompass Shares on the Record Date of all of the outstanding Enhabit Shares (the “Distribution”);

WHEREAS, pursuant to the Separation Step Plan and the terms of this Agreement, among other things, following certain preparatory transactions described in the Separation Step Plan, (a) Encompass IP Holding Corp. (“IP NewCo”) contributed to Enhabit Holdings, LLC (“HHH NewCo”), a Delaware limited liability company (which at the time of such transfer was treated as disregarded from IP NewCo for Federal Income Tax purposes) all of the issued and outstanding membership interests in Advanced Homecare Management, LLC, a Delaware limited liability company, and HHH NewCo converted from a limited liability company to a corporation pursuant to Delaware law (together, the “Contribution”), (b) IP NewCo distributed to Advanced Homecare Holdings, Inc. (“AH Holdings”), a Delaware corporation, all of the issued and outstanding stock of HHH NewCo (the “First Internal Distribution”), (c) AH Holdings distributed to Enhabit all of the issued and outstanding stock of HHH NewCo (the “Second Internal Distribution”), (d) Enhabit distributed to Distributing all of the issued and outstanding stock of AH Holdings (the “Third Internal Distribution”), (e) Enhabit transferred the net proceeds of new revolving and term loan facilities of approximately $566.5 million to Encompass, and (f) Enhabit recapitalized its issued and outstanding stock through a forward stock split;

WHEREAS, for Federal Income Tax purposes, it is intended that (a) the First Internal Distribution (together with the Contribution), shall qualify as a transaction that is generally tax-free pursuant to Sections 355(a) and 368(a)(1)(D) of the Code and (b) the Second Internal Distribution, the Third Internal Distribution and the Distribution shall each qualify as a transaction that is generally tax-free pursuant to Section 355(a) of the Code;


WHEREAS, Enhabit and Encompass have prepared, and Enhabit has filed with the SEC, the Form 10, which includes the Information Statement, and which sets forth disclosures concerning Enhabit, the Separation and the Distribution;

WHEREAS, each of Encompass and Enhabit has determined that it is necessary and desirable, on or prior to the Effective Time (as defined herein), to allocate and transfer to the applicable Group (as defined below) certain Assets, and to allocate and assign to the applicable Group responsibility for certain Liabilities, in respect of the activities of the Enhabit Business (as defined herein) and the Encompass Businesses (as defined herein), in each case, solely to the extent such Assets are not already held by or are not already Liabilities of the relevant Group; and

WHEREAS, the Parties acknowledge that this Agreement and the Ancillary Agreements represent the integrated agreement of Encompass and Enhabit relating to the Separation and the Distribution, are being entered into together, and would not have been entered into independently.

NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, hereby agree as follows:

ARTICLE I
DEFINITIONS

For the purpose of this Agreement, the following terms shall have the following meanings:

“Accounts Payable” shall mean any and all trade and non-trade accounts payable of either Party or member of its Group.

“Accounts Receivable” shall mean any and all trade and non-trade accounts receivable of either Party or member of its Group.

“Action” shall mean any demand, action, claim, dispute, suit, countersuit, arbitration, inquiry, subpoena, proceeding or investigation of any nature (whether criminal, civil, legislative, administrative, regulatory, prosecutorial or otherwise) by or before any federal, state, local, foreign or international Governmental Authority or any arbitration or mediation tribunal.

“Affiliate” shall mean, when used with respect to a specified Person, a Person that, directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with such specified Person.  For the purpose of this definition, “control” (including, with correlative meanings, “controlled by” and “under common control with”), when used with respect to any specified Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or other interests, by contract, agreement, obligation, indenture, instrument, lease, promise, arrangement, release, warranty, commitment, undertaking or otherwise.  It is expressly agreed that, prior to, at and after the Effective Time, for purposes of this Agreement and the Ancillary Agreements, (a) no member of the Enhabit Group shall be deemed to be an Affiliate of any member of the Encompass Group and (b) no member of the Encompass Group shall be deemed to be an Affiliate of any member of the Enhabit Group.

2

“Agent” shall mean the trust company or bank to be duly appointed by Encompass to act as distribution agent, transfer agent and registrar for the Enhabit Shares in connection with the Distribution.

“Agreement” shall have the meaning set forth in the Preamble.

“AH Holdings” shall have the meaning set forth in the Recitals.

“Ancillary Agreements” shall mean all agreements (other than this Agreement) entered into by the Parties or the members of their respective Groups (but as to which no Third Party is a party) in connection with the Separation, the Distribution or the other transactions contemplated by this Agreement, including the Transition Services Agreement, the Tax Matters Agreement, the Employee Matters Agreement, the Business Associate Agreement and the Transfer Documents.

“Approvals or Notifications” shall mean any consents, waivers, approvals, permits or authorizations to be obtained from, notices, registrations or reports to be submitted to, or other filings to be made with, any third Person, including any Governmental Authority.

“Arbitration Request” shall have the meaning set forth in Section 7.3(a).

“Assets” shall mean, with respect to any Person, the assets, properties, claims and rights (including goodwill) of such Person, wherever located (including in the possession of vendors or other third Persons or elsewhere), of every kind, character and description, whether real, personal or mixed, tangible, intangible or contingent, in each case whether or not recorded or reflected or required to be recorded or reflected on the books and records or financial statements of such Person, including rights and benefits pursuant to any contract, license, permit, indenture, note, bond, mortgage, agreement, concession, franchise, instrument, undertaking, commitment, understanding or other arrangement.

“Business Associate Agreement” shall mean the Business Associate Agreement to be entered into by and between Encompass and Enhabit or the members of their respective Groups in connection with, the Transition Services Agreement, the Separation, the Distribution or the other transactions contemplated by this Agreement, as it may be amended from time to time.

“Business Day” shall mean a day other than a Saturday, a Sunday or a day on which banking institutions located in Birmingham, Alabama; Dallas, Texas; or New York, New York are authorized or obligated by Law or executive order to close.

“Cash Transfer” shall have the meeting set forth in Section 2.12(a).

“CEO Negotiation Request” shall have the meaning set forth in Section 7.2.

“Change of Control” shall mean, with respect to a Party:  (a) a transaction whereby any Person or group (within the meaning of Section 13(d)(3) of the Exchange Act) would acquire, directly or indirectly, voting securities representing more than fifty percent (50%) of the total voting power of such Party; (b) a merger, consolidation, recapitalization or reorganization of such Party, unless securities representing more than fifty percent (50%) of the total voting power of the legal successor to such Party as a result of such merger, consolidation, recapitalization or reorganization are immediately thereafter beneficially owned, directly or indirectly, by the Persons who beneficially owned such Party’s outstanding voting securities immediately prior to such transaction; or (c) the sale of all or substantially all of the consolidated assets of such Party’s Group.  For the avoidance of doubt, no transaction contemplated by this Agreement shall be considered a Change of Control.

“Code” shall mean the Internal Revenue Code of 1986, as amended.

“Contribution” shall have the meaning set forth in the Recitals.

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“Delayed Encompass Asset” shall have the meaning set forth in Section 2.4(h).

“Delayed Encompass Liability” shall have the meaning set forth in Section 2.4(h).

“Delayed Enhabit Asset” shall have the meaning set forth in Section 2.4(c).

“Delayed Enhabit Liability” shall have the meaning set forth in Section 2.4(c).

“Disclosure Document” shall mean any registration statement (including the Form 10) filed with the SEC by or on behalf of any Party or any member of its Group, and also includes any information statement (including the Information Statement), prospectus, offering memorandum, offering circular, periodic report or similar disclosure document, whether or not filed with the SEC or any other Governmental Authority, in each case that describes the Separation or the Distribution or the Enhabit Group or primarily relates to the transactions contemplated hereby.

“Dispute” shall have the meaning set forth in Section 7.1.

“Distribution” shall have the meaning set forth in the Recitals.

“Distribution Date” shall mean 12:01 a.m. Eastern Time on July 1, 2022, which is the date of the consummation of the Distribution, which shall be determined by the Encompass Board in its sole and absolute discretion.

“Distribution Ratio” shall mean a number equal to 0.50.

“Effective Time” shall mean 12:01 a.m., New York City time, on the Distribution Date.

“Employee Matters Agreement” shall mean the Employee Matters Agreement to be entered into by and between Encompass and Enhabit in connection with the Separation or the Distribution or the other transactions contemplated by this Agreement, as it may be amended from time to time.

“Encompass” shall have the meaning set forth in the Preamble.

“Encompass Accounts” shall have the meaning set forth in Section 2.9(a).

“Encompass Assets” shall have the meaning set forth in Section 2.2(b).

“Encompass Board” shall have the meaning set forth in the Recitals.

“Encompass Business” shall mean all businesses, operations and activities conducted at any time prior to the Effective Time by either Party or any member of its Group, other than the Enhabit Business.

“Encompass Group” shall mean Encompass and each Person that is a Subsidiary of Encompass (other than Enhabit and any other member of the Enhabit Group).

“Encompass Indemnitees” shall have the meaning set forth in Section 4.2.

“Encompass Information Technology” shall mean all Information Technology, other than Enhabit Information Technology, owned by either Party or any member of its Group as of the Effective Time.

“Encompass Intellectual Property Rights” shall mean the Intellectual Property Rights set forth on Schedule 2.2(b)(iv) and all Intellectual Property Rights, other than Enhabit Intellectual Property Rights, owned by either Party or any member of its Group as of the Effective Time.

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“Encompass Inventory” shall mean all Inventory, other than Enhabit Inventory, owned by either Party or any member of its Group as of the Effective Time.

“Encompass Liabilities” shall have the meaning set forth in Section 2.3(b).

“Encompass Marks” shall mean all Trademarks, other than the Enhabit Marks, owned by either Party or any member of its Group as of the Effective Time.

“Encompass Policies” shall have the meaning set forth in Section 5.2(b).

“Encompass Records” shall have the meaning set forth in Section 2.2(a)(viii).

“Encompass Shares” shall mean the shares of common stock, par value $0.01 per share, of Encompass.

“Enhabit” shall have the meaning set forth in the Preamble.

“Enhabit Accounts” shall have the meaning set forth in Section 2.9(a).

“Enhabit Accounts Payable” shall mean any and all trade and non-trade accounts payable of either Party or member of its Group outstanding as of the Effective Time, in each case, to the extent related to the Enhabit Business or arising out of any Enhabit Contract.

“Enhabit Accounts Receivable” shall mean any and all trade and non-trade accounts receivable of either Party or member of its Group outstanding as of the Effective Time, in each case, to the extent related to the Enhabit Business or arising out of any Enhabit Contract.

“Enhabit Assets” shall have the meaning set forth in Section 2.2(a).

“Enhabit Balance Sheet” shall mean the pro forma combined balance sheet of the Enhabit Business, including any notes and subledgers thereto, as of March 31, 2022, as presented in the Information Statement.

“Enhabit Books and Records” shall mean all books and records used in or necessary, as of the Effective Time, for the general financial and administrative operation of the Enhabit Business, including financial, employee, and general business operating documents, instruments, papers, books, books of account, records and files and data related thereto; provided that Enhabit Books and Records shall not include (i) Enhabit Product and Customer Records, and (ii) material that Encompass is not permitted by applicable Law or agreement to disclose or transfer to Enhabit.

“Enhabit Business” shall mean the business, operations and activities of the Enhabit segment of Encompass conducted as of the Effective Time by either Party or any member of its Group, as described in the Information Statement.  For the avoidance of doubt, the Enhabit Business shall include the business, operations and activities set forth on Schedule 1.1(a) and exclude the business, operations and activities set forth on Schedule 1.1(b).

“Enhabit Bylaws” shall mean the Amended and Restated Bylaws of Enhabit, substantially in the form of Exhibit B.

“Enhabit Certificate of Incorporation” shall mean the Amended and Restated Certificate of Incorporation of Enhabit, substantially in the form of Exhibit A.

“Enhabit Common Stock” shall mean the common stock, par value $0.01 per share, of Enhabit.

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“Enhabit Contracts” shall mean the following contracts and agreements to which either Party or any member of its Group is a party or by which it or any member of its Group or any of their respective Assets is bound, whether or not in writing; provided that Enhabit Contracts shall not include any contract or agreement that shall be retained by Encompass or any member of the Encompass Group from and after the Effective Time pursuant to any provision of this Agreement or any Ancillary Agreement:

(a)
(i) any customer contract, agreement with third party payor (including government health programs and private insurance companies) or agreement entered into prior to the Effective Time exclusively related to the Enhabit Business, including the contracts and agreements set forth on Schedule 1.2(a) and (ii) with respect to any customer contract, agreement with third party payor (including government health programs and private insurance companies) or agreement entered into prior to the Effective Time that relates to the Enhabit Business but is not exclusively related to the Enhabit Business, that portion of any such contract or agreement that primarily relates to the Enhabit Business;

(b)
(i) any supply or vendor contract or agreement entered into prior to the Effective Time exclusively related to the Enhabit Business, including the contracts and agreements set forth on Schedule 1.2(b), and (ii) with respect to any supply or vendor contract or agreement entered into prior to the Effective Time that relates to the Enhabit Business but is not exclusively related to the Enhabit Business, that portion of any such contract or agreement that primarily relates to the Enhabit Business;

(c)
any contract or agreement entered into prior to the Effective Time pursuant to which Enhabit or any member of the Enhabit Group participates in any United States federal, state or local health care or reimbursement program administered by a Governmental Authority, including any “Federal Health Care Program” as defined in 42 U.S.C. §1320a-7b(f), including Medicare, state Medicaid programs, state CHIP programs, TRICARE and similar or successor programs with or for the benefit of any Governmental Authority;

(d)
any contract or agreement entered into prior to the Effective Time set forth on Schedule 1.2(d), which grants a Third Party rights or licenses to Intellectual Property Rights that are Enhabit Intellectual Property Rights;

(e)
any joint venture or partnership contract or agreement that exclusively relates to the Enhabit Business as of the Effective Time;

(f)
any guarantee, indemnity, representation, covenant, warranty or other liability of either Party or any member of its Group in respect of any other Enhabit Contract, any Enhabit Liability or the Enhabit Business;

(g)
any proprietary information and inventions agreement or similar Intellectual Property Rights assignment or license agreement with any current or former Enhabit Group employee, Encompass Group employee, consultant of the Enhabit Group or consultant of the Encompass Group, in each case entered into prior to the Effective Time (i) that is exclusively related to the Enhabit Business or (ii) if not exclusively related to the Enhabit Business, that portion of any such assignment or agreement that primarily relates to the Enhabit Business;

(h)
any contract or agreement that is expressly contemplated pursuant to this Agreement or any of the Ancillary Agreements to be assigned to, or to be a contract or agreement in the name of, Enhabit or any member of the Enhabit Group;

(i)
any interest rate, currency, commodity or other swap, collar, cap or other hedging or similar agreements or arrangements exclusively related to the Enhabit Business;

(j)
any contract or agreement entered into in the name of, or expressly on behalf of, any division, business unit or member of the Enhabit Group;

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(k)
any other contract or agreement exclusively related to the Enhabit Business or Enhabit Assets;

(l)
Enhabit Leases; and

(m)
any contracts, agreements or settlements set forth on Schedule 1.2(m), including the right to recover any amounts under such contracts, agreements, leases or settlements.

“Enhabit Debt” shall have the meeting set forth in Section 2.12(a).

“Enhabit Designees” shall mean any and all entities (including corporations, general or limited partnerships, trusts, joint ventures, unincorporated organizations, limited liability entities or other entities) designated by Encompass that will be members of the Enhabit Group as of the Effective Time.

“Enhabit Financing Arrangements” shall have the meaning set forth in Section 2.12(a).

“Enhabit Group” shall mean (a) Enhabit, (b) each Subsidiary of Enhabit as of the Effective Time, and (c) each other Person that is controlled directly or indirectly by Enhabit as of the Effective Time.

“Enhabit Indemnitees” shall have the meaning set forth in Section 4.3.

“Enhabit Information Technology” shall mean (a) all Information Technology owned by either Party or any member of its Group that is exclusively used or exclusively held for use in the Enhabit Business as of the Effective Time, and (b) the Information Technology set forth on Schedule 1.3; provided, however, that Enhabit Information Technology shall not include the Information Technology set forth on Schedule 1.4 or any Software licensed from a Third Party.

“Enhabit Intellectual Property Rights” shall mean (a) the Enhabit Registered IP, (b) the Enhabit Marks (to the extent not included in clause (a) above), and (c) all Intellectual Property Rights (other Patents, Trademarks and other Registered IP) of either Party or any of the members of its Group, in each case, that is embodied in the Enhabit Technology.

“Enhabit Inventory” shall have the meaning set forth in Section 2.2(a)(vii).

“Enhabit Leases” shall have the meaning set forth in the definition of Enhabit Real Property.

“Enhabit Liabilities” shall have the meaning set forth in Section 2.3(a).

“Enhabit Marks” shall mean the names, Trademarks, monograms, domain names and other source or business identifiers of either Party or any member of its Group that (a) use or contain “Enhabit” (including any stylized versions or design elements thereof), (b) are set forth on Schedule 1.5, or (c) otherwise identify Enhabit as a whole, either alone or in combination with other words or elements, and all names, Trademarks, monograms, domain names and other source or business identifiers confusingly similar to or embodying any of the foregoing, either alone or in combination with other words or elements; provided that Enhabit Marks shall not include the Encompass Marks.

“Enhabit Permits” shall mean all Permits owned or licensed by either Party or any member of its Group exclusively used or exclusively held for use in the Enhabit Business as of the Effective Time.

“Enhabit Product” shall mean products and services supplied, sold, provided or distributed, as the case may be, at any time, by Enhabit or members of its Group under an Enhabit Mark.

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“Enhabit Product and Customer Records” shall mean all books and records related to or used by Enhabit or any member of its Group as of the Effective Time in connection with the sourcing, supply chain management, marketing, sale, distribution, maintenance and warranty of Enhabit Products, including vendor and supplier information and records, customer lists, sales records, customer registration and account information, billing information, marketing materials, customer contracts, terms of use and privacy policies, sales literature catalogs, brochures, sales, warranty and other product information and materials, and Web Site content.

“Enhabit Real Property” shall mean (a) all of the Real Property owned by either Party or any member of its Group as of the Effective Time listed or described on Schedule 1.6(a), (b) the Real Property Leases to which either Party or any member of its Group is party as of the Effective Time set forth on Schedule 1.6(b) (“Enhabit Leases”), and (c) all recorded Real Property notices, easements, and obligations with respect to the Real Property and/or Real Property Leases described in clauses (a) and (b) of this paragraph.

“Enhabit Records” shall have the meaning set forth in Section 2.2(a)(viii).

“Enhabit Registered IP” shall mean the Registered IP set forth on Schedule 1.7.

“Enhabit Shares” shall mean the shares of common stock, par value $0.01 per share, of Enhabit.

“Enhabit Tangible Personal Property” shall have the meaning set forth in Section 2.2(a)(xv).

“Enhabit Technology” shall mean any Technology with respect to which the Intellectual Property Rights therein are owned by either Party or any member of its Group to the extent that such Technology is used in or necessary to the operation of the Enhabit Business as of the Effective Time and capable of being copied (for example, Software), including Technology set forth on Schedule 1.8; provided that Enhabit Technology shall not include (i) any Information Technology, (ii) any Tangible Personal Property, (iii) any Enhabit Books and Records, and (iv) any Enhabit sales and customer Records.

“Environmental Law” shall mean any Law relating to pollution, protection or restoration of or prevention of harm to the environment or natural resources, including the use, handling, transportation, treatment, storage, disposal, Release or discharge of Hazardous Materials or the protection of or prevention of harm to human health and safety.

“Environmental Liabilities” shall mean all Liabilities relating to, arising out of or resulting from any Hazardous Materials, Environmental Law or contract or agreement relating to environmental, health or safety matters (including all removal, remediation or cleanup costs, investigatory costs, response costs, natural resources damages, property damages, personal injury damages, costs of compliance with any product take back requirements or with any settlement, judgment or other determination of Liability and indemnity, contribution or similar obligations) and all costs and expenses, interest, fines, penalties or other monetary sanctions in connection therewith.

“Exchange Act” shall mean the U.S. Securities Exchange Act of 1934, as amended, together with the rules and regulations promulgated thereunder.

“Federal Income Tax” shall have the meaning set forth in the Tax Matters Agreement.

“First Internal Distribution” shall have the meaning set forth in the Recitals.

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“Force Majeure” shall mean, with respect to a Party, an event beyond the reasonable control of such Party (or any Person acting on its behalf), which event (a) does not arise or result from the fault or negligence of such Party (or any Person acting on its behalf) and (b) by its nature would not reasonably have been foreseen by such Party (or such Person), or, if it would reasonably have been foreseen, was unavoidable, and includes acts of God, acts of civil or military authority, embargoes, acts of terrorism, cyberattacks, epidemics, pandemics or diseases (including SARS-CoV-2 or Covid-19, and any evolutions or variants thereof or related or associated epidemics, pandemics or disease outbreaks) or other health crises or public health events, or any worsening of any of the foregoing, quarantine or government health alert that prohibits or restricts travel or prevents any individual from reporting to a work location, war, riots, insurrections, fires, explosions, earthquakes, floods, unusually severe weather conditions, labor problems or unavailability of parts, or, in the case of computer systems, any significant and prolonged failure in electrical or air conditioning equipment.  Notwithstanding the foregoing, the receipt by a Party of an unsolicited takeover offer or other acquisition proposal, even if unforeseen or unavoidable, and such Party’s response thereto shall not be deemed an event of Force Majeure.

“Form 10” shall mean the registration statement on Form 10 filed by Enhabit with the SEC to effect the registration of Enhabit Shares pursuant to the Exchange Act in connection with the Distribution, as such registration statement may be amended or supplemented from time to time prior to the Distribution.

“GAAP” means United States generally accepted accounting principles, consistently applied.

“Governmental Approvals” shall mean any Approvals or Notifications to be made to, or obtained from, any Governmental Authority.

“Governmental Authority” shall mean any nation or government, any state, municipality or other political subdivision thereof, and any entity, body, agency, commission, department, board, bureau, court, tribunal or other instrumentality, whether federal, state, local, domestic, foreign or multinational, exercising executive, legislative, judicial, regulatory, administrative or other similar functions of, or pertaining to, a government and any executive official thereof.

“Group” shall mean either the Enhabit Group or the Encompass Group, as the context requires.

“Hazardous Materials” shall mean any chemical, material, substance, waste, pollutant, emission, discharge, release or contaminant that could result in Liability under, or that is prohibited, limited or regulated by or pursuant to, any Environmental Law, and any natural or artificial substance (whether solid, liquid or gas, noise, ion, vapor or electromagnetic) that could cause harm to human health or the environment, including petroleum, petroleum products and byproducts, asbestos and asbestos-containing materials, urea formaldehyde foam insulation, electronic, medical or infectious wastes, polychlorinated biphenyls, radon gas, radioactive substances, chlorofluorocarbons and all other ozone-depleting substances.

“HHH Newco” shall have the meaning set forth in the Recitals.

“Indemnifying Party” shall have the meaning set forth in Section 4.4(a).

“Indemnitee” shall have the meaning set forth in Section 4.4(a).

“Indemnity Payment” shall have the meaning set forth in Section 4.4(a).

“Information Statement” shall mean the information statement to be made available to the holders of Encompass Shares in connection with the Distribution, as such information statement may be amended or supplemented from time to time prior to the Distribution.

9

“Information Technology” shall mean all computer systems (including hardware, computers, servers, workstations, routers, hubs, switches and data communication lines), network and telecommunications equipment, Internet-related information technology infrastructure, and other information technology equipment and all associated documentation.

“Insurance Proceeds” shall mean those monies:

(a)
received by an insured from an insurance carrier; or

(b)
paid by an insurance carrier on behalf of the insured;

in any such case net of any applicable premium adjustments (including reserves and retrospectively rated premium adjustments) and net of any costs or expenses incurred in the collection thereof.

“Intellectual Property Rights” shall mean any and all common law and statutory rights anywhere in the world arising under or associated with the following:  (a) patents, patent applications, utility models, statutory invention registrations, certificates of invention, registered designs and similar or equivalent rights in inventions and designs, and all rights therein provided by international treaties or conventions (“Patents”), (b) trademarks, service marks, trade names, service names, trade dress, logos and other designations of origin, including any registrations and applications for registration of any of the foregoing (“Trademarks”), (c) rights associated with Internet domain names, uniform resource locators, Internet Protocol addresses, social media accounts or “handles” with Facebook, LinkedIn, Twitter and similar social media platforms, handles and other names, identifiers and locators associated with Internet addresses, sites and services (“Internet Properties”), (d) copyrights and any other equivalent rights in works of authorship (including rights in software or databases as a work of authorship) and any other related rights of authors, and all registrations and applications for registration of any of the foregoing (“Copyrights”), (e) trade secrets and industrial secret rights and rights in know-how, inventions, data, and any other confidential or proprietary business or technical information, that derive independent economic value, whether actual or potential, from not being known to other persons, and (f) all other similar or equivalent intellectual property or proprietary rights anywhere in the world.

“Inventory” shall have the meaning set forth in Section 2.2(a)(vii).

“IP Newco” shall have the meaning set forth in the Recitals.

“JAMS Rules” shall have the meaning set forth in Section 7.3(a).

“Law” shall mean any national, supranational, federal, state, provincial, local or similar law (including common law), statute, code, order, ordinance, rule, regulation, treaty (including any Tax treaty), license, permit, authorization, approval, consent, decree, injunction, binding judicial or administrative interpretation or other requirement, in each case, enacted, promulgated, issued or entered by a Governmental Authority.

“Liabilities” shall mean any and all debts, guarantees, assurances, commitments, liabilities, responsibilities, Losses, remediation, deficiencies, damages, fines, penalties, settlements, sanctions, costs, expenses, interest and obligations of any nature or kind, whether accrued or fixed, absolute or contingent, matured or unmatured, accrued or not accrued, asserted or unasserted, liquidated or unliquidated, foreseen or unforeseen, known or unknown, reserved or unreserved, or determined or determinable, including those arising under any Law, claim (including any Third-Party Claim), demand, Action, or order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority or arbitration tribunal, and those arising under any contract, agreement, obligation, indenture, instrument, lease, promise, arrangement, release, warranty, commitment or undertaking, or any fines, damages or equitable relief that is imposed, in each case, including all costs and expenses relating thereto.

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“Linked” shall have the meaning set forth in Section 2.9(a).

“Losses” shall mean actual losses (including any diminution in value), costs, damages, penalties and expenses (including legal and accounting fees and expenses and costs of investigation and litigation), whether or not involving a Third-Party Claim.

“NYSE” shall mean the New York Stock Exchange.

“Officer Negotiation Request” shall have the meaning set forth in Section 7.1.

“Parties” shall mean the parties to this Agreement.

“Permits” shall mean permits, approvals, authorizations, consents, licenses or certificates issued by any Governmental Authority.

“Person” shall mean an individual, a general or limited partnership, a corporation, a trust, a joint venture, an unincorporated organization, a limited liability entity, any other entity and any Governmental Authority.

“Policies” shall mean insurance policies and insurance contracts of any kind, including but not limited to global property, excess and umbrella liability, commercial general liability, directors and officers liability, fiduciary liability, cyber, media and technology errors and omissions liability, employment practices liability, workers’ compensation and employers’ liability, employee dishonesty/crime/fidelity, bonds and self-insurance, together with the rights, benefits, privileges and obligations thereunder.

“Prime Rate” shall mean the rate that Bloomberg displays as “Prime Rate by Country United States” or “Prime Rate By Country US-BB Comp” at http://www.bloomberg.com/quote/PRIME:IND or on a Bloomberg terminal at PRIMBB Index.

“Privileged Information” shall mean any information, in written, oral, electronic or other tangible or intangible forms, including any communications by or to attorneys (including attorney-client privileged communications), memoranda and other materials prepared by attorneys or under their direction (including attorney work product), as to which a Party or any member of its Group would be entitled to assert or has asserted a privilege or other protection, including the attorney-client and work product privileges.

“Real Property” shall mean land together with all easements, rights and interests arising out of the ownership thereof or appurtenant thereto and all buildings, structures, improvements and fixtures located thereon.

“Real Property Leases” shall mean all leases to Real Property and, to the extent covered by such leases, any and all buildings, structures, improvements and fixtures located thereon.

“Record Date” shall mean the close of business on June 24, 2022, which is the date determined by the Encompass Board in its sole and absolute discretion as the record date for determining holders of Encompass Shares entitled to receive Enhabit Shares pursuant to the Distribution.

“Record Holders” shall mean the holders of record of Encompass Shares as of the Record Date.

“Registered IP” shall mean any United States, international or foreign (a) Patents and Patent applications; (b) registered Trademarks and applications to register Trademarks; (c) registered Copyrights and applications for Copyright registration; and (d) registered Internet Properties.

“Release” shall mean any release, spill, emission, discharge, leaking, pumping, pouring, dumping, injection, deposit, disposal, dispersal, leaching or migration of Hazardous Materials into the environment (including ambient air, surface water, groundwater and surface or subsurface strata).

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“Representatives” shall mean, with respect to any Person, any of such Person’s directors, officers, employees, agents, consultants, advisors, accountants, attorneys or other representatives.

“SEC” shall mean the U.S. Securities and Exchange Commission.

“Second Internal Distribution” shall have the meaning set forth in the Recitals.

“Section 1542” shall have the meaning set forth in Section 4.1(c).

“Security Interest” shall mean any mortgage, security interest, pledge, lien, charge, claim, option, right to acquire, voting or other restriction, right-of-way, covenant, condition, easement, encroachment, restriction on transfer or other encumbrance of any nature whatsoever.

“Separation” shall have the meaning set forth in the Recitals.

“Separation Step Plan” shall be the plan set forth on Schedule I hereto.

“Shared Contract” shall have the meaning set forth in Section 2.8(a).

“Shared Third-Party Claim” shall have the meaning set forth in Section 4.5(b).

“Software” shall mean any and all (a) computer programs, including any and all software implementation of algorithms, models and methodologies, whether in source code, object code, human readable form or other form, (b) databases and compilations, including any and all data and collections of data, whether machine readable or otherwise, (c) descriptions, flow charts and other work products used to design, plan, organize and develop any of the foregoing, (d) screens, user interfaces, report formats, firmware, development tools, templates, menus, buttons and icons, and (e) documentation, including user manuals and other training documentation, relating to any of the foregoing.

“Specified Ancillary Agreement” shall have the meeting set forth in Section 10.19(a).

“Straddle Period” shall have the meeting set forth in Section 2.12(a).

“Subsidiary” shall mean, with respect to any Person, any corporation, limited liability company, joint venture or partnership of which such Person (a) beneficially owns, either directly or indirectly, more than fifty percent (50%) of (i) the total combined voting power of all classes of voting securities, (ii) the total combined equity interests or (iii) the capital or profit interests, in the case of a partnership, or (b) otherwise has the power to vote, either directly or indirectly, sufficient securities to elect a majority of the board of directors or similar governing body.

“Tangible Information” shall mean information that is contained in written, electronic or other tangible forms.

“Tangible Personal Property” shall mean equipment, hardware, furniture, fixtures, motor vehicles and other transportation equipment, and other tangible personal property, it being understood that Tangible Personal Property shall not include (i) any Information Technology and (ii) any Technology.

“Tax” shall have the meaning set forth in the Tax Matters Agreement.

“Tax Matters Agreement” shall mean the Tax Matters Agreement to be entered into by and between Encompass and Enhabit in connection with the Separation, the Distribution and the other transactions contemplated by this Agreement, as it may be amended from time to time.

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“Tax Return” shall have the meaning set forth in the Tax Matters Agreement.

“Technology” shall mean embodiments, regardless of form, of Intellectual Property Rights, including, as the context requires, blueprints, designs, design protocols, documentation, specifications for materials, specifications for parts and devices, and design tools, materials, manuals, data, databases, Software and know-how or knowledge of employees, relating to, embodying, or describing products, articles, apparatus, devices, processes, methods, formulae, recipes or other technical information; provided that Technology specifically excludes (i) any and all Intellectual Property Rights, (ii) Tangible Personal Property, (iii) books and records, (iv) sales and customer records, and (v) customer data.

“Third Internal Distribution” shall have the meaning set forth in the Recitals.

“Third Party” shall mean any Person other than the Parties or any members of their respective Groups.

“Third-Party Claim” shall have the meaning set forth in Section 4.5(a).

“Transfer Documents” shall have the meaning set forth in Section 2.1(b).

“Transition Services Agreement” shall mean the Transition Services Agreement to be entered into by and between Encompass and Enhabit or any members of their respective Groups in connection with the Separation, the Distribution or the other transactions contemplated by this Agreement, as it may be amended from time to time.

“Unreleased Encompass Liability” shall have the meaning set forth in Section 2.5(b)(ii).

“Unreleased Enhabit Liability” shall have the meaning set forth in Section 2.5(a)(ii).

ARTICLE II
THE SEPARATION

2.1
Transfer of Assets and Assumption of Liabilities.

(a)
On or prior to the Effective Time, but in any case prior to the Distribution, solely with respect to (x) any Enhabit Assets not already owned by members of the Enhabit Group or Enhabit Liabilities that are not already liabilities of members of the Enhabit Group and (y) any Encompass Assets not already owned by members of the Encompass Group or Encompass Liabilities that are not already liabilities of members of the Encompass Group, including in connection with the Separation Step Plan:

(i)
Transfer and Assignment of Enhabit Assets.  Encompass shall, and shall cause the applicable members of its Group to, contribute, assign, transfer, convey and deliver to Enhabit, or the applicable Enhabit Designees, and Enhabit or such Enhabit Designees shall accept from Encompass and the applicable members of the Encompass Group, all of Encompass’s and such Encompass Group member’s respective direct or indirect right, title and interest in and to all of the Enhabit Assets;

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(ii)
Acceptance and Assumption of Enhabit Liabilities.  Enhabit and the applicable Enhabit Designees shall accept, assume and agree faithfully to perform, discharge and fulfill all the Enhabit Liabilities in accordance with their respective terms.  Enhabit and such Enhabit Designees shall be responsible for all Enhabit Liabilities, regardless of when or where such Enhabit Liabilities arose or arise, or whether the facts on which they are based occurred prior to or subsequent to the Effective Time, regardless of where or against whom such Enhabit Liabilities are asserted or determined (including any Enhabit Liabilities arising out of claims made by Encompass’s or Enhabit’s respective directors, officers, employees, agents, Subsidiaries or Affiliates against any member of the Encompass Group or the Enhabit Group) or whether asserted or determined prior to the date hereof, and regardless of whether arising from or alleged to arise from negligence, recklessness, violation of Law, fraud or misrepresentation by any member of the Encompass Group or the Enhabit Group, or any of their respective directors, officers, employees, agents, Subsidiaries or Affiliates;

(iii)
Transfer and Assignment of Encompass Assets.  Encompass and Enhabit shall cause Enhabit and the Enhabit Designees to contribute, assign, transfer, convey and deliver to Encompass or certain members of the Encompass Group designated by Encompass, and Encompass or such other members of the Encompass Group shall accept from Enhabit and the Enhabit Designees, all of Enhabit’s and such Enhabit Designees’ respective direct or indirect right, title and interest in and to all Encompass Assets held by Enhabit or an Enhabit Designee; and

(iv)
Acceptance and Assumption of Encompass Liabilities.  Encompass and certain members of the Encompass Group designated by Encompass shall accept and assume and agree faithfully to perform, discharge and fulfill all of the Encompass Liabilities held by Enhabit or any Enhabit Designee and Encompass and the applicable members of the Encompass Group shall be responsible for all Encompass Liabilities in accordance with their respective terms, regardless of when or where such Encompass Liabilities arose or arise, whether the facts on which they are based occurred prior to or subsequent to the Effective Time, where or against whom such Encompass Liabilities are asserted or determined (including any such Encompass Liabilities arising out of claims made by Encompass’s or Enhabit’s respective directors, officers, employees, agents, Subsidiaries or Affiliates against any member of the Encompass Group or the Enhabit Group) or whether asserted or determined prior to the date hereof, and regardless of whether arising from or alleged to arise from negligence, recklessness, violation of Law, fraud or misrepresentation by any member of the Encompass Group or the Enhabit Group, or any of their respective directors, officers, employees, agents, Subsidiaries or Affiliates.

(b)
Transfer Documents.  In furtherance of any contribution, assignment, transfer, conveyance and delivery of the Assets and the assumption of the Liabilities in accordance with Section 2.1(a), (i) each Party shall execute and deliver, and shall cause the applicable members of its Group to execute and deliver, to the other Party, such bills of sale, quitclaim deeds, stock powers, certificates of title, assignments of contracts and other instruments of transfer, conveyance and assignment as and to the extent necessary to evidence any transfer, conveyance and assignment of all of such Party’s and the applicable members of its Group’s right, title and interest in and to such Assets to the other Party and the applicable members of its Group in accordance with Section 2.1(a), and (ii) each Party shall execute and deliver, and shall cause the applicable members of its Group to execute and deliver, to the other Party, such assumptions of contracts and other instruments of assumption as and to the extent necessary to evidence the valid and effective assumption of the Liabilities by such Party and the applicable members of its Group in accordance with Section 2.1(a).  All of the foregoing documents contemplated by this Section 2.1(b) shall be referred to collectively herein as the “Transfer Documents.”  The Transfer Documents shall effect certain of the transactions contemplated by this Agreement and, notwithstanding anything in this Agreement to the contrary, shall not expand or limit any of the obligations, covenants or agreements in this Agreement.  It is expressly agreed that in the event of any conflict between the terms of the Transfer Documents and the terms of this Agreement or the Tax Matters Agreement, the terms of this Agreement or the Tax Matters Agreement, as applicable, shall control.

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(c)
Misallocations.  In the event that at any time or from time to time (whether prior to, at or after the Effective Time), one Party (or any member of such Party’s Group) shall receive or otherwise possess any Asset that is allocated to the other Party (or any member of such Party’s Group) pursuant to this Agreement or any Ancillary Agreement, such Party shall promptly transfer, or cause to be transferred, such Asset to the Party so entitled thereto (or to any member of such Party’s Group), and such Party (or member of such Party’s Group) so entitled thereto shall accept such Asset; provided that cash and cash equivalents received prior to the Effective Time shall not be subject to the requirements of this sentence.  Prior to any such transfer, the Person receiving or possessing such Asset shall hold such Asset in trust for such other Person.  In the event that at any time or from time to time (whether prior to, at or after the Effective Time), one Party hereto (or any member of such Party’s Group) shall receive or otherwise assume or be liable for any Liability that is allocated to the other Party (or any member of such Party’s Group) pursuant to this Agreement or any Ancillary Agreement, such other Party shall promptly assume, or cause to be assumed, such Liability and agree to faithfully perform or discharge such Liability in accordance with this Agreement.

(d)
Waiver of Bulk-Sale and Bulk-Transfer Laws.  Enhabit hereby waives compliance by each and every member of the Encompass Group with the requirements and provisions of any “bulk-sale” or “bulk-transfer” Laws of any jurisdiction that may otherwise be applicable with respect to the transfer or sale of any or all of the Enhabit Assets to any member of the Enhabit Group.  Encompass hereby waives compliance by each and every member of the Enhabit Group with the requirements and provisions of any “bulk-sale” or “bulk-transfer” Laws of any jurisdiction that may otherwise be applicable with respect to the transfer or sale of any or all of the Encompass Assets to any member of the Encompass Group.

(e)
Intellectual Property Rights.

(i)
If and to the extent that, as a matter of Law in any jurisdiction, Encompass or the applicable members of its Group cannot assign, transfer or convey any of Encompass’s or such Encompass Group members’ respective direct or indirect right, title and interest in and to any Technology or Intellectual Property Rights included in the Enhabit Assets, then, to the extent possible, Encompass shall, and shall cause the applicable members of its Group to, irrevocably grant to Enhabit, or the applicable Enhabit Designees, an exclusive, irrevocable, assignable, transferable, sublicenseable, worldwide, perpetual, royalty-free license to use, exploit and commercialize in any manner now known or in the future discovered and for whatever purpose, any such right, title or interest.

(ii)
If and to the extent that, as a matter of Law in any jurisdiction, Enhabit or the applicable members of its Group cannot assign, transfer or convey any of Enhabit’s or such Enhabit Group members’ respective direct or indirect right, title and interest in and to any Technology or Intellectual Property Rights included in the Encompass Assets, then, to the extent possible, Enhabit shall, and shall cause the applicable members of its Group to, irrevocably grant to Encompass, or its designee, an exclusive, irrevocable, assignable, transferable, sublicenseable, worldwide, perpetual, royalty-free license to use, exploit and commercialize in any manner now known or in the future discovered and for whatever purpose, any such right, title or interest.

(f)
Electronic Transfer.  All transferred Enhabit Assets and Encompass Assets, including transferred Technology, that can be delivered by electronic transmission will be so delivered or made available to Enhabit, Encompass or their respective designees (as applicable), at a designated FTP site or in another electronic form to be reasonably determined by the Parties.

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2.2
Enhabit Assets; Encompass Assets.

(a)
Enhabit Assets.  For the purposes of this Agreement, “Enhabit Assets” shall mean, without duplication, those Assets whether now existing or hereinafter acquired, used or contemplated to be used or held for use exclusively or primarily in the ownership, operation or conduct of the Enhabit Business or relating exclusively or primarily to the Enhabit Business or to a member of the Enhabit Group, including the following:

(i)
all issued and outstanding capital stock or other equity interests of any members of the Enhabit Group as of immediately prior to the Effective Time;

(ii)
except as otherwise contemplated or set forth in this Section 2.2(a), all Assets of either Party or any members of its Group included or reflected as assets of the Enhabit Group on the Enhabit Balance Sheet, subject to any dispositions of such Assets subsequent to the date of the Enhabit Balance Sheet; provided that the amounts set forth on the Enhabit Balance Sheet with respect to any Assets shall not be treated as minimum amounts or limitations on the amount of such Assets that are included in the definition of Enhabit Assets pursuant to this clause (ii);

(iii)
except as otherwise contemplated or set forth in this Section 2.2(a), all Assets of either Party or any of the members of its Group as of the Effective Time that are of a nature or type that would have resulted in such Assets being included as Assets of Enhabit or members of the Enhabit Group on a pro forma combined balance sheet of the Enhabit Group or any notes or subledgers thereto as of the Effective Time (were such balance sheet, notes and subledgers to be prepared on a basis consistent with the determination of the Assets included on the Enhabit Balance Sheet), it being understood that (x) the Enhabit Balance Sheet shall be used to determine the types of, and methodologies used to determine, those Assets that are included in the definition of Enhabit Assets pursuant to this clause (iii); and (y) the amounts set forth on the Enhabit Balance Sheet with respect to any Assets shall not be treated as minimum amounts or limitations on the amount of such Assets that are included in the definition of Enhabit Assets pursuant to this clause (iii);

(iv)
all Assets of either Party or any of the members of its Group as of the Effective Time that are expressly provided by any provision of this Agreement or any Ancillary Agreement as Assets to be transferred to or owned by Enhabit or any other member of the Enhabit Group;

(v)
all Enhabit Contracts as of the Effective Time and all rights, interests or claims of either Party or any of the members of its Group thereunder as of the Effective Time;

(vi)
any and all Enhabit Accounts Receivable;

(vii)
any and all inventory, supplies, components, packaging materials and other inventories, and all valuation-related adjustments relating thereto (including those relating to warranty, prompt pay discounts, royalties and other items) (“Inventory”), in each case, exclusively related to the Enhabit Business (“Enhabit Inventory”) as of the Effective Time;

(viii)
any and all (x) Enhabit Books and Records, and (y) Enhabit Product and Customer Records, in each case, in the possession of either Party as of the Effective Time (collectively, “Enhabit Records”); provided that Encompass shall be permitted to retain copies of, and continue to use, (A) any Enhabit Records that as of the Effective Time are used in or necessary for the operation or conduct of the Encompass Business, (B) any Enhabit Records that Encompass is required by Law to retain (and if copies are not provided to Enhabit, then, to the extent permitted by Law, such copies will be made available to Enhabit upon Enhabit’s reasonable request), (C) one (1) copy of any Enhabit Records to the extent required to demonstrate compliance with applicable Law or pursuant to internal compliance procedures or related to any Encompass Assets or Encompass’s and/or its Affiliates’ obligations under this Agreement or any of the Ancillary Agreements, and (D) “back-up” electronic tapes of such Enhabit Records maintained by Encompass in the ordinary course of business (such material in clauses (A) through (D), the “Encompass Records”), and such copies of the Encompass Records shall be considered Encompass Assets;

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(ix)
all Enhabit Intellectual Property Rights as of immediately prior to the Effective Time, including any goodwill appurtenant to any Trademarks included in the Enhabit Intellectual Property Rights and the right to seek, recover and retain damages for infringement of any Enhabit Intellectual Property Rights following the Effective Time;

(x)
without limiting clause (ix) above, the Enhabit Marks, and all goodwill of the Enhabit Business appurtenant thereto;

(xi)
all Enhabit Technology as of immediately prior to the Effective Time;

(xii)
all Enhabit Information Technology as of the Effective Time;

(xiii)
all Enhabit Permits as of the Effective Time and all rights, interests or claims of either Party or any of the members of its Group thereunder as of the Effective Time;

(xiv)
all Enhabit Real Property as of the Effective Time;

(xv)
the Tangible Personal Property listed on Schedule 2.2(a)(xv) (collectively, the “Enhabit Tangible Personal Property”); and

(xvi)
any and all Assets set forth on Schedule 2.2(a)(xvi).

Notwithstanding the foregoing, the Parties hereby acknowledge and agree that (A) while a single asset may fall within more than one of the clauses (i) through (xvi) in this Section 2.2(a), such fact does not imply that (x) such asset shall be transferred more than once or (y) any duplication of such asset is required, and (B) the Enhabit Assets shall not in any event include any Asset referred to in clauses (i) through (xi) of Section 2.2(b) or any Assets set forth on Schedule 2.2(a)(xvii).

(b)
Encompass Assets.  For the purposes of this Agreement, “Encompass Assets” shall mean all Assets of either Party or the members of its Group as of the Effective Time, other than the Enhabit Assets.  Notwithstanding anything herein to the contrary, the Encompass Assets shall include:

(i)
all Assets that are expressly contemplated by this Agreement or any Ancillary Agreement (or the Schedules hereto or thereto) as Assets to be retained by Encompass or any other member of the Encompass Group;

(ii)
all contracts and agreements of either Party or any of the members of its Group as of the Effective Time (other than the Enhabit Contracts);

(iii)
all Encompass Records;

(iv)
all Encompass Intellectual Property Rights and all rights, interests or claims of either Party or any of the members of its Group thereunder as of the Effective Time;

(v)
all Encompass Information Technology;

(vi)
all Accounts Receivable, other than the Enhabit Accounts Receivable;

(vii)
all Encompass Inventory;

(viii)
all Permits of either Party or any of the members of its Group as of the Effective Time (other than the Enhabit Permits) and all rights, interests or claims of either Party or any of the members of its Group thereunder as of the Effective Time;

(ix)
all Real Property of either Party or any of the members of its Group as of the Effective Time (other than the Enhabit Real Property);

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(x)
all cash and cash equivalents of either Party or any of the members of its Group as of the Effective Time (other than cash and cash equivalents of Enhabit or any other member of the Enhabit Group as of the Effective Time, except for any cash or cash equivalents withdrawn from Enhabit Accounts in accordance with Section 2.9(d)); and

(xi)
any and all Assets set forth on Schedule 2.2(b)(xi).

2.3
Enhabit Liabilities; Encompass Liabilities.

(a)
Enhabit Liabilities.  For the purposes of this Agreement, “Enhabit Liabilities” shall mean the following Liabilities of either Party or any of the members of its Group:

(i)
all Liabilities included or reflected as liabilities or obligations of Enhabit or the members of the Enhabit Group on the Enhabit Balance Sheet, subject to any discharge of such Liabilities subsequent to the date of the Enhabit Balance Sheet; provided that the amounts set forth on the Enhabit Balance Sheet with respect to any Liabilities shall not be treated as minimum amounts or limitations on the amount of such Liabilities that are included in the definition of Enhabit Liabilities pursuant to this clause (i);

(ii)
all Liabilities as of the Effective Time that are of a nature or type that would have resulted in such Liabilities being included or reflected as liabilities or obligations of Enhabit or the members of the Enhabit Group on a pro forma combined balance sheet of the Enhabit Group or any notes or subledgers thereto as of the Effective Time (were such balance sheet, notes and subledgers to be prepared on a basis consistent with the determination of the Liabilities included on the Enhabit Balance Sheet), it being understood that (x) the Enhabit Balance Sheet shall be used to determine the types of, and methodologies used to determine, those Liabilities that are included in the definition of Enhabit Liabilities pursuant to this clause (ii); and (y) the amounts set forth on the Enhabit Balance Sheet with respect to any Liabilities shall not be treated as minimum amounts or limitations on the amount of such Liabilities that are included in the definition of Enhabit Liabilities pursuant to this clause (ii);

(iii)
any and all Enhabit Accounts Payable;

(iv)
any and all Liabilities that are expressly provided by this Agreement or any Ancillary Agreement (or the Schedules hereto or thereto) as Liabilities to be assumed by Enhabit or any other member of the Enhabit Group, and all agreements, obligations and Liabilities of any member of the Enhabit Group under this Agreement or any of the Ancillary Agreements;

(v)
any and all Liabilities set forth on Schedule 2.3(a)(v);

(vi)
except as otherwise set forth in this Section 2.3(a), all Liabilities, including any Environmental Liabilities, relating to, arising out of or resulting from the actions, inactions, events, omissions, conditions, facts or circumstances occurring or existing prior to, at or after the Effective Time (whether or not such Liabilities cease being contingent, mature, become known, are asserted or foreseen, or accrue, in each case before, at or after the Effective Time), in each case to the extent that such Liabilities relate to, arise out of or result from the Enhabit Business or an Enhabit Asset;

(vii)
except as otherwise set forth in this Section 2.3(a), any and all Liabilities relating to, arising out of or resulting from the Enhabit Contracts, the Enhabit Intellectual Property Rights, the Enhabit Technology, Enhabit Information Technology, the Enhabit Permits, the Enhabit Real Property, the Enhabit Tangible Personal Property or any Enhabit Product, whether occurring or existing prior to, at or after the Effective Time (whether or not such Liabilities cease being contingent, mature, become known, are asserted or foreseen, or accrue, in each case before, at or after the Effective Time), including, for the avoidance of doubt, any and all Liabilities relating to, arising out of or resulting from the sale by any member of the Encompass Group prior to the Effective Time of Enhabit Products; and

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(viii)
all Liabilities arising out of claims made by any Third Party (including Encompass’s or Enhabit’s respective directors, officers, stockholders, employees and agents) against any member of the Encompass Group or the Enhabit Group to the extent relating to, arising out of or resulting from the Enhabit Business or the Enhabit Assets, or the other business, operations, activities or Liabilities referred to in clauses (i) through (vii) above, including for the avoidance of doubt the claims set forth on Schedule 2.3(a)(viii).

Notwithstanding the foregoing, the Parties hereby acknowledge and agree that (A) while a single Liability may fall within more than one of the clauses (i) through (viii) in this Section 2.3(a), such fact does not imply that (x) such Liability shall be transferred more than once or (y) any duplication of such Liability is required, and (B) the Enhabit Liabilities shall not in any event include any Liability referred to in clauses (i) through (v) of Section 2.3(b) or any Liabilities set forth on Schedule 2.3(a)(ix).

(b)
Encompass Liabilities.  For the purposes of this Agreement, “Encompass Liabilities” shall mean the following Liabilities of either Party or any of the members of its Group:

(i)
any and all Accounts Payable, other than the Enhabit Accounts Payable;

(ii)
all Liabilities, including any Environmental Liabilities, relating to, arising out of or resulting from actions, inactions, events, omissions, conditions, facts or circumstances occurring or existing prior to, at or after the Effective Time (whether or not such Liabilities cease being contingent, mature, become known, are asserted or foreseen, or accrue, in each case before, at or after the Effective Time) of any member of the Encompass Group, and, prior to the Effective Time, any member of the Enhabit Group, in each case, to the extent that such Liabilities are not Enhabit Liabilities;

(iii)
all Liabilities that are expressly provided by this Agreement or any Ancillary Agreement (or the Schedules hereto or thereto) as Liabilities to be assumed by Encompass or any other member of the Encompass Group, and all agreements, obligations and Liabilities of any member of the Encompass Group under this Agreement or any of the Ancillary Agreements;

(iv)
all Liabilities set forth on Schedule 2.3(b)(iv); and

(v)
all Liabilities arising out of claims made by any Third Party (including Encompass’s or Enhabit’s respective directors, officers, stockholders, employees and agents) against any member of the Encompass Group or the Enhabit Group to the extent relating to, arising out of or resulting from the Encompass Business or the Encompass Assets, or the other business, operations, activities or Liabilities referred to in clauses (i) through (iv) above, including for the avoidance of doubt the claims set forth on Schedule 2.3(b)(v), in each case, to the extent that such Liabilities are not Enhabit Liabilities.

2.4
Approvals and Notifications.

(a)
Approvals and Notifications for Enhabit Assets.  To the extent that the Separation or the Distribution or any transaction contemplated thereby requires any Approvals or Notifications, the Parties shall use their commercially reasonable efforts to obtain or make such Approvals or Notifications as soon as reasonably practicable; provided, however, that, except to the extent expressly provided in this Agreement or any of the Ancillary Agreements or as otherwise agreed in writing between Encompass and Enhabit, neither Encompass nor Enhabit shall be obligated to contribute capital or pay any consideration in any form (including providing any letter of credit, guaranty or other financial accommodation) to any Person in order to obtain or make such Approvals or Notifications.

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(b)
Delayed Enhabit Transfers.  If and to the extent that the valid, complete and perfected transfer or assignment to the Enhabit Group of any Enhabit Asset or assumption by the Enhabit Group of any Enhabit Liability in connection with the Separation or the Distribution would be a violation of applicable Law or require any Approvals or Notifications that have not been obtained or made by the Effective Time then, unless the Parties mutually shall otherwise determine, the transfer or assignment to the Enhabit Group of such Enhabit Assets or the assumption by the Enhabit Group of such Enhabit Liabilities, as the case may be, shall be automatically deemed deferred and any such purported transfer, assignment or assumption shall be null and void until such time as all legal impediments are removed or such Approvals or Notifications have been obtained or made.  Notwithstanding the foregoing, any such Enhabit Assets or Enhabit Liabilities shall continue to constitute Enhabit Assets and Enhabit Liabilities for all other purposes of this Agreement.

(c)
Treatment of Delayed Enhabit Assets and Delayed Enhabit Liabilities.  If any transfer or assignment of any Enhabit Asset (or a portion thereof) or any assumption of any Enhabit Liability (or a portion thereof) intended to be transferred, assigned or assumed hereunder, as the case may be, is not consummated at or prior to the Effective Time, whether as a result of the provisions of Section 2.4(b) or for any other reason (any such Enhabit Asset (or a portion thereof), a “Delayed Enhabit Asset” and any such Enhabit Liability (or a portion thereof), a “Delayed Enhabit Liability”), then, insofar as reasonably possible and subject to applicable Law, the member of the Encompass Group retaining such Delayed Enhabit Asset or such Delayed Enhabit Liability, as the case may be, shall thereafter hold such Delayed Enhabit Asset or Delayed Enhabit Liability, as the case may be, for the use and benefit (or the performance and obligation, in the case of a Liability) of the member of the Enhabit Group entitled thereto (at the expense of the member of the Enhabit Group entitled thereto).  In addition, the member of the Encompass Group retaining such Delayed Enhabit Asset or such Delayed Enhabit Liability shall, insofar as reasonably possible and to the extent permitted by applicable Law, treat such Delayed Enhabit Asset or Delayed Enhabit Liability in the ordinary course of business in accordance with past practice and take such other actions as may be reasonably requested by the member of the Enhabit Group to whom such Delayed Enhabit Asset is to be transferred or assigned, or which will assume such Delayed Enhabit Liability, as the case may be, in order to place such member of the Enhabit Group in a substantially similar position as if such Delayed Enhabit Asset or Delayed Enhabit Liability had been transferred, assigned or assumed as contemplated hereby and so that all the benefits and burdens relating to such Delayed Enhabit Asset or Delayed Enhabit Liability, as the case may be, including use, risk of loss, potential for gain, and dominion, control and command over such Delayed Enhabit Asset or Delayed Enhabit Liability, as the case may be, and all costs and expenses related thereto, shall inure from and after the Effective Time to the Enhabit Group.

(d)
Transfer of Delayed Enhabit Assets and Delayed Enhabit Liabilities.  If and when the Approvals or Notifications, the absence of which caused the deferral of transfer or assignment of any Delayed Enhabit Asset or the deferral of assumption of any Delayed Enhabit Liability pursuant to Section 2.4(b), are obtained or made, and, if and when any other legal impediments for the transfer or assignment of any Delayed Enhabit Asset or the assumption of any Delayed Enhabit Liability have been removed, the transfer or assignment of the applicable Delayed Enhabit Asset or the assumption of the applicable Delayed Enhabit Liability, as the case may be, shall be effected in accordance with the terms of this Agreement and/or the applicable Ancillary Agreement.

(e)
Costs for Delayed Enhabit Assets and Delayed Enhabit Liabilities; Payment of the Delayed Enhabit Asset Consideration.  Except as otherwise agreed in writing between the Parties, any member of the Encompass Group retaining a Delayed Enhabit Asset or Delayed Enhabit Liability due to the deferral of the transfer or assignment of such Delayed Enhabit Asset or the deferral of the assumption of such Delayed Enhabit Liability, as the case may be, shall not be obligated, in connection with the foregoing, to expend any money unless the necessary funds are advanced (or otherwise made available) by Enhabit or the member of the Enhabit Group entitled to the Delayed Enhabit Asset or Delayed Enhabit Liability, other than reasonable out-of-pocket expenses, attorneys’ fees and recording or similar fees, all of which shall be promptly reimbursed by Enhabit or the member of the Enhabit Group entitled to such Delayed Enhabit Asset or Delayed Enhabit Liability.

(f)
Approvals and Notifications for Encompass Assets.  To the extent that the transfer or assignment of any Encompass Asset, the assumption of any Encompass Liability, the Separation, the Distribution or any other transaction contemplated under this Agreement requires any Approvals or Notifications, the Parties shall use their commercially reasonable efforts to obtain or make such Approvals or Notifications as soon as reasonably practicable; provided, however, that, except to the extent expressly provided in this Agreement or any of the Ancillary Agreements or as otherwise agreed between Encompass and Enhabit, neither Encompass nor Enhabit shall be obligated to contribute capital or pay any consideration in any form (including providing any letter of credit, guaranty or other financial accommodation) to any Person in order to obtain or make such Approvals or Notifications.

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(g)
Delayed Encompass Transfers.  If and to the extent that the valid, complete and perfected transfer or assignment to the Encompass Group of any Encompass Asset or assumption by the Encompass Group of any Encompass Liability in connection with the Separation or the Distribution would be a violation of applicable Law or require any Approvals or Notifications that have not been obtained or made by the Effective Time then, unless the Parties mutually shall otherwise determine, the transfer or assignment to the Encompass Group of such Encompass Assets or the assumption by the Encompass Group of such Encompass Liabilities, as the case may be, shall be automatically deemed deferred and any such purported transfer, assignment or assumption shall be null and void until such time as all legal impediments are removed or such Approvals or Notifications have been obtained or made.  Notwithstanding the foregoing, any such Encompass Assets or Encompass Liabilities shall continue to constitute Encompass Assets and Encompass Liabilities for all other purposes of this Agreement.

(h)
Treatment of Delayed Encompass Assets and Delayed Encompass Liabilities.  If any transfer or assignment of any Encompass Asset (or a portion thereof) or any assumption of any Encompass Liability (or a portion thereof) intended to be transferred, assigned or assumed hereunder, as the case may be, is not consummated at or prior to the Effective Time whether as a result of the provisions of Section 2.4(g) or for any other reason (any such Encompass Asset (or a portion thereof), a “Delayed Encompass Asset” and any such Encompass Liability (or a portion thereof), a “Delayed Encompass Liability”), then, insofar as reasonably possible and subject to applicable Law, the member of the Enhabit Group retaining such Delayed Encompass Asset or such Delayed Encompass Liability, as the case may be, shall thereafter hold such Delayed Encompass Asset or Delayed Encompass Liability, as the case may be, for the use and benefit (or the performance or obligation, in the case of a Liability) of the member of the Encompass Group entitled thereto (at the expense of the member of the Encompass Group entitled thereto).  In addition, the member of the Enhabit Group retaining such Delayed Encompass Asset or such Delayed Encompass Liability shall, insofar as reasonably possible and to the extent permitted by applicable Law, treat such Delayed Encompass Asset or Delayed Encompass Liability in the ordinary course of business in accordance with past practice.  Such member of the Enhabit Group shall also take such other actions as may be reasonably requested by the member of the Encompass Group to which such Delayed Encompass Asset is to be transferred or assigned, or which will assume such Delayed Encompass Liability, as the case may be, in order to place such member of the Encompass Group in a substantially similar position as if such Delayed Encompass Asset or Delayed Encompass Liability had been transferred, assigned or assumed and so that all the benefits and burdens relating to such Delayed Encompass Asset or Delayed Encompass Liability, as the case may be, including use, risk of loss, potential for gain, and dominion, control and command over such Delayed Encompass Asset or Delayed Encompass Liability, as the case may be, and all costs and expenses related thereto, shall inure from and after the Effective Time to the Encompass Group.

(i)
Transfer of Delayed Encompass Assets and Delayed Encompass Liabilities.  If and when the Approvals or Notifications, the absence of which caused the deferral of transfer or assignment of any Delayed Encompass Asset or the deferral of assumption of any Delayed Encompass Liability pursuant to Section 2.4(g), are obtained or made, and, if and when any other legal impediments for the transfer or assignment of any Delayed Encompass Asset or the assumption of any Delayed Encompass Liability have been removed, the transfer or assignment of the applicable Delayed Encompass Asset or the assumption of the applicable Delayed Encompass Liability, as the case may be, shall be effected in accordance with the terms of this Agreement and/or the applicable Ancillary Agreement.

(j)
Costs for Delayed Encompass Assets and Delayed Encompass Liabilities.  Except as otherwise agreed in writing between the Parties, any member of the Enhabit Group retaining a Delayed Encompass Asset or Delayed Encompass Liability due to the deferral of the transfer or assignment of such Delayed Encompass Asset or the deferral of the assumption of such Delayed Encompass Liability, as the case may be, shall not be obligated, in connection with the foregoing, to expend any money unless the necessary funds are advanced (or otherwise made available) by Encompass or the member of the Encompass Group entitled to the Delayed Encompass Asset or Delayed Encompass Liability, other than reasonable out-of-pocket expenses, attorneys’ fees and recording or similar fees, all of which shall be promptly reimbursed by Encompass or the member of the Encompass Group entitled to such Delayed Encompass Asset or Delayed Encompass Liability.

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2.5
Assignment and Novation of Liabilities.

(a)
Assignment and Novation of Enhabit Liabilities.

(i)
Each of Encompass and Enhabit, at the request of the other, shall use commercially reasonable efforts to obtain, or to cause to be obtained, as soon as reasonably practicable, any consent, substitution, approval or amendment required to novate or assign all Enhabit Liabilities and obtain in writing the unconditional release of each member of the Encompass Group that is a party to or otherwise obligated under any such arrangements, to the extent permitted by applicable Law and effective as of the Effective Time, so that, in any such case, the members of the Enhabit Group shall be solely responsible for such Enhabit Liabilities; provided, however, that, except as otherwise expressly provided in this Agreement or any of the Ancillary Agreements, neither Encompass nor Enhabit shall be obligated to contribute any capital or pay any consideration in any form (including providing any letter of credit, guaranty or other financial accommodation) to any third Person from whom any such consent, substitution, approval, amendment or release is requested.  To the extent such substitution contemplated by the first sentence of this Section 2.5(a)(i) has been effected, the members of the Encompass Group shall, from and after the Effective Time, cease to have any obligation whatsoever arising from or in connection with such Enhabit Liabilities.

(ii)
If Encompass or Enhabit is unable to obtain, or to cause to be obtained, any such required consent, substitution, approval, amendment or release, and the applicable member of the Encompass Group continues to be bound by such agreement, lease, license or other obligation or Liability (each, an “Unreleased Enhabit Liability”), Enhabit shall, to the extent not prohibited by Law, (A) use its commercially reasonable efforts to effect such consent, substitution, approval, amendment or release as soon as practicable following the Effective Time, but in any event within six (6) months thereof, and (B) as indemnitor, guarantor, agent or subcontractor for such member of the Encompass Group, as the case may be, (1) pay, perform and discharge fully all the obligations or other Liabilities of such member of the Encompass Group that constitute Unreleased Enhabit Liabilities from and after the Effective Time and (2) use its commercially reasonable efforts to effect such payment, performance or discharge prior to any demand for such payment, performance or discharge is permitted to be made by the obligee thereunder on any member of the Encompass Group.  If and when any such consent, substitution, approval, amendment or release shall be obtained or the Unreleased Enhabit Liabilities shall otherwise become assignable or able to be novated, Encompass shall promptly assign, or cause to be assigned, and Enhabit or the applicable member of the Enhabit Group shall assume, such Unreleased Enhabit Liabilities without exchange of further consideration.

(iii)
If Enhabit is unable to obtain, or to cause to be obtained, any such required consent, substitution, approval, amendment or release as set forth in clause (ii) of this Section 2.5(a), Enhabit and any relevant member of its Group that has assumed the applicable Unreleased Enhabit Liability shall indemnify, defend and hold harmless Encompass against or from such Unreleased Enhabit Liability in accordance with the provisions of Article IV and shall, as agent or subcontractor for Encompass, pay, perform and discharge fully all the obligations or other Liabilities of Encompass thereunder.

(b)
Assignment and Novation of Encompass Liabilities.

(i)
Each of Encompass and Enhabit, at the request of the other, shall use commercially reasonable efforts to obtain, or to cause to be obtained, as soon as reasonably practicable, any consent, substitution, approval or amendment required to novate or assign all Encompass Liabilities and obtain in writing the unconditional release of each member of the Enhabit Group that is a party to any such arrangements, so that, in any such case, the members of the Encompass Group shall be solely responsible for such Encompass Liabilities; provided, however, that, except as otherwise expressly provided in this Agreement or any of the Ancillary Agreements, neither Encompass nor Enhabit shall be obligated to contribute any capital or pay any consideration in any form (including providing any letter of credit, guaranty or other financial accommodation) to any third Person from whom any such consent, substitution, approval, amendment or release is requested.  To the extent such substitution contemplated by the first sentence of this Section 2.5(b)(i) has been effected, the members of the Enhabit Group shall, from and after the Effective Time, cease to have any obligation whatsoever arising from or in connection with such Encompass Liabilities.

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(ii)
If Encompass or Enhabit is unable to obtain, or to cause to be obtained, any such required consent, substitution, approval, amendment or release and the applicable member of the Enhabit Group continues to be bound by such agreement, lease, license or other obligation or Liability (each, an “Unreleased Encompass Liability”), Encompass shall, to the extent not prohibited by Law, (A) use its commercially reasonable efforts to effect such consent, substitution, approval, amendment or release as soon as practicable following the Effective Time, but in any event within six (6) months thereof, and (B) as indemnitor, guarantor, agent or subcontractor for such member of the Enhabit Group, as the case may be, (1) pay, perform and discharge fully all the obligations or other Liabilities of such member of the Enhabit Group that constitute Unreleased Encompass Liabilities from and after the Effective Time and (2) use its commercially reasonable efforts to effect such payment, performance or discharge prior to any demand for such payment, performance or discharge is permitted to be made by the obligee thereunder on any member of the Enhabit Group.  If and when any such consent, substitution, approval, amendment or release shall be obtained or the Unreleased Encompass Liabilities shall otherwise become assignable or able to be novated, Enhabit shall promptly assign, or cause to be assigned, and Encompass or the applicable member of the Encompass Group shall assume, such Unreleased Encompass Liabilities without exchange of further consideration.

(iii)
If Encompass is unable to obtain, or to cause to be obtained, any such required consent, substitution, approval, amendment or release as set forth in clause (ii) of this Section 2.5(b), Encompass and any relevant member of its Group (except for members of the Enhabit Group) that has assumed the applicable Unreleased Encompass Liability shall indemnify, defend and hold harmless Enhabit against or from such Unreleased Encompass Liability in accordance with the provisions of Article IV and shall, as agent or subcontractor for Enhabit, pay, perform and discharge fully all the obligations or other Liabilities of Enhabit thereunder.

2.6
Release of Guarantees.  In furtherance of, and not in limitation of, the obligations set forth in Section 2.5:

(a)
At or prior to the Effective Time or as soon as practicable thereafter, each of Encompass and Enhabit shall, at the request of the other Party and with the reasonable cooperation of such other Party and the applicable member(s) of such other Party’s Group, use commercially reasonable efforts to (i) have any member(s) of the Encompass Group removed as guarantor of or obligor for any Enhabit Liability to the extent that such guarantee or obligation relates to Enhabit Liabilities, including the removal of any Security Interest on or in any Encompass Asset that may serve as collateral or security for any such Enhabit Liability; and (ii) have any member(s) of the Enhabit Group removed as guarantor of or obligor for any Encompass Liability to the extent that such guarantee or obligation relates to Encompass Liabilities, including the removal of any Security Interest on or in any Enhabit Asset that may serve as collateral or security for any such Encompass Liability.

(b)
To the extent required to obtain a release from a guarantee of:

(i)
any member of the Encompass Group, Enhabit shall execute a guarantee agreement substantially in the form of the existing guarantee or such other form as is agreed to by the relevant parties to such guarantee agreement, which agreement shall include the removal of any Security Interest on or in any Encompass Asset that may serve as collateral or security for any such Enhabit Liability, except to the extent that such existing guarantee contains representations, covenants or other terms or provisions either (i) with which Enhabit would be reasonably unable to comply or (ii) which Enhabit would not reasonably be able to avoid breaching; and

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(ii)
any member of the Enhabit Group, Encompass shall execute a guarantee agreement substantially in the form of the existing guarantee or such other form as is agreed to by the relevant parties to such guarantee agreement, which agreement shall include the removal of any Security Interest on or in any Enhabit Asset that may serve as collateral or security for any such Encompass Liability, except to the extent that such existing guarantee contains representations, covenants or other terms or provisions either (i) with which Encompass would be reasonably unable to comply or (ii) which Encompass would not reasonably be able to avoid breaching.

(c)
If Encompass or Enhabit is unable to obtain, or to cause to be obtained, any such required removal or release, or is expressly not required to do so, in each case as set forth in clauses (a) and (b) of this Section 2.6, (i) the Party or the relevant member of its Group that is responsible pursuant to this Agreement for the Liability associated with such guarantee shall indemnify, defend and hold harmless the guarantor or obligor, as applicable, against or from any Liability arising from or relating thereto in accordance with the provisions of Article IV and shall, as agent or subcontractor for such guarantor or obligor, pay, perform and discharge fully all the obligations or other Liabilities of such guarantor or obligor thereunder; and (ii) each of Encompass and Enhabit, on behalf of itself and the other members of its respective Group, agrees not to renew or extend the term of, increase any obligations under, or transfer to a Third Party, any loan, guarantee, lease, contract or other obligation for which the other Party or a member of its Group is or may be liable unless all obligations of such other Party and the members of such other Party’s Group with respect thereto are thereupon terminated by documentation satisfactory in form and substance to such other Party.

2.7
Termination of Agreements.

(a)
Except as set forth in Section 2.7(b), in furtherance of the releases and other provisions of Section 4.1, Enhabit and each member of the Enhabit Group, on the one hand, and Encompass and each member of the Encompass Group, on the other hand, hereby terminate any and all agreements, arrangements, commitments or understandings, whether or not in writing, between or among Enhabit and/or any member of the Enhabit Group, on the one hand, and Encompass and/or any member of the Encompass Group, on the other hand, effective as of the Effective Time.  No such terminated agreement, arrangement, commitment or understanding (including any provision thereof which purports to survive termination) shall be of any further force or effect after the Effective Time.  Each Party shall, at the reasonable request of the other Party, take, or cause to be taken, such other actions as may be necessary to effect the foregoing.

(b)
The provisions of Section 2.7(a) shall not apply to any of the following agreements, arrangements, commitments or understandings (or to any of the provisions thereof):

(i)
this Agreement and the Ancillary Agreements (and each other agreement or instrument expressly contemplated by this Agreement or any Ancillary Agreement to be entered into by any of the Parties or any of the members of their respective Groups or to be continued from and after the Effective Time);

(ii)
any agreements, arrangements, commitments or intercompany accounts receivable, accounts payable or other intercompany accounts listed or described on Schedule 2.7(b)(ii), which shall be treated as described therein;

(iii)
any agreements, arrangements, commitments or understandings to which any Third Party is a party thereto, including any Shared Contracts; and

(iv)
any agreements, arrangements, commitments or understandings to which any non-wholly owned Subsidiary of Encompass or Enhabit, as the case may be, is a party (it being understood that directors’ qualifying shares or similar interests will be disregarded for purposes of determining whether a Subsidiary is wholly owned).

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(c)
All of the intercompany accounts receivable and accounts payable between any member of the Encompass Group, on the one hand, and any member of the Enhabit Group, on the other hand, outstanding as of the Effective Time and arising out of the contracts or agreements described in Section 2.7(b) or out of the provision, prior to the Effective Time, of the services to be provided following the Effective Time pursuant to the Ancillary Agreements shall be repaid or settled following the Effective Time in the ordinary course of business or, if otherwise mutually agreed prior to the Effective Time by duly authorized representatives of Encompass and Enhabit, cancelled.  All other intercompany accounts receivable and accounts payable between any member of the Encompass Group, on the one hand, and any member of the Enhabit Group, on the other hand, outstanding as of the Effective Time shall be repaid or settled immediately prior to or as promptly as practicable after the Effective Time.

2.8
Treatment of Shared Contracts.

(a)
Subject to applicable Law and without limiting the generality of the obligations set forth in Section 2.1, unless the Parties otherwise agree or the benefits of any contract, agreement, arrangement, commitment or understanding described in this Section 2.8 are expressly conveyed to the applicable Party pursuant to this Agreement or an Ancillary Agreement, any contract or agreement, a portion of which relates to matters that would be the subject of an Enhabit Contract, but the remainder of which relates to matters that would be the subject of a Encompass Asset (any such contract or agreement, including those set forth on Schedule 2.8, a “Shared Contract”), shall be assigned in relevant part to the applicable member(s) of the applicable Group, if so assignable, or appropriately amended prior to, on or after the Effective Time, so that each Party or the member of its Group shall, as of the Effective Time, be entitled to the rights and benefits, and shall assume the related portion of any Liabilities, inuring to its respective businesses; provided, however, that (i) in no event shall any member of any Group be required to assign (or amend) any Shared Contract in its entirety or to assign a portion of any Shared Contract which is not assignable (or cannot be amended) by its terms (including any terms imposing consents or conditions on an assignment where such consents or conditions have not been obtained or fulfilled) and (ii) if any Shared Contract cannot be so partially assigned by its terms or otherwise, or cannot be amended or if such assignment or amendment would impair the benefit the parties thereto derive from such Shared Contract, then the Parties shall, and shall cause each of the members of their respective Groups to, take such other reasonable and permissible actions (including by providing prompt notice to the other Party with respect to any relevant claim of Liability or other relevant matters arising in connection with a Shared Contract so as to allow such other Party the ability to exercise any applicable rights under such Shared Contract) to cause a member of the Enhabit Group or the Encompass Group, as the case may be, to receive the rights and benefits of that portion of each Shared Contract that relates to the Enhabit Business or the Encompass Business, as the case may be (in each case, to the extent so related), as if such Shared Contract had been assigned to a member of the applicable Group (or amended to allow a member of the applicable Group to exercise applicable rights under such Shared Contract) pursuant to this Section 2.8, and to bear the burden of the corresponding Liabilities (including any Liabilities that may arise by reason of such arrangement), as if such Liabilities had been assumed by a member of the applicable Group pursuant to this Section 2.8.

(b)
Each of Encompass and Enhabit shall, and shall cause the members of its Group to, (i) treat for all Tax purposes the portion of each Shared Contract inuring to its respective businesses as an Asset owned by, and/or a Liability of, as applicable, such Party, or the members of its Group, as applicable, not later than the Effective Time, and (ii) neither report nor take any Tax position (on a Tax Return or otherwise) inconsistent with such treatment (unless required by applicable Law).

(c)
Nothing in this Section 2.8 shall require any member of any Group to make any payment (except to the extent advanced, assumed or agreed in advance to be reimbursed by any member of the other Group), incur any obligation or grant any concession for the benefit of any member of the other Group in order to effect any transaction contemplated by this Section 2.8.

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2.9
Bank Accounts; Cash Balances.

(a)
Each Party agrees to take, or cause the members of its Group to take, at the Effective Time (or such earlier time as the Parties may agree), all actions necessary to amend all contracts or agreements governing each bank and brokerage account owned by Enhabit or any other member of the Enhabit Group (collectively, the “Enhabit Accounts”) and all contracts or agreements governing each bank or brokerage account owned by Encompass or any other member of the Encompass Group (collectively, the “Encompass Accounts”) so that each such Enhabit Account and Encompass Account, if currently linked (whether by automatic withdrawal, automatic deposit or any other authorization to transfer funds from or to, hereinafter “Linked”) to any Encompass Account or Enhabit Account, respectively, is de-Linked from such Encompass Account or Enhabit Account, respectively.

(b)
It is intended that, following consummation of the actions contemplated by Section 2.9(a), there will be in place a cash management process pursuant to which the Enhabit Accounts will be managed and funds collected will be transferred into one (1) or more accounts maintained by Enhabit or a member of the Enhabit Group.

(c)
It is intended that, following consummation of the actions contemplated by Section 2.9(a), there will continue to be in place a cash management process pursuant to which the Encompass Accounts will be managed and funds collected will be transferred into one (1) or more accounts maintained by Encompass or a member of the Encompass Group.

(d)
With respect to any outstanding checks issued or payments initiated by Encompass, Enhabit, or any of the members of their respective Groups prior to the Effective Time, such outstanding checks and payments shall be honored following the Effective Time by the Person or Group owning the account on which the check is drawn or from which the payment was initiated, respectively.

(e)
As between Encompass and Enhabit (and the members of their respective Groups), all payments made and reimbursements received after the Effective Time by either Party (or member of its Group) that relate to a business, Asset or Liability of the other Party (or member of its Group), shall be held by such Party in trust for the use and benefit of the Party entitled thereto and, promptly following receipt by such Party of any such payment or reimbursement, such Party shall pay over, or shall cause the applicable member of its Group to pay over, to the other Party the amount of such payment or reimbursement without right of set-off.

2.10
Ancillary Agreements.  Effective at or prior to the Effective Time, each of Encompass and Enhabit will, or will cause the applicable members of its Group to, execute and deliver all Ancillary Agreements to which it is a party.

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2.11
Disclaimer of Representations and Warranties.  EACH OF ENCOMPASS (ON BEHALF OF ITSELF AND EACH MEMBER OF THE ENCOMPASS GROUP) AND ENHABIT (ON BEHALF OF ITSELF AND EACH MEMBER OF THE ENHABIT GROUP) UNDERSTANDS AND AGREES THAT, EXCEPT AS EXPRESSLY SET FORTH HEREIN OR IN ANY ANCILLARY AGREEMENT, NO PARTY TO THIS AGREEMENT, ANY ANCILLARY AGREEMENT OR ANY OTHER AGREEMENT OR DOCUMENT CONTEMPLATED BY THIS AGREEMENT, ANY ANCILLARY AGREEMENT OR OTHERWISE, IS REPRESENTING OR WARRANTING IN ANY WAY AS TO THE ASSETS, BUSINESSES OR LIABILITIES TRANSFERRED OR ASSUMED AS CONTEMPLATED HEREBY OR THEREBY, AS TO ANY CONSENTS OR APPROVALS REQUIRED IN CONNECTION THEREWITH (INCLUDING GOVERNMENTAL APPROVALS OR PERMITS OF ANY KIND), AS TO THE VALUE OR FREEDOM FROM ANY SECURITY INTERESTS OF, OR ANY OTHER MATTER CONCERNING, ANY ASSETS OF SUCH PARTY, OR AS TO THE ABSENCE OF ANY DEFENSES OR RIGHT OF SETOFF OR FREEDOM FROM COUNTERCLAIM WITH RESPECT TO ANY CLAIM OR OTHER ASSET, INCLUDING ANY ACCOUNTS RECEIVABLE, OF ANY PARTY, OR AS TO THE LEGAL SUFFICIENCY OF ANY ASSIGNMENT, DOCUMENT OR INSTRUMENT DELIVERED HEREUNDER TO CONVEY TITLE TO ANY ASSET OR THING OF VALUE UPON THE EXECUTION, DELIVERY AND FILING HEREOF OR THEREOF.  EXCEPT AS MAY EXPRESSLY BE SET FORTH HEREIN OR IN ANY ANCILLARY AGREEMENT, ALL SUCH ASSETS ARE BEING TRANSFERRED ON AN “AS IS,” “WHERE IS” BASIS (AND, IN THE CASE OF ANY REAL PROPERTY, BY MEANS OF A QUITCLAIM OR SIMILAR FORM OF DEED OR CONVEYANCE) AND THE RESPECTIVE TRANSFEREES SHALL BEAR, WITHOUT LIMITATION, THE ECONOMIC AND LEGAL RISKS THAT (I) ANY CONVEYANCE WILL PROVE TO BE INSUFFICIENT TO VEST IN THE TRANSFEREE GOOD AND MARKETABLE TITLE, FREE AND CLEAR OF ANY SECURITY INTEREST, AND (II) ANY NECESSARY APPROVALS OR NOTIFICATIONS ARE NOT OBTAINED OR MADE OR THAT ANY REQUIREMENTS OF LAWS OR JUDGMENTS ARE NOT COMPLIED WITH.

2.12
Enhabit Financing Arrangements; Enhabit Debt Incurrence.

(a)
Prior to the Effective Time and pursuant to the Separation Step Plan, (i) Enhabit will enter into one or more financing arrangements and agreements, as set forth on Schedule 2.12 (the “Enhabit Financing Arrangements”), pursuant to which it shall borrow prior to the Effective Time a principal amount of not less than $570 million (the “Enhabit Debt”) and (ii) Enhabit shall distribute, convey or otherwise transfer in the manner determined by Encompass some or all (as determined by Encompass) of the proceeds of the Enhabit Debt to Encompass (such distribution, conveyance or transfer, the “Cash Transfer”).  Encompass and Enhabit agree to take, and shall cause the respective members of their Group to take, all necessary actions to assure the full release and discharge of Encompass and the other members of the Encompass Group from all liabilities and other obligations pursuant to the Enhabit Financing Arrangements as of no later than the Effective Time.  The Parties agree that Enhabit or another member of the Enhabit Group, as the case may be, and not Encompass or any member of the Encompass Group, are and shall be responsible for all costs and expenses incurred in connection with the Enhabit Financing Arrangements.

(b)
Prior the Effective Time, Encompass and Enhabit shall cooperate in the preparation of all materials as may be necessary or advisable to execute the Enhabit Financing Arrangements.

2.13
Financial Information Certifications.  Encompass’s disclosure controls and procedures and internal control over financial reporting (as each is contemplated by the Exchange Act) are currently applicable to Enhabit as its wholly-owned Subsidiary (and not as a reporting company under the Exchange Act).  In order to enable the principal executive officer and principal financial officer of Enhabit to make the certifications required of them under Section 302 of the Sarbanes-Oxley Act of 2002 following the Distribution in respect of any quarterly or annual fiscal period of Enhabit that begins on or prior to the Distribution Date in respect of which financial statements are not included in the Form 10 (a “Straddle Period”), upon thirty (30) Business Days’ advance written request by Enhabit, Encompass shall provide Enhabit with one (1) or more certifications with respect to such disclosure controls and procedures and the effectiveness thereof and whether there were any changes in the internal controls over financial reporting that have materially affected or are reasonably likely to materially affect the internal control over financing reporting, which certification(s) shall (x) be with respect to the applicable Straddle Period (it being understood that no certification need be provided with respect to any period or portion of any period after the Distribution Date) and (y) be in substantially the same form as those that had been provided by officers or employees of Encompass in similar certifications delivered prior to the Distribution Date, with such changes thereto as Encompass may determine.  Such certification(s) shall be provided by Encompass (and not by any officer or employee in their individual capacity).

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ARTICLE III
THE DISTRIBUTION

3.1
Sole and Absolute Discretion; Cooperation.

(a)
Encompass shall, in its sole and absolute discretion, determine the terms of the Distribution, including the form, structure and terms of any transaction(s) and/or offering(s) to effect the Distribution and the timing and conditions to the consummation of the Distribution.  In addition, Encompass may, at any time and from time to time until the consummation of the Distribution, modify or change the terms of the Distribution, including by accelerating or delaying the timing of the consummation of all or part of the Distribution.  Nothing shall in any way limit Encompass’s right to terminate this Agreement or the Distribution as set forth in Article IX or alter the consequences of any such termination from those specified in Article IX.

(b)
Enhabit shall cooperate with Encompass to accomplish the Distribution and shall, at Encompass’s direction, promptly take any and all actions necessary or desirable to effect the Distribution, including in respect of the registration under the Exchange Act of Enhabit Shares on the Form 10.  Encompass shall select any investment bank or manager in connection with the Distribution, as well as any financial printer, solicitation and/or exchange agent and financial, legal, accounting and other advisors for Encompass.  Enhabit and Encompass, as the case may be, will provide to the Distribution Agent any information required in order to complete the Distribution.

3.2
Actions Prior to the Distribution.

(a)
Subject to the conditions specified in Section 3.3, Encompass and Enhabit shall use their reasonable best efforts to consummate the Distribution.  Such actions shall include, but not necessarily be limited to, those specified in this Section 3.2.

(b)
Notice to NYSE.  Encompass shall, to the extent possible, give the NYSE not less than ten (10) days’ advance notice of the Record Date in compliance with Rule 10b-17 under the Exchange Act.

(c)
Enhabit Certificate of Incorporation and Enhabit Bylaws.  On or prior to the Distribution Date, Encompass and Enhabit shall each take all actions that may be required to provide for the adoption by Enhabit of the Amended and Restated Certificate of Incorporation of Enhabit substantially in the form attached as Exhibit A and the Amended and Restated Bylaws of Enhabit substantially in the form attached as Exhibit B.

(d)
Enhabit Directors and Officers.  On or prior to the Distribution Date, Encompass and Enhabit shall take all necessary actions so that as of the Effective Time:  (i) the directors and executive officers of Enhabit shall be those set forth in the Information Statement made available to the Record Holders prior to the Distribution Date, unless otherwise agreed by the Parties; (ii) each individual referred to in clause (i) shall have resigned from his or her position, if any, as a member of the Encompass Board and/or as an executive officer of Encompass; and (iii) Enhabit shall have such other officers as Enhabit shall appoint.

(e)
Securities Law Matters.  Enhabit shall file any amendments or supplements to the Form 10 as may be necessary or advisable in order to cause the Form 10 to become and remain effective as required by the SEC or federal, state or other applicable securities Laws.  Encompass and Enhabit will prepare, and Enhabit will, to the extent required under applicable Law, file with the SEC any such documentation and any requisite no-action letters that Encompass determines are necessary or desirable to effectuate the Distribution, and Encompass and Enhabit shall each use reasonable best efforts to obtain all necessary approvals from the SEC with respect thereto as soon as practicable.  Encompass and Enhabit shall take all such action as may be necessary or appropriate under the securities or blue sky Laws of the United States (and any comparable Laws under any foreign jurisdiction) in connection with the Distribution.

(f)
NYSE Listing.  Enhabit shall prepare, file and use reasonable best efforts to seek to make effective, an application for listing of the shares of Enhabit Common Stock to be distributed in the Distribution on the NYSE, subject to official notice of distribution.

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(g)
Availability of Information Statement.  Encompass shall, as soon as is reasonably practicable after the Form 10 is declared effective under the Exchange Act and the Encompass Board has approved the Distribution, cause the Information Statement to be mailed or otherwise made available to the Record Holders.

(h)
The Distribution Agent.  Encompass shall enter into a distribution agent agreement with the Agent or otherwise provide instructions to the Agent regarding the Distribution.

3.3
Conditions to the Distribution.

(a)
The consummation of the Distribution will be subject to the satisfaction, or waiver by Encompass in its sole and absolute discretion, of the following conditions:

(i)
The SEC shall have declared effective the Form 10; no order suspending the effectiveness of the Form 10 shall be in effect; and no proceedings for such purposes shall have been instituted or threatened by the SEC;

(ii)
The Information Statement shall have been mailed or otherwise made available to the Record Holders;

(iii)
Encompass shall have received an opinion from its external counsel, which opinion remains valid as of the date hereof, satisfactory to the Encompass Board, regarding the qualification of the Distribution as a transaction that is generally tax free for Federal Income Tax purposes under Section 355 of the Code;

(iv)
Encompass shall have received a favorable private letter ruling from the IRS, which private letter ruling remains valid as of the date hereof, satisfactory to the Encompass Board, regarding the qualification of the Distribution as a transaction that is generally tax free for Federal Income Tax purposes under Section 355 of the Code and certain other Federal Income Tax matters relating to the Separation and the Distribution;

(v)
An independent valuation or financial advisory firm acceptable to Encompass shall have delivered one (1) or more opinions to the Encompass Board regarding solvency and capital adequacy matters with respect to each of Encompass and Enhabit after completion of the Distribution, and such opinions shall be in a form and substance acceptable to the Encompass Board in its sole and absolute discretion;

(vi)
All actions and filings necessary or appropriate under applicable U.S. federal, state or other securities Laws or blue sky Laws and the rules and regulations thereunder relating to the Separation and the Distribution shall have been taken or made, and, where applicable, have become effective or been accepted by the applicable Governmental Authority;

(vii)
Each of the Ancillary Agreements shall have been duly executed and delivered by the parties thereto;

(viii)
No order, injunction or decree issued by any Governmental Authority of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the Separation, the Distribution or any of the transactions related thereto shall be pending or in effect;

(ix)
The Enhabit Shares to be distributed to the Encompass stockholders in the Distribution shall have been approved for listing on the NYSE, subject to official notice of distribution;

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(x)
Encompass shall have received the proceeds from the Cash Transfer and shall be satisfied in its sole and absolute discretion that, as of the Effective Time, it shall have no further Liability whatsoever under the Enhabit Financing Arrangements, and Encompass shall have completed any required refinancing of its existing indebtedness on terms satisfactory to the Encompass Board in its sole and absolute discretion; and

(xi)
No other events or developments shall exist or shall have occurred that, in the judgment of the Encompass Board, in its sole and absolute discretion, makes it inadvisable to effect the Separation, the Distribution or the transactions contemplated by this Agreement or any Ancillary Agreement.

(b)
The foregoing conditions are for the sole benefit of Encompass and shall not give rise to or create any duty on the part of Encompass or the Encompass Board to waive or not waive such conditions or in any way limit Encompass’s right to terminate this Agreement as set forth in Article IX or alter the consequences of any such termination from those specified in such Article.  Any determination made by the Encompass Board prior to the Distribution concerning the satisfaction or waiver of any or all of the conditions set forth in this Section 3.3 shall be conclusive.

3.4
The Distribution.

(a)
Subject to Section 3.3, on or prior to the Effective Time, Enhabit will deliver to the Distribution Agent, for the benefit of the Record Holders, book-entry transfer authorizations for such number of the outstanding Enhabit Shares as is necessary to effect the Distribution, and shall cause the transfer agent for the Encompass Shares to instruct the Agent to distribute at the Effective Time the appropriate number of Enhabit Shares to each such holder or designated transferee or transferees of such holder by way of direct registration in book-entry form.  The Distribution shall be effective at the Effective Time.

(b)
Subject to Sections 3.3 and 3.4(c), each Record Holder will be entitled to receive in the Distribution a number of whole Enhabit Shares equal to the number of Encompass Shares held by such Record Holder on the Record Date multiplied by the Distribution Ratio.

(c)
No fractional shares will be distributed or credited to book-entry accounts in connection with the Distribution.  Fractional shares that any Record Holder would otherwise have been entitled to receive will be aggregated and sold in the open market by the Agent. The aggregate net cash proceeds of such sales will be distributed pro rata (based on the fractional share such Record Holder would otherwise have been entitled to receive) to those Record Holders who would otherwise have been entitled to receive fractional shares. Recipients of cash in lieu of fractional shares will not be entitled to any interest on the amounts of payment made in lieu of fractional shares.

(d)
Any Enhabit Shares that remain unclaimed by any Record Holder one hundred eighty (180) days after the Distribution Date shall be delivered to Enhabit, and Enhabit or its transfer agent on its behalf shall hold such Enhabit Shares for the account of such Record Holder, and the Parties agree that all obligations to provide such Enhabit Shares shall be obligations of Enhabit, subject in each case to applicable escheat or other abandoned property Laws, and Encompass shall have no Liability with respect thereto.

(e)
Until the Enhabit Shares are duly transferred in accordance with this Section 3.4 and applicable Law, from and after the Effective Time, Enhabit will regard the Persons entitled to receive such Enhabit Shares as record holders of Enhabit Shares in accordance with the terms of the Distribution without requiring any action on the part of such Persons.  Enhabit agrees that, subject to any transfers of such shares, from and after the Effective Time, (i) each such holder will be entitled to receive all dividends, if any, payable on, and exercise voting rights and all other rights and privileges with respect to, the Enhabit Shares then held by such holder, and (ii) each such holder will be entitled, without any action on the part of such holder, to receive evidence of ownership of the Enhabit Shares then held by such holder.

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ARTICLE IV
MUTUAL RELEASES; INDEMNIFICATION

4.1
Release of Pre-Distribution Claims.

(a)
Enhabit Release of Encompass.  Except as provided in Section 4.1(c) and Section 4.1(e), effective as of the Effective Time, Enhabit does hereby, for itself and each other member of the Enhabit Group, and their respective successors and assigns, and, to the extent permitted by Law, all Persons who at any time prior to the Effective Time have been stockholders, directors, officers, agents or employees of any member of the Enhabit Group (in each case, in their respective capacities as such), remise, release and forever discharge (i) Encompass and the members of the Encompass Group, and their respective successors and assigns and (ii) all Persons who at any time prior to the Effective Time have been stockholders, directors, officers, agents or employees of any member of the Encompass Group (in each case, in their respective capacities as such), and their respective heirs, executors, administrators, successors and assigns, in each case from: (A) all Enhabit Liabilities, (B) all Liabilities arising from or in connection with the transactions and all other activities to implement the Separation and the Distribution (for the avoidance of doubt this clause (B) shall not limit or affect indemnification obligations of the Parties set forth in this Agreement or any Ancillary Agreement) and (C) all Liabilities arising from or in connection with actions, inactions, events, omissions, conditions, facts or circumstances (including, for the avoidance of doubt, the presence of Hazardous Materials on the Enhabit Real Property) occurring or existing prior to the Effective Time (whether or not such Liabilities cease being contingent, mature, become known, are asserted or foreseen, or accrue, in each case before, at or after the Effective Time), in each case to the extent relating to, arising out of or resulting from the Enhabit Business, the Enhabit Assets or the Enhabit Liabilities.

(b)
Encompass Release of Enhabit.  Except as provided in Section 4.1(c) and Section 4.1(e), effective as of the Effective Time, Encompass does hereby, for itself and each other member of the Encompass Group and their respective successors and assigns, and, to the extent permitted by Law, all Persons who at any time prior to the Effective Time have been stockholders, directors, officers, agents or employees of any member of the Encompass Group (in each case, in their respective capacities as such), remise, release and forever discharge (i) Enhabit and the members of the Enhabit Group and their respective successors and assigns, and (ii) all Persons who at any time prior to the Effective Time have been stockholders, directors, officers, agents or employees of any member of the Enhabit Group (in each case, in their respective capacities as such), and their respective heirs, executors, administrators, successors and assigns, from (A) all Encompass Liabilities, (B) all Liabilities arising from or in connection with the transactions and all other activities to implement the Separation and the Distribution (for the avoidance of doubt this clause (B) shall not limit or affect indemnification obligations of the Parties set forth in this Agreement or any Ancillary Agreement) and (C) all Liabilities arising from or in connection with actions, inactions, events, omissions, conditions, facts or circumstances occurring or existing prior to the Effective Time (whether or not such Liabilities cease being contingent, mature, become known, are asserted or foreseen, or accrue, in each case before, at or after the Effective Time), in each case to the extent relating to, arising out of or resulting from the Encompass Business, the Encompass Assets or the Encompass Liabilities.

(c)
Acknowledgment of Unknown Losses or Claims.  The Parties expressly understand and acknowledge that it is possible that unknown losses or claims exist or might come to exist or that present losses may have been underestimated in amount, severity, or both. Accordingly, the Parties are deemed expressly to understand provisions and principles of law such as Section 1542 of the Civil Code of the State of California (“Section 1542”) (as well as any and all provisions, rights and benefits conferred by any law of any state or territory of the United States, or principle of common law, which is similar or comparable to Section 1542), which provides: 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.  The Parties are hereby deemed to agree that the provisions of Section 1542 and all similar federal or state laws, rights, rules, or legal principles of California or any other jurisdiction that may be applicable herein, are hereby knowingly and voluntarily waived and relinquished with respect to the releases in Section 4.1(a) and Section 4.1(b).

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(d)
Obligations Not Affected.  Nothing contained in Section 4.1(a) or 4.1(b) shall impair any right of any Person to enforce this Agreement, any Ancillary Agreement or any agreements, arrangements, commitments or understandings that are specified in Section 2.7(b) or the applicable Schedules thereto as not to terminate as of the Effective Time, in each case in accordance with its terms.  Nothing contained in Section 4.1(a) or 4.1(b) shall release any Person from:

(i)
any Liability provided in or resulting from any agreement among any members of the Encompass Group or any members of the Enhabit Group that is specified in Section 2.7(b) or the applicable Schedules thereto as not to terminate as of the Effective Time, or any other Liability specified in Section 2.7(b) as not to terminate as of the Effective Time;

(ii)
any Liability, contingent or otherwise, assumed, transferred, assigned or allocated to the Group of which such Person is a member in accordance with, or any other Liability of any member of any Group, including with respect to indemnification or contribution, under, this Agreement or any Ancillary Agreement;

(iii)
any Liability for the sale, lease, construction or receipt of goods, property or services purchased, obtained or used in the ordinary course of business by a member of one Group from a member of the other Group prior to the Effective Time;

(iv)
any Liability for unpaid amounts for products or services or refunds owing on products or services due on a value received basis for work done by a member of one Group at the request or on behalf of a member of the other Group;

(v)
any Liability provided in or resulting from any contract or understanding that is entered into after the Effective Time between any Party (and/or a member of such Party’s Group), on the one hand, and any other Party (and/or a member of the other Party’s Group), on the other hand;

(vi)
any Liability provided in or resulting from any agreement between any Person, who after the Effective Time is an employee of the Enhabit Group, on the one hand, and any member of the Encompass Group, on the other hand, including any Liability resulting from any obligation of any such Person in respect of confidentiality, non-competition, non-disparagement or assignment of rights;

(vii)
any Liability provided in or resulting from any agreement between any Person, who after the Effective Time is an employee of the Encompass Group, on the one hand, and any member of the Enhabit Group, on the other hand, including any Liability resulting from any obligation of any such Person in respect of confidentiality, non-competition, non-disparagement or assignment of rights;

(viii)
any Liability that the Parties may have with respect to any indemnification or contribution or other obligation pursuant to this Agreement, any Ancillary Agreement or otherwise for claims brought against the Parties by third Persons, which Liability shall be governed by the provisions of this Article IV and Article V and, if applicable, the appropriate provisions of the Ancillary Agreements; or

(ix)
any Liability the release of which would result in the release of any Person other than a Person expressly contemplated to be released pursuant to this Section 4.1.

In addition, nothing contained in Section 4.1(a) shall release any member of the Encompass Group from honoring its existing obligations to indemnify any director, officer or employee of Enhabit who was a director, officer or employee of any member of the Encompass Group at or prior to the Effective Time, to the extent such director, officer or employee becomes a named defendant in any Action with respect to which such director, officer or employee was entitled to such indemnification pursuant to such existing obligations; it being understood that, if the underlying obligation giving rise to such Action is an Enhabit Liability, Enhabit shall indemnify Encompass for such Liability (including Encompass’s costs to indemnify the director, officer or employee) in accordance with the provisions set forth in this Article IV.

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(e)
No Claims.  Enhabit shall not make, and shall not permit any other member of the Enhabit Group to make, any claim or demand, or commence any Action asserting any claim or demand, including any claim of contribution or any indemnification, against Encompass or any other member of the Encompass Group, or any other Person released pursuant to Section 4.1(a), with respect to any Liabilities released pursuant to Section 4.1(a).  Encompass shall not make, and shall not permit any other member of the Encompass Group to make, any claim or demand, or commence any Action asserting any claim or demand, including any claim of contribution or any indemnification, against Enhabit or any other member of the Enhabit Group, or any other Person released pursuant to Section 4.1(b), with respect to any Liabilities released pursuant to Section 4.1(b).

(f)
Execution of Further Releases.  At any time at or after the Effective Time, at the request of either Party, the other Party shall cause each member of its respective Group to execute and deliver releases reflecting the provisions of this Section 4.1.

4.2
Indemnification by Enhabit.  Except as otherwise specifically set forth in this Agreement or in any Ancillary Agreement, to the fullest extent permitted by Law, Enhabit shall, and shall cause the other members of the Enhabit Group to, indemnify, defend and hold harmless Encompass, each member of the Encompass Group and each of their respective past, present and future directors, officers, employees and agents, in each case in their respective capacities as such, and each of the heirs, executors, successors and assigns of any of the foregoing (collectively, the “Encompass Indemnitees”), from and against any and all Liabilities of the Encompass Indemnitees relating to, arising out of or resulting from, directly or indirectly, any of the following items (without duplication):

(a)
any Enhabit Liability;

(b)
any failure of Enhabit, any other member of the Enhabit Group or any other Person to pay, perform or otherwise promptly discharge any Enhabit Liabilities in accordance with their terms, whether prior to, on or after the Effective Time;

(c)
any breach by Enhabit or any other member of the Enhabit Group of this Agreement or any of the Ancillary Agreements;

(d)
except to the extent it relates to an Encompass Liability, any guarantee, indemnification or contribution obligation, surety bond or other credit support agreement, arrangement, commitment or understanding for the benefit of any member of the Enhabit Group by any member of the Encompass Group that survives following the Separation; and

(e)
any untrue statement or alleged untrue statement of a material fact or omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, with respect to all information contained in the Form 10, the Information Statement (as amended or supplemented if Enhabit shall have furnished any amendments or supplements thereto) or any other Disclosure Document, other than the matters described in clause (e) of Section 4.3.

4.3
Indemnification by Encompass.  Except as otherwise specifically set forth in this Agreement or in any Ancillary Agreement, to the fullest extent permitted by Law, Encompass shall, and shall cause the other members of the Encompass Group to, indemnify, defend and hold harmless Enhabit, each member of the Enhabit Group and each of their respective past, present and future directors, officers, employees or agents, in each case in their respective capacities as such, and each of the heirs, executors, successors and assigns of any of the foregoing (collectively, the “Enhabit Indemnitees”), from and against any and all Liabilities of the Enhabit Indemnitees relating to, arising out of or resulting from, directly or indirectly, any of the following items (without duplication):

(a)
any Encompass Liability;

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(b)
any failure of Encompass, any other member of the Encompass Group or any other Person to pay, perform or otherwise promptly discharge any Encompass Liabilities in accordance with their terms, whether prior to, on or after the Effective Time;

(c)
any breach by Encompass or any other member of the Encompass Group of this Agreement or any of the Ancillary Agreements;

(d)
except to the extent it relates to an Enhabit Liability, any guarantee, indemnification or contribution obligation, surety bond or other credit support agreement, arrangement, commitment or understanding for the benefit of any member of the Encompass Group by any member of the Enhabit Group that survives following the Separation; and

(e)
any untrue statement or alleged untrue statement of a material fact or omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, with respect to statements made explicitly in Encompass’s name in the Form 10, the Information Statement (as amended or supplemented if Enhabit shall have furnished any amendments or supplements thereto) or any other Disclosure Document; it being agreed that the statements set forth on Schedule 4.3(e) shall be the only statements made explicitly in Encompass’s name in the Form 10, the Information Statement or any other Disclosure Document, and all other information contained in the Form 10, the Information Statement or any other Disclosure Document shall be deemed to be information supplied by Enhabit.

4.4
Indemnification Obligations Net of Insurance Proceeds and Other Amounts.

(a)
The Parties intend that any Liability subject to indemnification, contribution or reimbursement pursuant to this Article IV or Article V will be net of Insurance Proceeds or other amounts actually recovered (net of any out-of-pocket costs or expenses incurred in the collection thereof) from any Person by or on behalf of the Indemnitee in respect of any indemnifiable Liability.  Accordingly, the amount which either Party (an “Indemnifying Party”) is required to pay to any Person entitled to indemnification or contribution hereunder (an “Indemnitee”) will be reduced by any Insurance Proceeds or other amounts actually recovered (net of any out-of-pocket costs or expenses incurred in the collection thereof) from any Person by or on behalf of the Indemnitee in respect of the related Liability.  If an Indemnitee receives a payment (an “Indemnity Payment”) required by this Agreement from an Indemnifying Party in respect of any Liability and subsequently receives Insurance Proceeds or any other amounts in respect of such Liability, then within ten (10) calendar days of receipt of such Insurance Proceeds, the Indemnitee will pay to the Indemnifying Party an amount equal to the excess of the Indemnity Payment received over the amount of the Indemnity Payment that would have been due if the Insurance Proceeds or such other amounts (net of any out-of-pocket costs or expenses incurred in the collection thereof) had been received, realized or recovered before the Indemnity Payment was made.

(b)
The Parties agree that it is their intent that an insurer that would otherwise be obligated to pay any claim shall not be relieved of the responsibility with respect thereto or, solely by virtue of any provision contained in this Agreement or any Ancillary Agreement, have any subrogation rights with respect thereto, it being understood that no insurer or any other Third Party shall be entitled to a “windfall” (i.e., a benefit they would not be entitled to receive in the absence of the indemnification provisions) by virtue of the indemnification and contribution provisions hereof.  Each Party shall, and shall cause the members of its Group to, use commercially reasonable efforts (taking into account the probability of success on the merits and the cost of expending such efforts, including attorneys’ fees and expenses) to collect or recover any Insurance Proceeds that may be collectible or recoverable respecting the Liabilities for which indemnification or contribution may be available under this Article IV.  Notwithstanding the foregoing, an Indemnifying Party may not delay making any indemnification payment required under the terms of this Agreement, or otherwise satisfying any indemnification obligation, pending the outcome of any Action to collect or recover Insurance Proceeds, and an Indemnitee need not attempt to collect any Insurance Proceeds prior to making a claim for indemnification or contribution or receiving any Indemnity Payment otherwise owed to it under this Agreement or any Ancillary Agreement.

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4.5
Procedures for Indemnification of Third-Party Claims.

(a)
Notice of Claims.  If, at or following the Effective Time, an Indemnitee shall receive notice or otherwise learn of the assertion by a Person (including any Governmental Authority) who is not a member of the Encompass Group or the Enhabit Group of any claim or of the commencement by any such Person of any Action (collectively, a “Third-Party Claim”) with respect to which an Indemnifying Party may be obligated to provide indemnification to such Indemnitee pursuant to Section 4.2 or 4.3, or any other Section of this Agreement or any Ancillary Agreement, such Indemnitee shall give such Indemnifying Party written notice thereof as soon as practicable, but in any event within fourteen (14) days (or sooner if the nature of the Third-Party Claim so requires) after becoming aware of such Third-Party Claim.  Any such notice shall describe the Third-Party Claim in reasonable detail, including the facts and circumstances giving rise to such claim for indemnification, and include copies of all notices and documents (including court papers) received by the Indemnitee relating to the Third-Party Claim.  Notwithstanding the foregoing, the failure of an Indemnitee to provide notice in accordance with this Section 4.5(a) shall not relieve an Indemnifying Party of its indemnification obligations under this Agreement, except to the extent to which the Indemnifying Party is actually prejudiced by the Indemnitee’s failure to provide notice in accordance with this Section 4.5(a).

(b)
Control of Defense.  Subject to any insurer’s rights pursuant to any Policies of either Party, an Indemnifying Party may elect to defend (and seek to settle or compromise), at its own expense and with its own counsel, any Third-Party Claim; provided, that, prior to the Indemnifying Party assuming and controlling defense of such Third-Party Claim, it shall first confirm to the Indemnitee in writing that, assuming the facts presented to the Indemnifying Party by the Indemnitee being true, the Indemnifying Party shall indemnify the Indemnitee for any such damages to the extent resulting from, or arising out of, such Third-Party Claim.  Notwithstanding the foregoing, if the Indemnifying Party assumes such defense and, in the course of defending such Third-Party Claim, (i) the Indemnifying Party discovers that the facts presented at the time the Indemnifying Party acknowledged its indemnification obligation in respect of such Third-Party Claim were not true in all material respects and (ii) such untruth provides a reasonable basis for asserting that the Indemnifying Party does not have an indemnification obligation in respect of such Third-Party Claim, then (A) the Indemnifying Party shall not be bound by such acknowledgment, (B) the Indemnifying Party shall promptly thereafter provide the Indemnitee written notice of its assertion that it does not have an indemnification obligation in respect of such Third-Party Claim and (C) the Indemnitee shall have the right to assume the defense of such Third-Party Claim.  Within thirty (30) days after the receipt of a notice from an Indemnitee in accordance with Section 4.5(a) (or sooner, if the nature of the Third-Party Claim so requires), the Indemnifying Party shall provide written notice to the Indemnitee indicating whether the Indemnifying Party shall assume responsibility for defending the Third-Party Claim and specifying any reservations or exceptions to its defense.  If an Indemnifying Party elects not to assume responsibility for defending any Third-Party Claim as provided in this Section 4.5(b) or fails to notify an Indemnitee of its election within thirty (30) days after receipt of the notice from an Indemnitee as provided in accordance with Section 4.5(a), then the Indemnitee that is the subject of such Third-Party Claim shall be entitled to continue to conduct and control the defense of such Third-Party Claim.  Notwithstanding anything herein to the contrary, to the extent a Third-Party Claim involves or would reasonably be expected to involve both an Enhabit Liability and an Encompass Liability (collectively, a “Shared Third-Party Claim”), Encompass shall have the sole right to defend and control such portion of any Action relating to such Third-Party Claim to the extent it relates to an Encompass Liability, and Enhabit shall have the sole right to defend and control such portion of any Action relating to such Third-Party Claim to the extent it relates to an Enhabit Liability.  For the avoidance of doubt, “Shared Third-Party Claim” shall include those matters set forth on Schedule 4.5(b).

(c)
Allocation of Defense Costs.  If an Indemnifying Party has elected to assume the defense of a Third-Party Claim, whether with or without any reservations or exceptions with respect to such defense, then such Indemnifying Party shall be solely liable for all fees and expenses incurred by it in connection with the defense of such Third-Party Claim and shall not be entitled to seek any indemnification or reimbursement from the Indemnitee for any such fees or expenses incurred by the Indemnifying Party during the course of the defense of such Third-Party Claim by such Indemnifying Party, regardless of any subsequent decision by the Indemnifying Party to reject or otherwise abandon its assumption of such defense.  If an Indemnifying Party elects not to assume responsibility for defending any Third-Party Claim or fails to notify an Indemnitee of its election within thirty (30) days after receipt of a notice from an Indemnitee as provided in accordance with Section 4.5(a), and the Indemnitee conducts and controls the defense of such Third-Party Claim and the Indemnifying Party has an indemnification obligation with respect to such Third-Party Claim, then the Indemnifying Party shall be liable for all reasonable fees and expenses incurred by the Indemnitee in connection with the defense of such Third-Party Claim.  In the event of a Shared Third-Party Claim, each Party shall be liable for the portion of the fees and expenses incurred by such Party in connection with the defense of such Shared Third-Party Claim that is equal to the relative portion of such Party’s Liability in respect of such Shared Third-Party Claim, and shall be entitled to seek any indemnification or reimbursement from the other Party for any fees or expenses incurred by such Party during the course of the defense of such Shared Third-Party Claim in excess of such fees and expenses that are the responsibility of such Party pursuant to this Agreement.

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(d)
Right to Monitor and Participate.  An Indemnitee that does not conduct and control the defense of any Third-Party Claim, an Indemnifying Party that has failed to elect to defend any Third-Party Claim as contemplated hereby and either Party in the case of a Shared Third-Party Claim, nevertheless shall have the right to employ separate counsel (including local counsel as necessary) of its own choosing to monitor and participate in (but not control) the defense of any Third-Party Claim for which it is a potential Indemnitee or Indemnifying Party, but the fees and expenses of such counsel shall be at the expense of such Indemnitee or Indemnifying Party, as the case may be, and the provisions of Section 4.5(c) shall not apply to such fees and expenses.  Notwithstanding the foregoing, but subject to Sections 6.7 and 6.8, such Party shall cooperate with the Party entitled to conduct and control the defense of such Third-Party Claim in such defense and make available to the controlling Party, at the non-controlling Party’s expense, all witnesses, information and materials in such Party’s possession or under such Party’s control relating thereto as are reasonably required by the controlling Party.  In addition to the foregoing, if any Indemnitee shall in good faith determine that such Indemnitee and the Indemnifying Party have actual or potential differing defenses or conflicts of interest between them that make joint representation inappropriate, then the Indemnitee shall have the right to employ separate counsel (including local counsel as necessary) and to participate in (but not control) the defense, compromise, or settlement thereof, and in such case the Indemnifying Party shall bear the reasonable fees and expenses of such counsel for all Indemnitees.

(e)
No Settlement.  Neither Party may settle or compromise any Third-Party Claim for which either Party is seeking to be indemnified hereunder without the prior written consent of the other Party, which consent may not be unreasonably withheld, unless such settlement or compromise is solely for monetary damages that are fully payable by the settling or compromising Party, does not involve any admission, finding or determination of wrongdoing or violation of Law by the other Party or another member of its Group or the Indemnitee and provides for a full, unconditional and irrevocable release of the other Party and the other members of its Group and the Indemnitee(s) from all Liability in connection with the Third-Party Claim.  The Parties hereby agree that if a Party presents the other Party with a written notice containing a proposal to settle or compromise a Third-Party Claim for which either Party is seeking to be indemnified hereunder and the Party receiving such proposal does not respond in any manner to the Party presenting such proposal within thirty (30) days (or within any such shorter time period that may be required by applicable Law or court order) of receipt of such proposal, then the Party receiving such proposal shall be deemed to have consented to the terms of such proposal.

(f)
Tax Matters Agreement Coordination.  The provisions of Section 4.2 through Section 4.10 hereof shall not apply with respect to Taxes or Tax matters (it being understood and agreed that claims with respect to Taxes and Tax matters, including the control of Tax-related proceedings, shall be governed exclusively by the Tax Matters Agreement).  In the case of any conflict between this Agreement and the Tax Matters Agreement in relation to any matters addressed by the Tax Matters Agreement, the Tax Matters Agreement shall prevail.

4.6
Additional Matters.

(a)
Timing of Payments.  Indemnification or contribution payments in respect of any Liabilities for which an Indemnitee is entitled to indemnification or contribution under this Article IV shall be paid reasonably promptly (but in any event within forty-five (45) days of the final determination of the amount for which the Indemnitee is entitled to indemnification or contribution under this Article IV) by the Indemnifying Party to the Indemnitee as such Liabilities are incurred upon demand by the Indemnitee, including reasonably satisfactory documentation setting forth the basis for the amount of such indemnification or contribution payment, including documentation with respect to calculations made and consideration of any Insurance Proceeds that actually reduce the amount of such Liabilities.  The indemnity and contribution provisions contained in this Article IV shall remain operative and in full force and effect, regardless of (i) any investigation made by or on behalf of any Indemnitee, and (ii) the knowledge by the Indemnitee of Liabilities for which it might be entitled to indemnification hereunder.

(b)
Notice of Direct Claims. Any claim for indemnification or contribution under this Agreement or any Ancillary Agreement that does not result from a Third-Party Claim shall be asserted by written notice given by the Indemnitee to the applicable Indemnifying Party; provided, that the failure by an Indemnitee to so assert any such claim shall not prejudice the ability of the Indemnitee to do so at a later time except to the extent (if any) that the Indemnifying Party is prejudiced thereby.  Such Indemnifying Party shall have a period of thirty (30) days after the receipt of such notice within which to respond thereto.  If such Indemnifying Party does not respond within such thirty (30)-day period, such specified claim shall be conclusively deemed a Liability of the Indemnifying Party under this Section 4.6(b) or, in the case of any written notice in which the amount of the claim (or any portion thereof) is estimated, on such later date when the amount of the claim (or such portion thereof) becomes finally determined.  If such Indemnifying Party does not respond within such thirty (30)-day period or rejects such claim in whole or in part, such Indemnitee shall, subject to the provisions of Article VII, be free to pursue such remedies as may be available to such party as contemplated by this Agreement and the Ancillary Agreements, as applicable, without prejudice to its continuing rights to pursue indemnification or contribution hereunder.

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(c)
Pursuit of Claims Against Third Parties.  If (i) a Party incurs any Liability arising out of this Agreement or any Ancillary Agreement; (ii) an adequate legal or equitable remedy is not available for any reason against the other Party to satisfy the Liability incurred by the incurring Party; and (iii) a legal or equitable remedy may be available to the other Party against a Third Party for such Liability, then the other Party shall use its commercially reasonable efforts to cooperate with the incurring Party, at the incurring Party’s expense, to permit the incurring Party to obtain the benefits of such legal or equitable remedy against the Third Party.

(d)
Subrogation.  In the event of payment by or on behalf of any Indemnifying Party to any Indemnitee in connection with any Third-Party Claim, such Indemnifying Party shall be subrogated to and shall stand in the place of such Indemnitee as to any events or circumstances in respect of which such Indemnitee may have any right, defense or claim relating to such Third-Party Claim against any claimant or plaintiff asserting such Third-Party Claim or against any other Person.  Such Indemnitee shall cooperate with such Indemnifying Party in a reasonable manner, and at the cost and expense of such Indemnifying Party, in prosecuting any subrogated right, defense or claim.

4.7
Right of Contribution.

(a)
Contribution.  If any right of indemnification contained in Section 4.2 or Section 4.3 is held unenforceable or is unavailable for any reason, or is insufficient to hold harmless an Indemnitee in respect of any Liability for which such Indemnitee is entitled to indemnification hereunder, then the Indemnifying Party shall contribute to the amounts paid or payable by the Indemnitees as a result of such Liability (or actions in respect thereof) in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and the members of its Group, on the one hand, and the Indemnitees entitled to contribution, on the other hand, as well as any other relevant equitable considerations.

(b)
Allocation of Relative Fault.  Solely for purposes of determining relative fault pursuant to this Section 4.7:  (i) any fault associated with the business conducted with the Delayed Enhabit Assets or Delayed Enhabit Liabilities (except for the gross negligence or intentional misconduct of a member of the Encompass Group) or with the ownership, operation or activities of the Enhabit Business prior to the Effective Time shall be deemed to be the fault of Enhabit and the other members of the Enhabit Group, and no such fault shall be deemed to be the fault of Encompass or any other member of the Encompass Group; (ii) any fault associated with the business conducted with Delayed Encompass Assets or Delayed Encompass Liabilities (except for the gross negligence or intentional misconduct of a member of the Enhabit Group) shall be deemed to be the fault of Encompass and the other members of the Encompass Group, and no such fault shall be deemed to be the fault of Enhabit or any other member of the Enhabit Group; and (iii) any fault associated with the ownership, operation or activities of the Encompass Business prior to the Effective Time shall be deemed to be the fault of Encompass and the other members of the Encompass Group, and no such fault shall be deemed to be the fault of Enhabit or any other member of the Enhabit Group.

4.8
Covenant Not to Sue.  Each Party hereby covenants and agrees that none of it, the members of such Party’s Group or any Person claiming through it shall bring suit or otherwise assert any claim against any Indemnitee, or assert a defense against any claim asserted by any Indemnitee, before any court, arbitrator, mediator or administrative agency anywhere in the world, alleging that: (a) the assumption of any Enhabit Liabilities by Enhabit or a member of the Enhabit Group on the terms and conditions set forth in this Agreement and the Ancillary Agreements is void or unenforceable for any reason; (b) the retention of any Encompass Liabilities by Encompass or a member of the Encompass Group on the terms and conditions set forth in this Agreement and the Ancillary Agreements is void or unenforceable for any reason; or (c) the provisions of this Article IV are void or unenforceable for any reason.

4.9
Remedies Cumulative.  The remedies provided in this Article IV shall be cumulative and, subject to the provisions of Article VII, shall not preclude assertion by any Indemnitee of any other rights or the seeking of any and all other remedies against any Indemnifying Party.

4.10
Survival of Indemnities.  The rights and obligations of each of Encompass and Enhabit and their respective Indemnitees under this Article IV shall survive (a) the sale or other transfer by either Party or any member of its Group of any Assets or businesses or the assignment by it of any Liabilities; or (b) any merger, consolidation, business combination, sale of all or substantially all of its Assets, restructuring, recapitalization, reorganization or similar transaction involving either Party or any of the members of its Group.

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ARTICLE V
CERTAIN OTHER MATTERS

5.1
Names Following the Effective Time.

(a)
Except as set forth in Section 5.1(b) below, neither Enhabit nor any member of its Group shall use, or have the right to use, the Encompass Marks or any name or mark that, in the reasonable judgment of Encompass, is confusingly similar to the Encompass Marks.  Notwithstanding Section 5.1(b) below, neither Enhabit nor any member of its Group shall use the Encompass Marks in any manner that detracts from the goodwill and reputation of Encompass associated with the Encompass Marks.

(b)
Effective upon the Effective Time and until the expiration of the applicable time period set forth on Schedule 5.1(b), Encompass shall, and shall cause members of its Group to, grant to Enhabit and members of its Group a limited, non-exclusive, royalty-free, fully paid-up, non-transferable, non-sublicenseable worldwide license or authorization, as applicable, to use the Encompass Marks solely (i) to the extent and in substantially the same manner as used immediately prior to Effective Time, (ii) in connection with any Enhabit Inventory that, as of the Effective Time, bears or incorporates the Encompass Marks, until such time as usable Enhabit Inventory existing as of the Effective Time has been exhausted; and (iii) in connection with building and other signage, in the case of this clause (iii), for a period ending at the Effective Time; provided, that such time period in clause (iii) shall be automatically extended to the extent required in connection with obtaining any necessary approvals of any landlord or other Third Party with respect thereto; provided, further, that in each case of clauses (i)-(iii), Enhabit and members of its Group use reasonable best efforts to minimize and eliminate use of the Encompass Marks by the Enhabit Group as soon as practicable after the Effective Time (and in any event within the applicable time period set forth on Schedule 5.1(b)).

(c)
Any use of the Encompass Marks authorized in Section 5.1(b) shall be subject to (x) compliance with the Encompass Group’s reasonable quality control requirements and guidelines in effect for the Encompass Marks and (y) to the extent practicable, the placement of a reasonably appropriate disclaimer on any materials bearing the Encompass Marks (including stationery, business cards, signage, advertising materials, inventory, packaging, product, service and training literature, and other similar materials) identifying in a readily observable manner that Enhabit and members of its Group are no longer Affiliates of the Encompass Group.  Any and all goodwill arising from the use of the Encompass Marks (including names) as described in Section 6.6(b) shall inure to the sole and exclusive benefit of the Encompass Group.

(d)
Except as set forth in Section 5.1(e) below, neither Encompass nor any member of its Group shall use, or have the right to use, the Enhabit Marks or any name or mark that, in the reasonable judgment of Enhabit, is confusingly similar to the Enhabit Marks.  Notwithstanding Section 5.1(e) below, neither Encompass nor any member of its Group shall use the Enhabit Marks in any manner that detracts from the goodwill and reputation of Enhabit associated with the Enhabit Marks.

(e)
Effective upon the Effective Time and until the expiration of the applicable time period set forth on Schedule 5.1(b), Enhabit shall, and shall cause members of its Group to, grant to Encompass and members of its Group a limited, non-exclusive, royalty-free, fully paid-up, non-transferable, non-sublicenseable worldwide license or authorization, as applicable, to use the Enhabit Marks solely (i) to the extent and in substantially the same manner as used immediately prior to Effective Time, (ii) in connection with any Encompass Inventory or Enhabit Inventory (to the extent such Enhabit Inventory is sold by Encompass pursuant to any contracts, arrangements or understandings between Encompass and Enhabit) that, as of the Effective Time, bears or incorporates the Enhabit Marks, until such time as such usable Encompass Inventory or Enhabit Inventory existing as of the Effective Time has been exhausted; and (iii) in connection with building and other signage, in the case of this clause (iii), for a period ending at the Effective Time; provided, that such time period in clause (iii) shall be automatically extended to the extent required in connection with obtaining any necessary approvals of any landlord or other Third Party with respect thereto; provided, further, that in each case of clauses (i)-(iii) Encompass and members of its Group use reasonable best efforts to minimize and eliminate use of the Enhabit Marks by the Encompass Group as soon as practicable after the Effective Time (and in any event within the applicable time period set forth on Schedule 5.1(b)).

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(f)
Any use of the Enhabit Marks authorized in Section 5.1(e) shall be subject to (x) compliance with the Enhabit Group’s reasonable quality control requirements and guidelines in effect for the Enhabit Marks and (y) to the extent practicable, the placement of a reasonably appropriate disclaimer on any materials bearing the Enhabit Marks (including stationery, business cards, signage, advertising materials, inventory, packaging, product, service and training literature, and other similar materials) identifying in a readily observable manner that Encompass and members of its Group are no longer Affiliates of the Enhabit Group.  Any and all goodwill arising from the use of the Enhabit Marks as described in Section 5.1(e) shall inure to the sole and exclusive benefit of the Enhabit Group.

(g)
Notwithstanding anything to the contrary in this Section 5.1, nothing set forth in this Section 5.1 shall limit either Party’s nominative use of the Enhabit Marks (in the case of Encompass) or the Encompass Marks (in the case of Enhabit), respectively, including for the purposes of referring to the other Party and the transactions contemplated hereby.

5.2
Insurance Matters.

(a)
Subject to the terms and conditions of this Agreement, Encompass and Enhabit agree to cooperate in good faith to attempt to implement an orderly transition of applicable insurance coverage from the date hereof through the Effective Time.  In no event shall Encompass, any other member of the Encompass Group or any Encompass Indemnitee have Liability or obligation whatsoever to any member of the Enhabit Group in the event that any insurance policy or insurance policy related contract shall be terminated or otherwise cease to be in effect for any reason, shall be unavailable or inadequate to cover any Liability of any member of the Enhabit Group for any reason whatsoever or shall not be renewed or extended beyond the current expiration date.

(b)
From and after the Effective Time, with respect to any losses, damages and Liability incurred by any member of the Enhabit Group prior to the Effective Time that constitutes an Enhabit Liability, at the request of Enhabit, Encompass will use commercially reasonable efforts to pursue claims, at Enhabit’s sole cost and expense (to the extent not otherwise covered by such insurance policies then in effect prior to the Effective Time), on behalf of the applicable member of the Enhabit Group under (with such member of the Enhabit Group entitled to all Insurance Proceeds resulting from or arising out of any such claims) Policies of Encompass or any other member of the Encompass Group in place immediately prior to the Effective Time (and any extended reporting periods for claims-made Policies of Encompass or any other member of the Encompass Group) and historical Policies of Encompass or any other member of the Encompass Group (such Policies, collectively, the “Encompass Policies”), but solely to the extent that such Encompass Policies provided coverage for the applicable member of the Enhabit Group prior to the Effective Time; provided that such obligation of Encompass to make claims on behalf of the applicable member of the Enhabit Group under such Encompass Policies shall be subject to the terms and conditions of such Encompass Policies, including any limits on coverage or scope, any deductibles, self-insured retentions and other fees and expenses, and shall be subject to the following additional conditions:

(i)
Enhabit shall provide written notification to Encompass of any request for Encompass to pursue a claim on behalf of the applicable member of the Enhabit Group pursuant to this Section 5.2(b), and Encompass shall use commercially reasonable efforts to pursue such claim, at Enhabit’s sole cost and expense (to the extent not otherwise covered by such insurance policies then in effect prior to the Effective Time), as promptly as is reasonably practicable;

(ii)
Enhabit and the other members of the Enhabit Group shall indemnify, hold harmless and reimburse Encompass and the other members of the Encompass Group for any deductibles, self-insured retention, retrospective premium payments, indemnity payments, settlements, judgments, legal fees, allocated claims expenses, claim handling fees and expenses, and other expenses incurred by Encompass or any other member of the Encompass Group to the extent resulting from any pursuit of any claims on behalf of Enhabit or any other members of the Enhabit Group, whether such claims are pursued on behalf of Enhabit or any other members of the Enhabit Group, employees of Enhabit or any other members of the Enhabit Group, or Third Parties;

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(iii)
Enhabit shall, and shall cause the other members of the Enhabit Group to, cooperate with and assist Encompass and the other members of the Encompass Group and share such information as is reasonably necessary in order to permit Encompass and the other members of the Encompass Group to manage and conduct the insurance matters contemplated by this Section 5.2; and

(iv)
Enhabit shall exclusively bear (and neither Encompass nor any other member of the Encompass Group shall have any obligation to repay or reimburse Enhabit or any other member of the Enhabit Group for) and shall be liable for all excluded, uninsured, uncovered, unavailable or uncollectible amounts of all such claims pursued on behalf of Enhabit or any other member of the Enhabit Group under the Encompass Policies as provided for in this Section 5.2(b).  In the event an Encompass Policy aggregate is exhausted, or believed likely to be exhausted, due to noticed claims, the Enhabit Group, on the one hand, and the Encompass Group, on the other hand, shall be responsible for their pro rata portion of the reinstatement premium, if any, based upon the losses of such Group submitted to Encompass’s insurance carrier(s) (including any submissions prior to the Effective Time).  To the extent that the Enhabit Group or the Encompass Group is allocated more than its pro rata portion of such premium due to the timing of losses submitted to Encompass’s insurance carrier(s), the other party shall promptly pay the first party an amount so that each Group has been properly allocated its pro rata portion of the reinstatement premium.  Subject to the following sentence, Encompass may elect not to reinstate the Encompass Policy aggregate.  In the event that Encompass elects not to reinstate the Encompass Policy aggregate, it shall provide prompt written notice to Enhabit, and Enhabit may direct Encompass in writing to, and Encompass shall, in such case reinstate the Encompass Policy aggregate; provided that Enhabit shall be responsible for all reinstatement premiums and other costs associated with such reinstatement.

In the event that any member of the Encompass Group incurs any losses, damages or Liability prior to or in respect of the period prior to the Effective Time for which such member of the Encompass Group is entitled to coverage under the Policies of Enhabit or any other member of the Enhabit Group, the same process pursuant to this Section 5.2(b) shall apply, substituting “Encompass” for “Enhabit” and “Enhabit” for “Encompass,” as applicable.

(c)
Except as provided in Section 5.2(a) and Section 5.2(b), from and after the Distribution Date, neither Enhabit nor any member of the Enhabit Group shall have any rights to or under any of the Policies of Encompass or any other member of the Encompass Group.  At the Distribution Date, Enhabit shall have in effect all insurance programs required to comply with Enhabit’s contractual obligations and such other Policies required by Law or as reasonably necessary or appropriate for companies operating a business similar to Enhabit’s.

(d)
In connection with Encompass’s pursuit of a claim on behalf of Enhabit or any other member of the Enhabit Group under any Encompass Policy pursuant to this Section 5.2, Encompass shall not be required to take any action that would be reasonably likely to:  (i) have an adverse impact on the then-current relationship between Encompass or any member of the Encompass Group, on the one hand, and the applicable insurance company, on the other hand; (ii) result in the applicable insurance company terminating or reducing coverage, or increasing the amount of any premium owed by Encompass or any other member of the Encompass Group under the applicable Encompass Policy; or (iii) otherwise compromise, jeopardize or interfere with the rights of Encompass or any other member of the Encompass Group under the applicable Encompass Policy.

(e)
All payments and reimbursements by Enhabit pursuant to this Section 5.2 shall be made within forty-five (45) days after Enhabit’s receipt of an invoice therefor from Encompass.  If Encompass incurs costs to enforce Enhabit’s obligations herein, Enhabit agrees to indemnify and hold harmless Encompass for such enforcement costs, including reasonable attorneys’ fees pursuant to Section 4.6.  Encompass shall retain the exclusive right to control the Encompass Policies and the insurance programs of Encompass or any other member of the Encompass Group, including the right to exhaust, settle, release, commute, buy back or otherwise resolve disputes with respect to any such Encompass Policies and programs and to amend, modify or waive any rights under any such Encompass Policies and programs, notwithstanding whether any such Encompass Policies or programs apply to any Enhabit Liabilities and/or claims Enhabit has made or could make in the future, and no member of the Enhabit Group shall erode, exhaust, settle, release, commute, buy back or otherwise resolve disputes with insurers of Encompass or any other member of the Encompass Group with respect to any of the Encompass Policies and the insurance programs of Encompass or any other member of the Encompass Group, or amend, modify or waive any rights under any such Encompass Policies and programs.  No member of the Encompass Group shall have any obligation to secure extended reporting for any claims under any Encompass Policy for any acts or omissions of any member of the Enhabit Group incurred prior to the Effective Time.

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(f)
This Agreement shall not be considered as an attempted assignment of any Policy or other Policy-related contract and shall not be construed to waive any right or remedy of any member of the Encompass Group in respect of any Policy or other Policy-related contract.

(g)
Enhabit does hereby, for itself and each other member of the Enhabit Group, agree that no member of the Encompass Group shall have any Liability whatsoever as a result of the Encompass Policies or the insurance practices of Encompass or any other member of the Encompass Group as in effect at any time, including as a result of the level or scope of any insurance, the creditworthiness of any insurance carrier, the terms and conditions of any policy, or the adequacy or timeliness of any notice to any insurance carrier with respect to any claim or potential claim or otherwise.

5.3
Late Payments.  Except as expressly provided to the contrary in this Agreement or in any Ancillary Agreement, or as otherwise agreed in writing by the Parties, any amount not paid when due pursuant to this Agreement or any Ancillary Agreement (and any amounts billed or otherwise invoiced or demanded and properly payable that are not paid within forty five (45) days of such bill, invoice or other demand) shall accrue interest at a rate per annum equal to the Prime Rate plus two percent (2%); provided, that notice of any such late payment has been provided and the other Party has been provided fifteen (15) days to cure any such late payment.

5.4
Inducement.  Enhabit acknowledges and agrees that Encompass’s willingness to cause, effect and consummate the Separation and the Distribution has been conditioned upon and induced by Enhabit’s covenants and agreements in this Agreement and the Ancillary Agreements, including Enhabit’s assumption of the Enhabit Liabilities pursuant to the Separation and the provisions of this Agreement and Enhabit’s covenants and agreements contained in Article IV.

5.5
Post-Effective Time Conduct.  The Parties acknowledge that, after the Effective Time, each Party shall be independent of the other Party, with responsibility for its own actions and inactions and its own Liabilities relating to, arising out of or resulting from the conduct of its business, operations and activities following the Effective Time, except as may otherwise be provided in any Ancillary Agreement, and each Party shall (except as otherwise provided in Article IV) use commercially reasonable efforts to prevent such Liabilities from being inappropriately borne by the other Party.

ARTICLE VI
EXCHANGE OF INFORMATION; CONFIDENTIALITY

6.1
Agreement for Exchange of Information.

(a)
Subject to Section 6.9 and any other applicable confidentiality obligations, each of Encompass and Enhabit, on behalf of itself and each member of its respective Group, agrees to use commercially reasonable efforts to provide or make available, or cause to be provided or made available, to the other Party and the members of such other Party’s Group, at any time before, on or after the Effective Time, as soon as reasonably practicable after written request therefor is received by such Party’s legal department from the requesting Party’s legal department, any information (or a copy thereof) in the possession or under the control of such Party or its Group which the requesting Party’s legal department requests to the extent that (i) such information relates to the Enhabit Business, or any Enhabit Asset or Enhabit Liability, if Enhabit is the requesting Party, or to the Encompass Business, or any Encompass Asset or Encompass Liability, if Encompass is the requesting Party; (ii) such information is required by the requesting Party to comply with its obligations under this Agreement or any Ancillary Agreement; or (iii) such information is required by the requesting Party to comply with any obligation imposed by any Governmental Authority; provided, however, that, in the event that the Party to whom the request has been made determines that any such provision of information could be detrimental to the Party providing the information, violate any Law or agreement, or waive any privilege available under applicable Law, including any attorney-client privilege, then the Parties shall use commercially reasonable efforts to permit compliance with such obligations to the extent and in a manner that avoids any such harm or consequence.  The Party providing information pursuant to this Section 6.1 shall only be obligated to provide such information in the form, condition and format in which it then exists, and in no event shall such Party be required to perform any improvement, modification, conversion, updating or reformatting of any such information, and nothing in this Section 6.1 shall expand the obligations of a Party under Section 6.4.

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(b)
Without limiting the generality of the foregoing, until the end of Encompass’s fiscal year during which the Distribution Date occurs (and for a reasonable period of time afterwards as required for each Party to prepare consolidated financial statements or complete a financial statement audit for the fiscal year during which the Distribution Date occurs), each Party shall use commercially reasonable efforts to cooperate with the other Party’s information requests to enable (i) the other Party to meet its timetable for dissemination of its earnings releases, financial statements and management’s assessment of the effectiveness of its disclosure controls and procedures and its internal control over financial reporting in accordance with Items 307 and 308, respectively, of Regulation S-K promulgated under the Exchange Act and (ii) the other Party’s accountants to timely complete their review of the quarterly financial statements and audit of the annual financial statements, including, to the extent applicable to such Party, its auditor’s audit of its internal control over financial reporting and management’s assessment thereof in accordance with Section 404 of the Sarbanes-Oxley Act of 2002, the SEC’s and Public Company Accounting Oversight Board’s rules and auditing standards thereunder and any other applicable Laws.

6.2
Ownership of Information.  The provision of any information pursuant to Section 6.1 or Section 6.7 shall not affect the ownership of such information (which shall be determined solely in accordance with the terms of this Agreement and the Ancillary Agreements), or constitute a grant of rights in or to any such information.

6.3
Compensation for Providing Information.  The Party requesting information after the Effective Time agrees to reimburse the other Party for the reasonable costs, if any, of creating, gathering, copying, transporting and otherwise complying with the request with respect to such information (including any reasonable costs and expenses incurred in any review of information for purposes of protecting the Privileged Information of the providing Party or in connection with the restoration of backup media for purposes of providing the requested information).  Except as may be otherwise specifically provided elsewhere in this Agreement, any Ancillary Agreement or any other agreement between the Parties, such costs shall be computed in accordance with the providing Party’s standard methodology and procedures.

6.4
Record Retention.

(a)
To facilitate the possible exchange of information pursuant to this Article VI and other provisions of this Agreement after the Effective Time, the Parties agree to use their commercially reasonable efforts, which shall be no less rigorous than those used for retention of such Party’s own information, to retain all information in their respective possession or control on the Effective Time in accordance with their respective policies regarding retention of records.  No Party will destroy, or permit any of its Subsidiaries to destroy, any information which the other Party may have the right to obtain pursuant to this Agreement prior to the end of the retention period set forth in such policies without first notifying the other Party of the proposed destruction and giving the other Party the opportunity to take possession of such information prior to such destruction.  Notwithstanding anything in this Article VI to the contrary, the Tax Matters Agreement exclusively governs the retention of Tax related records and the exchange of Tax-related information.

(b)
Each Party shall preserve and keep all documents subject to a litigation hold as of the date of this Agreement until such Party has been notified that such litigation hold is no longer applicable.

6.5
Limitations of Liability.  Neither Party shall have any Liability to the other Party in the event that any information exchanged or provided pursuant to this Agreement is found to be inaccurate in the absence of gross negligence, bad faith or willful misconduct by the Party providing such information.  Neither Party shall have any Liability to any other Party if any information is destroyed after commercially reasonable efforts by such Party to comply with the provisions of Section 6.4.

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6.6
Other Agreements Providing for Exchange of Information.

(a)
The rights and obligations granted under this Article VI are subject to any specific limitations, qualifications or additional provisions on the sharing, exchange, retention, destruction or confidential treatment of information set forth in any Ancillary Agreement.

(b)
Any party that receives, pursuant to a request for information in accordance with this Article VI, Tangible Information that is not relevant to its request shall, at the request of the providing Party, (i) return it to the providing Party or, at the providing Party’s request, destroy such Tangible Information; and (ii) deliver to the providing Party written confirmation that such Tangible Information was returned or destroyed, as the case may be, which confirmation shall be signed by an authorized representative of the requesting Party.

6.7
Production of Witnesses; Records; Cooperation.

(a)
After the Effective Time, except in the case of a Dispute between Encompass and Enhabit, or any members of their respective Groups, each Party shall use its commercially reasonable efforts to make available to the other Party, upon written request, the former, current and future directors, officers, employees, other personnel and agents of the members of its respective Group as witnesses and any books, records or other documents within its control or which it otherwise has the ability to make available without undue burden, to the extent that any such person (giving consideration to business demands of such directors, officers, employees, other personnel and agents) or books, records or other documents may reasonably be required in connection with any Action in which the requesting Party (or member of its Group) may from time to time be involved, regardless of whether such Action is a matter with respect to which indemnification may be sought hereunder.  The requesting Party shall bear all costs and expenses in connection therewith.

(b)
If an Indemnifying Party chooses to defend or to seek to compromise or settle any Third-Party Claim, the other Party shall make available to such Indemnifying Party, upon written request, the former, current and future directors, officers, employees, other personnel and agents of the members of its respective Group as witnesses and any books, records or other documents within its control or which it otherwise has the ability to make available without undue burden, to the extent that any such person (giving consideration to business demands of such directors, officers, employees, other personnel and agents) or books, records or other documents may reasonably be required in connection with such defense, settlement or compromise, or such prosecution, evaluation or pursuit, as the case may be, and shall otherwise cooperate in such defense, settlement or compromise, or such prosecution, evaluation or pursuit, as the case may be.

(c)
Without limiting the foregoing, the Parties shall cooperate and consult to the extent reasonably necessary with respect to any of the Actions described in clauses (a), (b) and (d) of this Section 6.7.

(d)
Without limiting any provision of this Section 6.7, each of the Parties agrees to cooperate, and to cause each member of its respective Group to cooperate, with each other in the defense of any infringement or similar claim with respect to any Intellectual Property Rights and shall not claim to acknowledge, or permit any member of its respective Group to claim to acknowledge, the validity or infringing use of any Intellectual Property Rights of a third Person in a manner that would hamper or undermine the defense of such infringement or similar claim.

(e)
The obligation of the Parties to provide witnesses pursuant to this Section 6.7 is intended to be interpreted in a manner so as to facilitate cooperation and shall include the obligation to provide as witnesses directors, officers, employees, other personnel and agents without regard to whether such person could assert a possible business conflict (subject to the exception set forth in the first sentence of Section 6.7(a)).


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6.8
Privileged Matters.

(a)
The Parties recognize that legal and other professional services that have been and will be provided prior to the Effective Time have been and will be rendered for the collective benefit of each of the members of the Encompass Group and the Enhabit Group, and that each of the members of the Encompass Group and the Enhabit Group should be deemed to be the client with respect to such services for the purposes of asserting all privileges which may be asserted under applicable Law in connection therewith.  The Parties recognize that legal and other professional services will be provided following the Effective Time, which services will be rendered solely for the benefit of the Encompass Group or the Enhabit Group, as the case may be.  In furtherance of the foregoing, each Party shall authorize the delivery to and/or retention by the other Party of materials existing as of the Effective Time that are necessary for such other Party to perform such services.

(b)
The Parties agree as follows:

(i)
Except as set forth on Schedule 6.8(b)(i), Encompass shall be entitled, in perpetuity, to control the assertion or waiver of all privileges and immunities in connection with any Privileged Information that relates solely to the Encompass Business and not to the Enhabit Business, whether or not the Privileged Information is in the possession or under the control of any member of the Encompass Group or any member of the Enhabit Group.  Except as set forth on Schedule 6.8(b)(i), Encompass shall also be entitled, in perpetuity, to control the assertion or waiver of all privileges and immunities in connection with any Privileged Information that relates solely to any Encompass Liabilities resulting from any Actions that are now pending or may be asserted in the future, whether or not the Privileged Information is in the possession or under the control of any member of the Encompass Group or any member of the Enhabit Group;

(ii)
Except as set forth on Schedule 6.8(b)(ii), Enhabit shall be entitled, in perpetuity, to control the assertion or waiver of all privileges and immunities in connection with any Privileged Information that relates solely to the Enhabit Business and not to the Encompass Business.  Except as set forth on Schedule 6.8(b)(ii), Enhabit shall also be entitled, in perpetuity, to control the assertion or waiver of all privileges and immunities in connection with any Privileged Information that relates solely to any Enhabit Liabilities resulting from any Actions that are now pending or may be asserted in the future; and

(iii)
if the Parties do not agree as to whether certain information is Privileged Information, then such information shall be treated as Privileged Information, and the Party that believes that such information is Privileged Information shall be entitled to control the assertion or waiver of all privileges and immunities in connection with any such information unless the Parties otherwise agree.  The Parties shall use the procedures set forth in Article VII to resolve any disputes as to whether any information relates solely to the Encompass Business, solely to the Enhabit Business, or to both the Encompass Business and the Enhabit Business.

(c)
Subject to the remaining provisions of this Section 6.8, the Parties agree that they shall have a shared privilege or immunity with respect to all privileges and immunities not allocated pursuant to Section 6.8(b) and all privileges and immunities relating to any Actions or other matters that involve both Parties (or one or more members of their respective Groups) and in respect of which both Parties have Liabilities under this Agreement, and that no such shared privilege or immunity may be waived by either Party without the prior written consent of the other Party.

(d)
If any Dispute arises between the Parties or any members of their respective Groups regarding whether a privilege or immunity should be waived to protect or advance the interests of either Party and/or any member of their respective Groups, each Party agrees that it shall (i) negotiate with the other Party in good faith; (ii) endeavor to minimize any prejudice to the rights of the other Party; and (iii) not unreasonably withhold consent to any request for waiver by the other Party.  Further, each Party specifically agrees that it shall not withhold its consent to the waiver of a privilege or immunity for any purpose except in good faith to protect its own legitimate interests.

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(e)
In the event of any Dispute between Encompass and Enhabit, or any members of their respective Groups, either Party may waive a privilege in which the other Party or member of such other Party’s Group has a shared privilege, without obtaining prior written consent pursuant to Section 6.8(c); provided that the Parties intend such waiver of a shared privilege to be effective only as to the use of information with respect to the Action between the Parties and/or the applicable members of their respective Groups, and is not intended to operate as a waiver of the shared privilege with respect to any Third Party.

(f)
Upon receipt by either Party, or by any member of its respective Group, of any subpoena, discovery or other request that may reasonably be expected to result in the production or disclosure of Privileged Information subject to a shared privilege or immunity or as to which another Party has the sole right hereunder to assert a privilege or immunity, or if either Party obtains knowledge that any of its, or any member of its respective Group’s, current or former directors, officers, agents or employees have received any subpoena, discovery or other requests that may reasonably be expected to result in the production or disclosure of such Privileged Information, such Party shall promptly notify the other Party of the existence of the request (which notice shall be delivered to such other Party no later than five (5) Business Days following the receipt of any such subpoena, discovery or other request) and shall provide the other Party a reasonable opportunity to review the Privileged Information and to assert any rights it or they may have under this Section 6.8 or otherwise, to prevent the production or disclosure of such Privileged Information.

(g)
Any furnishing of, or access or transfer of, any information pursuant to this Agreement is made in reliance on the agreement of Encompass and Enhabit set forth in this Section 6.8 and in Section 6.9 to maintain the confidentiality of Privileged Information and to assert and maintain all applicable privileges and immunities. The Parties agree that their respective rights to any access to information, witnesses and other Persons, the furnishing of notices and documents and other cooperative efforts between the Parties contemplated by this Agreement, and the transfer of Privileged Information between the Parties and members of their respective Groups as needed pursuant to this Agreement, is not intended to be deemed a waiver of any privilege that has been or may be asserted under this Agreement or otherwise.

(h)
In connection with any matter contemplated by Section 6.7 or this Section 6.8, the Parties agree to, and to cause the applicable members of their Group to, use commercially reasonable efforts to maintain their respective separate and joint privileges and immunities, including by executing joint defense and/or common interest agreements where necessary or useful for this purpose.

6.9
Confidentiality.

(a)
Confidentiality.  Subject to Section 6.10, from and after the Effective Time until the five (5)-year anniversary of the Effective Time, each of Encompass and Enhabit, on behalf of itself and each member of its respective Group, agrees to hold, and to cause its respective Representatives to hold, in strict confidence, with at least the same degree of care that applies to Encompass’s confidential and proprietary information pursuant to policies in effect as of the Effective Time, all confidential and proprietary information concerning the other Party or any member of the other Party’s Group or their respective businesses (giving effect to the Separation) that is either in its possession (including confidential and proprietary information in its possession prior to the date hereof) or furnished by any such other Party or any member of such Party’s Group or their respective Representatives at any time pursuant to this Agreement, any Ancillary Agreement or otherwise, and shall not use any such confidential and proprietary information other than for such purposes as shall be expressly permitted hereunder or thereunder, except, in each case, to the extent that such confidential and proprietary information has been (i) in the public domain or generally available to the public, other than as a result of a disclosure by such Party or any member of such Party’s Group or any of their respective Representatives in violation of this Agreement, (ii) later lawfully acquired from other sources by such Party (or any member of such Party’s Group) which sources are not themselves bound by a confidentiality obligation or other contractual, legal or fiduciary obligation of confidentiality with respect to such confidential and proprietary information, or (iii) independently developed or generated without reference to or use of any proprietary or confidential information of the other Party or any member of such Party’s Group.  If any confidential and proprietary information of one Party or any member of its Group is disclosed to the other Party or any member of such other Party’s Group in connection with providing services to such first Party or any member of such first Party’s Group under this Agreement or any Ancillary Agreement, then such disclosed confidential and proprietary information shall be used only as required to perform such services.

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(b)
No Release; Return or Destruction.  Each Party agrees not to release or disclose, or permit to be released or disclosed, any information addressed in Section 6.9(a) to any other Person, except its Representatives who need to know such information in their capacities as such (who shall be advised of their obligations hereunder with respect to such information), and except in compliance with Section 6.10.  Without limiting the foregoing, when any such information is no longer needed for the purposes contemplated by this Agreement or any Ancillary Agreement, and is no longer subject to any legal hold or other document preservation obligation, each Party will promptly after request of the other Party either return to the other Party all such information in a tangible form (including all copies thereof and all notes, extracts or summaries based thereon) or notify the other Party in writing that it has destroyed such information (and such copies thereof and such notes, extracts or summaries based thereon); provided that the Parties may retain electronic back-up versions of such information maintained on routine computer system backup tapes, disks or other backup storage devices; provided, further, that any such information so retained shall remain subject to the confidentiality provisions of this Agreement or any Ancillary Agreement.

(c)
Third-Party Information; Privacy or Data Protection Laws.  Each Party acknowledges that it and members of its Group may presently have and, following the Effective Time, may gain access to or possession of confidential or proprietary information of, or legally protected personal information relating to, Third Parties (i) that was received under privacy policies and/or confidentiality or non-disclosure agreements entered into between such Third Parties, on the one hand, and the other Party or members of such other Party’s Group, on the other hand, prior to the Effective Time; or (ii) that, as between the two Parties, was originally collected by the other Party or members of such other Party’s Group and that may be subject to and protected by privacy policies, as well as privacy, data protection or other applicable Laws.  Each Party agrees that it shall hold, protect and use, and shall cause the members of its Group and its and their respective Representatives to hold, protect and use, in strict confidence the confidential and proprietary information of, or legally protected personal information relating to, Third Parties in accordance with privacy policies and privacy, data protection or other applicable Laws and the terms of any agreements that were either entered into before the Effective Time or affirmative commitments or representations that were made before the Effective Time by, between or among the other Party or members of the other Party’s Group, on the one hand, and such Third Parties, on the other hand.  With respect to legally protected personal information received from consumers before the Effective Time, each Party agrees that it will not use data in a manner that is materially inconsistent with promises made at the time the data was collected unless it first obtains affirmative express consent from the relevant consumer.  Nothwithstanding anything to the contrary herein, each Party agrees that the treatment of protected health information that is subject to the Health Insurance Portability and Accountability Act of 1996, as amended, shall be governed by the Business Associates Agreement.

6.10
Protective Arrangements.  In the event that a Party or any member of its Group either determines on the advice of its counsel that it is required to disclose any information pursuant to applicable Law or receives any request or demand under lawful process or from any Governmental Authority to disclose or provide information of the other Party (or any member of the other Party’s Group) that is subject to the confidentiality provisions hereof, such Party shall notify the other Party (to the extent legally permitted) as promptly as practicable under the circumstances prior to disclosing or providing such information and shall cooperate, at the expense of the other Party, in seeking any appropriate protective order requested by the other Party.  In the event that such other Party fails to receive such appropriate protective order in a timely manner, then the Party that received such request or demand may thereafter disclose or provide information to the extent required by such Law (as so advised by its counsel) or by lawful process or such Governmental Authority, and the disclosing Party shall promptly provide the other Party with a copy of the information so disclosed, in the same form and format so disclosed, together with a list of all Persons to whom such information was disclosed, in each case to the extent legally permitted.

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ARTICLE VII
DISPUTE RESOLUTION

7.1
Good-Faith Officer Negotiation.  Subject to Section 7.4, either Party seeking resolution of any dispute, controversy or claim arising out of or relating to this Agreement or any Ancillary Agreement (other than the Tax Matters Agreement), including regarding whether any Assets are Enhabit Assets, any Liabilities are Enhabit Liabilities or the validity, interpretation, breach or termination of this Agreement or any Ancillary Agreement (a “Dispute”), shall provide written notice thereof to the other Party (the “Officer Negotiation Request”).  Within fifteen (15) days of the delivery of the Officer Negotiation Request, the Parties shall attempt to resolve the Dispute through good faith negotiation.  All such negotiations shall be conducted by executives who hold, at a minimum, the title of Senior Vice President and who have authority to settle the Dispute.  All such negotiations shall be confidential and shall be treated as compromise and settlement negotiations for purposes of applicable rules of evidence.  If the Parties are unable for any reason to resolve a Dispute within thirty (30) days of receipt of the Officer Negotiation Request, and such thirty (30)-day period is not extended by mutual written consent of the Parties, the Chief Executive Officers of the Parties shall enter into good-faith negotiations in accordance with Section 7.2.

7.2
Good-Faith Negotiation.  If any Dispute is not resolved pursuant to Section 7.1, the Party that delivered the Officer Negotiation Request shall provide written notice of such Dispute to the Chief Executive Officer of each Party (a “CEO Negotiation Request”).  As soon as reasonably practicable following receipt of a CEO Negotiation Request, the Chief Executive Officers of the Parties shall begin conducting good-faith negotiations with respect to such Dispute.  All such negotiations shall be confidential and shall be treated as compromise and settlement negotiations for purposes of applicable rules of evidence.  If the Chief Executive Officers of the Parties are unable for any reason to resolve a Dispute within thirty (30) days of receipt of a CEO Negotiation Request, and such thirty (30)-day period is not extended by mutual written consent of the Parties, the Dispute shall be submitted to arbitration in accordance with Section 7.3.

7.3
Arbitration.

(a)
In the event that a Dispute has not been resolved within thirty (30) days of the receipt of a CEO Negotiation Request in accordance with Section 7.2, or within such longer period as the Parties may agree to in writing, then such Dispute shall, upon the written request of a Party (the “Arbitration Request”) be submitted to be finally resolved by binding arbitration in accordance with the then-current JAMS Comprehensive Arbitration Rules and Procedures (“JAMS Rules”), except as modified herein.  The arbitration shall be held, and the award shall be rendered, in (i) Birmingham, Alabama, or (ii) such other place as the Parties may mutually agree in writing.  The arbitration shall be conducted in the English language.  Unless otherwise agreed by the Parties in writing, any Dispute to be decided pursuant to this Section 7.3 will be decided (i) before a sole arbitrator if the amount in dispute, inclusive of all claims and counterclaims, totals less than $5 million; or (ii) by a panel of three (3) arbitrators if the amount in dispute, inclusive of all claims and counterclaims, totals $5 million or more.

(b)
The panel of three (3) arbitrators will be chosen as follows: (i) within thirty (30) days from the date of the receipt of the Arbitration Request, each Party will name an arbitrator; and (ii) the two (2) Party-appointed arbitrators will thereafter, within thirty (30) days from the date on which the second of the two (2) arbitrators was named, name a third independent arbitrator who will act as chairperson of the arbitral tribunal.  In the event that either Party fails to name an arbitrator within thirty (30) days from the date of receipt of the Arbitration Request, then upon written application by either Party, that arbitrator shall be appointed pursuant to the JAMS Rules.  In the event that the two (2) Party-appointed arbitrators fail to appoint the third, then the third independent arbitrator will be appointed pursuant to the JAMS Rules.  If the arbitration will be before a sole independent arbitrator, then the sole independent arbitrator will be appointed by agreement of the Parties within thirty (30) days of the date of receipt of the Arbitration Request.  If the Parties cannot agree to a sole independent arbitrator during such thirty (30)-day period, then upon written application by either party, the sole independent arbitrator will be appointed pursuant to the JAMS Rules.

47

(c)
The arbitrator(s) will have the right to award, on an interim basis, or include in the final award, any relief which it deems proper in the circumstances, including money damages (with interest on unpaid amounts from the due date), injunctive relief (including specific performance) and attorneys’ fees and costs; provided that the arbitrator(s) will not award any relief not specifically requested by the Parties and, in any event, will not award any indirect, punitive, exemplary, remote, speculative or similar damages in excess of compensatory damages of the other arising in connection with the transactions contemplated hereby (other than any such Liability with respect to a Third-Party Claim).  Upon selection of the arbitrator(s) following any grant of interim relief by a special arbitrator or court pursuant to Section 7.4, the arbitrator(s) may affirm or disaffirm that relief, and the Parties will seek modification or rescission of the order entered by the court as necessary to accord with the decision of the arbitrator(s).  The award of the arbitrator(s) shall be final and binding on the Parties, and may be enforced in any court of competent jurisdiction.  The initiation of arbitration pursuant to this Article VII will toll the applicable statute of limitations for the duration of any such proceedings.

7.4
Litigation and Unilateral Commencement of Arbitration.  Notwithstanding the foregoing provisions of this Article VII, (a) a Party may seek preliminary provisional or injunctive judicial relief with respect to a Dispute without first complying with the procedures set forth in Section 7.1, Section 7.2 and Section 7.3 if such action is reasonably necessary to avoid irreparable damage and (b) either Party may initiate arbitration before the expiration of the periods specified in Section 7.1, Section 7.2 and/or Section 7.3 if such Party has submitted an Officer Negotiation Request, a CEO Negotiation Request and/or an Arbitration Request and the other Party has failed to comply with Section 7.1, Section 7.2 and/or Section 7.3 in good faith with respect to such negotiation and/or the commencement and engagement in arbitration.  In such event, the other Party may commence and prosecute such arbitration unilaterally in accordance with the JAMS Rules.

7.5
Conduct During Dispute Resolution Process.  Unless otherwise agreed in writing, the Parties shall, and shall cause the respective members of their Groups to, continue to honor all commitments under this Agreement and each Ancillary Agreement to the extent required by such agreements during the course of dispute resolution pursuant to the provisions of this Article VII, unless such commitments are the specific subject of the Dispute at issue.

7.6
Dispute Resolution Coordination.  Except to the extent otherwise provided in the Tax Matters Agreement, the provisions of this Article VII (other than this Section 7.6) shall not apply with respect to the resolution of any dispute, controversy or claim arising out of or relating to Taxes or Tax matters (it being understood and agreed that the resolution of any dispute, controversy or claim arising out of or relating to Taxes or Tax matters shall be governed by the Tax Matters Agreement).

ARTICLE VIII
FURTHER ASSURANCES AND ADDITIONAL COVENANTS

8.1
Further Assurances.

(a)
In addition to the actions specifically provided for elsewhere in this Agreement, each of the Parties shall use its reasonable best efforts, prior to, on and after the Effective Time, to take, or cause to be taken, all actions, and to do, or cause to be done, all things, reasonably necessary, proper or advisable under applicable Laws, regulations and agreements to consummate and make effective the transactions contemplated by this Agreement and the Ancillary Agreements.

(b)
Without limiting the foregoing, prior to, on and after the Effective Time, each Party hereto shall cooperate with the other Party, and without any further consideration, but at the expense of the requesting Party, to execute and deliver, or use its reasonable best efforts to cause to be executed and delivered, all instruments, including instruments of conveyance, assignment and transfer, and to make all filings with, and to obtain all Approvals or Notifications of, any Governmental Authority or any other Person under any permit, license, agreement, indenture or other instrument (including any consents or Governmental Approvals), and to take all such other actions as such Party may reasonably be requested to take by the other Party from time to time, consistent with the terms of this Agreement and the Ancillary Agreements, in order to effectuate the provisions and purposes of this Agreement and the Ancillary Agreements and the transfers of the Enhabit Assets and the Encompass Assets and the assignment and assumption of the Enhabit Liabilities and the Encompass Liabilities and the other transactions contemplated hereby and thereby.  Without limiting the foregoing, each Party will, at the reasonable request, cost and expense of the other Party, take such other actions as may be reasonably necessary to vest in such other Party good and marketable title to the Assets allocated to such Party under this Agreement or any of the Ancillary Agreements, free and clear of any Security Interest, if and to the extent it is practicable to do so.

48

(c)
At or prior to the Effective Time, Encompass and Enhabit, in their respective capacities as direct and indirect stockholders of the members of their Groups, shall each ratify any actions which are reasonably necessary or desirable to be taken by Encompass, Enhabit or any of the members of their respective Groups, as the case may be, to effectuate the transactions contemplated by this Agreement and the Ancillary Agreements.

ARTICLE IX
TERMINATION

9.1
Termination.  This Agreement and all Ancillary Agreements may be terminated and the Distribution may be amended, modified or abandoned at any time prior to the Effective Time by Encompass, in its sole and absolute discretion, without the approval or consent of any other Person, including Enhabit.  After the Effective Time, this Agreement may not be terminated, except by an agreement in writing signed by a duly authorized officer of each of the Parties.

9.2
Effect of Termination.  In the event of any termination of this Agreement prior to the Effective Time, no Party (nor any of its directors, officers or employees) shall have any Liability or further obligation to the other Party by reason of this Agreement.

ARTICLE X
MISCELLANEOUS

10.1
Counterparts; Entire Agreement; Corporate Power.

(a)
This Agreement and each Ancillary Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more counterparts have been signed by each of the Parties and delivered to the other Party.

(b)
This Agreement, the Ancillary Agreements and the Exhibits, Schedules and appendices hereto and thereto contain the entire agreement between the Parties with respect to the subject matter hereof, supersede all previous agreements, negotiations, discussions, writings, understandings, commitments and conversations with respect to such subject matter, and there are no agreements or understandings between the Parties other than those set forth or referred to herein or therein.  This Agreement and the Ancillary Agreements together govern the arrangements in connection with the Separation and Distribution and would not have been entered independently.

(c)
Encompass represents on behalf of itself and each other member of the Encompass Group, and Enhabit represents on behalf of itself and each other member of the Enhabit Group, as follows:

(i) 
each such Person has the requisite corporate or other power and authority and has taken all corporate or other action necessary in order to execute, deliver and perform this Agreement and each Ancillary Agreement to which it is a party and to consummate the transactions contemplated hereby and thereby; and

(ii)
this Agreement and each Ancillary Agreement to which it is a party has been duly executed and delivered by it and constitutes a valid and binding agreement of it enforceable in accordance with the terms thereof.

49

(d)
Each Party acknowledges that it and each other Party is executing certain of the Ancillary Agreements by facsimile, stamp, electronic (including via DocuSign) or mechanical signature, and that delivery of an executed counterpart of a signature page to this Agreement or any Ancillary Agreement (whether executed by manual, stamp, electronic (including via DocuSign) or mechanical signature) by facsimile or by e-mail in portable document format (PDF) shall be effective as delivery of such executed counterpart of this Agreement or any Ancillary Agreement.  Each Party expressly adopts and confirms each such facsimile, stamp, electronic (including via DocuSign) or mechanical signature (regardless of whether delivered in person, by mail, by courier, by facsimile or by e-mail in portable document format (PDF)) made in its respective name as if it were a manual signature delivered in person, agrees that it will not assert that any such signature or delivery is not adequate to bind such Party to the same extent as if it were signed manually and delivered in person and agrees that, at the reasonable request of the other Party at any time, it will as promptly as reasonably practicable cause each such Ancillary Agreement to be manually executed (any such execution to be as of the date of the initial date thereof) and delivered in person, by mail or by courier.

10.2
Governing Law.  This Agreement and, unless expressly provided therein, each Ancillary Agreement (and any claims or disputes arising out of or related hereto or thereto or to the transactions contemplated hereby and thereby or to the inducement of any party to enter herein and therein, whether for breach of contract, tortious conduct or otherwise and whether predicated on common law, statute or otherwise) shall be governed by and construed and interpreted in accordance with the Laws of the State of Delaware irrespective of the choice of laws principles of the State of Delaware including all matters of validity, construction, effect, enforceability, performance and remedies.

10.3
Assignability.  Except as set forth in any Ancillary Agreement, this Agreement and each Ancillary Agreement shall be binding upon and inure to the benefit of the Parties and the parties thereto, respectively, and their respective successors and permitted assigns; provided, however, that neither Party nor any such party thereto may assign its rights or delegate its obligations under this Agreement or any Ancillary Agreement without the express prior written consent of the other Party hereto or other parties thereto, as applicable.  Notwithstanding the foregoing, no such consent shall be required for the assignment of a party’s rights and obligations under this Agreement and the Ancillary Agreements (except as may be otherwise provided in any such Ancillary Agreement) in whole (i.e., the assignment of a party’s rights and obligations under this Agreement and all Ancillary Agreements all at the same time) in connection with a Change of Control of a Party so long as the resulting, surviving or transferee Person assumes all the obligations of the relevant party thereto by operation of Law or pursuant to an agreement in form and substance reasonably satisfactory to the other Party.

10.4
Third-Party Beneficiaries.  Except for the indemnification rights under this Agreement and each Ancillary Agreement of any Encompass Indemnitee or Enhabit Indemnitee in their respective capacities as such, (a) the provisions of this Agreement and each Ancillary Agreement are solely for the benefit of the Parties and are not intended to confer upon any Person except the Parties any rights or remedies hereunder, and (b) there are no third-party beneficiaries of this Agreement or any Ancillary Agreement and neither this Agreement nor any Ancillary Agreement shall provide any third person with any remedy, claim, Liability, reimbursement, claim of action or other right in excess of those existing without reference to this Agreement or any Ancillary Agreement.

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10.5
Notices.  All notices and other communications given or made hereunder by one or more Parties to one or more of the other Parties shall, unless otherwise specified herein, be in writing and shall be deemed to have been duly given or made on the date of receipt by the recipient thereof if received prior to 5:00 p.m. Birmingham, Alabama time (or otherwise on the next succeeding Business Day) if (a) served by personal delivery or by a nationally recognized overnight courier service upon the Party or Parties for whom it is intended, (b) delivered by registered or certified mail, return receipt requested or (c) sent by e-mail; provided that the e-mail transmission is promptly confirmed by telephone, a responsive electronic communication by the recipient thereof or otherwise or clearly evidenced (excluding out-of-office replies or other automatically generated responses) or is followed up within one (1) Business Day after e-mail by dispatch pursuant to one of the methods described in the foregoing clauses (a) and (b) of this Section 10.5.  Such communications must be sent to the respective Parties at the following street addresses, facsimile numbers or e-mail addresses or at such street address or e-mail address previously made available or at such other street address or e-mail address for a Party as shall be specified for such purpose in a notice given in accordance with this Section 10.5) (it being understood that rejection or other refusal to accept or the inability to deliver because of changed street address or e-mail address of which no notice was given shall be deemed to be receipt of such communication as of the date of such rejection, refusal or inability to deliver):

If to Encompass, to:

Encompass Health Corporation
9001 Liberty Parkway
Birmingham, Alabama  35242

 Attention:
General Counsel

E-mail:
*  *  *

with a copy to:

Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York  10019

 Attention:
Igor Kirman
Elina Tetelbaum
Zachary S. Podolsky

E-mail:
IKirman@wlrk.com
ETetelbaum@wlrk.com
ZSPodolsky@wlrk.com

Facsimile:
(212) 403-2000

If to Enhabit, to:

Enhabit, Inc.
6688 N. Central Expressway
Suite 1300
Dallas, Texas  75206

 Attention:
General Counsel

E-mail:
*  *  *

with a copy to:

Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York  10019

 Attention:
Igor Kirman
Elina Tetelbaum
Zachary S. Podolsky

E-mail:
IKirman@wlrk.com
ETetelbaum@wlrk.com
ZSPodolsky@wlrk.com

Facsimile:
(212) 403-2000

and to:

Bradley Arant Boult Cummings LLP
One Federal Place
1819 5th Avenue N.
Birmingham, Alabama 35209

 Attention:
Charles Roberts
Stephen Hinton

Email:
croberts@bradley.com
shinton@bradley.com


A Party may, by notice to the other Party, change the address to which such notices are to be given.
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10.6
Severability.  If any provision of this Agreement or any Ancillary Agreement or the application thereof to any Person or circumstance is determined by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof or thereof, or the application of such provision to Persons or circumstances or in jurisdictions other than those as to which it has been held invalid or unenforceable, shall remain in full force and effect and shall in no way be affected, impaired or invalidated thereby.  Upon such determination, the Parties shall negotiate in good faith in an effort to agree upon such a suitable and equitable provision to effect the original intent of the Parties.

10.7
Force Majeure.  No Party shall be deemed in default of this Agreement or, unless otherwise expressly provided therein, any Ancillary Agreement for any delay or failure to fulfill any obligation (other than a payment obligation) hereunder or thereunder so long as and to the extent to which any delay or failure in the fulfillment of such obligation is prevented, frustrated, hindered or delayed as a consequence of circumstances of Force Majeure.  In the event of any such excused delay, the time for performance of such obligations (other than a payment obligation) shall be extended for a period equal to the time lost by reason of the delay.  A Party claiming the benefit of this provision shall, as soon as reasonably practicable after the occurrence of any such event, (a) provide written notice to the other Party of the nature and extent of any such Force Majeure condition; and (b) use commercially reasonable efforts to remove any such causes and resume performance under this Agreement and the Ancillary Agreements, as applicable, as soon as reasonably practicable.

10.8
No Set-Off.  Except as expressly set forth in any Ancillary Agreement or as otherwise mutually agreed to in writing by the Parties, neither Party nor any member of such Party’s Group shall have any right of set-off or other similar rights with respect to (a) any amounts received pursuant to this Agreement or any Ancillary Agreement; or (b) any other amounts claimed to be owed to the other Party or any member of its Group arising out of this Agreement or any Ancillary Agreement.

10.9
Expenses.  Except as otherwise expressly set forth in this Agreement or any Ancillary Agreement, or as otherwise agreed to in writing by the Parties, all fees, costs and expenses incurred on or prior to the Effective Time in connection with the preparation, execution, delivery and implementation of this Agreement, including the Separation and the Distribution, and any Ancillary Agreement, the Separation, the Form 10, the Separation Step Plan and the consummation of the transactions contemplated hereby and thereby will be borne by the Party or its applicable Subsidiary incurring such fees, costs or expenses.  The Parties agree that certain specified costs and expenses shall be allocated between the Parties, and borne and be the responsibility of the applicable Party, as set forth on Schedule 10.9.

10.10
Headings.  The article, section and paragraph headings contained in this Agreement and in the Ancillary Agreements are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement or any Ancillary Agreement.

10.11
Survival of Covenants.  Except as expressly set forth in this Agreement or any Ancillary Agreement, the covenants, representations and warranties contained in this Agreement and each Ancillary Agreement, and Liability for the breach of any obligations contained herein, shall survive the Separation and the Distribution and shall remain in full force and effect.

10.12
Waivers of Default.  Waiver by a Party of any default by the other Party of any provision of this Agreement or any Ancillary Agreement shall not be deemed a waiver by the waiving Party of any subsequent or other default, nor shall it prejudice the rights of the other Party.  No failure or delay by a Party in exercising any right, power or privilege under this Agreement or any Ancillary Agreement shall operate as a waiver thereof, nor shall a single or partial exercise thereof prejudice any other or further exercise thereof or the exercise of any other right, power or privilege.

52

10.13
Specific Performance.  Subject to the provisions of Article VII, in the event of any actual or threatened default in, or breach of, any of the terms, conditions and provisions of this Agreement or any Ancillary Agreement, the Party or Parties who are, or are to be, thereby aggrieved shall have the right to specific performance and injunctive or other equitable relief in respect of its or their rights under this Agreement or such Ancillary Agreement, in addition to any and all other rights and remedies at law or in equity, and all such rights and remedies shall be cumulative.  The Parties agree that the remedies at law for any breach or threatened breach, including monetary damages, are inadequate compensation for any loss and that any defense in any Action for specific performance that a remedy at law would be adequate is waived.  Any requirements for the securing or posting of any bond with such remedy are waived by each of the Parties.

10.14
Amendments.  No provisions of this Agreement or any Ancillary Agreement shall be deemed waived, amended, supplemented or modified by a Party, unless such waiver, amendment, supplement or modification is in writing and signed by the authorized representative of the Party against whom it is sought to enforce such waiver, amendment, supplement or modification.

10.15
Interpretation.  In this Agreement and any Ancillary Agreement, (a) words in the singular shall be deemed to include the plural and vice versa and words of one gender shall be deemed to include the other genders as the context requires; (b) the terms “hereof,” “herein,” and “herewith” and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement (or the applicable Ancillary Agreement) as a whole (including all of the Schedules, Exhibits and Appendices hereto and thereto) and not to any particular provision of this Agreement (or such Ancillary Agreement); (c) Article, Section, Schedule, Exhibit and Appendix references are to the Articles, Sections, Schedules, Exhibits and Appendices to this Agreement (or the applicable Ancillary Agreement) unless otherwise specified; (d) unless otherwise stated, all references to any agreement (including this Agreement and each Ancillary Agreement) shall be deemed to include the exhibits, schedules and annexes (including all Schedules, Exhibits and Appendices) to such agreement; (e) the word “including” and words of similar import when used in this Agreement (or the applicable Ancillary Agreement) shall mean “including, without limitation,” unless otherwise specified; (f) the word “or” shall not be exclusive; (g) unless otherwise specified in a particular case, the word “days” refers to calendar days; (h) references herein to this Agreement or any other agreement contemplated herein shall be deemed to refer to this Agreement or such other agreement as of the date on which it is executed and as it may be amended, modified or supplemented thereafter, unless otherwise specified; and (i) unless expressly stated to the contrary in this Agreement or in any Ancillary Agreement, all references to “the date hereof,” “the date of this Agreement,” “hereby” and “hereupon” and words of similar import shall all be references to June 30, 2022.

10.16
Limitations of Liability.  Notwithstanding anything in this Agreement to the contrary, neither Enhabit or any member of the Enhabit Group, on the one hand, nor Encompass or any member of the Encompass Group, on the other hand, shall be liable under this Agreement to the other for any special, indirect, punitive, exemplary, remote, speculative or similar damages in excess of compensatory damages of the other arising in connection with the transactions contemplated hereby (other than any such Liability with respect to a Third-Party Claim).

10.17
Performance.  Encompass will cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth in this Agreement or in any Ancillary Agreement to be performed by any member of the Encompass Group.  Enhabit will cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth in this Agreement or in any Ancillary Agreement to be performed by any member of the Enhabit Group.  Each Party (including its permitted successors and assigns) further agrees that it will (a) give timely notice of the terms, conditions and continuing obligations contained in this Agreement and any applicable Ancillary Agreement to all of the other members of its Group and (b) cause all of the other members of its Group not to take any action or fail to take any such action inconsistent with such Party’s obligations under this Agreement, any Ancillary Agreement or the transactions contemplated hereby or thereby.

10.18
Mutual Drafting.  This Agreement and the Ancillary Agreements shall be deemed to be the joint work product of the Parties and any rule of construction that a document shall be interpreted or construed against a drafter of such document shall not be applicable.

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10.19
Ancillary Agreements.

(a)
In the event of any conflict or inconsistency between the terms of this Agreement and the terms of the Transition Services Agreement, the Tax Matters Agreement or the Employee Matters Agreement (each, a “Specified Ancillary Agreement”), the terms of the applicable Specified Ancillary Agreement shall control with respect to the subject matter addressed by such Specified Ancillary Agreement to the extent of such conflict or inconsistency.

(b)
In the event of any conflict or inconsistency between the terms of this Agreement or any Specified Ancillary Agreement, on the one hand, and any Transfer Document, on the other hand, including with respect to the allocation of Assets and Liabilities as among the Parties or the members of their respective Groups, this Agreement or such Specified Ancillary Agreement shall control.

[Remainder of page intentionally left blank]

54

IN WITNESS WHEREOF, the Parties have caused this Separation and Distribution Agreement to be executed by their duly authorized representatives as of the date first written above.

 
ENCOMPASS HEALTH CORPORATION
     
 
By:
 /s/ Patrick Darby
   
Name: Patrick Darby
   
Title: Executive Vice President, General Counsel and Secretary
     
 
ENHABIT, INC.
     
 
By:
 /s/ Barbara A. Jacobsmeyer
   
Name: Barbara A. Jacobsmeyer
   
Title: President and Chief Executive Officer






[Signature Page to Separation and Distribution Agreement]
Exhibit 2.2

TRANSITION SERVICES AGREEMENT

BY AND BETWEEN

ENCOMPASS HEALTH CORPORATION

AND

ENHABIT, INC.

_________________


Dated as of June 30, 2022
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS
1
ARTICLE II SERVICES, DURATION AND SERVICES MANAGERS
4
 
2.1
Services
4
 
2.2
Duration of Services
4
 
2.3
Additional Unspecified Services
5
 
2.4
Services Not Included
6
 
2.5
Transitional Nature of Services
6
 
2.6
Transition Services Managers
6
 
2.7
Personnel
7
 
2.8
Third-Party Providers
8
 
2.9
Local Agreements
8
 
2.10
Intellectual Property
9
ARTICLE III ADDITIONAL ARRANGEMENTS
9
 
3.1
System Security; HIPAA
9
 
3.2
Access
10
 
3.3
Data Privacy
10
 
3.4
Cooperation
10
ARTICLE IV COSTS AND DISBURSEMENTS
11
 
4.1
Costs and Disbursements
11
 
4.2
Tax Matters
12
ARTICLE V STANDARD FOR SERVICE
13
 
5.1
Standard for Service
13
 
5.2
Disclaimer of Warranties
14
 
5.3
Compliance with Laws and Regulations
14
ARTICLE VI LIMITED LIABILITY AND INDEMNIFICATION
14
 
6.1
Consequential and Other Damages
14
 
6.2
Limitation of Liability
15
 
6.3
Obligation to Re-perform; Liabilities
15
 
6.4
Release and Recipient Indemnity
15
 
6.5
Provider Indemnity
15
 
6.6
Indemnification Procedures
16
 
6.7
Liability for Payment Obligations
16
 
6.8
Exclusion of Other Remedies
16
 
6.9
Confirmation
16
ARTICLE VII TERM AND TERMINATION
16
 
7.1
Term and Termination
16
 
7.2
Effect of Termination
17
 
7.3
Force Majeure
18
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ARTICLE VIII DISPUTE RESOLUTION
18
 
8.1
Dispute Resolution
18
ARTICLE IX GENERAL PROVISIONS
19
 
9.1
No Agency
19
 
9.2
Treatment of Confidential Information
19
 
9.3
Further Assurances
20
 
9.4
Notices
20
 
9.5
Severability
21
 
9.6
Entire Agreement
21
 
9.7
No Third-Party Beneficiaries
22
 
9.8
Governing Law
22
 
9.9
Amendment
22
 
9.10
Rules of Construction
22
 
9.11
Precedence of Schedules
23
 
9.12
Counterparts
23
 
9.13
Assignability; Change of Control
23
 
9.14
Non-Recourse
23
 
9.15
Mutual Drafting
23

SCHEDULE A Encompass Services
A-1
SCHEDULE B Enhabit Services
B-1
EXHIBIT I Services Managers
I-1
EXHIBIT II Business Associate Agreement
II-1

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TRANSITION SERVICES AGREEMENT

This TRANSITION SERVICES AGREEMENT, dated as of June 30, 2022 (this “Agreement”), is by and between Encompass Health Corporation, a Delaware corporation (“Encompass”), and Enhabit, Inc., a Delaware corporation (“Enhabit”).  Unless otherwise defined in this Agreement, all capitalized terms used in this Agreement shall have the meaning set forth in the Separation and Distribution Agreement, dated as of the date hereof, by and between Encompass and Enhabit (as amended, modified or supplemented from time to time in accordance with its terms, the “Separation Agreement”).

R E C I T A L S

WHEREAS, in furtherance of the foregoing, the Board of Directors of Encompass (the “Encompass Board”) has determined that it is appropriate and desirable to separate the Enhabit Business from the Encompass Business (the “Separation”) and, following the Separation, make a distribution, on a pro rata basis, to holders of Encompass Shares on the Record Date of all of the outstanding Enhabit Shares owned by Encompass (the “Distribution”);

WHEREAS, Encompass and Enhabit have entered into the Separation Agreement on or about the date hereof pursuant to which, and subject to the terms thereof, the Parties will effect the Separation and the Distribution and the transactions contemplated therein and thereby;

WHEREAS, in order to facilitate and provide for an orderly transition under the Separation Agreement, the Parties desire to enter into this Agreement to set forth the terms and conditions pursuant to which each of the Parties or a member of their respective Groups shall provide to the other the Services (as defined herein) for a transitional period; and

WHEREAS, the Parties acknowledge that this Agreement, the Separation Agreement, and the other Ancillary Agreements represent the integrated agreement of Encompass and Enhabit relating to the Separation and Distribution, are being entered together, and would not have been entered independently.

NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained in this Agreement, the Parties, intending to be legally bound, hereby agree as follows:

ARTICLE I
DEFINITIONS

The following capitalized terms used in this Agreement shall have the meanings set forth below:

“Additional Services” shall have the meaning set forth in Section 2.3(a).

“Agreement” shall have the meaning set forth in the Preamble.

“Confidential Information” shall have the meaning set forth in Section 9.2(a).
“Covid-19” shall mean SARS-CoV-2 or Covid-19, and any evolutions or variants thereof or related or associated epidemics, pandemics or disease outbreaks.

“Covid-19 Measures” shall mean any quarantine, “shelter in place,” “stay at home,” workforce reduction, social or physical distancing, shutdown, closure, sequester, safety or similar Law, directive, guidelines or recommendations promulgated by any industry group, nationally or internationally recognized organization or any Governmental Authority, including the Centers for Disease Control and Prevention and the World Health Organization, in each case, in connection with or in response to Covid-19, including the CARES Act, Families First Act and American Rescue Plan Act of 2021.

“Dispute” shall have the meaning set forth in Section 8.1(a).

“Distribution” shall have the meaning set forth in the Recitals.

“Distribution Date” shall mean the date of the consummation of the Distribution, which shall be determined by the Encompass Board in its sole and absolute discretion.

“Effective Time” shall mean 12:01 a.m., New York City time, on the Distribution Date.

“Encompass” shall have the meaning set forth in the Preamble.

“Encompass Board” shall have the meaning set forth in the Recitals.

“Encompass Functional Area Service Manager” shall have the meaning set forth in Section 2.6(a).

“Encompass Monthly Charges” shall have the meaning set forth in Section 4.1(d).

“Encompass Services” shall have the meaning set forth in Section 2.1.

“Encompass Services Managers” shall have the meaning set forth in Section 2.6(a).

“Enhabit” shall have the meaning set forth in the Preamble.

“Enhabit Change of Control” shall mean, with respect to Enhabit, (a) a transaction whereby any Person or group (within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended) would acquire, directly or indirectly, voting securities representing more than fifty percent (50%) of the total voting power of Enhabit; (b) a merger, consolidation, recapitalization or reorganization of Enhabit, unless securities representing more than fifty percent (50%) of the total voting power of the legal successor to Enhabit as a result of such merger, consolidation, recapitalization or reorganization are immediately thereafter beneficially owned, directly or indirectly, by the Persons who beneficially owned Enhabit’s outstanding voting securities immediately prior to such transaction; or (c) the sale of all or substantially all of the consolidated assets of the Enhabit Group.  For the avoidance of doubt, no transaction contemplated by the Separation Agreement shall be considered an Enhabit Change of Control.
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“Enhabit Functional Area Service Manager” shall have the meaning set forth in Section 2.6(b).

“Enhabit Monthly Charges” shall have the meaning set forth in Section 4.1(d).

“Enhabit Services” shall have the meaning set forth in Section 2.1.

“Enhabit Services Managers” shall have the meaning set forth in Section 2.6(b).

“Force Majeure” shall mean, with respect to a Party, an event beyond the control of such Party (or any Person acting on its behalf), which event (a) does not arise or result from the fault or negligence of such Party (or any Person acting on its behalf) and (b) by its nature would not reasonably have been foreseen by such Party (or such Person), or, if it would reasonably have been foreseen, was unavoidable, and includes acts of God, acts of civil or military authority, embargoes, acts of terrorism, cyberattacks, epidemics, pandemics or diseases (including Covid-19) or other health crises or public health events, or any worsening of any of the foregoing, quarantine or government health alert that prohibits or restricts travel or prevents any individual from reporting to a work location, changes in Law (including any proposed Law, and including any governmental or quasi-governmental action, including Covid-19 Measures or any changes to existing Covid-19 Measures), war, riots, insurrections, fires, explosions, earthquakes, floods, unusually severe weather conditions, labor problems or unavailability of parts or, in the case of computer systems, any failure in electrical or air conditioning equipment.

“HIPAA” shall mean the Health Insurance Portability and Accountability Act of 1996, as amended and implemented through regulation.

“Interest Payment” shall have the meaning set forth in Section 4.1(d).

“Local Agreement” shall have the meaning set forth in Section 2.9.

“Net Monthly Charges” shall have the meaning set forth in Section 4.1(d).

“Non-Income Taxes” shall have the meaning set forth in Section 4.2(a).

“Parties” shall mean the parties to this Agreement.

“Personal Data” shall mean data relating to an identified or identifiable natural person, whether on a stand-alone basis or when aggregated with other data, that is either (a) provided by the Recipient or any Affiliate of the Recipient to the Provider or any Affiliate of the Provider under this Agreement or (b) accessed and/or processed by the Provider or any Affiliate of the Provider on behalf of the Recipient or any Affiliate of the Recipient in connection with this Agreement.

“Provider” shall mean the Party or its Subsidiary or Affiliate providing a Service under this Agreement.

“Provider Indemnified Party” shall have the meaning set forth in Section 6.4.
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“Recipient” shall mean the Party or its Subsidiary or Affiliate to whom a Service under this Agreement is being provided.

“Recipient Indemnified Party” shall have the meaning set forth in Section 6.5.

“Reimbursement Charge(s)” shall have the meaning set forth in Section 4.1(c).

“Schedule(s)” shall have the meaning set forth in Section 2.2.

“Separation” shall have the meaning set forth in the Recitals.

“Separation Agreement” shall have the meaning set forth in the Preamble.

“Service Charge(s)” shall have the meaning set forth in Section 4.1(a).

“Service Extension” shall have the meaning set forth in Section 7.1(d).

“Service Increases” shall have the meaning set forth in Section 2.3(b).

“Services” shall have the meaning set forth in Section 2.1.

“Taxes” shall have the meaning set forth in the Tax Matters Agreement.

“Third-Party Provider” shall have the meaning set forth in Section 2.8.

ARTICLE II
SERVICES, DURATION AND SERVICES MANAGERS

2.1          Services.  Subject to the terms and conditions of this Agreement, commencing as of the Effective Time, (a) Encompass shall provide or cause to be provided to the Enhabit Group the services listed on Schedule A to this Agreement (the “Encompass Services”) and (b) Enhabit shall provide or cause to be provided to the Encompass Group the services listed on Schedule B to this Agreement (the “Enhabit Services,” and, collectively with the Encompass Services, any Additional Services and any Service Increases, the “Services”).  All of the Services shall be for the sole use and benefit of the respective Recipient and its respective Party.

2.2          Duration of Services.  Subject to the terms of this Agreement, each of Encompass and Enhabit shall provide or cause to be provided to the respective Recipients each Service until the earlier to occur of, with respect to each such Service, (a) the expiration of the term for such Service (or, subject to the terms of Section 7.1(d), the expiration of any Service Extension) as set forth on Schedule A or Schedule B (each, a “Schedule,” and, collectively, the “Schedules”), (b) the date on which such Service is terminated under Section 7.1(b), or (c) the date that is the twenty-four (24)-month anniversary of the Distribution Date; provided, to the extent that a Provider’s ability to provide a Service is dependent on the continuation of either an Encompass Service or an Enhabit Service (and such dependence has been made known to the other Party), as the case may be, and the Provider’s ability to provide a particular Service in accordance with this Agreement is materially and adversely affected by the termination of such supporting Encompass Service or Enhabit Service, as the case may be, then the Provider’s obligation to provide such dependent Service shall terminate automatically with the termination of such supporting Encompass Service or supporting Enhabit Service, as the case may be.
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2.3          Additional Unspecified Services.

(a)          After the date of this Agreement, if Encompass or Enhabit (i) identifies a service that (x) the Encompass Group provided to the Enhabit Group prior to the Distribution Date that Enhabit reasonably needs in order for the Enhabit Business to continue to operate in substantially the same manner in which the Enhabit Business operated prior to the Distribution Date, and such service was not included on Schedule A (other than because the Parties expressly agreed that such service shall not be provided), or (y) the Enhabit Group provided to the Encompass Group prior to the Distribution Date that Encompass reasonably needs in order for the Encompass Business to continue to operate in substantially the same manner in which the Encompass Business operated prior to the Distribution Date, and such service was not included on Schedule B (other than because the Parties expressly agreed that such service shall not be provided) and (ii) provides written notice to the other Party prior to the date that is sixty (60) days following the Distribution Date requesting such additional services, then such other Party shall use its commercially reasonable efforts to provide such requested additional services (such requested additional services, the “Additional Services”); provided, however, that no Party shall be obligated to provide any Additional Service if it does not, in its reasonable judgment, have adequate resources to provide such Additional Service or if the provision of such Additional Service would significantly disrupt the operation of its businesses; and provided, further, that a Provider shall not be required to provide any Additional Services if the Parties, despite using good-faith efforts, are unable to reach agreement on the terms thereof (including with respect to Service Charges therefor).  If the Parties agree that any Additional Service shall be provided and received in accordance with this Section 2.3(a), the Encompass Services Managers (as defined below) and the relevant Encompass Functional Area Service Manager (as defined below) with respect to such Additional Service, on the one hand, and the Enhabit Services Managers (as defined below) and the relevant Enhabit Functional Area Service Manager (as defined below) with respect to such Additional Service, on the other, shall in good faith negotiate on an arm’s-length basis the terms of a supplement to the applicable Schedule, which terms shall be consistent with the terms of, and the pricing methodology used for, similar Services provided under this Agreement.  Upon the mutual written agreement of the Parties, the supplement to the applicable Schedule shall describe in reasonable detail the Service Charge and the nature, scope, service period(s) (which, with respect to any such Additional Service, shall expire no later than the date set forth in clause (c) of Section 2.2), termination provisions and other terms applicable to such Additional Services in a manner similar to that in which the Services are described in the existing Schedules.  Each supplement to the applicable Schedule, as agreed in writing by the Parties, shall be deemed part of this Agreement as of the date of such agreement, and the Additional Services set forth therein shall be deemed “Services” provided under this Agreement, in each case, subject to the terms and conditions of this Agreement.
    
(b)          After the date of this Agreement, if (i) a Recipient requests a Provider to increase, relative to historical levels prior to the Distribution Date, the volume, amount, level or frequency, as applicable, of any Service provided by such Provider of such Service and (ii) such increase is reasonably determined by such Recipient as necessary for such Recipient to operate its businesses (such increases, the “Service Increases”), then such Provider shall consider such request in good faith; provided, however, that no Party shall be obligated to provide any Service Increase, including because, after good-faith negotiations between the Parties, the Parties fail to reach an agreement with respect to the terms thereof (including with respect to Service Charges therefor).  In connection with any request for Service Increases in accordance with this Section 2.3(b), the Encompass Services Managers and the relevant Encompass Functional Area Service Manager with respect to such Service Increase, on the one hand, and the Enhabit Services Managers and the relevant Enhabit Functional Area Service Manager with respect to such Service Increase, on the other, shall in good faith negotiate on an arm’s-length basis the terms of an amendment to the applicable Schedule, which amendment shall be consistent with the terms of, and the pricing methodology used for, the applicable Service.         
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(c)          Each amended Schedule, as agreed in writing by the Parties, shall be deemed part of this Agreement as of the date of such agreement, and the Service Increases set forth therein shall be deemed a part of the “Services” provided under this Agreement, in each case, subject to the terms and conditions of this Agreement.
         
2.4          Services Not Included.  It is not the intent of any Provider to render, nor of any Recipient to receive from any Provider, professional advice or opinions, whether with regard to Tax, legal, treasury, finance, employment or other business or financial matters, technical advice, whether with regard to information technology or other matters, or the handling of or addressing of environmental matters; no Recipient shall rely on, or construe, any Service rendered by or on behalf of a Provider as such professional advice or opinions or technical advice; and all Recipients shall seek all third-party professional advice or opinions or technical advice as it may desire or need.

2.5          Transitional Nature of Services.  The Parties acknowledge the transitional nature of the Services and agree to cooperate in good faith and to use commercially reasonable efforts to avoid a disruption in the transition of the Services from the applicable Provider to the applicable Recipient (or its designee).  Each Recipient agrees to use commercially reasonable efforts to reduce or eliminate its and its Affiliates’ dependency on each Service to the extent and as soon as is reasonably practicable.

2.6          Transition Services Managers.

(a)          Encompass hereby appoints and designates the individuals set forth on Exhibit I-A to act as its initial services managers (the “Encompass Services Managers”), who will each be directly responsible for coordinating and managing the delivery of the Encompass Services and have authority to act on Encompass’s behalf with respect to matters relating to the provision of Services under this Agreement.  The Encompass Services Managers will work with the personnel of the Encompass Group to periodically address issues and matters raised by Enhabit relating to the provision of Services under this Agreement.  Notwithstanding the requirements of Section 9.4, all communications from Enhabit to Encompass pursuant to this Agreement regarding routine matters involving a Service shall be made first through the individual or individuals, as the case may be, specified as the functional area service manager (the “Encompass Functional Area Service Manager”) with respect to such Service on Exhibit I-B or such other individual as may be specified by an Encompass Services Manager in writing and delivered to Enhabit by email or facsimile transmission with receipt confirmed; provided that, if the Encompass Functional Area Service Manager is not available, communication shall thereafter be made through an Encompass Services Manager.  Encompass shall notify Enhabit of the appointment of a different Encompass Services Manager or Encompass Functional Area Service Manager(s), if necessary, in accordance with Section 9.4.        
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(b)          Enhabit hereby appoints and designates the individuals set forth on Exhibit I-A to act as its initial services managers (the “Enhabit Services Managers”), who will each be directly responsible for coordinating and managing the delivery of the Enhabit Services and have authority to act on Enhabit’s behalf with respect to matters relating to this Agreement.  The Enhabit Services Managers will work with the personnel of the Enhabit Group to periodically address issues and matters raised by Encompass relating to this Agreement.  Notwithstanding the requirements of Section 9.4, all communications from Encompass to Enhabit pursuant to this Agreement regarding routine matters involving a Service shall be made through the individual or individuals, as the case may be, specified as the functional area service manager (the “Enhabit Functional Area Service Manager”) with respect to such Service on Exhibit I-B or as specified by an Enhabit Services Manager in writing and delivered to Encompass by email or facsimile transmission with receipt confirmed; provided that, if the Enhabit Functional Area Service Manager is not available, communication shall thereafter be made through an Enhabit Services Manager.  Enhabit shall notify Encompass of the appointment of a different Enhabit Services Manager or Enhabit Functional Area Service Manager(s), if necessary, in accordance with Section 9.4.
         
2.7          Personnel.

(a)          The Provider of any Service will make available to the Recipient of such Service such appropriately qualified personnel as may be necessary to provide such Service, on the understanding that such personnel shall remain employed and/or engaged by the Provider.  The Provider will have the right, in its reasonable discretion, to (i) designate which personnel it will assign to perform such Service and (ii) remove and replace such personnel at any time; provided, however, that any such removal or replacement shall not be the basis for any increase in any Service Charge or Reimbursement Charge payable hereunder or relieve the Provider of its obligation to provide any Service hereunder; and provided, further, that the Provider will use its commercially reasonable efforts to limit the disruption to the Recipient in the transition of the Services to different personnel.
         
(b)          In the event that the provision of any Service by the applicable Provider requires the cooperation and services of the personnel of the Recipient, the applicable Recipient will make available to the Provider such personnel (who shall be appropriately qualified for purposes of so supporting the provision of such Service by the Provider) as may be necessary for the Provider to provide such Service, on the understanding that such personnel shall remain employed and/or engaged by the Recipient.  The Recipient will have the right, in its reasonable discretion, to (i) designate which personnel it will make available to the Provider in connection with the provision of such Service and (ii) remove and replace such personnel at any time; provided, however, that any directly resulting increase in costs to the Provider shall be borne by the Recipient and any directly resulting adverse effect to the provision of such Service by the Provider shall not be deemed a breach of this Agreement; and provided, further, that the Recipient will use its commercially reasonable efforts to limit the disruption to the Provider in the transition of such personnel.       
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(c)          No Provider shall be liable under this Agreement for any Liabilities incurred by the Recipient Indemnified Parties that are primarily attributable to, or that are primarily a consequence of, any actions or inactions of the personnel of the Recipient, except for any such actions or inactions undertaken pursuant to the direction of the Provider.
         
(d)          Nothing in this Agreement shall grant any Provider, or its employees or agents that are performing the Services, the right directly or indirectly to control or direct the operations of the applicable Recipient or any member of its Group.  Such employees and agents shall not be required to report to the management of the applicable Recipient, nor be deemed to be under the management or direction of such Recipient.  Each Recipient acknowledges and agrees that, except as may be expressly set forth herein as a Service (including any Additional Services or Service Increases) or otherwise expressly set forth in the Separation Agreement, another Ancillary Agreement or any other applicable agreement, no Provider or any member of its Group shall be obligated to provide, or cause to be provided, any service or goods to such Recipient or any member of its Group, or to expand or modify any facilities, incur any capital expenditures, acquire any additional equipment or software or hire or retain any additional personnel in connection with its obligation to provide Services hereunder.
         
2.8          Third-Party Providers.  The Parties acknowledge that each Provider may provide the applicable Services directly (including through a Subsidiary or an Affiliate), or through one or more third parties engaged by the applicable Provider to provide the applicable Services in accordance with the terms of this Section 2.8 (each such third party, a “Third-Party Provider”).  Each Provider shall make, in its sole discretion, any decisions as to whether it will provide applicable Services directly or through a Third-Party Provider; provided that (a) each Provider shall use at least the same degree of care in selecting any such Third-Party Provider (or replacement thereof) as it would if such Third-Party Provider was being retained to provide similar services to such Provider, and (b) such Provider shall remain responsible for all of its obligations under this Agreement with respect to the scope, standard and content of the Services provided to the Recipient.

2.9          Local Agreements.  Encompass and Enhabit each recognize and agree that there may be a need to document the Services provided hereunder from time to time or to otherwise modify the scope or nature of such Services to the extent necessary to comply with applicable Law.  If such an agreement is required by applicable Law, or if Encompass and Enhabit mutually determine it to be necessary or desirable, in order for a Provider to provide the Services in a particular jurisdiction, Encompass and Enhabit shall cause the applicable Providers and Recipients to enter into local implementing agreements in form and content reasonably acceptable to the Parties (each, a “Local Agreement”); provided, however, that the execution or performance of any such Local Agreement shall in no way alter or modify any term or condition hereof nor the effect thereof.  In accordance with Section 9.9, Encompass and Enhabit may from time to time agree in writing to amend any terms of this Agreement, and, in such cases, such amendment will be deemed to amend the terms of all Local Agreements, except to the extent expressly provided to the contrary in an amendment to this Agreement.
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2.10          Intellectual Property.

(a)          This Agreement and the performance of the Services hereunder will not affect or result in the transfer of any rights in or to, or the ownership of, any Intellectual Property Rights, Information Technology, Software or other Technology of the Provider or any of its Affiliates.  Except as expressly provided under the terms of the Separation Agreement or any other Ancillary Agreement, neither Party shall acquire, by virtue of this Agreement or the provision of the Services hereunder, by implication or otherwise, any right, title or interest (except for the express license rights set forth in Section 2.10(b) and Section 2.10(c)) of any Intellectual Property Rights, Information Technology, Software or other Technology owned or licensed by the other.  For the avoidance of doubt, nothing in this Agreement shall limit or modify the transfer of the rights in and to, the ownership of, or the licenses with respect to any Intellectual Property Rights, Information Technology, Software or other Technology as set forth in the Separation Agreement or any other Ancillary Agreement.
         
(b)          Subject to Section 2.10(a), solely to the extent that in connection with receiving the benefit of any Service, the Recipient provides the Provider with any Information Technology, Software or other Technology owned or controlled by the Recipient or any of its Affiliates that is necessary to enable the Provider to provide such Service, the Recipient hereby grants to the Provider a non-exclusive, worldwide, non-transferable, non-sublicensable (except solely to the extent necessary for the Provider to provide the Services, to Provider’s subcontractors), revocable, fully paid-up, royalty-free license under any Intellectual Property Rights of the Recipient to use such Information Technology, Software or other Technology, solely during the term of the applicable Service, and for the sole and limited purpose of providing, and only to the extent reasonably necessary for the provision of, such Service.
         
(c)          Subject to Section 2.10(a), solely to the extent that in connection with providing any Service, the Provider provides the Recipient with any Information Technology, Software or other Technology owned or controlled by the Provider or any of its Affiliates that is necessary to enable the Recipient to receive the benefit of such Service, the Provider hereby grants to the Recipient a limited, non-exclusive, non-transferable, non-sublicensable, revocable, fully paid-up, royalty-free license under any Intellectual Property Rights of the Provider to use such Information Technology, Software or other Technology, solely during the term of the applicable Service, for the sole and limited purpose of receiving such Service, and only to the extent necessary for receipt of such Service.

ARTICLE III
ADDITIONAL ARRANGEMENTS

3.1          System Security; HIPAA.

(a)          From and after the date of this Agreement, if a Party or its Affiliates is given access to the internal computer systems and intranet or such other computer software, networks, hardware, technology or computer-based resources of the other Party or its Affiliates pursuant to this Agreement or any other Ancillary Agreement, or in connection with performance, receipt or delivery of a Service, such accessing party shall comply with all security guidelines (including physical security, network access, internet security, confidentiality and personal data security guidelines) of such granting party.  The Parties shall ensure that the access contemplated by this Section 3.1(a) shall be used by such personnel only for the purposes contemplated by, and subject to the terms of, this Agreement.       
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(b)          Effective at or prior to the Effective Time, the Parties will enter into and abide by the terms of the Business Associate Agreement attached hereto as Exhibit II.
         
3.2          Access.

(a)          Enhabit shall, and shall cause its Subsidiaries to, allow Encompass and its Representatives reasonable access to the facilities of Enhabit necessary for Encompass to fulfill its obligations under this Agreement.
         
(b)          Encompass shall, and shall cause its Subsidiaries to, allow Enhabit and its Representatives reasonable access to the facilities of Encompass necessary for Enhabit to fulfill its obligations under this Agreement.
         
(c)          Notwithstanding the other rights of access of the Parties under this Agreement, each Party shall, and shall cause its Subsidiaries to, afford the other Party, its Subsidiaries and Representatives, following not less than five (5) business days’ prior written notice from the other Party, reasonable access during normal business hours to the facilities, information, systems, infrastructure and personnel of the relevant Providers as reasonably necessary for the other Party to verify the adequacy of internal controls over Information Technology, reporting of financial data and related processes employed in connection with the Services, including in connection with verifying compliance with Section 404 of the Sarbanes-Oxley Act of 2002; provided, however, that such access shall not unreasonably interfere with any of the business or operations of such Party or its Subsidiaries.
         
(d)          Except as otherwise permitted by the other Party in writing, each Party shall permit only its authorized Representatives, Third-Party Providers, contractors, invitees or licensees to access the other Party’s facilities.
         
3.3          Data Privacy.  Each Party agrees to use reasonable best efforts to comply with, and to cause its controlled Affiliates and its and their respective employees, agents and subcontractors to comply with all applicable data privacy and data protection Laws in connection with the performance of their obligations under this Agreement.  The Parties agree that with respect to any Personal Data:  (a) the Recipient is a data controller (or equivalent term under applicable Law) and the Provider is acting only as a data processor (or equivalent term under applicable Law); (b) the Provider shall only undertake processing of Personal Data to the extent reasonably necessary or advisable to enable it to perform its obligations under this Agreement; and (c) the Provider shall ensure that all personnel with access to or involved in the processing of Personal Data are bound by appropriate confidentiality obligations.

3.4          Cooperation.  It is understood that it will require the significant efforts of both Parties to implement this Agreement and to ensure performance of this Agreement by the Parties at the agreed-upon levels in accordance with all of the terms and conditions of this Agreement.  The Parties will cooperate, acting in good faith and using commercially reasonable efforts, to effect a smooth and orderly transition of the Services provided under this Agreement from the Provider to the Recipient (including repairs and maintenance Services and the assignment or transfer of the rights and obligations under any third-party contracts relating to the Services); provided, however, that this Section 3.4 shall not require either Party to incur any out-of-pocket costs or expenses unless and except as expressly provided in this Agreement or otherwise agreed in writing by the Parties.
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ARTICLE IV
COSTS AND DISBURSEMENTS

4.1          Costs and Disbursements.

(a)          Except as otherwise provided in this Agreement or in the Schedules to this Agreement, a Recipient of Services (or its designee) shall pay to the Provider of such Services (or its designee) a monthly fee for the Services (or category of Services, as applicable) (each fee constituting a “Service Charge,” and, collectively, “Service Charges”) as listed on the Schedules hereto.  Except as otherwise set forth on the Schedules hereto, all Service Charges shall be exclusive of any Taxes (responsibility for which shall be governed by Section 4.2).
         
(b)          During the term of this Agreement, the amount of a Service Charge for any Services (or category of Services, as applicable) may increase to the extent of:  (i) any increases mutually agreed to by the Parties; (ii) any Service Charges applicable to any Additional Services or Service Increases; (iii) subject to Section 7.1(d), any increases applicable to Service Extensions; and (iv) subject to the terms and conditions of this Agreement, any increase in the rates or charges imposed by any Third-Party Provider that is providing Services.  Together with any monthly invoice for Service Charges and Reimbursement Charges (as defined below), the Provider shall, upon request, provide the Recipient with documentation to support the calculation of such Service Charges or any Reimbursement Charges.
         
(c)          Each Recipient shall reimburse the applicable Provider for reasonable unaffiliated third-party out-of-pocket costs and expenses incurred by such Provider or its Affiliates in connection with providing the Services (including reasonable travel-related expenses) (each such cost or expense, a “Reimbursement Charge,” and, collectively, “Reimbursement Charges”); provided, however, that any such cost or expense that is materially inconsistent with historical practice between the Parties for any Service (including business travel and related expenses) shall require advance approval of the Recipient.  Any authorized travel-related expenses incurred in performing the Services shall be incurred and charged to the applicable Recipient in accordance with the applicable Provider’s then-applicable business travel policies made known to the Recipient.
         
(d)          The Service Charges and Reimbursement Charges due and payable hereunder shall be invoiced and paid in U.S. dollars, unless otherwise set forth on the Schedules hereto or unless the Parties otherwise agree.  Except as otherwise agreed by the Parties, on a monthly basis, Encompass shall prepare an invoice for such fiscal month noting, in reasonable detail, (i) the Service Charges and Reimbursement Charges with respect to Encompass Services (the “Encompass Monthly Charges”), (ii) the Service Charges and Reimbursement Charges with respect to Enhabit Services (the “Enhabit Monthly Charges”), and (iii) the Net Monthly Charges (as defined below).  For purposes of this Agreement, the “Net Monthly Charges” shall be the Encompass Monthly Charges minus the Enhabit Monthly Charges (which may be positive or negative).  If the Net Monthly Charges is positive, the relevant Recipient that is a member of the Enhabit Group (or its designee) shall pay the amount of the Net Monthly Charges by wire transfer (or such other method of payment as may be agreed between the Parties) to the relevant Provider that is a member of the Encompass Group (or its designee) within thirty (30) days of the receipt of each such invoice, including appropriate documentation as described herein, as instructed by the applicable Provider.  If the Net Monthly Charges is negative, the relevant Recipient that is a member of the Encompass Group (or its designee) shall pay the amount of the Net Monthly Charges by wire transfer (or such other method of payment as may be agreed between the Parties) to the relevant Provider that is a member of the Enhabit Group (or its designee) within thirty (30) days of the receipt of each such invoice, including appropriate documentation as described herein, as instructed by the applicable Provider.  In the absence of a timely notice of billing dispute in accordance with the provisions of Article VIII of this Agreement, if the applicable Recipient fails to pay such amount by the due date, the Recipient shall be obligated to pay to the Provider, in addition to the amount due, interest at an annual default interest rate of the Prime Rate (as published in The Wall Street Journal as of the date of payment) plus two percent (2%), or the maximum legal rate, whichever is lower (the “Interest Payment”), accruing from the date the payment was due up to the date of actual payment.  In the event of any billing dispute, the Recipient shall promptly pay any undisputed amount.  Payments under this Agreement shall be made without set-off or counterclaim, except as expressly set forth in this Agreement.         
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(e)          Subject to the confidentiality provisions set forth in Section 9.2, each Party shall, and shall cause their respective Affiliates to, provide, upon ten (10) days’ prior written notice from the other Party, any information within such Party’s or its Affiliates’ possession that the requesting Party reasonably requests in connection with any Services being provided to such requesting Party by a Third-Party Provider, including any applicable invoices, agreements documenting the arrangements between such Third-Party Provider and the Provider and other supporting documentation.
         
4.2          Tax Matters.

(a)          Without limiting any provisions of this Agreement, the Recipient shall be responsible for and shall pay any and all excise, sales, use, value-added, goods and services, transfer, stamp, documentary, filing, recordation and other similar Taxes, in each case, imposed on, payable with respect to, or assessed as a result of the provision of Services by the Provider or any fees or charges (including any Service Charges) payable by the Recipient pursuant to this Agreement (collectively, “Non-Income Taxes”).  The Party required to account for such Non-Income Tax shall provide to the other Party, upon such Party’s request, appropriate tax invoices and, if applicable, evidence of the remittance of the amount of such Non-Income Tax to the relevant Governmental Authority.  The Parties shall use commercially reasonable efforts to minimize Non-Income Taxes and obtain any refund, return, rebate or the like of any Non-Income Tax, including by filing any necessary exemption or other similar forms, certificates or other similar documents, in each case, to the extent legally permissible.  The Recipient shall promptly reimburse the Provider for any unaffiliated third-party out-of-pocket costs incurred by the Provider or its Affiliates in connection with the Provider obtaining a refund or credit of any Non-Income Tax for the benefit of the Recipient.  For the avoidance of doubt, any net income-based Taxes imposed or assessed as a result of the provision of Services by the Provider shall be borne exclusively by the Provider.         
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(b)          Notwithstanding anything to the contrary set forth in this Agreement, the Recipient shall be entitled to deduct and withhold from any payment to the Provider any such Taxes that the Recipient is required by any applicable Law to withhold.  To the extent any amounts are so withheld, the Recipient shall timely pay when due such deducted and withheld amounts to the proper Governmental Authority, promptly provide to the Provider evidence of such payment to such Governmental Authority and shall promptly pay to the Provider such additional amounts as to result in the Provider receiving the same net amount as the Provider would have received had such deduction and withholding not been made.  The Parties shall use commercially reasonable efforts to minimize withholding Taxes to the extent legally permissible.
         
(c)          If the Provider (i) receives any refund (whether by payment, offset, credit or otherwise) or (ii) utilizes any overpayment, in each case, of Taxes that were borne by the Recipient pursuant to this Agreement, then the Provider shall promptly pay, or cause to be paid, to the Recipient an amount equal to such refund or overpayment, net of any additional Taxes payable by the Provider as a result of the receipt of such refund or such overpayment.

ARTICLE V
STANDARD FOR SERVICE

5.1          Standard for Service.

(a)          The Provider agrees (i) to perform the Services in a manner that is substantially similar in all material respects to which the same or similar services were performed by or on behalf of the Provider prior to the Distribution Date or, if not so previously provided, then substantially similar in all material respects to which similar services are provided by or on behalf of such Provider to the Provider’s Affiliates or other business components; and (ii) upon receipt of written notice from the Recipient identifying any outage, interruption or other failure of any Service, to respond to such outage, interruption or other failure of such Service in a manner that is substantially similar in all material respects to the manner in which such Provider or its Affiliates responded to any outage, interruption or other failure of the same or similar services prior to the Distribution Date.  The Parties acknowledge that an outage, interruption or other failure of any Service shall not be deemed to be a breach of the provisions of this Section 5.1 so long as the applicable Provider complies with the foregoing clause (ii).
         
(b)          Notwithstanding anything to the contrary set forth in this Agreement, nothing in this Agreement shall require the Provider to perform or cause to be performed any Service to the extent the manner of such performance would constitute a violation of applicable Law or any existing contract or agreement with a third party.  If the Provider is or becomes aware of any restriction on the Provider by an existing contract with a third party that would restrict the nature, quality, standard of care or service levels applicable to delivery of the Services to be provided by the Provider to the Recipient, the Provider shall use commercially reasonable efforts to promptly notify the Recipient of any such restriction.  The Parties each agree to cooperate and use commercially reasonable efforts to obtain any necessary third-party consents required under any existing contract or agreement with a third party to allow the Provider to perform or cause to be performed any Service in accordance with the standards set forth in this Section 5.1.  Any out-of-pocket costs and expenses incurred by either Party in connection with obtaining any such third-party consent that is required to allow the Provider to perform or cause to be performed any Service shall be solely the responsibility of the Recipient.  If, with respect to a Service, the Parties, despite the use of such commercially reasonable efforts, are unable to obtain a required third-party consent, or the performance of such Service by the Provider would continue to constitute a violation of applicable Laws, the Provider shall use commercially reasonable efforts in good faith to provide such Services in a manner as closely as possible to the standards described in this Section 5.1 that would apply absent the exception provided for in the first sentence of this Section 5.1(b).       
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5.2          Disclaimer of Warranties.  EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, THE PARTIES ACKNOWLEDGE AND AGREE THAT THE SERVICES ARE PROVIDED AS-IS, THAT EACH RECIPIENT ASSUMES ALL RISKS AND LIABILITY ARISING FROM OR RELATING TO ITS USE OF AND RELIANCE UPON THE SERVICES, AND EACH PROVIDER, TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, MAKES NO REPRESENTATION OR WARRANTY WITH RESPECT THERETO.  EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, EACH PROVIDER HEREBY EXPRESSLY DISCLAIMS ALL REPRESENTATIONS AND WARRANTIES REGARDING THE SERVICES, WHETHER EXPRESS OR IMPLIED, EITHER IN FACT OR BY OPERATION OF LAW, BY STATUTE OR OTHERWISE, INCLUDING ANY REPRESENTATION OR WARRANTY IN REGARD TO QUALITY, PERFORMANCE, NON-INFRINGEMENT, COMMERCIAL UTILITY, MERCHANTABILITY OR FITNESS OF ANY SERVICE FOR A PARTICULAR PURPOSE.

5.3          Compliance with Laws and Regulations.  Each Party shall be responsible for its own compliance with any and all Laws applicable to its performance under this Agreement, including, without limitation, the federal physician self-referral law (commonly known as the “Stark Law,” 42 U.S.C. §§ 1395nn et seq.) and the anti-fraud and abuse provisions of the Social Security Act (42 U.S.C. §§ 1320a-7 et seq.) and applicable state and federal laws and regulations relating to the security and privacy of protected health information (including HIPAA), as they may be amended from time to time.  No Party will knowingly take any action in violation of any such applicable Law that results in liability being imposed on the other Party.  This Agreement does not require, and is not to be interpreted in any manner so as to require, the referral of patients by one Party to the other Party in violation of any applicable law or regulation.

ARTICLE VI
LIMITED LIABILITY AND INDEMNIFICATION

6.1          Consequential and Other Damages.  Notwithstanding anything to the contrary set forth in the Separation Agreement or this Agreement, the Provider shall not be liable to the Recipient or any of its Affiliates or Representatives, whether in contract, tort (including negligence and strict liability) or otherwise, at law or equity, for any special, indirect, incidental, punitive or consequential damages whatsoever (including lost profits or damages calculated on multiples of earnings approaches), which in any way arise out of, relate to or are a consequence of, the performance or non-performance by the Provider (including any Affiliates and Representatives of the Provider and any Third-Party Providers, in each case, providing the applicable Services) under this Agreement or the provision of, or failure to provide, any Services under this Agreement, including with respect to loss of profits, business interruptions or claims of patients, vendors or referral sources, and that each Party hereby waives on behalf of itself, its Subsidiaries and its Representatives that are Recipients hereunder any claim for such damages.
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6.2          Limitation of Liability.  The Liabilities of each Provider and its Affiliates and Representatives, collectively, under this Agreement for any act or failure to act in connection herewith (including the performance or breach of this Agreement), or from the sale, delivery, provision or use of any Services provided under or contemplated by this Agreement, whether in contract, tort (including negligence and strict liability) or otherwise, at law or equity, shall not exceed the total aggregate Service Charges (excluding any Reimbursement Charges) actually paid or payable to such Provider by the Recipient pursuant to this Agreement.

6.3          Obligation to Re-perform; Liabilities.  In the event of any breach of this Agreement by any Provider with respect to the provision of any Services (with respect to which the Provider can reasonably be expected to re-perform in a commercially reasonable manner), the Provider shall (a) promptly correct in all material respects such error, defect or breach or to perform again in all material respects such Services at the request of the Recipient and at the sole cost and expense of the Provider and (b) subject to the limitations set forth in Section 6.1 and Section 6.2, reimburse the Recipient and its Affiliates and Representatives for Liabilities attributable to such breach by the Provider.  The remedy set forth in this Section 6.3 shall be the sole and exclusive remedy of the Recipient for any such breach of this Agreement.  Any request for re-performance in accordance with this Section 6.3 by the Recipient must be in writing and specify in reasonable detail the particular error, defect or breach, and such request must be made no more than one (1) month from the date such error, defect or breach becomes apparent to Encompass or should have reasonably become apparent to Encompass.  This Section 6.3 shall survive any termination of this Agreement.

6.4          Release and Recipient Indemnity.  In addition to (but not in duplication of) its other indemnification obligations (if any) under the Separation Agreement, this Agreement or any other Ancillary Agreement, and subject to Section 6.1 and Section 6.2, each Recipient hereby releases the applicable Provider and its Affiliates and Representatives (each, a “Provider Indemnified Party”), and each Recipient hereby agrees to indemnify, defend and hold harmless each such Provider Indemnified Party from and against any and all Liabilities arising from, relating to or in connection with (a) the use of any Services by such Recipient or any of its Affiliates, Representatives or other Persons using such Services or (b) the sale, delivery, provision or use of any Services provided under or contemplated by this Agreement, in the case of each of clauses (a) and (b), except to the extent that such Liabilities arise out of, relate to or are a consequence of the applicable Provider Indemnified Party’s gross negligence, bad faith, willful misconduct or fraud.

6.5          Provider Indemnity.  In addition to (but not in duplication of) its other indemnification obligations (if any) under the Separation Agreement, this Agreement or any other Ancillary Agreement, and subject to Section 6.1 and Section 6.2, each Provider hereby agrees to indemnify, defend and hold harmless the applicable Recipient and its Affiliates and Representatives (each, a “Recipient Indemnified Party”), from and against any and all Liabilities arising from, relating to or in connection with (a) the use of any Services by such Recipient or any of its Affiliates, Representatives or other Persons using such Services or (b) the sale, delivery, provision or use of any Services provided under or contemplated by this Agreement, in the case of each of clauses (a) and (b), to the extent that such Liabilities arise out of, relate to or are a consequence of the applicable Provider’s gross negligence, bad faith or willful misconduct or fraud.
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6.6          Indemnification Procedures.  Subject to the provisions of this Article VI, the provisions of Article IV of the Separation Agreement shall govern claims for indemnification under this Agreement.

6.7          Liability for Payment Obligations.  Nothing in this Article VI shall be deemed to eliminate or limit, in any respect, Encompass’s or Enhabit’s express obligation in this Agreement to pay Service Charges and Reimbursement Charges for Services rendered in accordance with this Agreement.

6.8          Exclusion of Other Remedies.  The provisions of Section 6.3, Section 6.4 and Section 6.5 shall, to the maximum extent permitted by applicable Law, be the sole and exclusive remedies of the Provider Indemnified Parties and the Recipient Indemnified Parties, as applicable, for any claim, loss, damage, expense or liability, whether arising from statute, principle of common or civil law, principles of strict liability, tort, contract or otherwise under this Agreement, except as set forth in Section 9.2.

6.9          Confirmation.  Neither Party excludes responsibility for any Liability that cannot be excluded pursuant to applicable Law.

ARTICLE VII
TERM AND TERMINATION

7.1          Term and Termination.

(a)          This Agreement shall commence immediately upon the Effective Time and shall terminate upon the earlier to occur of:  (i) the last date on which either Party is obligated to provide any Service to the other Party in accordance with the terms of this Agreement; (ii) the mutual written agreement of the Parties to terminate this Agreement in its entirety; or (iii) a termination by Encompass in accordance with Section 9.13(b).
         
(b)          Without prejudice to a Recipient’s rights with respect to a Force Majeure, a Recipient may from time to time terminate this Agreement with respect to the entirety of any individual Service but not a portion thereof, for any reason or no reason, upon providing at least thirty (30) days’ prior written notice to the Provider; provided, however, that the Recipient shall pay to the Provider the necessary and reasonable documented out-of-pocket costs incurred in connection with the wind down of such Service other than any employee severance and relocation expenses, but including unamortized license fees and costs for equipment used to provide such Service, contractual obligations under agreements used to provide such Service, any breakage or termination fees and any other termination costs payable by the Provider with respect to any resources or pursuant to any other third-party agreements that were used by the Provider to provide such Service (or an equitably allocated portion thereof, in the case of any such equipment, resources or agreements that also were used for purposes other than providing Services).         
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(c)          A Provider may terminate this Agreement with respect to one or more Services, in whole but not in part, at any time upon prior written notice to the Recipient if the Recipient has failed to perform any of its material obligations under this Agreement relating to such Services, including making payment of Service Charges when due, and such failure shall continue uncured for a period of thirty (30) days after receipt by the Recipient of a written notice of such failure from the Provider.  In the event that any Service is terminated other than at the end of a month, the Service Charge associated with such Service shall be pro-rated appropriately.  The Parties acknowledge that there may be interdependencies among the Services being provided under this Agreement that may not be identified on the applicable Schedules and agree that, if the Provider’s ability to provide a particular Service in accordance with this Agreement is materially and adversely affected by the termination of another Service in accordance with Section 7.1(b), then the Parties shall negotiate in good faith to amend the Schedule relating to such affected continuing Service, which amendment shall be consistent with the terms of, and the pricing methodology used for, comparable Services.
         
(d)          In connection with the termination of any Service, if the Recipient reasonably determines that it will require such Service to continue beyond the date on which such Service is scheduled to terminate, the Recipient may request that the Provider extend such Service (any such extension, a “Service Extension”) for a specified period beyond the scheduled termination of such Service (which period shall in no event (i) be longer than one hundred eighty (180) days (or such longer period as the Provider of such Service agrees in its sole discretion, subject to the following clause (ii)) or (ii) end later than the date that is the twenty-four (24)-month anniversary of the Distribution Date) by written notice to the Provider no less than thirty (30) days prior to the date of such scheduled termination, and the Parties shall use commercially reasonable efforts to comply with such Service Extension; provided that the Provider shall not be obligated to provide such Service Extension if a third-party consent is required and cannot be obtained by the Provider.  In connection with any request for Service Extensions in accordance with this Section 7.1(d), the Encompass Services Managers and the relevant Encompass Functional Area Service Manager with respect to such Service, on the one hand, and the Enhabit Services Managers and the relevant Enhabit Functional Area Service Manager with respect to such Service, on the other, shall in good faith (x) negotiate the terms of an amendment to the applicable Schedule, which amendment shall be consistent with the terms of, and the pricing methodology used for, the applicable Service (including, as applicable, increases in the applicable Service Charge for each such Service Extension as mutually agreed by the Parties), and (y) determine the costs and expenses (other than Service Charges), if any, that would be incurred by the Provider or the Recipient, as the case may be, in connection with the provision of such Service Extension, which costs and expenses shall be borne solely by the Party requesting the Service Extension.  Each amended Schedule to implement a Service Extension, as agreed in writing by the Parties, shall be deemed part of this Agreement as of the date of such agreement and any Services provided pursuant to such Service Extensions shall be deemed “Services” provided under this Agreement, in each case, subject to the terms and conditions of this Agreement.
         
7.2          Effect of Termination.  Upon termination of any Service pursuant to this Agreement, the Provider of the terminated Service will have no further obligation to provide the terminated Service, and the relevant Recipient will have no obligation to pay any future Service Charges relating to any such Service; provided, however, that the Recipient shall remain obligated to the relevant Provider for (a) the Service Charges and Reimbursement Charges owed and payable in respect of Services provided prior to the effective date of termination and (b) any applicable charges described in Section 7.1(b), which charges shall be payable only in the event that the Recipient terminates any Service pursuant to Section 7.1(b).  In connection with the termination of any Service, the provisions of this Agreement not relating solely to such terminated Service shall survive any such termination, and in connection with a termination of this Agreement, Article I, Article VI (including liability in respect of any indemnifiable Liabilities under this Agreement arising or occurring on or prior to the date of termination), this Article VII, Article IX and all confidentiality obligations under this Agreement and liability for all due and unpaid Service Charges and Reimbursement Charges and any applicable charges payable pursuant to Section 7.1(b), shall continue to survive indefinitely.
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7.3          Force Majeure.

(a)          Neither Party (nor any Person acting on its behalf) shall have any liability or responsibility for failure to fulfill any obligation (other than a payment obligation) under this Agreement so long as and to the extent to which the fulfillment of such obligation is prevented, frustrated, hindered or delayed as a consequence of a Force Majeure.  In the event of an occurrence of a Force Majeure, the Party whose performance is affected thereby shall give notice of suspension as soon as reasonably practicable to the other stating the date and extent of such suspension and the cause thereof, and such Party shall use commercially reasonable efforts to remove any such causes and resume the performance of such obligations as soon as reasonably practicable after the removal of such cause.
         
(b)          During the period of a Force Majeure, the Recipient shall be entitled to seek an alternative service provider with respect to such Service(s) and, in the event a Force Majeure shall continue to exist for more than thirty (30) consecutive days, permanently terminate such Service(s), it being understood that Recipient shall not be required to provide any advance notice of such termination to Provider or pay any charges in connection therewith.  The Recipient shall be relieved of the obligation to pay Service Charges for the affected Service(s) throughout the duration of such Force Majeure.

ARTICLE VIII
DISPUTE RESOLUTION

8.1          Dispute Resolution.

(a)          In the event of any dispute, controversy or claim arising out of or relating to the transactions contemplated by this Agreement, or the validity, interpretation, breach or termination of any provision of this Agreement, or calculation or allocation of the costs of any Service, including claims seeking redress or asserting rights under any Law (each, a “Dispute”), Encompass and Enhabit agree that the Encompass Services Managers and the Enhabit Services Managers (or such other persons as Encompass and Enhabit may designate) shall negotiate in good faith in an attempt to resolve such Dispute amicably.  If such Dispute has not been resolved to the mutual satisfaction of Encompass and Enhabit within fifteen (15) days after the initial written notice of the Dispute (or after such longer period as the Parties may agree), then such Dispute shall be resolved in accordance with the dispute resolution process referred to in Article VII of the Separation Agreement; provided, however, that such dispute resolution process shall not modify or add to the remedies available to the Parties under this Agreement.         
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(b)          In any Dispute regarding the amount of a Service Charge, if such Dispute is finally resolved pursuant to the dispute resolution process set forth or referred to in Section 8.1(a), and it is determined that the Service Charge that the Provider has invoiced the Recipient, and that the Recipient has paid to the Provider, is greater or less than the amount that the Service Charge should have been, then (i) if it is determined that the Recipient has overpaid the Service Charge, the Provider shall within five (5) business days after such determination reimburse the Recipient an amount of cash equal to such overpayment, plus the Interest Payment, accruing from the date of payment by the Recipient to the time of reimbursement by the Provider; and (ii) if it is determined that the Recipient has underpaid the Service Charge, the Recipient shall within five (5) business days after such determination reimburse the Provider an amount of cash equal to such underpayment, plus the Interest Payment, accruing from the date such payment originally should have been made by the Recipient to the time of payment by the Recipient.

ARTICLE IX
GENERAL PROVISIONS

9.1          No Agency.  Nothing in this Agreement shall be deemed in any way or for any purpose to constitute any Party as an agent of an unaffiliated party in the conduct of such other party’s business.  A Provider of any Service under this Agreement shall act as an independent contractor and not as the agent of the Recipient in performing such Service, maintaining control over its employees, its subcontractors and their employees and complying with all withholding of income at source requirements, whether federal, national, state, local or foreign.

9.2          Treatment of Confidential Information.

(a)          The Parties shall not, and shall cause all other Persons providing Services or having access to information of the other Party that is known to such Party as confidential or proprietary (the “Confidential Information”) not to, disclose to any other Person or use, except for purposes of this Agreement, any Confidential Information of the other Party; provided, however, that the Confidential Information may be used by such Party to the extent that such Confidential Information has been (i) in the public domain through no fault of such Party or any member of such Group or any of their respective Representatives or (ii) later lawfully acquired from other sources by such Party (or any member of such Party’s Group), which sources are not themselves bound by a confidentiality obligation; provided, further, that each Party may disclose Confidential Information of the other Party, to the extent not prohibited by applicable Law:  (A) to its Representatives on a need-to-know basis in connection with the performance of such Party’s obligations under this Agreement; (B) in any report, statement, testimony or other submission required to be made to any Governmental Authority having jurisdiction over the disclosing Party; or (C) in order to comply with applicable Law, or in response to any summons, subpoena or other legal process or formal or informal investigative demand issued to the disclosing Party in the course of any litigation, investigation or administrative proceeding.  In the event that a Party becomes legally compelled (based on advice of counsel) by deposition, interrogatory, request for documents subpoena, civil investigative demand or similar judicial or administrative process to disclose any Confidential Information of the other Party, such disclosing Party shall provide the other Party with prompt prior written notice of such requirement, and, to the extent reasonably practicable, cooperate with the other Party (at such other Party’s expense) to obtain a protective order or similar remedy to cause such Confidential Information not to be disclosed, including interposing all available objections thereto, such as objections based on settlement privilege.  In the event that such protective order or other similar remedy is not obtained, the disclosing Party shall furnish only that portion of the Confidential Information that has been legally compelled, and shall exercise its commercially reasonable efforts (at such other Party’s expense) to obtain assurance that confidential treatment will be accorded such Confidential Information.         
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(b)          Each Party shall, and shall cause its Representatives to, protect the Confidential Information of the other Party by using the same degree of care to prevent the unauthorized disclosure of such as the Party uses to protect its own confidential information of a like nature, but in any event no less than a reasonable degree of care.
         
(c)          Each Party shall be liable for any failure by its respective Representatives to comply with the restrictions on use and disclosure of Confidential Information contained in this Agreement.
         
9.3          Further Assurances.  Each Party covenants and agrees that, without any additional consideration, it shall execute and deliver any further legal instruments and perform any acts that are or may become necessary to effectuate this Agreement.

9.4          Notices.  Except with respect to routine communications by the Encompass Services Managers, the Enhabit Services Managers, the Encompass Functional Area Service Managers and the Enhabit Functional Area Service Managers under Section 2.6, all notices, requests, claims, demands and other communications under this Agreement shall be in writing and shall be given or made (and shall be deemed to have been duly given or made upon receipt) by delivery in person, by overnight courier service, by facsimile or electronic transmission with receipt confirmed or by registered or certified mail (postage prepaid, return receipt requested) to the respective Parties at the following addresses (or at such other address for a Party as shall be specified in a notice given in accordance with this Section 9.4):

If to Encompass, to:
Encompass Health Corporation
9001 Liberty Parkway
Birmingham, Alabama  35242
Attention: 
General Counsel
E-mail:
* * *
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with a copy to:
   
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York  10019
Attention:
Igor Kirman
 
Elina Tetelbaum
 
Zachary S. Podolsky
E-mail:
IKirman@wlrk.com
 
ETetelbaum@wlrk.com
 
ZSPodolsky@wlrk.com
Facsimile: 
(212) 403-2000
   
If to Enhabit, to:
 
Enhabit, Inc.
6688 N. Central Expressway, Suite 1300
Dallas, Texas  75206
Attention:
General Counsel
E-mail:
* * *
   
with a copy to:
   
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York  10019
Attention:
Igor Kirman
 
Elina Tetelbaum
 
Zachary S. Podolsky
E-mail:
IKirman@wlrk.com
 
ETetelbaum@wlrk.com
 
ZSPodolsky@wlrk.com
   
 and to:
  
   
 Bradley Arant Boult Cummings LLP
 One Federal Place
1819 5th Avenue N.
Birmingham, Alabama 35209
Attention:
Charles Roberts
Stephen Hinton
Email:
 croberts@bradley.com
  shinton@bradley.com
   
   

A Party may, by notice to the other Party, change the address to which such notices are to be given.

9.5          Severability.  If any provision of this Agreement or the application thereof to any Person or circumstance is determined by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof, or the application of such provision to Persons or circumstances or in jurisdictions other than those as to which it has been held invalid or unenforceable, shall remain in full force and effect and shall in no way be affected, impaired or invalidated thereby.  Upon such determination, the Parties shall negotiate in good faith in an effort to agree upon such a suitable and equitable provision to effect the original intent of the Parties.

9.6          Entire Agreement.  This Agreement, the Separation Agreement and any other Ancillary Agreements, and the Exhibits, Schedules and appendices hereto and thereto, contain the entire agreement between the Parties with respect to the subject matter hereof, supersede all previous agreements, negotiations, discussions, writings, understandings, commitments and conversations with respect to such subject matter, and there are no agreements or understandings between the Parties other than those set forth or referred to herein or therein.  This Agreement, the Separation Agreement and any other Ancillary Agreements together govern the arrangements in connection with the Separation and the Distribution and would not have been entered independently.
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9.7          No Third-Party Beneficiaries.  Except as provided in Article VI with respect to Provider Indemnified Parties and Recipient Indemnified Parties, this Agreement is for the sole benefit of the Parties and their permitted successors and assigns and nothing in this Agreement, express or implied, is intended to or shall confer upon any other Person, including any union or any employee or former employee of Encompass or Enhabit, any legal or equitable right, benefit or remedy of any nature whatsoever, including any rights of employment for any specified period, under or by reason of this Agreement.

9.8          Governing Law.  This Agreement (and any claims or Disputes arising out of or related hereto or thereto or to the transactions contemplated hereby and thereby or to the inducement of any party to enter herein and therein, whether for breach of contract, tortious conduct or otherwise and whether predicated on common law, statute or otherwise) shall be governed by and construed and interpreted in accordance with the Laws of the State of Delaware irrespective of the choice of laws principles of the State of Delaware, including all matters of validity, construction, effect, enforceability, performance and remedies.

9.9          Amendment.  No provisions of this Agreement, including any Schedules to this Agreement, shall be deemed waived, amended, supplemented or modified by a Party, unless such waiver, amendment, supplement or modification is in writing and signed by the authorized representative of the Party against whom it is sought to enforce such waiver, amendment, supplement or modification.

9.10          Rules of Construction.  In this Agreement, (a) words in the singular shall be deemed to include the plural and vice versa and words of one gender shall be deemed to include the other genders as the context requires; (b) the terms “hereof,” “herein” and “herewith” and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole (including all of the Schedules, Exhibits and Appendices hereto) and not to any particular provision of this Agreement; (c) Article, Section, Schedule, Exhibit and Appendix references are to the Articles, Sections, Schedules, Exhibits and Appendices to this Agreement unless otherwise specified; (d) unless otherwise stated, all references to any agreement (including this Agreement) shall be deemed to include the exhibits, schedules and annexes (including all Schedules, Exhibits and Appendixes) to such agreement; (e) the word “including” and words of similar import when used in this Agreement shall mean “including, without limitation,” unless otherwise specified; (f) the word “or” need not be exclusive; (g) unless otherwise specified in a particular case, the word “days” refers to calendar days; (h) references herein to this Agreement or any other agreement contemplated herein shall be deemed to refer to this Agreement or such other agreement as of the date on which it is executed and as it may be amended, modified or supplemented thereafter, unless otherwise specified; (i) unless expressly stated to the contrary in this Agreement, all references to “the date hereof,” “the date of this Agreement,” “hereby” and “hereupon” and words of similar import shall all be references to June 30, 2022; and (j) the word “extent” and the phrase “to the extent” shall mean the degree to which a subject or other thing extends, and such word or phrase shall not merely mean “if.”
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9.11          Precedence of Schedules.  Each Schedule attached to or referenced in this Agreement is hereby incorporated into and shall form a part of this Agreement; provided, however, that the terms contained in such Schedule shall only apply with respect to the Services provided under that Schedule.  In the event of a conflict between the terms contained in an individual Schedule and the terms in the body of this Agreement, the terms in the Schedule shall take precedence with respect to the Services under such Schedule only.  No terms contained in individual Schedules shall otherwise modify the terms of this Agreement.

9.12          Counterparts.  This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more counterparts have been signed by each of the Parties and delivered to the other Party.

9.13          Assignability; Change of Control.

(a)          This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns; provided that neither Party may assign its rights or delegate its obligations under this Agreement without the express prior written consent of the other Party hereto.  Notwithstanding the foregoing but subject to Section 9.13(b), no such consent shall be required for the assignment of a Party’s rights and obligations under this Agreement, the Separation Agreement and the other Ancillary Agreements (except as may be otherwise provided in any such other Ancillary Agreement) in whole (i.e., the assignment of a party’s rights and obligations under this Agreement, the Separation Agreement and all other Ancillary Agreements all at the same time) in connection with a change of control of a Party so long as the resulting, surviving or transferee Person assumes all the obligations of the relevant party thereto by operation of Law or pursuant to an agreement in form and substance reasonably satisfactory to the other Party.
         
(b)          To the extent legally permissible, Enhabit shall notify Encompass in writing at least ninety (90) calendar days prior to the completion of any Enhabit Change of Control.  In the event of an Enhabit Change of Control, notwithstanding anything to the contrary herein, Encompass shall be entitled to terminate this Agreement, in whole or in part, without any penalty, liability or further obligation with thirty (30) calendar days’ prior written notice to Enhabit.
         
9.14          Non-Recourse.  No past, present or future director, officer, employee, incorporator, member, partner, shareholder, Affiliate, agent, attorney or representative of either Encompass or Enhabit or their Affiliates shall have any liability for any obligations or liabilities of Encompass or Enhabit, respectively, under this Agreement or for any claims based on, in respect of, or by reason of, the transactions contemplated by this Agreement.

9.15          Mutual Drafting.  This Agreement shall be deemed to be the joint work product of the Parties and any rule of construction that a document shall be interpreted or construed against a drafter of such document shall not be applicable.

[The remainder of this page is intentionally left blank.]
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their duly authorized representatives as of the date first written above.

  ENCOMPASS HEALTH CORPORATION  
       
       
 
By:
 /s/ Douglas E. Coltharp
   
Name:
Douglas E. Coltharp
   
Title:
Executive Vice President and Chief Financial Officer



  ENHABIT, INC.  
       
       
 
By:
 /s/ Crissy Carlisle
   
Name:
Crissy Carlisle
   
Title:
Chief Financial Officer
       
[Signature Page to Transition Services Agreement]
Exhibit 2.3

TAX MATTERS AGREEMENT

BY AND BETWEEN

ENCOMPASS HEALTH CORPORATION

and

ENHABIT, INC.

DATED AS OF JUNE 30, 2022

TABLE OF CONTENTS

Page

Section 1.
Definition of Terms
2
       
Section 2.
Allocation of Tax Liabilities
10
       
 
Section 2.01
General Rule
10
       
 
Section 2.02
Allocation of Federal Income Tax and Federal Other Tax
10
       
 
Section 2.03
Allocation of State Income and State Other Taxes
11
       
 
Section 2.04
Allocation of Foreign Taxes
12
       
 
Section 2.05
Certain Transaction and Other Taxes
12
       
Section 3.
Proration of Taxes for Straddle Periods
13
       
Section 4.
Preparation and Filing of Tax Returns
13
       
 
Section 4.01
General
13
       
 
Section 4.02
Encompass’s Responsibility
14
       
 
Section 4.03
Enhabit’s Responsibility
14
       
 
Section 4.04
Tax Accounting Practices
14
       
 
Section 4.05
Consolidated or Combined Tax Returns
15
       
 
Section 4.06
Right to Review Tax Returns
15
       
 
Section 4.07
Enhabit Carrybacks and Claims for Refund
16
       
 
Section 4.08
Apportionment of Earnings and Profits and Tax Attributes
16
       
Section 5.
Tax Payments
17
       
 
Section 5.01
Payment of Taxes with Respect to Tax Returns
17
       
 
Section 5.02
Indemnification Payments
17
       
Section 6.
Tax Benefits
18
       
 
Section 6.01
Tax Benefits
18
       
 
Section 6.02
Encompass and Enhabit Income Tax Deductions in Respect of Certain Equity Awards and Incentive Compensation
19
i

Section 7.
Tax-Free Status
20
       
 
Section 7.01
Representations
20
       
 
Section 7.02
Restrictions on Enhabit
20
       
 
Section 7.03
Restrictions on Encompass
22
       
 
Section 7.04
Procedures Regarding Opinions and Rulings
23
       
 
Section 7.05
Liability for Tax-Related Losses
24
       
 
Section 7.06
Section 336(e) Election
26
       
Section 8.
Assistance and Cooperation
26
       
 
Section 8.01
Assistance and Cooperation
26
       
 
Section 8.02
Income Tax Return Information
27
       
 
Section 8.03
Reliance by Encompass
27
       
 
Section 8.04
Reliance by Enhabit
27
       
Section 9.
Tax Records
28
       
 
Section 9.01
Retention of Tax Records
28
       
 
Section 9.02
Access to Tax Records
28
       
Section 10.
Tax Contests
28
       
 
Section 10.01
Notice
28
       
 
Section 10.02
Control of Tax Contests
28
       
Section 11.
Effective Date; Termination of Prior Intercompany Tax Allocation Agreements
30
       
Section 12.
Survival of Obligations
31
       
Section 13.
Treatment of Payments; Tax Gross-Up
31
       
 
Section 13.01
Treatment of Tax Indemnity and Tax Benefit Payments
31
       
 
Section 13.02
Tax Gross-Up
31
       
 
Section 13.03
Interest
31
       
Section 14.
Disagreements
31

ii

Section 15.
Late Payments
32
       
Section 16.
Expenses
32
       
Section 17.
General Provisions
33
       
 
Section 17.01
Notices
33
       
 
Section 17.02
Waiver of Default
34
       
 
Section 17.03
Severability
34
       
 
Section 17.04
Corporate Power
34
       
 
Section 17.05
Performance
34
       
 
Section 17.06
Entire Agreement
34
       
 
Section 17.07
Headings
34
       
 
Section 17.08
Interpretation
35
       
 
Section 17.09
Counterparts
35
       
 
Section 17.10
Governing Law
35
       
 
Section 17.11
Amendments
35
       
 
Section 17.12
Enhabit Subsidiaries
35
       
 
Section 17.13
Assignability
36
       
 
Section 17.14
Third-Party Beneficiaries
36
       
 
Section 17.15
Force Majeure
36
       
 
Section 17.16
No Set-Off
36
       
 
Section 17.17
Expenses
36
       
 
Section 17.18
Mutual Drafting
37
       
 
Section 17.19
Specific Performance
37

iii

TAX MATTERS AGREEMENT

This TAX MATTERS AGREEMENT, dated as of June 30, 2022 (this “Agreement”), is by and between Encompass Health Corporation, a Delaware corporation (“Encompass”) and Enhabit, Inc., a Delaware corporation formerly named “Encompass Health Home Health Holdings, Inc.” (“Enhabit”) (together, the “Companies,” and each, a “Company”).

R E C I T A L S

WHEREAS, Encompass and Enhabit have entered into a Separation and Distribution Agreement, dated as of June 30, 2022 (including the Separation Step Plan set forth on Schedule I thereto, the “Separation Agreement”), providing for the separation of the Enhabit Group from the Encompass Affiliated Group (the “Separation”);

WHEREAS, Encompass and its Subsidiaries have engaged in certain restructuring transactions to facilitate the Separation as set forth in the Separation Step Plan;

WHEREAS, pursuant to the Separation Step Plan and the terms of the Separation Agreement, among other things, following certain preparatory transactions described in the Separation Step Plan, (a) Encompass IP Holding Corp. (“IP NewCo”) contributed to Enhabit Holdings, LLC, a Delaware limited liability company (which, at the time of such transfer, was treated as disregarded from IP NewCo for Federal Income Tax purposes) (“HHH NewCo”) all of the issued and outstanding membership interests in Advanced Homecare Management, LLC, also a Delaware limited liability company and, following such transfer, HHH NewCo converted from a limited liability company to a corporation pursuant to Delaware law (together, the “Contribution”), (b) IP NewCo distributed to Advanced Homecare Holdings, Inc. (“AH Holdings”) all of the issued and outstanding stock of HHH NewCo (the “First Internal Distribution”), (c) AH Holdings distributed to Enhabit all of the issued and outstanding stock of HHH NewCo (the “Second Internal Distribution”), (d) Enhabit distributed to Encompass all of the issued and outstanding stock of AH Holdings (the “Third Internal Distribution”), (e) Enhabit transferred the net proceeds of new revolving and term loan facilities of approximately $566.5 million to Encompass, (f) Enhabit recapitalized its issued and outstanding stock through a forward stock split, and (g) Encompass shall make a distribution of all the outstanding Enhabit Shares pro rata to holders of Encompass Shares (the “Distribution”);

WHEREAS, for Federal Income Tax purposes, it is intended that (a) the First Internal Distribution (together with the Contribution) shall qualify as a transaction that is generally tax-free pursuant to Sections 355(a) and 368(a)(1)(D) of the Code and (b) the Second Internal Distribution, the Third Internal Distribution and the Distribution shall each qualify as a transaction that is generally tax-free pursuant to Section 355(a) of the Code;

WHEREAS, as of the date hereof, Encompass is the common parent of an affiliated group (as defined in Section 1504 of the Code) of corporations, including Enhabit, which has elected to file consolidated Federal Income Tax Returns (the “Encompass Affiliated Group”);

WHEREAS, Encompass and Enhabit entered into an Amended and Restated Consolidated Tax Allocation Agreement, dated as of January 1, 2015 (such agreement, as it exists immediately prior to its termination pursuant to Section 11 hereof, the “Existing Tax Allocation Agreement”), setting forth their agreement with respect to certain Tax matters; and

WHEREAS, the Parties desire to provide for and agree upon the allocation between the Parties of liabilities for Taxes arising prior to, as a result of, and subsequent to the Distribution, and to provide for and agree upon other matters relating to Taxes.

NOW THEREFORE, in consideration of the mutual agreements contained herein, the Parties hereby agree as follows:

Section 1.          Definition of Terms.  For purposes of this Agreement (including the Recitals hereof), the following terms have the following meanings, and capitalized terms used but not otherwise defined herein shall have the meaning ascribed to them in the Separation Agreement:

“Adjustment Request” shall mean any formal or informal claim or request filed with any Tax Authority, or with any administrative agency or court, for the adjustment, refund or credit of Taxes, including (a) any amended Tax Return claiming adjustment to the Taxes as reported on the Tax Return or, if applicable, as previously adjusted, (b) any claim for equitable recoupment or other offset, and (c) any claim for refund or credit of Taxes previously paid.

“Affiliate” shall mean any entity that is directly or indirectly “controlled” by either the Person in question or an Affiliate of such Person.  For purposes of this definition, “control” shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise.  The term Affiliate shall refer to Affiliates of a Person as determined immediately after the Distribution.

“Agreement” shall have the meaning set forth in the Preamble.

“AH Holdings” shall have the meaning set forth in the Recitals.

“Capital Stock” shall mean all classes or series of capital stock, including (a) common stock, (b) all options, warrants and other rights to acquire such capital stock and (c) all instruments properly treated as stock for Federal Income Tax purposes.

“Code” shall mean the Internal Revenue Code of 1986, as amended.

“Companies” and “Company” shall have the meaning set forth in the Preamble.

“Compensatory Equity Interests” shall have the meaning set forth in Section 6.02(a).

“Contribution” shall have the meaning set forth in the Recitals.

“DGCL” shall mean the Delaware General Corporation Law.

“Distribution” shall have the meaning set forth in the Recitals.

“Distribution-Related Tax Contest” shall mean any Tax Contest in which the IRS, another Tax Authority or any other Person asserts a position that could reasonably be expected to adversely affect the Tax-Free Status.
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“Distributions” shall mean the First Internal Distribution, the Second Internal Distribution, the Third Internal Distribution, and the Distribution.

“Encompass” shall have the meaning set forth in the Preamble, and references herein to Encompass shall include any entity treated as a successor to Encompass.

“Encompass Adjustment” shall mean any proposed adjustment by a Tax Authority or claim for refund asserted in a Tax Contest to the extent Encompass would be exclusively liable for any resulting Tax under this Agreement or exclusively entitled to receive any resulting Tax Benefit under this Agreement.

“Encompass Affiliated Group” shall have the meaning set forth in the Recitals.

“Encompass Federal Consolidated Income Tax Return” shall mean any Federal Income Tax Return for the Encompass Affiliated Group.

“Encompass Foreign Combined Income Tax Return” shall mean a consolidated, combined or unitary or other similar Foreign Income Tax Return or any Foreign Income Tax Return with respect to any profit- and/or loss-sharing group, group payment or similar group or fiscal unity that actually includes, by election or otherwise, one or more members of the Encompass Group together with one or more members of the Enhabit Group.

“Encompass Group” shall mean Encompass and each Person that is a Subsidiary of Encompass as determined immediately after the Distribution.

“Encompass Group Employee” shall have the meaning set forth in the Employee Matters Agreement.

“Encompass Separate Return” shall mean any Separate Return of Encompass or any member of the Encompass Group.

“Encompass State Combined Income Tax Return” shall mean a consolidated, combined or unitary Tax Return with respect to State Income Taxes that actually includes, by election or otherwise, one or more members of the Encompass Group and one or more members of the Enhabit Group.

“Enhabit” shall have the meaning set forth in the Preamble, and references herein to Enhabit shall include any entity treated as a successor to Enhabit.

“Enhabit Active Business” shall mean the active conduct (as defined in Section 355(b)(2) of the Code and the Treasury Regulations promulgated thereunder) (a) by HHH NewCo and its “separate affiliated group” (as defined in Section 355(b)(3)(B) of the Code) of the trade(s) or business(es) relied upon to satisfy Section 355(b) of the Code with respect to the First Internal Distribution and the Second Internal Distribution (as described in the Ruling Request and the Representation Letters), as conducted immediately prior to the First Internal Distribution and the Second Internal Distribution, as applicable, and (b) by Enhabit and its “separate affiliated group” (as defined in Section 355(b)(3)(B) of the Code) of the trade(s) or business(es) relied upon to satisfy Section 355(b) of the Code with respect to the Third Internal Distribution and the Distribution (as described in the Ruling Request and the Representation Letters), as conducted immediately prior to the Third Internal Distribution and the Distribution, as applicable.
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“Enhabit Adjustment” shall mean any proposed adjustment by a Tax Authority or claim for refund asserted in a Tax Contest to the extent Enhabit would be exclusively liable for any resulting Tax under this Agreement or exclusively entitled to receive any resulting Tax Benefit under this Agreement.

“Enhabit Carryback” shall mean any net operating loss, net capital loss, excess tax credit or other similar Tax Item of any member of the Enhabit Group which may or must be carried from one Tax Period to another prior Tax Period under the Code or other applicable Tax Law.

“Enhabit CFO Certificate” shall have the meaning set forth in Section 7.02(d).

“Enhabit Federal Consolidated Income Tax Return” shall mean any Federal Income Tax Return for an affiliated group (as defined in Section 1504 of the Code) of which Enhabit is the common parent.

“Enhabit Group” shall mean Enhabit and each Person that is a Subsidiary of Enhabit, as determined immediately after the Distribution.

“Enhabit Group Employee” shall have the meaning set forth in the Employee Matters Agreement.

“Enhabit Group Federal Consolidated Income Tax Sharing Payment” shall have the meaning set forth in Section 2.02(a).

“Enhabit Group Foreign Combined Income Tax Sharing Payment” shall have the meaning set forth in Section 2.04(a).

“Enhabit Group State Combined Income Tax Sharing Payment” shall have the meaning set forth in Section 2.03(a).

“Enhabit Separate Return” shall mean any Separate Return of Enhabit or any member of the Enhabit Group.

“Existing Tax Allocation Agreement” shall have the meaning set forth in the Recitals.

“Federal Income Tax” shall mean any Tax imposed by Subtitle A of the Code, and any interest, penalties, additions to tax or additional amounts in respect of the foregoing.

“Federal Other Tax” shall mean any Tax imposed by the federal government of the United States other than any Federal Income Taxes, and any interest, penalties, additions to tax or additional amounts in respect of the foregoing.

“Fifty-Percent or Greater Interest” shall have the meaning ascribed to such term for purposes of Sections 355(d) and (e) of the Code.
-4-

“Final Determination” shall mean the final resolution of liability for any Tax, which resolution may be for a specific issue or adjustment or for a Tax Period, (a) by IRS Form 870 or 870-AD (or any successor forms thereto), on the date of acceptance by or on behalf of the taxpayer, or by a comparable form under the laws of a state, local or foreign taxing jurisdiction, except that a Form 870 or 870-AD or comparable form shall not constitute a Final Determination to the extent that it reserves (whether by its terms or by operation of law) the right of the taxpayer to file a claim for refund or the right of the Tax Authority to assert a further deficiency in respect of such issue or adjustment or for such Tax Period (as the case may be); (b) by a decision, judgment, decree or other order by a court of competent jurisdiction, which has become final and unappealable; (c) by a closing agreement or accepted offer in compromise under Section 7121 or 7122 of the Code, or a comparable agreement under the laws of a state, local or foreign taxing jurisdiction; (d) by any allowance of a refund or credit in respect of an overpayment of Tax, but only after the expiration of all Tax Periods during which such refund may be recovered (including by way of offset) by the jurisdiction imposing such Tax; or (e) by any other final disposition, including by reason of the expiration of the applicable statute of limitations or by mutual agreement of the Parties.

“First Internal Distribution” shall have the meaning set forth in the Recitals.

“Foreign Income Tax” shall mean any Tax imposed by any foreign country or any possession of the United States, or by any political subdivision of any foreign country or U.S. possession, which is an income tax as defined in Treasury Regulations Section 1.901‑2, and any interest, penalties, additions to tax or additional amounts in respect of the foregoing.

“Foreign Other Tax” shall mean any Tax imposed by any foreign country or any possession of the United States, or by any political subdivision of any foreign country or U.S. possession, other than any Foreign Income Taxes, and any interest, penalties, additions to tax or additional amounts in respect of the foregoing.

“Foreign Tax” shall mean any Foreign Income Tax or Foreign Other Tax.

“Former Encompass Group Employee” shall have the meaning set forth in the Employee Matters Agreement.

“Former Enhabit Group Employee” shall have the meaning set forth in the Employee Matters Agreement.

“Group” shall mean the Encompass Group, the Enhabit Group or both, as the context requires.

“HHH NewCo” shall have the meaning set forth in the Recitals.

“Income Tax” shall mean any Federal Income Tax, State Income Tax or Foreign Income Tax.

“Internal Distributions” shall mean the First Internal Distribution, the Second Internal Distribution, and the Third Internal Distribution.

“IP NewCo” shall have the meaning set forth in the Recitals.

“IRS” shall mean the U.S. Internal Revenue Service.
-5-

“Joint Adjustment” shall mean any proposed adjustment by a Tax Authority or claim for refund asserted in a Tax Contest that is not an Enhabit Adjustment or an Encompass Adjustment.

“Joint Return” shall mean any Tax Return of a member of the Encompass Group or the Enhabit Group that is not a Separate Return.

“Notified Action” shall have the meaning set forth in Section 7.04(a).

“Other Tax” shall mean any Federal Other Tax, State Other Tax or Foreign Other Tax.

“Parties” shall mean the parties to this Agreement.

“Past Practices” shall have the meaning set forth in Section 4.04(a).

“Payment Date” shall mean (a) with respect to any Encompass Federal Consolidated Income Tax Return, the due date for any required installment of estimated Taxes determined under Section 6655 of the Code, the due date (determined without regard to extensions) for filing the Tax Return determined under Section 6072 of the Code, and the date the Tax Return is filed, and (b) with respect to any other Tax Return, the corresponding dates determined under applicable Tax Law; in each case, taking into account any automatic or validly elected extensions, deferrals or postponements of the due date for payment of any such estimated Taxes or any Tax shown on such Tax Return, as applicable.

“Payor” shall have the meaning set forth in Section 5.02(a).

“Person” shall mean any individual, partnership, corporation, limited liability company, association, joint-stock company, trust, joint venture, unincorporated organization or a Governmental Authority or any department, agency or political subdivision thereof, without regard to whether any entity is treated as disregarded for Federal Income Tax purposes.

“Post-Distribution Period” shall mean any Tax Period beginning after the Distribution Date, and, in the case of any Straddle Period, the portion of such Straddle Period beginning the day after the Distribution Date.

“Pre-Distribution Period” shall mean any Tax Period ending on or prior to the Distribution Date, and, in the case of any Straddle Period, the portion of such Straddle Period ending on and including the Distribution Date.

“Privilege” shall mean any privilege that may be asserted under applicable law, including any privilege arising under or relating to the attorney-client relationship (including the attorney-client and work product privileges), the accountant-client privilege and any privilege relating to internal evaluation processes.
-6-

“Proposed Acquisition Transaction” shall mean, with respect to Enhabit, a transaction or series of transactions (or any agreement, understanding or arrangement, within the meaning of Section 355(e) of the Code and Treasury Regulations Section 1.355-7 or any other Treasury Regulations promulgated thereunder, to enter into a transaction or series of transactions), whether such transaction is supported by the management or shareholders of Enhabit, is a hostile acquisition, or otherwise, as a result of which Enhabit would merge or consolidate with any other Person or as a result of which any Person or Persons would (directly or indirectly) acquire, or have the right to acquire, from Enhabit and/or one or more holders of outstanding shares of Capital Stock of Enhabit, a number of shares of Capital Stock of Enhabit that would, when combined with any other changes in ownership of Capital Stock of Enhabit pertinent for purposes of Section 355(e) of the Code, comprise 45% or more of (a) the value of all outstanding shares of Capital Stock of Enhabit as of the date of such transaction, or in the case of a series of transactions, the date of the last transaction of such series, or (b) the total combined voting power of all outstanding shares of voting stock of Enhabit as of the date of such transaction, or in the case of a series of transactions, the date of the last transaction of such series.  Notwithstanding the foregoing, a Proposed Acquisition Transaction shall not include (i) the adoption by Enhabit of a shareholder rights plan or (ii) issuances by Enhabit that satisfy Safe Harbor VIII (relating to acquisitions in connection with a Person’s performance of services) or Safe Harbor IX (relating to acquisitions by a retirement plan of an employer) of Treasury Regulations Section 1.355-7(d).  For purposes of determining whether a transaction constitutes an indirect acquisition, any recapitalization resulting in a shift of voting power or any redemption of shares of stock shall be treated as an indirect acquisition of shares of stock by the non-exchanging shareholders.  This definition and the application thereof is intended to monitor compliance with Section 355(e) of the Code and shall be interpreted accordingly.  Any clarification of, or change in, the statute or Treasury Regulations promulgated under Section 355(e) of the Code shall be incorporated into this definition and its interpretation.

“Representation Letters” shall mean the representation letters and any other materials (including, without limitation, the Ruling Request and any related supplemental submissions to the IRS or other Tax Authority) delivered by, or on behalf of, Encompass, Enhabit or others to a Tax Advisor (or a Tax Authority) in connection with the issuance by such Tax Advisor (or Tax Authority) of a Tax Opinion/Ruling.

“Required Party” shall have the meaning set forth in Section 5.02(a).

“Responsible Company” shall mean, with respect to any Tax Return, the Company having responsibility for preparing and filing such Tax Return under this Agreement.

“Restriction Period” shall mean the period beginning on the date hereof and ending on the two-year anniversary of the Distribution Date.

“Retention Date” shall have the meaning set forth in Section 9.01.

“Ruling Request” shall mean the request for private letter rulings filed by Encompass on December 14, 2021 with the IRS (including all attachments, exhibits, and other materials submitted with such ruling request letter) and any amendments or supplements to such request.

“Second Internal Distribution” shall have the meaning set forth in the Recitals.

“Section 336(e) Election” shall have the meaning set forth in Section 7.06.

“Section 7.02(d) Acquisition Transaction” shall mean any transaction or series of transactions that is not a Proposed Acquisition Transaction but would be a Proposed Acquisition Transaction if the percentage reflected in the definition of Proposed Acquisition Transaction were 30% instead of 45%.
-7-

“Separate Return” shall mean (a) in the case of any Tax Return of any member of the Enhabit Group (including any consolidated, combined or unitary return), any such Tax Return that does not include any member of the Encompass Group, and (b) in the case of any Tax Return of any member of the Encompass Group (including any consolidated, combined or unitary return), any such Tax Return that does not include any member of the Enhabit Group.

“Separation” shall have the meaning set forth in the Recitals.

“Separation Agreement” shall have the meaning set forth in the Recitals.

“Separation Transactions” shall mean the Contribution, the Distributions, and the other transactions contemplated by the Separation Agreement and the Separation Step Plan.

“State Income Tax” shall mean any Tax imposed by any state of the United States (or by any political subdivision of any such state) or the District of Columbia, or any city, county, parish, authority or municipality located therein, that is imposed on or measured by net income, including state and local franchise or similar Taxes measured by net income, and any interest, penalties, additions to Tax or additional amounts in respect of the foregoing.

“State Other Tax” shall mean any Tax imposed by any state of the United States (or by any political subdivision of any such state) or the District of Columbia, or any city, county, parish, authority or municipality located therein, other than any State Income Taxes, and any interest, penalties, additions to Tax or additional amounts in respect of the foregoing.

“Straddle Period” shall mean any Tax Period that begins on or before and ends after the Distribution Date.

“Tax” or “Taxes” shall mean any income, gross income, gross receipts, profits, capital stock, franchise, withholding, payroll, social security, workers’ compensation, unemployment, unclaimed property, escheatment, disability, property, ad valorem, stamp, excise, severance, occupation, service, sales, use, license, lease, transfer, import, export, value-added, alternative minimum, estimated or other tax (including any fee, assessment or other charge in the nature of or in lieu of any tax) imposed by any Governmental Authority or political subdivision thereof, and any interest, penalties, additions to tax or additional amounts in respect of the foregoing.

“Tax Advisor” shall mean any Tax counsel or accountant of recognized national standing in the United States.

“Tax Advisor Dispute” shall have the meaning set forth in Section 14.

“Tax Attribute” shall mean a net operating loss, net capital loss, unused investment credit, unused foreign tax credit, excess charitable contribution, general business credit or any other Tax Item that could reduce a Tax.

“Tax Authority” shall mean, with respect to any Tax, the Governmental Authority or political subdivision thereof that imposes such Tax, and the agency (if any) charged with the collection of such Tax for such entity or subdivision.

“Tax Benefit” shall mean any reduction in liability for Tax as a result of any loss, deduction, refund, credit or other item reducing Taxes otherwise payable.
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“Tax Contest” shall mean an audit, review, examination, assessment or any other administrative or judicial proceeding with the purpose or effect of redetermining Taxes (including any administrative or judicial review of any claim for refund).

“Tax-Free Status” shall mean, (a) with respect to the Contribution and the First Internal Distribution, taken together, the qualification thereof (i) as a transaction described in Section 368(a)(1)(D) and Section 355(a) of the Code, (ii) in which the stock distributed thereby is “qualified property” for purposes of Sections 355(c)(2) and 361(c)(2) of the Code and (iii) in which Encompass, Enhabit and members of their respective Groups (as relevant) recognize no income or gain for Federal Income Tax purposes pursuant to Sections 355, 357, 361 and/or 1032 of the Code; (b) with respect to each of the Second Internal Distribution, the Third Internal Distribution and the Distribution, the qualification thereof (i) as a transaction described in Section 355(a) of the Code, (ii) as a transaction in which the stock distributed thereby is “qualified property” for purposes of Section 355(c)(2) of the Code, and (iii) as a transaction in which Encompass, Enhabit and members of their respective Groups (as relevant) recognize no income or gain for Federal Income Tax purposes pursuant to Section 355 of the Code, other than, in the case of the Distribution, intercompany items or excess loss accounts taken into account pursuant to the Treasury Regulations promulgated pursuant to Section 1502 of the Code; and (c) with respect to any other Separation Transaction that is covered by a Tax Opinion/Ruling addressing the Federal Income Tax treatment thereof, the qualification of such transaction for the Federal Income Tax treatment set forth in such Tax Opinion/Ruling.

“Tax Item” shall mean, with respect to any Income Tax, any item of income, gain, loss, deduction or credit.

“Tax Law” shall mean the law of any Governmental Authority or political subdivision thereof relating to any Tax.

“Tax Opinion/Ruling” shall mean each opinion of a Tax Advisor or ruling by the IRS or another Tax Authority delivered or issued to Encompass in connection with and regarding the Federal Income Tax treatment of the Separation Transactions.

“Tax Period” shall mean, with respect to any Tax, the period for which the Tax is reported as provided under the Code or other applicable Tax Law.

“Tax Records” shall mean any Tax Returns, Tax Return workpapers, documentation relating to any Tax Contests and any other books of account or records (whether or not in written, electronic or other tangible or intangible forms and whether or not stored on electronic or any other media) required to be maintained under the Code or other applicable Tax Laws or under any record retention agreement with any Tax Authority.

“Tax-Related Losses” shall mean (a) all Taxes imposed pursuant to (or any reduction in a refund resulting from) any settlement, Final Determination, judgment or otherwise; (b) all accounting, legal and other professional fees and court costs incurred in connection with such Taxes (or reduction in a refund); and (c) all costs, expenses and damages associated with stockholder litigation or controversies and any amount paid by Encompass (or any Encompass Affiliate) or Enhabit (or any Enhabit Affiliate) in respect of the liability of shareholders, whether paid to shareholders or to the IRS or any other Governmental Authority, in each case, resulting from the failure of the Tax-Free Status.
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“Tax Return” shall mean any report of Taxes due, any claim for refund of Taxes paid, any information return with respect to Taxes, or any other similar report, statement, declaration or document filed or required to be filed under the Code or other Tax Law, including any attachments, exhibits or other materials submitted with any of the foregoing, and including any amendments or supplements to any of the foregoing.

“Third Internal Distribution” shall have the meaning set forth in the Recitals.

“Treasury Regulations” shall mean the regulations promulgated from time to time under the Code as in effect for the relevant Tax Period.

“Unqualified Tax Opinion” shall mean an unqualified opinion of a Tax Advisor on which Encompass may rely to the effect that a transaction will not (a) affect the Tax-Free Status or (b) adversely affect any of the conclusions set forth in any Tax Opinion/Ruling regarding the Tax-Free Status; provided, that any tax opinion obtained in connection with a proposed acquisition of Capital Stock of Enhabit or HHH NewCo (and, in each case, any successor thereto) entered into during the Restriction Period shall not qualify as an Unqualified Tax Opinion unless such tax opinion concludes that such proposed acquisition will not be treated as “part of a plan (or series of related transactions),” within the meaning of Section 355(e) of the Code and the Treasury Regulations promulgated thereunder, that includes any of the Distributions.  Any such tax opinion must assume that the relevant Distribution(s) would have qualified for Tax-Free Status if the transaction in question did not occur.

Section 2.          Allocation of Tax Liabilities.

Section 2.01          General Rule.

(a)          Encompass Liability.  Encompass shall be liable for, and shall indemnify and hold harmless the Enhabit Group from and against any liability for, Taxes that are allocated to Encompass under this Section 2.

(b)          Enhabit Liability.  Enhabit shall be liable for, and shall indemnify and hold harmless the Encompass Group from and against any liability for, Taxes that are allocated to Enhabit under this Section 2.

Section 2.02          Allocation of Federal Income Tax and Federal Other Tax.  Except as otherwise provided in Section 2.05, Federal Income Tax and Federal Other Tax shall be allocated as follows:

(a)          Allocation of Tax Relating to Encompass Federal Consolidated Income Tax Returns.  With respect to any Encompass Federal Consolidated Income Tax Return (i) for any Pre-Distribution Period, (A) Encompass shall be responsible for any and all Federal Income Taxes due or required to be reported on any such Tax Return (including any increase in such Tax as a result of a Final Determination) reduced by the aggregate amount in respect of such Federal Income Taxes for which members of the Enhabit Group are or would be responsible with respect to such period pursuant to the Existing Tax Allocation Agreement (without giving effect to the termination thereof pursuant to Section 11 hereof) (“Enhabit Group Federal Consolidated Income Tax Sharing Payment”), and (B) Enhabit shall be responsible for the Enhabit Group Federal Consolidated Income Tax Sharing Payment (including any increase thereof as a result of a Final Determination); and (ii) for any Post-Distribution Period, Encompass shall be responsible for any and all Federal Income Taxes due or required to be reported on any such Tax Return (including any increase in such Tax as a result of a Final Determination).
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(b)          Allocation of Tax Relating to Federal Separate Income Tax Returns. (i) Encompass shall be responsible for any and all Federal Income Taxes due with respect to or required to be reported on any Encompass Separate Return and (ii) Enhabit shall be responsible for any and all Federal Income Taxes due with respect to or required to be reported on any Enhabit Separate Return (in each case, including any increase in such Tax as a result of a Final Determination).

(c)          Allocation of Federal Other Tax.  Federal Other Taxes (in each case, including any increase in such Tax as a result of a Final Determination) shall be allocated in a manner consistent with past practice, as reasonably determined by Encompass.

Section 2.03          Allocation of State Income and State Other Taxes.  Except as otherwise provided in Section 2.05, State Income Tax and State Other Tax shall be allocated as follows:

(a)          Allocation of Tax Relating to Encompass State Combined Income Tax Returns.  With respect to any Encompass State Combined Income Tax Return (i) for any Pre-Distribution Period, (A) Encompass shall be responsible for any and all State Income Taxes due with respect to or required to be reported on any such Tax Return (including any increase in such Tax as a result of a Final Determination) reduced by the aggregate amount in respect of such State Income Taxes for which members of the Enhabit Group are or would be responsible with respect to such period pursuant to the Existing Tax Allocation Agreement (without giving effect to the termination thereof pursuant to Section 11 hereof) (“Enhabit Group State Combined Income Tax Sharing Payment”), and (B) Enhabit shall be responsible for the Enhabit Group State Combined Income Tax Sharing Payment (including any increase thereof as a result of a Final Determination); and (ii) for any Post-Distribution Period, Encompass shall be responsible for any and all State Income Taxes due or required to be reported on any such Tax Return (including any increase in such Tax as a result of a Final Determination).

(b)          Allocation of Tax Relating to State Separate Income Tax Returns.  (i) Encompass shall be responsible for any and all State Income Taxes due with respect to or required to be reported on any Encompass Separate Return and (ii) Enhabit shall be responsible for any and all State Income Taxes due with respect to or required to be reported on any Enhabit Separate Return (in each case, including any increase in such Tax as a result of a Final Determination).

(c)          Allocation of State Other Tax.  State Other Taxes (in each case, including any increase in such Tax as a result of a Final Determination) shall be allocated in a manner consistent with past practice, as reasonably determined by Encompass.
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Section 2.04          Allocation of Foreign Taxes.  Except as otherwise provided in Section 2.05, Foreign Income Tax and Foreign Other Tax shall be allocated as follows:

(a)          Allocation of Tax Relating to Encompass Foreign Combined Income Tax Returns.  With respect to any Encompass Foreign Combined Income Tax Return (i) for any Pre-Distribution Period, (A) Encompass shall be responsible for any and all Foreign Income Taxes due with respect to or required to be reported on such Tax Return (including any increase in such Tax as a result of a Final Determination) reduced by the aggregate amount in respect of such Foreign Income Taxes that would be incurred by the Enhabit Group and/or its members for such Tax Period had the Enhabit Group and/or its members not been included in such Encompass Foreign Combined Income Tax Return (“Enhabit Group Foreign Combined Income Tax Sharing Payment”), and (B) Enhabit shall be responsible for the Enhabit Group Foreign Combined Income Tax Sharing Payment (including any increase thereof as a result of a Final Determination); and (ii) for any Post-Distribution Period, Encompass shall be responsible for any and all Foreign Income Taxes due or required to be reported on any such Tax Return (including any increase in such Tax as a result of a Final Determination).

(b)          Allocation of Tax Relating to Foreign Separate Income Tax Returns.  (i) Encompass shall be responsible for any and all Foreign Income Taxes due with respect to or required to be reported on any Encompass Separate Return and (ii) Enhabit shall be responsible for any and all Foreign Income Taxes due with respect to or required to be reported on any Enhabit Separate Return (in each case, including any increase in such Tax as a result of a Final Determination).

(c)          Allocation of Foreign Other Tax.  Foreign Other Taxes (in each case, including any increase in such Tax as a result of a Final Determination) shall be allocated in a manner consistent with past practice, as reasonably determined by Encompass.

Section 2.05          Certain Transaction and Other Taxes.

(a)          Enhabit Liability.  Enhabit shall be liable for, and shall indemnify and hold harmless the Encompass Group from and against any liability for:

(i)          any stamp, sales and use, gross receipts or other transfer Tax imposed by any Tax Authority on any member of the Enhabit Group (if such member is primarily liable for such Tax) on any transfers occurring pursuant to the Separation Transactions;

(ii)          any value-added or goods and services Tax imposed by any Tax Authority on any transfer occurring pursuant to the Separation Transactions to the extent any member of the Enhabit Group is the transferee with respect to the relevant transfer;

(iii)          any Tax (other than Tax-Related Losses) resulting from a breach by Enhabit of any covenant made by Enhabit (or any other member of the Enhabit Group) in this Agreement, the Separation Agreement or any Ancillary Agreement; and

(iv)          any Tax-Related Losses for which Enhabit is responsible pursuant to Section 7.05.

The amounts for which Enhabit is liable pursuant to Sections 2.05(a)(i), (ii), and (iii) shall include all accounting, legal and other professional fees and court costs incurred in connection with the relevant Taxes.
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(b)          Encompass Liability.  Encompass shall be liable for, and shall indemnify and hold harmless the Enhabit Group from and against any liability for:

(i)          any stamp, sales and use, gross receipts or other transfer Tax imposed by any Tax Authority on any member of the Encompass Group (if such member is primarily liable for such Tax) on any transfers occurring pursuant to the Separation Transactions;

(ii)          any value-added or goods and services Tax imposed by any Tax Authority on any transfer occurring pursuant to the Separation Transactions to the extent any member of the Encompass Group is the transferee with respect to the relevant transfer;

(iii)          any Tax (other than Tax-Related Losses) resulting from a breach by Encompass of any covenant made by Encompass (or any other member of the Encompass Group) in this Agreement, the Separation Agreement or any Ancillary Agreement; and

(iv)          any Tax-Related Losses for which Encompass is responsible pursuant to Section 7.05.

The amounts for which Encompass is liable pursuant to Sections 2.05(b)(i), (ii), and (iii) shall include all accounting, legal and other professional fees and court costs incurred in connection with the relevant Taxes.

Section 3.          Proration of Taxes for Straddle Periods.

(a)          General Method of Proration.  In the case of any Straddle Period, Tax Items shall be apportioned between Pre-Distribution Periods and Post-Distribution Periods in accordance with the principles of Treasury Regulations Section 1.1502-76(b) as reasonably interpreted and applied by Encompass.  With respect to the Encompass Federal Consolidated Income Tax Return for the Tax Period that includes the Distribution, Encompass may determine in its sole discretion whether to make a ratable allocation election under Treasury Regulations Section 1.1502-76(b)(2)(ii) with respect to Enhabit.  Enhabit shall, and shall cause each member of the Enhabit Group to, take all actions necessary to give effect to such election.

(b)          Distribution Treated as Extraordinary Items.  In determining the apportionment of Tax Items between Pre-Distribution Periods and Post-Distribution Periods, any Tax Items relating to the Distribution shall be treated as extraordinary items described in Treasury Regulations Section 1.1502-76(b)(2)(ii)(C) and shall (to the extent arising on or prior to the Distribution Date) be allocated to Pre-Distribution Periods, and any Taxes related to such items shall be treated under Treasury Regulations Section 1.1502-76(b)(2)(iv) as relating to such extraordinary item and shall (to the extent arising on or prior to the Distribution Date) be allocated to Pre-Distribution Periods.

Section 4.          Preparation and Filing of Tax Returns.

Section 4.01          General.  Except as otherwise provided in this Section 4, Tax Returns shall be prepared and filed when due (taking into account extensions) by the Person obligated to file such Tax Returns under the Code or applicable Tax Law.  The Companies shall, and shall cause their respective Affiliates to, provide assistance and cooperation to one another in accordance with Section 8 with respect to the preparation and filing of Tax Returns (including by providing information required to be provided pursuant to Section 8).
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Section 4.02          Encompass’s Responsibility.  Encompass has the exclusive obligation and right to prepare and file, or to cause to be prepared and filed:

(a)          Encompass Federal Consolidated Income Tax Returns for any Tax Periods;

(b)          Encompass State Combined Income Tax Returns, Encompass Foreign Combined Income Tax Returns and any other Joint Returns that Encompass reasonably determines are required to be filed (or that Encompass chooses to be filed) by the Companies or any of their Affiliates for any Tax Periods;

(c)          Encompass Separate Returns that Encompass reasonably determines are required to be filed by the Companies or any of their Affiliates for any Tax Periods; and

(d)          Enhabit Separate Returns that Encompass reasonably determines are required to be filed by the Companies or any of their Affiliates on or before the Distribution Date.

Section 4.03          Enhabit’s Responsibility.  Enhabit shall prepare and file, or shall cause to be prepared and filed, all Tax Returns required to be filed by or with respect to members of the Enhabit Group other than those Tax Returns that Encompass is required or entitled to prepare and file under Section 4.02.  The Tax Returns required to be prepared and filed by Enhabit under this Section 4.03 shall include (a) any Enhabit Federal Consolidated Income Tax Return for Tax Periods ending after the Distribution Date and (b) Enhabit Separate Returns required to be filed after the Distribution Date.  For the avoidance of doubt, the Parties’ rights and obligations under Sections 4.02 and 4.03 shall not be affected by any provisions of the Transition Services Agreement.

Section 4.04          Tax Accounting Practices.

(a)          General Rule.  Except as otherwise provided in Section 4.04(b), with respect to any Tax Return that Enhabit has the obligation and right to prepare and file, or cause to be prepared and filed, under Section 4.03, for any Pre-Distribution Period or any Straddle Period (or any Tax Period beginning after the Distribution Date to the extent items reported on such Tax Return could reasonably be expected to affect items reported on any Tax Return that Encompass has the obligation or right to prepare and file for any Pre-Distribution Period or any Straddle Period), such Tax Return shall be prepared in accordance with past practices, accounting methods, elections or conventions (“Past Practices”) used with respect to the Tax Returns in question (unless there is no reasonable basis for the use of such Past Practices), and to the extent any items are not covered by Past Practices (or in the event that there is no reasonable basis for the use of such Past Practices), in accordance with reasonable Tax accounting practices selected by Enhabit.  Except as otherwise provided in Section 4.04(b), Encompass shall prepare any Tax Return that it has the obligation or right to prepare and file, or cause to be prepared and filed, under Section 4.02 in accordance with reasonable Tax accounting practices selected by Encompass.
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(b)          Reporting of Transactions.  Except to the extent otherwise required (x) by a change in applicable law or (y) as a result of a Final Determination, (i) neither Encompass nor Enhabit shall (and neither shall permit or cause any member of its respective Group to) take any position that is inconsistent with the Tax-Free Status (or analogous status under state or local law) or with any of the Separation Transactions not described in the Tax Opinions/Rulings having the tax treatment described in the Separation Step Plan; provided, that in any case or with respect to any item where there is no relevant Tax Opinion/Ruling or description in the Separation Step Plan, the tax treatment of any of the Separation Transactions shall be as determined by Encompass in its sole and absolute discretion; and (ii) Enhabit shall not (and shall not permit or cause any member of the Enhabit Group to) take any position with respect to any material item of income, deduction, gain, loss, or credit on a Tax Return, or otherwise treat such item in a manner that is inconsistent with the manner such item is reported on a Tax Return permitted or required to be prepared or filed by Encompass pursuant to Section 4.02 (including, without limitation, the claiming of a deduction previously claimed on any such Tax Return).

Section 4.05          Consolidated or Combined Tax Returns.  Enhabit will elect and join, and will cause its Affiliates to elect and join, in filing any Encompass Federal Consolidated Income Tax Returns, Encompass State Combined Income Tax Returns, Encompass Foreign Combined Income Tax Returns, and any other Joint Returns that Encompass determines are required to be filed by the Companies or any of their Affiliates or that Encompass chooses to file pursuant to Section 4.02(a) and Section 4.02(b).  With respect to any Tax Returns relating to any Pre-Distribution Period, which Tax Returns would otherwise be Enhabit Separate Returns, Enhabit will elect and join, and will cause its respective Affiliates to elect and join, in filing consolidated, unitary, combined or other similar joint Tax Returns, to the extent each entity is eligible to join in such Tax Returns, upon Encompass’s request.

Section 4.06          Right to Review Tax Returns.

(a)          General.  The Responsible Company with respect to any material Tax Return shall make such Tax Return (or the relevant portions thereof) and related workpapers available for review by the other Company, if requested, to the extent the requesting party (i) is or would reasonably be expected to be liable, in whole or in part, for Taxes reflected on such Tax Return, (ii) is or would reasonably be expected to be liable, in whole or in part, for any additional Taxes owing as a result of adjustments to the amount of such Taxes reported on such Tax Return, (iii) has or would reasonably be expected to have a claim for Tax Benefits under this Agreement in respect of items reflected on such Tax Return, or (iv) reasonably requires such documents to confirm compliance with the terms of this Agreement; provided, however, that notwithstanding anything in this Agreement to the contrary, Encompass shall not be required to make any Encompass Federal Consolidated Income Tax Return or Encompass State Combined Income Tax Return available for review by Enhabit.  The Responsible Company shall use reasonable efforts to make such Tax Return (or the relevant portions thereof) and related workpapers available for review as required under this paragraph sufficiently in advance of the due date for filing such Tax Return to provide the requesting Party with a meaningful opportunity to review and comment on such Tax Return and shall consider such comments in good faith.  The Companies shall attempt in good faith to resolve any material disagreement arising out of the review of such Tax Return and, failing such resolution, any material disagreement shall be resolved in accordance with the provisions of Section 14 as promptly as practicable.
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(b)          Execution of Tax Returns Prepared by Other Party.  In the case of any Tax Return that is required to be prepared by one Company under this Agreement and that is required by law to be signed by the other Company (or by its authorized representative), the Company that is legally required to sign such Tax Return shall not be required to sign such Tax Return under this Agreement unless there is at least a “reasonable basis” (or comparable standard under state, local or foreign law) for the Tax treatment of each material item reported on the Tax Return.

Section 4.07          Enhabit Carrybacks and Claims for Refund.  Enhabit hereby agrees that, unless Encompass consents in writing, (i) no Adjustment Request with respect to any Joint Return (or any other Tax Return reflecting Taxes for which both Encompass and Enhabit are responsible under Section 2) shall be filed, and (ii) any available elections to waive the right to claim in any Pre-Distribution Period with respect to any Joint Return (or any other Tax Return reflecting Taxes for which both Encompass and Enhabit are responsible under Section 2) any Enhabit Carryback arising in a Post-Distribution Period shall be made, and no affirmative election shall be made to claim any such Enhabit Carryback; provided, however, that the Parties agree that any such Adjustment Request shall be made with respect to any Enhabit Carryback related to Federal or State Income Taxes, upon the reasonable request of Enhabit, if (x) such Enhabit Carryback is necessary to prevent the loss of the Federal and/or State Income Tax Benefit of such Enhabit Carryback (including, but not limited to, an Adjustment Request with respect to an Enhabit Carryback of a federal or state capital loss arising in a Post-Distribution Period to a Pre-Distribution Period) and (y) such Adjustment Request, based on Encompass’s sole determination, will cause no Tax detriment to Encompass, the Encompass Group or any member of the Encompass Group.  Any Adjustment Request to which Encompass consents under this Section 4.07 shall be prepared and filed by the Responsible Company with respect to the Tax Return to be adjusted.

Section 4.08          Apportionment of Earnings and Profits and Tax Attributes.

(a)          If the Encompass Affiliated Group has a Tax Attribute, the portion, if any, of such Tax Attribute apportioned to Enhabit or any member of the Enhabit Group and/or treated as a carryover to the first Post-Distribution Period of Enhabit (or such member) shall be determined by Encompass in accordance with Treasury Regulations Sections 1.1502-21, 1.1502‑21T, 1.1502-22, 1.1502-79 and, if applicable, 1.1502-79A.

(b)          No Tax Attribute with respect to any consolidated Federal Income Tax of the Encompass Affiliated Group, other than those described in Section 4.08(a), and no Tax Attribute with respect to any consolidated, combined or unitary State or Foreign Income Tax, in each case, arising in respect of a Joint Return, shall be apportioned to Enhabit or any member of the Enhabit Group, except as Encompass (or such member of the Encompass Group as Encompass shall designate) determines is otherwise required under applicable law.

(c)          To the extent required by applicable law or at Enhabit’s reasonable request, Encompass shall, or shall cause its designee to determine the portion, if any, of any Tax Attribute that must (absent a Final Determination to the contrary) be apportioned to Enhabit or any member of the Enhabit Group in accordance with this Section 4.08 and applicable law and the amount of Tax basis and earnings and profits to be apportioned to Enhabit or any member of the Enhabit Group in accordance with this Section 4.08 and applicable law, and shall provide written notice of a proposed calculation thereof to Enhabit as soon as reasonably practicable after Encompass or its designee prepares such calculation.  As soon as reasonably practicable following the delivery of such calculation, Enhabit shall provide written comments on such calculation to Encompass, which comments Encompass shall consider in good faith.  For the absence of doubt, Encompass shall not be liable to Enhabit or any member of the Enhabit Group for any failure of any determination under this Section 4.08 to be accurate or sustained under applicable law, including as the result of any Final Determination.  The costs of any earnings and profits, Tax basis or similar study necessary or appropriate to determine the apportionment of Tax Attributes hereunder shall be borne equally by Encompass and Enhabit.
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(d)          Any written notice delivered by Encompass pursuant to Section 4.08(c) shall be binding on Enhabit and each member of the Enhabit Group and shall not be subject to dispute resolution.  Except to the extent otherwise required by a change in applicable law or pursuant to a Final Determination, Enhabit shall not take any position (whether on a Tax Return or otherwise) that is inconsistent with the information contained in any such written notice.

Section 5.          Tax Payments.

Section 5.01          Payment of Taxes with Respect to Tax Returns.  Subject to Section 5.02, (a) the Responsible Company with respect to any Tax Return shall pay any Tax required to be paid to the applicable Tax Authority on or before the relevant Payment Date, and (b) in the case of any adjustment pursuant to a Final Determination with respect to any Tax Return, the Responsible Company shall pay to the applicable Tax Authority when due (taking into account any automatic or validly elected extensions, deferrals or postponements) any additional Tax due with respect to such Tax Return required to be paid as a result of such adjustment pursuant to a Final Determination.

Section 5.02          Indemnification Payments.

(a)          If any Company (the “Payor”) is required pursuant to Section 5.01 (or otherwise under applicable Tax Law) to pay to a Tax Authority a Tax for which another Company (the “Required Party”) is liable, in whole or in part, under this Agreement (including for the avoidance of doubt, any administrative or judicial deposit required to be paid by the Payor to a Tax Authority or other Governmental Authority to pursue any Tax Contest, to the extent the Required Party would be liable under this Agreement for any Tax resulting from such Tax Contest), the Required Party shall reimburse the Payor within 15 days of delivery by the Payor to the Required Party of an invoice for the amount due from the Required Party, accompanied by evidence of payment and a statement detailing the Taxes paid and describing in reasonable detail the particulars relating thereto.  If the amount to be paid by the Required Party pursuant to this Section 5.02 is in excess of $1 million, then the Required Party shall pay such amount to the Payor no later than the later of (i) seven business days after delivery by the Payor to the Required Party of an invoice for the amount due, accompanied by a statement detailing the Taxes required to be paid and describing in reasonable detail the particulars relating thereto, and (ii) three business days prior to the due date for the payment of such Tax (taking into account any automatic or validly elected extensions, deferrals or postponements).

(b)          All indemnification payments under this Agreement shall be made by Encompass directly to Enhabit and by Enhabit directly to Encompass; provided, however, that if the Companies mutually agree with respect to any such indemnification payment, (i) any member of the Encompass Group may make such indemnification payment to any member of the Enhabit Group and (ii) any member of the Enhabit Group may make such indemnification payment to any member of the Encompass Group.
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Section 6.          Tax Benefits.

Section 6.01          Tax Benefits.

(a)          Except as set forth below, (i) Encompass shall be entitled to any refund (and any interest thereon received from the applicable Tax Authority) of Income Taxes and Other Taxes for which Encompass is liable hereunder, (ii) Enhabit shall be entitled to any refund (and any interest thereon received from the applicable Tax Authority) of Income Taxes and Other Taxes for which Enhabit is liable hereunder, and (iii) a Company receiving a refund to which the other Company is entitled hereunder in whole or in part shall pay over such refund (or portion thereof), net of cost (including Taxes) resulting therefrom, to such other Company within 30 days after such refund is received; it being understood that, with respect to any refund (or interest thereon received from the applicable Tax Authority) of Taxes for which both Companies are liable under Section 7.05(c)(i), each Company shall be entitled to the portion of such refund (or interest thereon) that reflects its proportionate liability for such Taxes.

(b)          Notwithstanding anything in this Section 6.01 to the contrary and except as provided in Section 6.01(c), with respect to any Encompass Federal Consolidated Income Tax Return or Encompass State Combined Income Tax Return, to the extent any Tax Attribute arising in the Pre-Distribution Period and allocated to any member of the Enhabit Group is utilized on such Tax Return, Encompass shall pay to Enhabit in the year in which the Tax Attribute is utilized an amount equal to the actual Tax savings realized by the Encompass Affiliated Group, in accordance with Section 5 of the Existing Tax Allocation Agreement (without giving effect to the termination thereof pursuant to Section 13 thereof or Section 11 hereof).

(c)          If (i) a member of the Enhabit Group actually realizes in cash any Tax Benefit as a result of an adjustment pursuant to a Final Determination or reporting required by clause (x) or clause (y) of Section 4.04(b), in each case, that increases Taxes for which a member of the Encompass Group is liable hereunder (or reduces any Tax Attribute of a member of the Encompass Group) and such Tax Benefit would not have arisen but for such adjustment or reporting (determined on a “with and without” basis) or (ii) a member of the Encompass Group actually realizes in cash any Tax Benefit as a result of an adjustment pursuant to a Final Determination or reporting required by clause (x) or clause (y) of Section 4.04(b), in each case, that increases Taxes for which a member of the Enhabit Group is liable hereunder (or reduces any Tax Attribute of a member of the Enhabit Group) and such Tax Benefit would not have arisen but for such adjustment or reporting (determined on a “with and without” basis), then Enhabit or Encompass, as the case may be, shall make a payment to Encompass or Enhabit, as appropriate, within 30 days following such actual realization of the Tax Benefit, in an amount equal to such Tax Benefit actually realized in cash (including any Tax Benefit actually realized as a result of the payment); provided, however, that no Company (or any Affiliates of any Company) shall be obligated to make a payment otherwise required pursuant to this Section 6.01(c) to the extent making such payment would place such Company (or any of its Affiliates) in a less favorable net after-Tax position than such Company (or such Affiliate) would have been in if the relevant Tax Benefit had not been realized.  If a Company or one of its Affiliates pays over any amount pursuant to the preceding sentence and such Tax Benefit is subsequently disallowed or adjusted, the Parties shall promptly make appropriate payments (including in respect of any interest paid or imposed by any Tax Authority) to reflect such disallowance or adjustment.
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(d)          No later than 30 days after a Tax Benefit described in Section 6.01(c) is actually realized in cash by a member of the Encompass Group or a member of the Enhabit Group, Encompass (if a member of the Encompass Group actually realizes such Tax Benefit) or Enhabit (if a member of the Enhabit Group actually realizes such Tax Benefit) shall provide the other Company with a written calculation of the amount payable to such other Company by Encompass or Enhabit pursuant to this Section 6.  In the event that Encompass or Enhabit disagrees with any such calculation described in this Section 6.01(d), Encompass or Enhabit shall so notify the other Company in writing within 30 days of receiving such written calculation.  Encompass and Enhabit shall endeavor in good faith to resolve such disagreement, and, failing that, the amount payable under this Section 6 shall be determined in accordance with the provisions of Section 14 as promptly as practicable.

(e)          Enhabit shall be entitled to any refund that is attributable to, and would not have arisen but for, an Enhabit Carryback pursuant to the proviso set forth in Section 4.07; provided, however, that Enhabit shall indemnify and hold the members of the Encompass Group harmless from and against any and all collateral Tax consequences resulting from or caused by any such Enhabit Carryback, including (but not limited to) the loss or postponement of any benefit from the use of Tax Attributes generated by a member of the Encompass Group or an Affiliate thereof if (x) such Tax Attributes expire unutilized, but would have been utilized but for such Enhabit Carryback, or (y) the use of such Tax Attributes is postponed to a later Tax Period than the Tax Period in which such Tax Attributes would have been utilized but for such Enhabit Carryback.  Any such payment of such refund made by Encompass to Enhabit pursuant to this Section 6.01(e) shall be recalculated in light of any Final Determination (or any other facts that may arise or come to light after such payment is made, such as a carryback of an Encompass Group Tax Attribute to a Tax Period in respect of which such refund is received) that would affect the amount to which Enhabit is entitled, and an appropriate adjusting payment shall be made by Enhabit to Encompass such that the aggregate amount paid pursuant to this Section 6.01(e) equals such recalculated amount.

Section 6.02          Encompass and Enhabit Income Tax Deductions in Respect of Certain Equity Awards and Incentive Compensation.

(a)          Allocation of Deductions.  To the extent permitted by applicable law, Income Tax deductions arising by reason of exercises of options or vesting or settlement of restricted stock units, restricted stock, or performance share units, in each case, following the Distribution, with respect to Encompass stock or Enhabit stock (such options, restricted stock units, restricted stock, and performance share units, collectively, “Compensatory Equity Interests”) held by any Person shall be claimed (i) in the case of an Encompass Group Employee or Former Encompass Group Employee, solely by the Encompass Group, (ii) in the case of an Enhabit Group Employee or Former Enhabit Group Employee, solely by the Enhabit Group, and (iii) in the case of a non-employee director (solely with respect to Compensatory Equity Interests received in his or her capacity as a director), by the Company that issued such Compensatory Equity Interests.

(b)          Withholding and Reporting.  Each Company entitled to claim the Tax deductions described in Section 6.02(a) with respect to Compensatory Equity Interests shall be responsible for all applicable Taxes (including, but not limited to, withholding and excise Taxes) and shall satisfy, or shall cause to be satisfied, all applicable Tax reporting obligations with respect to such Compensatory Equity Interests; provided, however, that such Company shall be entitled to receive, within 10 days following the event giving rise to the relevant deduction, any amounts collected (or deemed collected) by the issuing corporation or any of its Affiliates or agents from or on behalf of a holder of the applicable Compensatory Equity Interests in respect of Taxes required to be paid by such holder in connection with the exercise, vesting or settlement thereof (including any payments made by such holder to the issuing corporation, any proceeds from the sale of underlying equity securities on behalf of such holder, or the fair market value of any equity securities withheld by the issuing corporation in respect of such holder’s Taxes by way of “net” settlement).
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Section 7.          Tax-Free Status.

Section 7.01          Representations.

(a)          Each of Encompass and Enhabit hereby represents and warrants that (i) it has reviewed the Representation Letters and the Tax Opinions/Rulings and (ii) subject to any qualifications therein, all information, representations and covenants contained therein that relate to such Company or any member of its Group are true, correct and complete.

(b)          Enhabit hereby represents and warrants that it has no plan or intention of taking any action, or failing to take any action (or causing or permitting any member of its Group to take or fail to take any action), and does not know of any circumstance, that could reasonably be expected to (i) adversely affect the Tax-Free Status or (ii) cause any representation, covenant or factual statement made in this Agreement, the Separation Agreement, the Representation Letters, the Tax Opinions/Rulings, or any of the Ancillary Agreements to be untrue.

(c)          Enhabit hereby represents and warrants that, during the two-year period ending on the date hereof, there was no “agreement, understanding, arrangement, substantial negotiations or discussions” (as such terms are defined in Treasury Regulations Section 1.355‑7(h)) by any one or more officers or directors of any member of the Enhabit Group or by any other Person or Persons with the implicit or explicit permission of one or more of such officers or directors regarding an acquisition of all or a significant portion of the Enhabit Capital Stock (or the Capital Stock of any Enhabit predecessor); provided, however, that no representation is made regarding any “agreement, understanding, arrangement, substantial negotiations or discussions” (as such terms are defined in Treasury Regulations Section 1.355-7(h)) by any one or more officers or directors of Encompass (or by any other Person or Persons with the implicit or explicit permission of one or more of such officers or directors).

Section 7.02          Restrictions on Enhabit.  Enhabit agrees that:

(a)          Enhabit will not take or fail to take, and will not cause or permit any of its Affiliates to take or fail to take, any action where such action or failure to act would be inconsistent with or cause to be untrue any material, information, covenant or representation in this Agreement, the Separation Agreement, any of the Ancillary Agreements, any Representation Letter or any Tax Opinion/Ruling.  Enhabit will not take or fail to take, and will not cause or permit any of its Affiliates to take or fail to take, any action where such action or failure to act would, or could reasonably be expected to, adversely affect the Tax-Free Status.
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(b)          From the date hereof until the first day after the Restriction Period, Enhabit will (and will cause its “separate affiliated group” (as defined in Section 355(b)(3)(B) of the Code) to) (i) maintain the active conduct (as defined in Section 355(b)(2) of the Code and the Treasury Regulations promulgated thereunder) of the Enhabit Active Business and (ii) not engage in any transaction that would or reasonably could result in it ceasing to be engaged in such Enhabit Active Business for purposes of Section 355(b)(2) of the Code. Enhabit further agrees that, from the date hereof until the first day after the Restriction Period, it will cause HHH NewCo (and its “separate affiliated group” (as defined in Section 355(b)(3)(B) of the Code)) to (x) maintain the active conduct (as defined in Section 355(b)(2) of the Code and the Treasury Regulations promulgated thereunder) of the Enhabit Active Business and (y) not engage in any transaction that would or reasonably could result in HHH NewCo ceasing to be engaged in such Enhabit Active Business for purposes of Section 355(b)(2) of the Code.

(c)          From the date hereof until the first day after the Restriction Period, Enhabit will not:

(i)          enter into any Proposed Acquisition Transaction or, to the extent Enhabit has the right to prohibit any Proposed Acquisition Transaction, permit any Proposed Acquisition Transaction to occur (whether by (A) redeeming rights under a shareholder rights plan, (B) finding a tender offer to be a “permitted offer” under any such plan or otherwise causing any such plan to be inapplicable or neutralized with respect to any Proposed Acquisition Transaction, or (C) approving any Proposed Acquisition Transaction, whether for purposes of Section 203 of the DGCL or any similar corporate statute, any “fair price” or other provision of Enhabit’s charter or bylaws or otherwise),

(ii)          merge or consolidate with any other Person or liquidate or partially liquidate,

(iii)          in a single transaction or series of transactions, (A) sell or transfer to any Person that is not a member of Enhabit’s “separate affiliated group” (as defined in Section 355(b)(3)(B) of the Code) 30% or more of the gross assets of the Enhabit Active Business, or (B) sell or transfer 30% or more of the consolidated gross assets of Enhabit and its Affiliates (in each case, such percentages to be measured based on fair market value as of the Distribution Date),

(iv)          redeem or otherwise repurchase (directly or through an Enhabit Affiliate) any Enhabit Capital Stock or rights to acquire Enhabit Capital Stock, except to the extent such repurchases satisfy Section 4.05(1)(b) of Revenue Procedure 96-30 (as in effect prior to the amendment by Revenue Procedure 2003-48),

(v)          amend its certificate of incorporation (or other organizational documents), or take any other action, whether through a stockholder vote or otherwise, affecting the voting rights of Enhabit Capital Stock (including, without limitation, through the conversion of one class of Enhabit Capital Stock into another class of Enhabit Capital Stock),

(vi)          take any other action or actions (including any action or transaction that would be reasonably likely to be inconsistent with any representation or covenant made or to be made in any Representation Letter or any Tax Opinion/Ruling) that, in the aggregate (and taking into account any other transactions described in this Section 7.02(c)), would be reasonably likely to have the effect of causing or permitting one or more Persons to acquire, directly or indirectly, Enhabit Capital Stock representing a Fifty-Percent or Greater Interest in Enhabit or otherwise jeopardize the Tax‑Free Status, or
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(vii)          cause or permit HHH NewCo to (A) take any action or enter into any transaction described in the preceding clauses (i), (ii), (iii), (iv), (v), or (vi) (substituting references therein to “Enhabit” and “Enhabit Capital Stock” with references to HHH NewCo and the Capital Stock of HHH NewCo), or (B) in a single transaction or series of transactions, sell or transfer or cause or permit any of its Affiliates to sell or transfer (other than sales or transfers of inventory in the ordinary course of business) all or substantially all of the assets that were transferred to HHH NewCo pursuant to the Contribution,

unless, in each case, prior to taking any such action set forth in the foregoing clauses (i) through (vii), (x) Enhabit shall have requested that Encompass obtain a private letter ruling (or, if applicable, a supplemental private letter ruling) from the IRS and/or any other applicable Tax Authority in accordance with Section 7.04(b) and (d) to the effect that such transaction will not affect the Tax-Free Status, and Encompass shall have received such a private letter ruling in form and substance satisfactory to Encompass in its sole and absolute discretion (and in determining whether a private letter ruling is satisfactory, Encompass may consider, among other factors, the appropriateness of any underlying assumptions and management’s representations made in connection with such private letter ruling), (y) Enhabit shall have provided Encompass with an Unqualified Tax Opinion in form and substance satisfactory to Encompass in its sole and absolute discretion (and in determining whether an opinion is satisfactory, Encompass may consider, among other factors, the appropriateness of any underlying assumptions and management’s representations if used as a basis for the opinion and Encompass may determine that no opinion would be acceptable to Encompass), or (z) Encompass shall have waived in writing (which waiver may be withheld or granted by Encompass, in its sole and absolute discretion) the requirement to obtain such private letter ruling or Unqualified Tax Opinion.

(d)          Certain Acquisitions of Enhabit Capital Stock.  If Enhabit proposes to enter into any Section 7.02(d) Acquisition Transaction or, to the extent Enhabit has the right to prohibit any Section 7.02(d) Acquisition Transaction, proposes to permit any Section 7.02(d) Acquisition Transaction to occur, in each case, during the period from the date hereof until the first day after the Restriction Period, then Enhabit shall provide Encompass, no later than 10 days following the signing of any written agreement with respect to the Section 7.02(d) Acquisition Transaction, with a written description of such transaction (including the type and amount of Enhabit Capital Stock to be issued in such transaction) and a certificate of the chief financial officer of Enhabit to the effect that the Section 7.02(d) Acquisition Transaction is not a Proposed Acquisition Transaction or any other transaction to which the requirements of Section 7.02(c) apply (an “Enhabit CFO Certificate”).

Section 7.03          Restrictions on Encompass.  Encompass agrees that (a) it will not take or fail to take, or cause or permit any member of the Encompass Group to take or fail to take, any action where such action or failure to act would be inconsistent with or cause to be untrue any material, information, covenant or representation in this Agreement, the Separation Agreement, any of the Ancillary Agreements, any Representation Letter, or any Tax Opinion/Ruling, and (b) it will not take or fail to take, or cause or permit any member of the Encompass Group to take or fail to take, any action where such action or failure to act would reasonably be expected to adversely affect the Tax-Free Status.
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Section 7.04          Procedures Regarding Opinions and Rulings.

(a)          Following the Distribution Date, if Enhabit notifies Encompass that it desires to take one of the actions described in clauses (i) through (vii) of Section 7.02(c), as applicable (a “Notified Action”), Encompass and Enhabit shall reasonably cooperate to attempt to obtain the private letter ruling or Unqualified Tax Opinion referred to in Section 7.02(c), unless Encompass shall have waived the requirement to obtain such private letter ruling or Unqualified Tax Opinion.

(b)          Rulings or Unqualified Tax Opinions at Enhabit’s Request.  At the reasonable request of Enhabit pursuant to Section 7.02(c), Encompass shall cooperate with Enhabit and use commercially reasonable efforts to seek to obtain, as expeditiously as reasonably practicable, a private letter ruling from the IRS (and/or any other applicable Tax Authority, or if applicable, a supplemental private letter ruling) or an Unqualified Tax Opinion for the purpose of permitting Enhabit to take the Notified Action.  In no event shall Encompass be required to file any request for a private letter ruling under this Section 7.04(b) unless Enhabit represents that (i) it has reviewed the request for such private letter ruling, and (ii) all statements, information and representations, if any, relating to any member of the Enhabit Group, contained in the related documents are (subject to any qualifications therein) true, correct and complete.  Enhabit shall reimburse Encompass for all reasonable costs and expenses incurred by the Encompass Group, including out-of-pocket expenses and expenses relating to the utilization of Encompass personnel, in obtaining a private letter ruling or Unqualified Tax Opinion requested by Enhabit within 10 business days after receiving an invoice from Encompass therefor.

(c)          Rulings or Unqualified Tax Opinions at Encompass’s Request.  Encompass shall have the right to seek a private letter ruling (or other ruling) from the IRS (and/or any other applicable Tax Authority, or if applicable, a supplemental private letter ruling or other ruling) concerning any Separation Transaction (including the impact of any subsequent transaction thereon) or an Unqualified Tax Opinion (or other opinion of a Tax Advisor) with respect to any of the Separation Transactions at any time in its sole and absolute discretion.  If Encompass determines to seek such a private letter ruling (or other ruling) or an Unqualified Tax Opinion (or other opinion), Enhabit shall (and shall cause each of its Affiliates to) cooperate with Encompass and take any and all actions reasonably requested by Encompass in connection with obtaining the private letter ruling (or other ruling) or Unqualified Tax Opinion (or other opinion) (including, without limitation, by making any representation or covenant or providing any materials or information requested by the IRS (and/or any other applicable Tax Authority) or any Tax Advisor; provided, that Enhabit shall not be required to make (or cause any of its Affiliates to make) any representation or covenant that is inconsistent with historical facts or as to future matters or events over which it has no control).  Encompass and Enhabit shall each bear its own costs and expenses in obtaining such a private letter ruling (or other ruling) or an Unqualified Tax Opinion (or other opinion) requested by Encompass.

(d)          Ruling Process Control.  Enhabit hereby agrees that Encompass shall have sole and exclusive control over the process of obtaining any private letter ruling (or other ruling) regarding any Separation Transaction, and that only Encompass shall be permitted to apply for such a private letter ruling (or other ruling).  In connection with obtaining a private letter ruling pursuant to Section 7.04(b), Encompass shall (i) keep Enhabit informed in a timely manner of all material actions taken or proposed to be taken by Encompass in connection therewith; (ii) (A) reasonably in advance of the submission of any related private letter ruling documents, provide Enhabit with a draft copy thereof, (B) reasonably consider Enhabit’s comments on such draft copy, and (C) provide Enhabit with a final copy of such documents; and (iii) provide Enhabit with notice reasonably in advance of, and Enhabit shall have the right to attend, any formally scheduled meetings with the IRS (or other applicable Tax Authority) (subject to the approval of the IRS (or other applicable Tax Authority)) that relate to such private letter ruling request.  Neither Enhabit nor any of its directly or indirectly controlled Affiliates shall seek any guidance from the IRS or any other Tax Authority (whether written, oral or otherwise) at any time concerning any Separation Transaction (including the impact of any subsequent transaction thereon).
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Section 7.05          Liability for Tax-Related Losses.

(a)          Notwithstanding anything in this Agreement or the Separation Agreement to the contrary, subject to Section 7.05(c), Enhabit shall be responsible for, and shall indemnify and hold harmless Encompass and its Affiliates and each of their respective officers, directors and employees from and against, 100% of any Tax-Related Losses that are attributable to or result from any one or more of the following:  (i) the acquisition after the Distribution of all or a portion of Enhabit’s Capital Stock and/or its or its Subsidiaries’ stock or assets by any means whatsoever by any Person, (ii) any action or failure to act by Enhabit or any Enhabit Affiliate after the Distribution (including, without limitation, any amendment to Enhabit’s certificate of incorporation (or other organizational documents), whether through a stockholder vote or otherwise) affecting the voting rights of Enhabit Capital Stock (including, without limitation, through the conversion of one class of Enhabit Capital Stock into another class of Enhabit Capital Stock), or (iii) any act or failure to act or breach of any covenant by Enhabit or any Enhabit Affiliate described in Section 7.02 (regardless of whether such act or failure to act is covered by a private letter ruling, Unqualified Tax Opinion or waiver described in clause (x), (y) or (z) of Section 7.02(c) or an Enhabit CFO Certificate described in Section 7.02(d)).

(b)          Notwithstanding anything in this Agreement or the Separation Agreement to the contrary, subject to Section 7.05(c), Encompass shall be responsible for, and shall indemnify and hold harmless Enhabit, its Affiliates and its officers, directors and employees from and against, 100% of any Tax-Related Losses that are attributable to or result from any one or more of the following:  (i) the acquisition after the Distribution of all or a portion of Encompass’s Capital Stock and/or its or its Subsidiaries’ stock or assets by any means whatsoever by any Person, or (ii) any act or failure to act or breach of any covenant by Encompass or a member of the Encompass Group described in Section 7.03.

(c)

(i)          To the extent that any Tax-Related Loss is subject to indemnification  under both of Section 7.05(a) and Section 7.05(b), responsibility for such Tax-Related Loss shall be shared by Enhabit and Encompass according to relative fault.

(ii)          Notwithstanding anything in Section 7.05(b), Section 7.05(c)(i) or any other provision of this Agreement or the Separation Agreement to the contrary:

(A)          with respect to any Tax-Related Loss resulting, in whole or in part, from an acquisition after the Distribution of any Capital Stock or assets of Enhabit or any Enhabit Affiliate by any means whatsoever by any Person or any action or failure to act by Enhabit after the Distribution affecting the voting rights of Enhabit, Enhabit shall be responsible for, and shall indemnify and hold harmless Encompass and its Affiliates and each of their officers, directors and employees from and against, 100% of such Tax-Related Loss; and
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(B)          for purposes of calculating the amount and timing of any Tax-Related Loss for which Enhabit is responsible under this Section 7.05, Tax-Related Losses shall be calculated by assuming that Encompass, the Encompass Group, and each member of the Encompass Group (1) pay Tax at the highest marginal corporate Tax rates in effect in each relevant Tax Period and (2) have no Tax Attributes in any relevant Tax Period.

(iii)          Notwithstanding anything in Section 7.05(a), Section 7.05(c)(i) or any other provision of this Agreement or the Separation Agreement to the contrary, with respect to any Tax-Related Loss resulting, in whole or in part, from an acquisition after the Distribution of any stock or assets of Encompass or any Encompass Affiliate by any means whatsoever by any Person, Encompass shall be responsible for, and shall indemnify and hold harmless Enhabit, its Affiliates and its officers, directors and employees from and against, 100% of such Tax-Related Loss.

(d)          Notwithstanding any other provision of this Agreement or the Separation Agreement to the contrary:

(i)          Enhabit shall pay Encompass the amount for which Enhabit has an indemnification obligation under this Section 7.05:  (A) in the case of Tax-Related Losses described in clause (a) of the definition of Tax-Related Losses, no later than the later of (x) seven business days after delivery by Encompass to Enhabit of an invoice for the amount of such Tax-Related Losses or (y) three business days prior to the date Encompass files, or causes to be filed, the applicable Tax Return for the year of the relevant transaction, as applicable (provided, that if such Tax-Related Losses arise pursuant to a Final Determination described in clause (a), (b) or (c) of the definition of Final Determination, then Enhabit shall pay Encompass no later than the later of (x) seven business days after delivery by Encompass to Enhabit of an invoice for the amount of such Tax-Related Losses or (y) three business days prior to the date for making payment with respect to such Final Determination); and (B) in the case of Tax-Related Losses described in clause (b) or (c) of the definition of Tax-Related Losses, no later than the later of (x) seven business days after delivery by Encompass to Enhabit of an invoice for the amount of such Tax-Related Losses or (y) two business days after the date Encompass pays such Tax-Related Losses.

(ii)          Encompass shall pay Enhabit the amount for which Encompass has an indemnification obligation under this Section 7.05:  (A) in the case of Tax-Related Losses described in clause (a) of the definition of Tax-Related Losses, no later than the later of (x) seven business days after delivery by Enhabit to Encompass of an invoice for the amount of such Tax-Related Losses or (y) three business days prior to the date Enhabit files, or causes to be filed, the applicable Tax Return for the year of the relevant transaction, as applicable (provided, that if such Tax-Related Losses arise pursuant to a Final Determination described in clause (a), (b) or (c) of the definition of Final Determination, then Encompass shall pay Enhabit no later than the later of (x) seven business days after delivery by Enhabit to Encompass of an invoice for the amount of such Tax-Related Losses or (y) three business days prior to the date for making payment with respect to such Final Determination); and (B) in the case of Tax-Related Losses described in clause (b) or (c) of the definition of Tax-Related Losses, no later than the later of (x) seven business days after delivery by Enhabit to Encompass of an invoice for the amount of such Tax-Related Losses or (y) two business days after the date Enhabit pays such Tax-Related Losses.
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Section 7.06          Section 336(e) Election.  If Encompass determines, in its sole discretion, that a protective election under Section 336(e) of the Code (a “Section 336(e) Election”) shall be made with respect to the Distribution, Enhabit shall (and shall cause any relevant member of the Enhabit Group to) join with Encompass and/or any relevant member of the Encompass Group in the making of such election and shall take any action reasonably requested by Encompass or that is otherwise necessary to give effect to such election (including making any other related election).  If a Section 336(e) Election is made with respect to the Distribution, then this Agreement shall be amended in such a manner as is determined by Encompass in good faith to take into account such Section 336(e) Election, including by requiring that, in the event (i) the Distribution fails to have Tax-Free Status, (ii) Enhabit does not have exclusive responsibility pursuant to this Agreement for the Tax-Related Losses arising from such failure, and (iii) Enhabit actually realizes in cash a Tax Benefit from the step-up in Tax basis resulting from the Section 336(e) Election, Enhabit shall pay over to Encompass any such Tax Benefits realized (provided, that if such Tax-Related Losses are Taxes for which more than one Company is liable under Section 7.05(c)(i), Enhabit shall pay over to Encompass the percentage of any such Tax Benefits realized that corresponds to Encompass’s percentage share of such Taxes).

Section 8.          Assistance and Cooperation.

Section 8.01          Assistance and Cooperation.

(a)          Each of the Companies shall provide (and shall cause its Affiliates to provide) the other Company and its agents, including accounting firms and legal counsel, with such cooperation or information as such other Company may reasonably request in connection with (i) preparing and filing Tax Returns, (ii) determining the liability for and amount of any Taxes due (including estimated Taxes) or the right to and amount of any refund of Taxes, (iii) examinations of Tax Returns, and (iv) any administrative or judicial proceeding in respect of Taxes assessed or proposed to be assessed.  Such cooperation shall include making available, upon reasonable notice, all information and documents in their possession relating to the other Company and its Affiliates as provided in Section 9.  Each of the Companies shall also make available to the other Company, as reasonably requested and available, personnel (including employees and agents of the Companies or their respective Affiliates) responsible for preparing, maintaining and interpreting information and documents relevant to Taxes.

(b)          Any information or documents provided under this Section 8 or Section 9 shall be kept confidential by the Company receiving the information or documents, except as may otherwise be necessary in connection with the filing of Tax Returns or in connection with any administrative or judicial proceedings relating to Taxes.  Notwithstanding any other provision of this Agreement or any other agreement, (i) neither Encompass nor any Encompass Affiliate shall be required to provide Enhabit or its Affiliates or any other Person access to or copies of any information, documents or procedures other than information, documents or procedures that relate solely to Enhabit, the business or assets of Enhabit or any Affiliate of Enhabit and (ii) in no event shall Encompass or any Encompass Affiliate be required to provide Enhabit, its Affiliates or any other Person access to or copies of any information or documents if such action could reasonably be expected to result in the waiver of any Privilege.  In addition, in the event that Encompass determines that the provision of any information to Enhabit or its Affiliates could be commercially detrimental, violate any law or agreement or waive any Privilege, the Parties shall use reasonable best efforts to permit compliance with their obligations under this Section 8 or Section 9 in a manner that avoids any such harm or consequence.
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Section 8.02          Income Tax Return Information.  Encompass and Enhabit acknowledge that time is of the essence in relation to any request for information, assistance or cooperation made by Enhabit or Encompass pursuant to Section 8.01 or this Section 8.02.  Encompass and Enhabit acknowledge that failure to comply with the deadlines set forth herein or reasonable deadlines otherwise set by Enhabit or Encompass could cause irreparable harm.  Each Company shall provide to the other Company information and documents relating to its Group required by the other Company to prepare its Tax Returns.  Any information or documents required by the Responsible Company shall be provided in such form as the Responsible Company reasonably requests and in sufficient time for such Tax Returns to be filed on a timely basis; provided, that this Section 8.02 shall not apply to information governed by Section 4.08.

Section 8.03          Reliance by Encompass.  If any member of the Enhabit Group supplies information to a member of the Encompass Group in connection with a Tax liability and an officer of a member of the Encompass Group signs a statement or other document under penalties of perjury in reliance upon the accuracy of such information, then, upon the written request of such member of the Encompass Group identifying the information being so relied upon, the chief financial officer of Enhabit (or any officer of Enhabit as designated by the chief financial officer of Enhabit) shall certify in writing that to his or her knowledge (based upon consultation with appropriate employees), the information so supplied is accurate and complete.  Enhabit agrees to indemnify and hold harmless each member of the Encompass Group and its directors, officers and employees from and against any fine, penalty or other cost or expense of any kind attributable to a member of the Enhabit Group having supplied, pursuant to this Section 8, a member of the Encompass Group with inaccurate or incomplete information (regardless of whether the written certification contemplated by this Section was requested or received).

Section 8.04          Reliance by Enhabit.  If any member of the Encompass Group supplies information to a member of the Enhabit Group in connection with a Tax liability and an officer of a member of the Enhabit Group signs a statement or other document under penalties of perjury in reliance upon the accuracy of such information, then, upon the written request of such member of the Enhabit Group identifying the information being so relied upon, the chief financial officer of Encompass (or any officer of Encompass as designated by the chief financial officer of Encompass) shall certify in writing that to his or her knowledge (based upon consultation with appropriate employees), the information so supplied is accurate and complete.  Encompass agrees to indemnify and hold harmless each member of the Enhabit Group and its directors, officers and employees from and against any fine, penalty or other cost or expense of any kind attributable to a member of the Encompass Group having supplied, pursuant to this Section 8, a member of the Enhabit Group with inaccurate or incomplete information (regardless of whether the written certification contemplated by this Section was requested or received); provided, that this Section 8.04 shall not apply to information governed by Section 4.08.
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Section 9.          Tax Records.

Section 9.01          Retention of Tax Records.  Each Company shall preserve and keep all Tax Records exclusively relating to the assets and activities of its Group for Pre-Distribution Periods, and Encompass shall preserve and keep all other Tax Records relating to Taxes of the Groups for Pre-Distribution Periods, for so long as the contents thereof may become material in the administration of any matter under the Code or other applicable Tax Law, but in any event until the later of (a) the expiration of any applicable statutes of limitations (taking into account extensions), or (b) seven years after the Distribution Date (such later date, the “Retention Date”).  After the Retention Date, each Company may dispose of such Tax Records upon 90 days’ prior written notice to the other Company.  If, prior to the Retention Date, a Company reasonably determines that any Tax Records that it would otherwise be required to preserve and keep under this Section 9 are no longer material in the administration of any matter under the Code or other applicable Tax Law and the other Company agrees, then such first Company may dispose of such Tax Records upon 90 days’ prior notice to the other Company.  Any notice of an intent to dispose given pursuant to this Section 9.01 shall include a list of the Tax Records to be disposed of describing in reasonable detail the files, books or other records being disposed.  The notified Company shall have the opportunity, at its cost and expense, to copy or remove, within such 90-day period, all or any part of such Tax Records.

Section 9.02          Access to Tax Records.  The Companies and their respective Affiliates shall make available to each other for inspection and copying/scanning during normal business hours upon reasonable notice all Tax Records for Pre-Distribution Periods or Straddle Periods to the extent reasonably required by the other Company in connection with the preparation of financial accounting statements, audits, litigation or the resolution of items under this Agreement.

Section 10.          Tax Contests.

Section 10.01          Notice.  Each of the Companies shall provide prompt notice to the other of any written communication from a Tax Authority regarding any pending or threatened Tax audit, assessment or proceeding or other Tax Contest of which it becomes aware for which it may be entitled to indemnification by the other Company hereunder.  Such notice shall include copies of the pertinent portion of any written communication from the relevant Tax Authority and contain factual information (to the extent known) describing any asserted Tax liability and/or other relevant Tax matters in reasonable detail.  The failure of one Company to notify the other of such communication in accordance with the immediately preceding sentences shall not relieve such other Company of any liability or obligation to pay such Tax or make indemnification payments under this Agreement, except to the extent that the failure timely to provide such notification actually prejudices the ability of such other Company to contest such Tax liability (or contest any determination in respect of any Tax Benefit) or increases the amount of such Tax liability (or reduces the amount of such Tax Benefit).

Section 10.02          Control of Tax Contests.

(a)          Separate Company Taxes.  In the case of any Tax Contest with respect to any Separate Return, the Company having liability for the Tax pursuant to Section 2 shall have exclusive control over such Tax Contest, including exclusive authority with respect to any settlement of such Tax liability, subject to Section 10.02(d).
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(b)          Encompass Federal Consolidated Income Tax Return, Encompass State Combined Income Tax Return and Encompass Foreign Combined Income Tax Return.  In the case of any Tax Contest with respect to any Encompass Federal Consolidated Income Tax Return, Encompass State Combined Income Tax Return or Encompass Foreign Combined Income Tax Return, Encompass shall have exclusive control over the Tax Contest, including exclusive authority with respect to any settlement of such Tax liability, subject to Section 10.02(d)(i).

(c)          Other Joint Returns and Certain Other Tax Returns.  In the case of any Tax Contest with respect to any Joint Return (other than any Encompass Federal Consolidated Income Tax Return, Encompass State Combined Income Tax Return or Encompass Foreign Combined Income Tax Return) or any Taxes allocated pursuant to Section 2.02(c) or Section 2.03(c) hereof, (i) Encompass shall control the defense or prosecution of the portion of the Tax Contest, if any, directly and exclusively related to any Encompass Adjustment, including settlement of any such Encompass Adjustment, (ii) Enhabit shall control the defense or prosecution of the portion of the Tax Contest, if any, directly and exclusively related to any Enhabit Adjustment, including settlement of any such Enhabit Adjustment, and (iii) Encompass and Enhabit shall jointly control the defense or prosecution of Joint Adjustments and any and all administrative matters not directly and exclusively related to any Encompass Adjustment or Enhabit Adjustment.  In the event of any disagreement regarding any matter described in clause (iii), the provisions of Section 14 shall apply.

(d)          Distribution-Related Tax Contests.

(i)          In the event of any:

(A)          Distribution-Related Tax Contest as a result of which Enhabit could reasonably be expected to become liable for any Tax or Tax-Related Losses and which Encompass has the right to administer and control pursuant to Section 10.02(b) above (other than any Distribution-Related Tax Contest described in Section 10.02(d)(i)(B)), (1) Encompass shall consult with Enhabit reasonably in advance of taking any significant action in connection with such Tax Contest, (2) Encompass shall offer Enhabit a reasonable opportunity to comment before submitting any written materials prepared or furnished in connection with such Tax Contest, (3) Encompass shall defend such Tax Contest diligently and in good faith as if it were the only party in interest in connection with such Tax Contest, and (4) Encompass shall provide Enhabit copies of any written materials relating to such Tax Contest received from the relevant Tax Authority.  Notwithstanding anything in the preceding sentence to the contrary, the final determination of the positions taken, including with respect to settlement or other disposition, in any Distribution-Related Tax Contest described in the preceding sentence, shall be made in the sole discretion of Encompass and shall be final and not subject to the dispute resolution provisions of Section 14 or of Article VII of the Separation Agreement.
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(B)          Distribution-Related Tax Contest as a result of which Enhabit could reasonably be expected to become liable for any portion of any Tax or Tax-Related Losses pursuant to Section 7.05(c)(i) and which Encompass has the right to administer and control pursuant to Section 10.02(b), (1) Encompass shall keep Enhabit reasonably informed with respect to such Tax Contest, (2) Encompass shall defend such Tax Contest diligently and in good faith as if it were the only party in interest in connection with such Tax Contest, and (3) Encompass shall provide Enhabit copies of any written materials relating to such Tax Contest received from the relevant Tax Authority.

(ii)          In the event of any Distribution-Related Tax Contest with respect to any Enhabit Separate Return as a result of which Encompass could reasonably be expected to become liable for any Tax or Tax-Related Losses, (A) Enhabit shall consult with Encompass reasonably in advance of taking any significant action in connection with such Tax Contest, (B) Enhabit shall consult with Encompass and offer Encompass a reasonable opportunity to comment before submitting any written materials prepared or furnished in connection with such Tax Contest, (C) Enhabit shall defend such Tax Contest diligently and in good faith as if it were the only party in interest in connection with such Tax Contest, (D) Encompass shall be entitled to participate in such Tax Contest and receive copies of any written materials relating to such Tax Contest received from the relevant Tax Authority, and (E) Enhabit shall not settle, compromise or abandon any such Tax Contest without obtaining the prior written consent of Encompass, which consent shall not be unreasonably withheld; provided, however, that in the case of any Distribution-Related Tax Contest as a result of which Encompass could reasonably be expected to become liable for any Tax or Tax-Related Losses pursuant to Section 7.05(b) or Section 7.05(c)(i) and which Enhabit has the right to administer and control pursuant to Section 10.02(a), Encompass shall have the right to elect to assume control of such Tax Contest, in which case the provisions of Section 10.02(d)(i)(B) shall apply.

(e)          Power of Attorney.  Enhabit shall (and shall cause each member of the Enhabit Group to) execute and deliver to Encompass (or such member of the Encompass Group as Encompass shall designate) any power of attorney or other similar document reasonably requested by Encompass (or such designee) in connection with any Tax Contest controlled by Encompass described in this Section 10 within two business days of such request.

Section 11.          Effective Date; Termination of Prior Intercompany Tax Allocation Agreements.  This Agreement shall be effective as of the date hereof.  As of the date hereof, (a) all prior intercompany Tax allocation agreements or arrangements solely between or among Encompass and/or any of its Subsidiaries, on the one hand, and Enhabit and/or any of its Subsidiaries, on the other hand, including the Existing Tax Allocation Agreement, shall be terminated, and (b) amounts due under such agreements or arrangements as of the date hereof shall be settled as promptly as practicable after the date hereof.  Subject to clause (b) of the preceding sentence, upon such termination and settlement, no further payments by or to Encompass or any of its Subsidiaries or by or to Enhabit or any of its Subsidiaries with respect to such agreements or arrangements shall be made, and all other rights and obligations resulting from such agreements or arrangements shall cease at such time.  Any payments pursuant to such agreements or arrangements shall be disregarded for purposes of computing amounts due under this Agreement; provided, that to the extent appropriate, as determined by Encompass, payments made pursuant to such agreements or arrangements shall be credited to Enhabit or Encompass, respectively, in computing their respective obligations pursuant to this Agreement, in the event that such payments relate to a Tax liability that is the subject matter of this Agreement for a Tax Period that is the subject matter of this Agreement.
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Section 12.          Survival of Obligations.  The representations, warranties, covenants and agreements set forth in this Agreement shall be unconditional and absolute and shall remain in effect without limitation as to time.

Section 13.          Treatment of Payments; Tax Gross-Up.

Section 13.01          Treatment of Tax Indemnity and Tax Benefit Payments.  In the absence of any change in Tax treatment under the Code or other applicable Tax Law and except as otherwise agreed between the Companies or as otherwise required by applicable law, for all Income Tax purposes, the Companies agree to treat, and to cause their respective Affiliates to treat, (a) any indemnity payment required by this Agreement or by the Separation Agreement (other than payments of interest) to be made (i) by Encompass to Enhabit as a contribution by Encompass to Enhabit occurring immediately prior to the Distribution and (ii) by Enhabit to Encompass as reasonably determined by Encompass; and (b) any payment of interest or State Income Taxes by or to a Tax Authority, as taxable or deductible, as the case may be, to the Company entitled under this Agreement to retain such payment or required under this Agreement to make such payment.  The Parties shall cooperate in good faith (including, where relevant, by using commercially reasonable efforts to establish local payment arrangements between each Party’s Subsidiaries) to minimize or eliminate, to the extent permissible under applicable law, any Tax that would otherwise be imposed with respect to any payment required by this Agreement or by the Separation Agreement (or maximize the ability to obtain a credit for, or refund of, any such Tax).

Section 13.02          Tax Gross-Up.  If, notwithstanding the manner in which payments described in Section 13.01(a) were reported, there is a Tax liability or an adjustment to a Tax liability of a Company as a result of its receipt of a payment pursuant to this Agreement or the Separation Agreement, such payment shall be appropriately adjusted so that the amount of such payment, reduced by the amount of all Income Taxes payable with respect to the receipt thereof (but taking into account all correlative Tax Benefits resulting from the payment of such Income Taxes), shall equal the amount of the payment that the Company receiving such payment would otherwise be entitled to receive.

Section 13.03          Interest.  Anything herein to the contrary notwithstanding, to the extent one Company makes a payment of interest to another Company under this Agreement, with respect to the period from (a) the date that the payor was required to make a payment to the payee to (b) the date that the payor actually made such payment, the interest payment shall be treated as interest expense to the payor (deductible to the extent provided by law) and as interest income by the payee (includible in income to the extent provided by law).  The amount of the payment shall not be adjusted to take into account any associated Tax Benefit to the payor or increase in Tax to the payee.

Section 14.          Disagreements.  The Companies desire that collaboration will continue between them.  Accordingly, they will try, and they will cause their respective Group members to try, to resolve in good faith all disagreements regarding their respective rights and obligations under this Agreement, including any amendments hereto.  In furtherance thereof, in the event of any dispute or disagreement (a “Tax Advisor Dispute”) between any member of the Encompass Group and any member of the Enhabit Group as to the interpretation of any provision of this Agreement or the performance of obligations hereunder, representatives of the Tax departments of the Companies shall negotiate in good faith to resolve the Tax Advisor Dispute.  If such good-faith negotiations do not resolve the Tax Advisor Dispute, then such Tax Advisor Dispute shall be resolved pursuant to the procedures set forth in Section 7.3 of the Separation Agreement (treating thirty (30) days from the receipt of a CEO Negotiation Request as having expired); provided, that any arbitrator selected in accordance with Section 7.3 of the Separation Agreement must be a Tax Advisor.  Nothing in this Section 14 will prevent either Company from seeking injunctive relief if any delay resulting from the efforts to resolve the Tax Advisor Dispute through the procedures set forth in Section 7.3 of the Separation Agreement could result in serious and irreparable injury to such Company.  Notwithstanding anything to the contrary in this Agreement, the Separation Agreement or any Ancillary Agreement, Encompass and Enhabit are the only members of their respective Groups entitled to commence a dispute resolution procedure under this Agreement, and each of Encompass and Enhabit will cause its respective Group members not to commence any dispute resolution procedure other than through such Party as provided in this Section 14.
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Section 15.          Late Payments.  Any amount owed by one Party to another Party under this Agreement that is not paid when due shall bear interest at the Prime Rate plus two percent from the due date of the payment to the date paid.  To the extent interest required to be paid under this Section 15 duplicates interest required to be paid under any other provision of this Agreement, interest shall be computed at the higher of the interest rate provided under this Section 15 or the interest rate provided under such other provision.

Section 16.          Expenses.  Except as otherwise provided in this Agreement, each Party and its Affiliates shall bear their own expenses incurred in connection with the preparation of Tax Returns, Tax Contests, and other matters related to Taxes under the provisions of this Agreement.
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Section 17.          General Provisions.

Section 17.01          Notices.  All notices and other communications given hereunder by one Party to the other Party shall, unless otherwise specified herein, be in writing and shall be deemed to have been duly given or made on the date of receipt by the recipient thereof if received prior to 5:00 p.m. Birmingham, Alabama time (or otherwise on the next succeeding Business Day) if (a) served by personal delivery or by nationally recognized overnight courier service upon the Party for whom it is intended, (b) delivered by registered or certified mail, return receipt requested or (c) sent by e-mail; provided, that the e-mail transmission is promptly confirmed by telephone, a responsive electronic communication by the recipient thereof or otherwise or clearly evidenced (excluding out-of-office replies or other automatically generated responses) or is followed up within one (1) Business Day after e-mail by dispatch pursuant to one of the methods described in the foregoing clauses (a) and (b) of this Section 17.01. Such communications must be sent to the respective Parties at the following street addresses or e-mail addresses or at such street address or e-mail address previously made available or at such other street address or e-mail address for a Party as shall be specified for such purpose in a notice given in accordance with this Section 17.01) (it being understood that rejection or other refusal to accept or the inability to deliver because of changed street address or e-mail address of which no notice was given shall be deemed to be receipt of such communication as of the date of such rejection, refusal or inability to deliver):

If to Encompass, to:
 
Encompass Health Corporation
9001 Liberty Parkway
Birmingham, AL 35242
Attention:  Chief Tax Officer
Email:  * * *
 
with copies to:
 
Encompass Health Corporation
9001 Liberty Parkway
Birmingham, AL 35242
Attention:  General Counsel
Email:  * * *

Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention:  Igor Kirman
Elina Tetelbaum
Zachary S. Podolsky
Email:         IKirman@wlrk.com
ETetelbaum@wlrk.com
ZSPodolsky@wlrk.com
Facsimile:  (212) 403-2000
 
If to Enhabit, to:
 
Enhabit, Inc.
6688 N. Central Expressway
Suite 1300
Dallas, TX 75206
Attention:  General Counsel
Email:  * * *

with a copy to:

Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention:  Igor Kirman
Elina Tetelbaum
Zachary S. Podolsky
Email:         IKirman@wlrk.com
ETetelbaum@wlrk.com
ZSPodolsky@wlrk.com
Facsimile:  (212) 403-2000

and to:

Bradley Arant Boult Cummings LLP
One Federal Place
1819 5th Avenue N.
Birmingham, Alabama 35209
Attention: Charles Roberts
Stephen Hinton
Email:        croberts@bradley.com
shinton@bradley.com

A Party may, by notice to the other Party, change the address to which such notices are to be given.
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Section 17.02          Waiver of Default.  Waiver by a Party of any default by the other Party of any provision of this Agreement shall not be deemed a waiver by the waiving Party of any subsequent or other default, nor shall it prejudice the rights of the other Party.  No failure or delay by a Party in exercising any right, power or privilege under this Agreement shall operate as a waiver thereof, nor shall a single or partial exercise thereof prejudice any other or further exercise thereof or the exercise of any other right, power or privilege.

Section 17.03          Severability.  If any provision of this Agreement or the application thereof to any Person or circumstance is determined by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof, or the application of such provision to Persons or circumstances or in jurisdictions other than those as to which it has been held invalid or unenforceable, shall remain in full force and effect and shall in no way be affected, impaired or invalidated thereby.  Upon such determination, the Parties shall negotiate in good faith in an effort to agree upon such a suitable and equitable provision to effect the original intent of the Parties.

Section 17.04          Corporate Power.  Encompass represents on behalf of itself and each other member of the Encompass Group, and Enhabit represents on behalf of itself and each other member of the Enhabit Group, as follows:

(a)          each such Person has the requisite corporate or other power and authority and has taken all corporate or other action necessary in order to execute, deliver and perform this Agreement; and

(b)          this Agreement has been duly executed and delivered by it and constitutes a valid and binding agreement of it enforceable in accordance with the terms hereof.

Section 17.05          Performance.  Encompass will cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth in this Agreement to be performed by any member of the Encompass Group.  Enhabit will cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth in this Agreement to be performed by any member of the Enhabit Group.  Each Party (including its permitted successors and assigns) further agrees that it will (a) give timely notice of the terms, conditions and continuing obligations contained in this Agreement to all of the other members of its Group and (b) cause all of the other members of its Group not to take any action or fail to take any such action inconsistent with such Party’s obligations under this Agreement.

Section 17.06          Entire Agreement.  This Agreement, together with each of the exhibits, schedules and appendices hereto and the specific agreements contemplated hereby, contains the entire agreement between the Parties with respect to the subject matter hereof and supersedes all previous agreements, negotiations, discussions, writings, understandings, commitments and conversations with respect to such subject matter, and there are no agreements or understandings between the Parties other than those set forth or referred to herein and in the Separation Agreement and the other Ancillary Agreements.  This Agreement, the Separation Agreement, and the other Ancillary Agreements together govern the arrangements in connection with the Separation Transactions and would not have been entered into independently.  In the event of any conflict or inconsistency between the terms of this Agreement and the terms of the Separation Agreement or any other Ancillary Agreement, the terms of this Agreement shall control with respect to the subject matter addressed herein to the extent of such conflict or inconsistency.

Section 17.07          Headings.  The article, section and paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.
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Section 17.08          Interpretation.  In this Agreement, (a) words in the singular shall be deemed to include the plural and vice versa and words of one gender shall be deemed to include the other genders as the context requires; (b) the terms “hereof,” “herein,” and “herewith” and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole (including all of the schedules, exhibits and appendices hereto) and not to any particular provision of this Agreement; (c) Article, Section, Schedule, Exhibit and Appendix references are to the articles, sections, schedules, exhibits and appendices to this Agreement unless otherwise specified; (d) unless otherwise stated, all references to any agreement (including this Agreement) shall be deemed to include the exhibits, schedules and annexes to such agreement; (e) the word “including” and words of similar import when used in this Agreement shall mean “including, without limitation,” unless otherwise specified; (f) the word “or” shall not be exclusive; (g) unless otherwise specified in a particular case, the word “days” refers to calendar days; (h) references herein to this Agreement or any other agreement contemplated herein shall be deemed to refer to this Agreement or such other agreement as of the date on which it is executed and as it may be amended, modified or supplemented thereafter, unless otherwise specified; and (i) unless expressly stated to the contrary in this Agreement, all references to “the date hereof,” “the date of this Agreement,” “hereby” and “hereupon” and words of similar import shall all be references to June 30, 2022.

Section 17.09          Counterparts.  Each Party acknowledges that it and the other Party may execute this Agreement by facsimile, stamp, electronic (including DocuSign) or mechanical signature, and that delivery of an executed counterpart of a signature page to this Agreement (whether executed by manual, stamp, electronic (including DocuSign) or mechanical signature) by facsimile or by e-mail in portable document format (PDF) shall be effective as delivery of such executed counterpart of this Agreement.  Each Party expressly adopts and confirms each such facsimile, stamp, electronic (including via DocuSign) or mechanical signature (regardless of whether delivered in person, by mail, by courier, by facsimile or by e-mail in portable document format (PDF)) made in its respective name as if it were a manual signature delivered in person, agrees that it will not assert that any such signature or delivery is not adequate to bind such Party to the same extent as if it were signed manually and delivered in person and agrees that, at the reasonable request of the other Party at any time, it will as promptly as reasonably practicable cause this Agreement to be manually executed (any such execution to be as of the date of the initial date hereof) and delivered in person, by mail or by courier.  This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more counterparts have been signed by each of the Parties and delivered to the other Party.

Section 17.10          Governing Law.  This Agreement (and any claims or disputes arising out of or related hereto or to the transactions contemplated hereby or to the inducement of any party to enter herein, whether for breach of contract, tortious conduct or otherwise and whether predicated on common law, statute or otherwise) shall be governed by and construed and interpreted in accordance with the laws of the State of Delaware irrespective of the choice-of-laws principles of the State of Delaware, including all matters of validity, construction, effect, enforceability, performance and remedies.

Section 17.11          Amendments.  No provisions of this Agreement shall be deemed waived, amended, supplemented or modified by a Party, unless such waiver, amendment, supplement or modification is in writing and signed by the authorized representative of the Party against whom it is sought to enforce such waiver, amendment, supplement or modification.

Section 17.12          Enhabit Subsidiaries.  If, at any time, Enhabit acquires or creates one or more Subsidiaries that are includable in the Enhabit Group, they shall be subject to this Agreement and all references to the Enhabit Group herein shall thereafter include a reference to such Subsidiaries.
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Section 17.13          Assignability.  This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns (including but not limited to any successor of Encompass or Enhabit succeeding to the Tax Attributes of either under Section 381 of the Code); provided, however, that neither Party may assign its rights or delegate its obligations under this Agreement without the express prior written consent of the other Party.  Notwithstanding the foregoing, no such consent shall be required for the assignment of a Party’s rights and obligations under this Agreement in whole (i.e., the assignment of a Party’s rights and obligations under this Agreement all at the same time) in connection with a Change of Control of a Party so long as the resulting, surviving or transferee Person assumes all the obligations of such Party by operation of Law or pursuant to an agreement in form and substance reasonably satisfactory to the other Party.

Section 17.14          Third-Party Beneficiaries.  Except for the indemnification rights under this Agreement of any Encompass Affiliate or Enhabit Affiliate, and any officer, director or employee thereof, in their respective capacities as such, (a) the provisions of this Agreement are solely for the benefit of the Parties and are not intended to confer upon any Person except the Parties any rights or remedies hereunder, and (b) there are no third-party beneficiaries of this Agreement, and this Agreement shall not provide any third person with any remedy, claim, Liability, reimbursement, claim of action or other right in excess of those existing without reference to this Agreement.

Section 17.15          Force Majeure.  No Party shall be deemed in default of this Agreement for any delay or failure to fulfill any obligation (other than a payment obligation) hereunder so long as and to the extent to which any delay or failure in the fulfillment of such obligation is prevented, frustrated, hindered or delayed as a consequence of circumstances of Force Majeure.  In the event of any such excused delay, the time for performance of such obligations (other than a payment obligation) shall be extended for a period equal to the time lost by reason of the delay.  A Party claiming the benefit of this provision shall, as soon as reasonably practicable after the occurrence of any such event, (a) provide written notice to the other Party of the nature and extent of any such Force Majeure condition; and (b) use commercially reasonable efforts to remove any such causes and resume performance under this Agreement as soon as reasonably practicable.

Section 17.16          No Set-Off.  Except as expressly set forth in this Agreement or as otherwise mutually agreed to in writing by the Parties, neither Party nor any member of such Party’s Group shall have any right of set-off or other similar rights with respect to (a) any amounts received pursuant to this Agreement; or (b) any other amounts claimed to be owed to the other Party or any member of its Group arising out of this Agreement.

Section 17.17          Expenses.  Except as otherwise expressly set forth in this Agreement or as otherwise agreed to in writing by the Parties, all fees, costs and expenses incurred on or prior to the Effective Time in connection with the preparation, execution, delivery and implementation of this Agreement will be borne by the Party or its applicable Subsidiary incurring such fees, costs or expenses.
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Section 17.18          Mutual Drafting.  This Agreement shall be deemed to be the joint work product of the Parties and any rule of construction that a document shall be interpreted or construed against a drafter of such document shall not be applicable.

Section 17.19          Specific Performance.  In the event of any actual or threatened default in, or breach of, any of the terms, conditions and provisions of this Agreement, the Party or Parties who are, or are to be, thereby aggrieved shall have the right to specific performance and injunctive or other equitable relief in respect of its or their rights under this Agreement, in addition to any and all other rights and remedies at law or in equity, and all such rights and remedies shall be cumulative.  The Parties agree that the remedies at law for any breach or threatened breach, including monetary damages, are inadequate compensation for any loss and that any defense in any action for specific performance that a remedy at law would be adequate is waived.  Any requirements for the securing or posting of any bond with such remedy are waived by each of the Parties.

[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their duly authorized representatives as of the date first written above.

 
Encompass Health Corporation
       
       
 
By:
 /s/ Douglas E. Coltharp
   
Name:
 Douglas E. Coltharp
   
Title:
 Executive Vice President and Chief Financial Officer
       
 
Enhabit, Inc.
       
       
 
By:
 /s/ Crissy Carlisle
   
Name:
 Crissy Carlisle
   
Title:
 Chief Financial Officer

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Exhibit 2.4





EMPLOYEE MATTERS AGREEMENT

BY AND BETWEEN

ENCOMPASS HEALTH CORPORATION

AND

ENHABIT, INC.

DATED AS OF JUNE 30, 2022


TABLE OF CONTENTS

   
Page
     
ARTICLE I DEFINITIONS
1
     
Section 1.01.
Definitions
1
Section 1.02.
Interpretation
6
     
ARTICLE II GENERAL PRINCIPLES FOR ALLOCATION OF LIABILITIES
6
     
Section 2.01.
General Principles
6
Section 2.02.
Service Credit Recognized by Enhabit and Enhabit Benefit Plans
7
     
ARTICLE III ASSIGNMENT OF EMPLOYEES
8
     
Section 3.01.
Active Employees
8
Section 3.02.
Individual Agreements
9
Section 3.03.
Consultation with Labor Representatives; Labor Agreements
9
Section 3.04.
Non-Solicitation; Non-Hire
10
     
ARTICLE IV EQUITY, INCENTIVE AND EXECUTIVE COMPENSATION
10
     
Section 4.01.
Generally
10
Section 4.02.
Equity Incentive Awards
11
Section 4.03.
Non-Equity Incentive Practices and Plans
13
     
ARTICLE V QUALIFIED RETIREMENT PLANS
14
     
Section 5.01.
Encompass 401(k) Plan
14
Section 5.02.
Enhabit 401(k) Plan
14
Section 5.03.
Rollover of Account Balances
14
     
ARTICLE VI NONQUALIFIED DEFERRED COMPENSATION PLANS
14
     
Section 6.01.
Encompass Deferred Compensation Plans
14
Section 6.02.
Adjustment of Encompass Shares under the Director Deferred Compensation Plan
15
Section 6.03.
Participation; Distributions
15
Section 6.04.
Deferred Compensation Notice Requirements Regarding Transferred Directors
15
     
ARTICLE VII WELFARE BENEFIT PLANS
15
     
Section 7.01.
Welfare Plans
15
Section 7.02.
COBRA
15
     
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ARTICLE VIII MISCELLANEOUS
16
     
Section 8.01.
Preservation of Rights to Amend
16
Section 8.02.
Fiduciary Matters
16
Section 8.03.
Information Sharing and Access.
16
Section 8.04.
Third-Party Beneficiaries
17
Section 8.05.
Further Assurances
17
Section 8.06.
Dispute Resolution
17
Section 8.07.
Incorporation of Separation and Distribution Agreement Provisions
17

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EMPLOYEE MATTERS AGREEMENT

This EMPLOYEE MATTERS AGREEMENT, dated as of June 30, 2022 (this “Agreement”), is by and between Encompass Health Corporation, a Delaware corporation (“Encompass”), and Enhabit, Inc., a Delaware corporation (“Enhabit”).

R E C I T A L S:

WHEREAS, the board of directors of Encompass (the “Encompass Board”) has determined that it is in the best interests of Encompass and its stockholders for Enhabit to operate the Enhabit Business as a separate, publicly traded company;

WHEREAS, in furtherance of the foregoing, the Encompass Board has determined that it is appropriate and desirable to separate the Enhabit Business from the other businesses conducted by Encompass (the “Separation”) and, following the Separation, make a distribution, on a pro rata basis, to holders of Encompass Shares on the Record Date of all of the outstanding Enhabit Shares (the “Distribution”);

WHEREAS, Enhabit and Encompass have prepared, and Enhabit has filed with the SEC, the Form 10, which includes the Information Statement and which sets forth disclosures concerning Enhabit, the Separation and the Distribution;

WHEREAS, in order to effectuate the Separation and Distribution, Encompass and Enhabit have entered into a Separation and Distribution Agreement, dated as of the date hereof (the “Separation and Distribution Agreement”);

WHEREAS, in addition to the matters addressed by the Separation and Distribution Agreement, the Parties desire to enter into this Agreement to set forth the terms and conditions of certain employment, compensation and benefit matters; and

WHEREAS, the Parties acknowledge that this Agreement, the Separation and Distribution Agreement and the other Ancillary Agreements represent the integrated agreement of Encompass and Enhabit relating to the Separation and the Distribution, are being entered into together and would not have been entered into independently.

NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, hereby agree as follows:

ARTICLE I
DEFINITIONS

Section 1.01. Definitions.  For purposes of this Agreement (including the recitals hereof), the following terms have the following meanings, and capitalized terms used but not otherwise defined herein shall have the meaning ascribed to them in the Separation and Distribution Agreement.

“Affiliates” shall have the meaning set forth in the Separation and Distribution Agreement.

“Agreement” shall have the meaning set forth in the Preamble to this Agreement and shall include all Schedules hereto and all amendments, modifications, and changes hereto entered into pursuant to Section 10.14 of the Separation and Distribution Agreement (Amendments).

“Ancillary Agreements” shall have the meaning set forth in the Separation and Distribution Agreement.


“Assets” shall have the meaning set forth in the Separation and Distribution Agreement.

“Benefit Plan” shall mean any contract, agreement, policy, practice, program, plan, trust, commitment or arrangement providing for benefits, perquisites or compensation of any nature from an employer to any Employee or Former Employee, or to any family member, dependent, or beneficiary of any such Employee or Former Employee, including cash or deferred arrangement plans, profit-sharing plans, post-employment programs, pension plans, supplemental pension plans, welfare plans, stock purchase, and contracts, agreements, policies, practices, programs, plans, trusts, commitments and arrangements providing for terms of employment, fringe benefits, severance benefits, change-in-control protections or benefits, life, accidental death and dismemberment, disability and accident insurance, tuition reimbursement, adoption assistance, travel reimbursement, vacation, sick, personal or bereavement days, leaves of absences and holidays; provided, however, that the term “Benefit Plan” does not include any government-sponsored benefits, such as workers’ compensation, unemployment or any similar plans, programs or policies or Individual Agreements.

“COBRA” shall mean the U.S. Consolidated Omnibus Budget Reconciliation Act of 1985, as codified at Section 601 et seq. of ERISA and at Section 4980B of the Code and including all regulations promulgated thereunder.

“Director Deferred Compensation Plan” shall mean the HealthSouth Corporation Directors’ Deferred Stock Investment Plan, as amended from time to time.

“Distribution” shall have the meaning set forth in the Recitals.

“Distribution Date” shall have the meaning set forth in the Separation and Distribution Agreement.

“Effective Time” shall have the meaning set forth in the Separation and Distribution Agreement.

“Employee” shall mean any Encompass Group Employee or Enhabit Group Employee.

“Encompass” shall have the meaning set forth in the Preamble.

“Encompass 401(k) Plan” shall mean the Encompass Health Retirement Investment Plan.

“Encompass Awards” shall mean Encompass Option Awards, Encompass Performance Share Unit Awards, Encompass Restricted Stock Awards and Encompass RSU Awards, collectively.

“Encompass Benefit Plan” shall mean any Benefit Plan established, sponsored or maintained by Encompass or any of its Subsidiaries immediately prior to the Effective Time, but excluding any Enhabit Benefit Plan.

“Encompass Board” shall have the meaning set forth in the Recitals.

“Encompass Compensation Committee” shall mean the Compensation and Human Capital Committee of the Encompass Board.

“Encompass Deferred Compensation Plans” shall mean:  Encompass Health Corporation Nonqualified 401(k) Plan, as amended from time to time and the Director Deferred Compensation Plan.

“Encompass Group Employees” shall have the meaning set forth in Section 3.01(a)(ii).

“Encompass Non-Equity Incentive Practices” shall mean the corporate non-equity incentive practices of the Encompass Group.

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“Encompass Omnibus Plan” shall mean any equity compensation plan sponsored or maintained by the Encompass immediately prior to the Effective Time, including the 2004 Amended and Restated Director Incentive Plan, 2008 Equity Incentive Plan and the HealthSouth Corporation 2016 Omnibus Performance Incentive Compensation Plan, as amended from time to time.

“Encompass Option Award” shall mean an award of options to purchase Encompass Shares granted pursuant to an Encompass Omnibus Plan that is outstanding as of immediately prior to the Effective Time.

“Encompass Performance Share Unit Award” shall mean a performance share unit award outstanding as of immediately prior to the Effective Time that is subject to performance-based vesting, granted pursuant to the Encompass Omnibus Plan.

“Encompass Ratio” shall mean the quotient obtained by dividing (a) the Pre-Separation Encompass Stock Value by (b) the Post-Separation Encompass Stock Value.

“Encompass Restricted Stock Award” shall mean a restricted stock award outstanding immediately prior to the Effective Time that is not subject to performance-based vesting conditions, granted pursuant to the Encompass Omnibus Plan.

“Encompass RSU Award” shall mean a restricted stock unit award outstanding as of immediately prior to the Effective Time that is not subject to performance-based vesting conditions, granted pursuant to the Encompass Omnibus Plan.

“Encompass Shares” shall have the meaning set forth in the Separation and Distribution Agreement.

“Encompass Welfare Plan” shall mean any Encompass Benefit Plan that is a Welfare Plan.

“Enhabit” shall have the meaning set forth in the Preamble.

“Enhabit 401(k) Plan” shall mean the Encompass Home Health Savings Plan.

“Enhabit Awards” shall mean Enhabit Option Awards and Enhabit Restricted Stock Awards, collectively.

“Enhabit Benefit Plan” shall mean any Benefit Plan established, sponsored, maintained or contributed to by a member of the Enhabit Group as of or after the Effective Time.

“Enhabit Business” shall have the meaning set forth in the Separation and Distribution Agreement.

“Enhabit Designees” shall have the meaning set forth in the Separation and Distribution Agreement.

“Enhabit Group Employees” shall have the meaning set forth in Section 3.01(a)(i).

“Enhabit Non-Equity Incentive Practices” shall mean the corporate non-equity incentive practices, as established by Enhabit as of the Effective Time pursuant to Section 4.03(a).

“Enhabit Omnibus Plan” shall mean the Enhabit 2022 Omnibus Performance Incentive Plan, as established by Enhabit as of the Effective Time pursuant to Section 4.01.

“Enhabit Option Award” shall mean an award of stock options assumed and granted by Enhabit pursuant to the Enhabit Omnibus Plan in accordance with Section 4.02(a).

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“Enhabit Ratio” shall mean the quotient obtained by dividing (a) the Pre-Separation Encompass Stock Value by (b) the Enhabit Stock Value.

“Enhabit Restricted Stock Award” shall mean an award of restricted stock that is not subject to performance-based vesting conditions, assumed and granted pursuant to the Enhabit Omnibus Plan in accordance with Section 4.02(b) or Section 4.02(c), as applicable.

“Enhabit Shares” shall have the meaning set forth in the Separation and Distribution Agreement.

“Enhabit Stock Value” shall mean the closing per-share price of Enhabit Shares on the NYSE on the first regular trading session (9:30 a.m. to 4:00 p.m. EST) commencing after the Effective Time.

“Enhabit Welfare Plan” shall mean a Welfare Plan established, sponsored, maintained or contributed to by any member of the Enhabit Group for the benefit of Enhabit Group Employees and Former Enhabit Group Employees.

“ERISA” shall mean the U.S. Employee Retirement Income Security Act of 1974, as amended, and the regulations promulgated thereunder.

“Former Employees” shall mean Former Encompass Group Employees and Former Enhabit Group Employees.

“Former Encompass Group Employee” shall mean any individual who is a former employee of the Encompass Group as of the Effective Time and who is not a Former Enhabit Group Employee.

“Former Enhabit Group Employee” shall mean any individual who is a former employee of a Subsidiary that is part of the Enhabit Group as of immediately prior to termination of employment and whose termination of employment occurred prior to the Effective Time.

“Group” shall mean either the Enhabit Group or the Encompass Group, as the context requires.

“Individual Agreement” shall mean any individual (a) employment contract, (b) retention, severance or change-in-control agreement, or (c) other agreement containing restrictive covenants (including confidentiality, noncompetition and nonsolicitation provisions) between a member of the Encompass Group and an Enhabit Group Employee or any Former Enhabit Group Employee, as in effect immediately prior to the Effective Time.

“Information Statement” shall have the meaning set forth in the Separation and Distribution Agreement.

“Labor Agreement” shall have the meaning set forth in Section 2.01.

“Law” shall have the meaning set forth in the Separation and Distribution Agreement.

“Liabilities” shall have the meaning set forth in the Separation and Distribution Agreement.

“Parties” shall mean the parties to this Agreement.

“Person” shall have the meaning set forth in the Separation and Distribution Agreement.

“Post-Separation Encompass Awards” shall mean Post-Separation Encompass Option Awards, Post-Separation Encompass Performance Share Unit Awards, Post-Separation Encompass Restricted Stock Awards and Post-Separation Encompass RSU Awards, collectively.

4

“Post-Separation Encompass Option Award” shall mean an Encompass Option Award, as adjusted as of the Effective Time in accordance with Section 4.02(a).

“Post-Separation Encompass Performance Share Unit Award” shall mean an Encompass Performance-Based Unit Award, as adjusted as of the Effective Time in accordance with Section 4.02(c), as applicable.

“Post-Separation Encompass Restricted Stock Award” shall mean an Encompass Restricted Stock Award, as adjusted as of the Effective Time in accordance with Section 4.02(d).

“Post-Separation Encompass RSU Award” shall mean an Encompass RSU Award, as adjusted as of the Effective Time in accordance with Section 4.02(d).

“Post-Separation Encompass Stock Value” shall mean the closing per-share price of Encompass Shares on the NYSE on the first regular trading session (9:30 a.m. to 4:00 p.m. EST) commencing after the Effective Time.

“Pre-Separation Encompass Stock Value” shall mean the closing per-share price of Encompass Shares trading “regular way with due bills” on the NYSE on the last regular trading session (9:30 am to 4:00 pm EST) ending prior to the Effective Time.

“Record Date” shall have the meaning set forth in the Separation and Distribution Agreement.

“Restricted Employees” shall have the meaning set forth in Section 3.04(a).

“Securities Act” shall mean the U.S. Securities Act of 1933, as amended, together with the rules and regulations promulgated thereunder.

“Separation” shall have the meaning set forth in the Recitals.

“Separation and Distribution Agreement” shall have the meaning set forth in the

Recitals.

“Subsidiary” shall have the meaning set forth in the Separation and Distribution Agreement.

“Tax” shall have the meaning set forth in the Separation and Distribution Agreement.

“Third Party” shall have the meaning set forth in the Separation and Distribution Agreement.

“Transferred Director” shall mean each Enhabit nonemployee director as of immediately after the Effective Time who last served on the Encompass Board on May 5, 2022.

“U.S.” shall mean the United States of America.

“Welfare Plan” shall mean any “welfare plan” (as defined in Section 3(1) of ERISA) or a “cafeteria plan” under Section 125 of the Code, and any benefits offered thereunder, and any other plan offering health benefits (including medical, prescription drug, dental, vision, mental health, substance abuse and retiree health), disability benefits, or life, accidental death and dismemberment, and business travel insurance, pre-Tax premium conversion benefits, dependent care assistance programs, employee assistance programs, paid time off programs, contribution funding toward a health savings account, flexible spending accounts or severance.

5

Section 1.02. Interpretation.  Section 10.15 of the Separation and Distribution Agreement is hereby incorporated by reference.

ARTICLE II
GENERAL PRINCIPLES FOR ALLOCATION OF LIABILITIES

Section 2.01. General Principles.  All provisions herein shall be subject to the requirements of all applicable Law and any collective bargaining, works council or similar agreement or arrangement with any labor union, works council or other labor representative (each, a “Labor Agreement”).  Notwithstanding anything in this Agreement to the contrary, if the terms of a Labor Agreement or applicable Law require that any Assets or Liabilities be retained or assumed by, or transferred to, a Party in a manner that is different than what is set forth in this Agreement, such retention, assumption or transfer shall be made in accordance with the terms of such Labor Agreement and applicable Law and shall not be made as otherwise set forth in this Agreement; provided that, in such case, the Parties shall take all necessary action to preserve the economic terms of the allocation of Assets and Liabilities contemplated by this Agreement.  The provisions of this Agreement shall apply in respect of all jurisdictions.

(a)          Acceptance and Assumption of Enhabit Liabilities.  Except as otherwise provided by this Agreement, on or prior to the Effective Time, but in any case prior to the Distribution, Enhabit and the applicable Enhabit Designees shall accept, assume and agree faithfully to perform, discharge and fulfill all of the following Liabilities in accordance with their respective terms (each of which shall be considered an Enhabit Liability), regardless of when or where such Liabilities arose or arise, or whether the facts on which they are based occurred prior to, at or subsequent to the Effective Time, regardless of where or against whom such Liabilities are asserted or determined (including any Liabilities arising out of claims made by Encompass’s or Enhabit’s respective directors, officers, Employees, Former Employees, agents, Subsidiaries or Affiliates against any member of the Encompass Group or the Enhabit Group) or whether asserted or determined prior to the date hereof, and regardless of whether arising from or alleged to arise from negligence, recklessness, violation of Law, fraud or misrepresentation by any member of the Encompass Group or the Enhabit Group, or any of their respective directors, officers, Employees, Former Employees, agents, Subsidiaries or Affiliates:

(i)          any and all wages, salaries, incentive compensation, equity compensation, commissions, bonuses and any other employee compensation or benefits payable to or on behalf of any Enhabit Group Employees and Former Enhabit Group Employees after the Effective Time, without regard to when such wages, salaries, incentive compensation, equity compensation, commissions, bonuses or other employee compensation or benefits are or may have been awarded or earned;

(ii)          any and all Liabilities whatsoever with respect to claims under an Enhabit Benefit Plan;

(iii)          any and all Liabilities arising out of, relating to or resulting from the employment, or termination of employment of all Enhabit Group Employees and Former Enhabit Group Employees; and

(iv)          any and all Liabilities expressly assumed or retained by any member of the Enhabit Group pursuant to this Agreement.

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(b)          Acceptance and Assumption of Encompass Liabilities.  Except as otherwise provided by this Agreement, on or prior to the Effective Time, but in any case prior to the Distribution, Encompass and certain members of the Encompass Group designated by Encompass shall accept, assume and agree faithfully to perform, discharge and fulfill all of the following Liabilities in accordance with their respective terms (each of which shall be considered an Encompass Liability), regardless of when or where such Liabilities arose or arise, or whether the facts on which they are based occurred prior to, at or subsequent to the Effective Time, regardless of where or against whom such Liabilities are asserted or determined (including any Liabilities arising out of claims made by Encompass’s or Enhabit’s respective directors, officers, Employees, Former Employees, agents, Subsidiaries or Affiliates against any member of the Encompass Group or the Enhabit Group) or whether asserted or determined prior to the date hereof, and regardless of whether arising from or alleged to arise from negligence, recklessness, violation of Law, fraud or misrepresentation by any member of the Encompass Group or the Enhabit Group, or any of their respective directors, officers, Employees, Former Employees, agents, Subsidiaries or Affiliates:

(i)          any and all wages, salaries, incentive compensation, equity compensation, commissions, bonuses and any other employee compensation or benefits payable to or on behalf of any Encompass Group Employees and Former Encompass Group Employees after the Effective Time, without regard to when such wages, salaries, incentive compensation, equity compensation, commissions, bonuses or other employee compensation or benefits are or may have been awarded or earned;

(ii)          any and all Liabilities whatsoever with respect to claims under an Encompass Benefit Plan;

(iii)          any and all Liabilities arising out of, relating to or resulting from the employment, or termination of employment of all Encompass Group Employees and Former Encompass Group Employees; and

(iv)          any and all Liabilities expressly assumed or retained by any member of the Encompass Group pursuant to this Agreement.

(c)          Unaddressed Liabilities.  To the extent that this Agreement does not address particular Liabilities under any Benefit Plan and the Parties later determine that they should be allocated in connection with the Distribution, the Parties shall agree in good faith on the allocation, taking into account the handling of comparable Liabilities under this Agreement.

(d)          Employment Litigation.  Notwithstanding anything contained herein to the contrary, Liabilities arising out of litigation involving Employees and Former Employee with respect to the termination of employment or violation of restrictive covenants shall be governed by the Separation and Distribution Agreement.

Section 2.02. Service Credit Recognized by Enhabit and Enhabit Benefit Plans.

(a)          Service Credit Generally.  As of the Effective Time, the Enhabit Benefit Plans shall, and Enhabit shall cause each member of the Enhabit Group to, recognize each Enhabit Group Employee’s and each Former Enhabit Group Employee’s full service with Encompass or any of its Subsidiaries or predecessor entities at or prior to the Effective Time, to the same extent that such service was recognized by Encompass for similar purposes prior to the Effective Time as if such full service had been performed for a member of the Enhabit Group, for purposes of eligibility, vesting and determination of level of benefits under any Enhabit Benefit Plans.

7

(b)          No Duplication or Acceleration of Benefits.  Notwithstanding anything to the contrary in this Agreement, the Separation and Distribution Agreement or any Ancillary Agreement, no participant in any Benefit Plan shall receive service credit or benefits or recognition of compensation or other factors to the extent that receipt of such service credit or benefits or recognition of compensation or other factors would result in duplication of benefits provided to such participant by the corresponding Benefit Plan or any other plan, program or arrangement sponsored or maintained by a member of the Group that sponsors the corresponding Benefit Plan.  Furthermore, unless expressly provided for in this Agreement, the Separation and Distribution Agreement or in any Ancillary Agreement or required by applicable Law, no provision in this Agreement shall be construed to (i) create any right to accelerate vesting distributions or entitlements under any Benefit Plan sponsored or maintained by a member of the Encompass Group or member of the Enhabit Group on the part of any Employee or Former Employee or (ii) limit the ability of a member of the Encompass Group or Enhabit Group to amend, merge, modify, eliminate, reduce or otherwise alter in any respect any benefit under any Benefit Plan sponsored or maintained by a member of the Encompass Group or Enhabit Group, respectively, or any trust, insurance policy or funding vehicle related thereto.

(c)          Beneficiaries.  References to Encompass Group Employees, Former Encompass Group Employees, Enhabit Group Employees, Former Enhabit Group Employees, and current and former nonemployee directors of either Encompass or Enhabit shall be deemed to refer to their beneficiaries, dependents, survivors and alternate payees, as applicable.

ARTICLE III
ASSIGNMENT OF EMPLOYEES

Section 3.01. Active Employees.

(a)          Assignment and Transfer of Employees.  Effective as of no later than the Effective Time and except as otherwise agreed to by the Parties, (i) the applicable member of the Encompass Group shall have taken such actions as are necessary to ensure that each individual who is intended to be an employee of the Enhabit Group as of immediately after the Effective Time (including any such individual who is not actively working as of the Effective Time as a result of an illness, injury or an approved leave of absence) (collectively, the “Enhabit Group Employees”) is employed by a member of the Enhabit Group as of immediately after the Effective Time, and (ii) the applicable member of the Encompass Group shall have taken such actions as are necessary to ensure that each individual who is intended to be an employee of the Encompass Group as of immediately after the Effective Time (including any such individual who is not actively working as of the Effective Time as a result of an illness, injury or an approved leave of absence) and any other individual employed by the Encompass Group as of the Effective Time who is not an Enhabit Group Employee (collectively, the “Encompass Group Employees”) is employed by a member of the Encompass Group as of immediately after the Effective Time.  Each of the Parties agrees to execute, and to seek to have the applicable Employees execute, such documentation, if any, as may be necessary to reflect such assignment and/or transfer.

(b)          At-Will Status.  Nothing in this Agreement shall create any obligation on the part of any member of the Encompass Group or any member of the Enhabit Group to (i) continue the employment of any Employee or permit the return from a leave of absence for any period after the date of this Agreement (except as required by applicable Law) or (ii) change the employment status of any Employee from “at-will,” to the extent that such Employee is an “at-will” employee under applicable Law.  Except as provided in this Agreement, this Agreement shall not limit the ability of the Encompass Group or the Enhabit Group to change the position, compensation or benefits of any Employees for performance-related, business or any other reason.

(c)          Non-compete, Severance, Change in Control, or Other Payments.  The Parties acknowledge and agree that the Separation, Distribution and the assignment, transfer or continuation of the employment of Employees as contemplated by this Section 3.01 shall not be deemed an involuntary termination of employment entitling any Enhabit Group Employee or Encompass Group Employee to non-compete, severance, change in control, or other payments or benefits.

8

(d)          Not a Change in Control.  The Parties acknowledge and agree that neither the consummation of the Separation, Distribution nor any transaction contemplated by this Agreement, the Separation and Distribution Agreement or any other Ancillary Agreement shall be deemed a “change in control,” “change of control,” or term of similar import for purposes of any Benefit Plan sponsored or maintained by any member of the Encompass Group or member of the Enhabit Group and except as provided in this Agreement or as otherwise required by applicable Law or Individual Agreement, no provision of this Agreement shall be construed to accelerate any vesting or create an right or entitlement to any compensation or benefits on the part of any Employee.

Section 3.02. Individual Agreements.

(a)          Assignment by Encompass.  To the extent necessary, Encompass shall assign, or cause an applicable member of the Encompass Group to assign, to Enhabit or another member of the Enhabit Group, as designated by Enhabit, all Individual Agreements (other than any provision relating to restrictive covenants), with such assignment to be effective as of no later than the Effective Time; provided, however, that to the extent that assignment of any such Individual Agreement is not permitted by the terms of such agreement or by applicable Law, effective as of the Effective Time, each member of the Enhabit Group shall be considered to be a successor to each member of the Encompass Group for purposes of, and a third-party beneficiary with respect to, such Individual Agreement, such that each member of the Enhabit Group shall enjoy all the rights and benefits under such agreement (including rights and benefits as a third-party beneficiary); provided, further, that in no event shall Encompass be permitted to enforce any Individual Agreement (including any agreement containing noncompetition or nonsolicitation covenants) against an Enhabit Group Employee or Former Enhabit Group Employee for action taken in such individual’s capacity as an Enhabit Group Employee or Former Enhabit Group Employee.

(b)          Assumption by Enhabit.  Effective as of the Effective Time, Enhabit shall, or shall cause the members of the Enhabit Group to, assume and honor any Individual Agreement to the extent assigned, including any obligations thereunder to which any Enhabit Group Employee or Former Enhabit Group Employee is a party with any member of the Encompass Group.

Section 3.03.          Consultation with Labor Representatives; Labor Agreements.  The Parties shall cooperate to notify, inform and/or consult with any labor union, works council or other labor representative regarding the Separation and Distributions to the extent required by Law or a Labor Agreement.  No later than as of immediately before the Effective Time, Enhabit shall have taken, or caused another member of the Enhabit Group to take, all actions that are necessary (if any) for Enhabit or another member of the Enhabit Group to (a) assume any Labor Agreements in effect with respect to Enhabit Group Employees and Former Enhabit Group Employees (excluding obligations thereunder with respect to any Encompass Group Employees or Former Encompass Group Employees, to the extent applicable) and (b) unless otherwise provided in this Agreement, assume and honor any obligations of the Encompass Group under any Labor Agreements as such obligations relate to Enhabit Group Employees and Former Enhabit Group Employees.  No later than as of immediately before the Effective Time, Encompass shall have taken, or caused another member of the Encompass Group to take, all actions that are necessary (if any) for Encompass or another member of the Encompass Group to (a) assume any Labor Agreements in effect with respect to Encompass Group Employees and Former Encompass Group Employees (excluding obligations thereunder with respect to any Enhabit Group Employees, or Former Enhabit Group Employees, the extent applicable) and (b) assume and honor any obligations of the Enhabit Group under any Labor Agreements as such obligations relate to Encompass Group Employees and Former Encompass Group Employees.

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Section 3.04. Non-Solicitation; Non-Hire.

(a)          Non-Solicitation, Non-Hire.  Each Party agrees that, for the period of one (1) year immediately following the Effective Time, such Party shall, and shall cause each member in its Group, to not solicit for employment or hire any individual who is an employee at the level of director (eligible to participate in the Party’s senior management bonus plan) or above of a member of the other Group as of immediately prior to the Effective Time (“Restricted Employees”); provided that the foregoing restrictions shall not apply to:  (i) any Restricted Employee who terminates employment at least six (6) months prior to the applicable solicitation and/or hiring, (ii) the solicitation of a Restricted Employee whose employment was involuntarily terminated by the employing Party in a severance qualifying termination before the employment discussions with the soliciting Party commenced, and (iii) any Restricted Employee whose prospective employment is agreed to in writing by the soliciting Party and the employing Party, or in the case of a Restricted Employee who is not currently employed, the Party who last employed Restricted Employee; and provided, further, that it shall not be deemed to be a violation of the non-solicitation covenant of this Section 3.04 for either Party, or the members of its Group, to post a general solicitation that is not targeted at Restricted Employees of the other Party and the members of its Group.

(b)          Remedies; Enforcement.  Each Party acknowledges and agrees that (i) injury to the employing Party from any breach by the other Party of the obligations set forth in this Section 3.04 would be irreparable and impossible to measure and (ii) the remedies at Law for any breach or threatened breach of this Section 3.04, including monetary damages, would therefore be inadequate compensation for any loss and the employing Party shall have the right to specific performance and injunctive or other equitable relief in accordance with this Section 3.04, in addition to any and all other rights and remedies at Law or in equity, and all such rights and remedies shall be cumulative.  Each Party understands and acknowledges that the restrictive covenants and other agreements contained in this Section 3.04 are an essential part of this Agreement and the transactions contemplated hereby.  It is the intent of the Parties that the provisions of this Section 3.04 shall be enforced to the fullest extent permissible under applicable Law applied in each jurisdiction in which enforcement is sought.  If any particular provision or portion of this Section 3.04 shall be adjudicated to be invalid or unenforceable, such provision or portion thereof shall be deemed amended to the minimum extent necessary to render such provision or portion valid and enforceable, such amendment to apply only with respect to the operation of such provision or portion thereof in the particular jurisdiction in which such adjudication is made.

ARTICLE IV
EQUITY, INCENTIVE AND EXECUTIVE COMPENSATION

Section 4.01. Generally.  Each Encompass Award that is outstanding as of immediately prior to the Effective Time shall be adjusted as described below; provided, however, that, prior to the Effective Time, the Encompass Compensation Committee may provide for different adjustments with respect to some or all Encompass Awards to the extent that the Encompass Compensation Committee deems such adjustments necessary and appropriate.  Any adjustments made by the Encompass Compensation Committee pursuant to the foregoing sentence shall be deemed incorporated by reference herein as if fully set forth below and shall be binding on the Parties and their respective Affiliates.  Before the Effective Time, the Enhabit Omnibus Plan shall be established, with such terms as are necessary to permit the implementation of the provisions of Section 4.02.

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Section 4.02. Equity Incentive Awards.

(a)          Option Awards.  Each Encompass Option Award that is outstanding immediately prior to the Effective Time shall be converted as of the Effective Time into either a Post-Separation Encompass Option Award or an Enhabit Option Award as described below:

(i)          Each Encompass Option Award held by an Encompass Group Employee and Former Employee shall be converted as of the Effective Time, through an adjustment thereto, into a Post-Separation Encompass Option Award and shall, except as otherwise provided in this Section 4.02(a), be subject to the same terms and conditions (including with respect to vesting and expiration) after the Effective Time as applicable to such Encompass Option Award immediately prior to the Effective Time.  From and after the Effective Time:

(A)          the number of Encompass Shares subject to such Post-Separation Encompass Option Award, shall be equal to the sum of all the Encompass Shares subject to all tranches of the Award where the number of Encompass Shares of each tranche is equal to the product, rounded down to the nearest whole number of shares for each tranche, obtained by multiplying (1) the number of Encompass Shares subject to the corresponding tranche of the Encompass Option Award immediately prior to the Effective Time, by (2) the Encompass Ratio; and

(B)          the per share exercise price of such Post-Separation Encompass Option Award, rounded up to the nearest cent, shall be equal to the quotient obtained by dividing (1) the per share exercise price of the corresponding Encompass Option Award as of immediately prior to the Effective Time, by (2) the Encompass Ratio.

(ii)          Each Encompass Option Award held by an Enhabit Group Employee shall be converted as of the Effective Time into an Enhabit Option Award outstanding under the Enhabit Omnibus Plan and shall, except as otherwise provided in this Section 4.02(a), be subject to the same terms and conditions (including with respect to vesting and expiration) after the Effective Time as applicable to such Encompass Option Award immediately prior to the Effective Time.  From and after the Effective Time:

(A)          the number of Enhabit Shares subject to such Enhabit Option Award, shall be equal to the sum of all the Enhabit Shares subject to all tranches of the Award where the number of Enhabit Shares of each tranche is equal to the product, rounded down to the nearest whole number of shares for each tranche, obtained by multiplying (1) the number of Encompass Shares subject to the corresponding tranche of the Encompass Option Award immediately prior to the Effective Time, by (2) the Enhabit Ratio; and

(B)          the per share exercise price of such Enhabit Option Award, rounded up to the nearest cent, shall be equal to the quotient obtained by dividing (1) the per share exercise price of the corresponding Encompass Option Award as of immediately prior to the Effective Time, by (2) the Enhabit Ratio.

Notwithstanding anything to the contrary in this Section 4.02(a), the exercise price, the number of Encompass Shares and Enhabit Shares subject to each Post-Separation Encompass Option Award and Enhabit Option Award, and the terms and conditions of exercise of such options, shall be determined in a manner consistent with the requirements of Section 409A of the Code.

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(b)          Restricted Stock Awards.  Each Encompass Restricted Stock Award that is outstanding as of immediately prior to the Effective Time shall be treated as follows:

(i)          If the holder is an Encompass Group Employee, such award shall be converted, as of the Effective Time, into a Post-Separation Encompass Restricted Stock Award, and shall, except as otherwise provided in this Section 4.02, be subject to the same terms and conditions (including with respect to vesting) after the Effective Time as were applicable to such Encompass Restricted Stock Award immediately prior to the Effective Time; provided, however, that from and after the Effective Time, the number of Encompass Shares subject to such Post-Separation Encompass Restricted Stock Award shall be equal to the sum of all the Encompass Shares subject to all tranches of the Award where the number of Encompass Shares subject to each tranche is equal to the product, rounded up to the nearest whole number of shares for each such tranche, obtained by multiplying (A) the number of Encompass Shares subject to such tranche of the corresponding Encompass Restricted Stock Award immediately prior to the Effective Time, by (B) the Encompass Ratio.

(ii)          If the holder is an Enhabit Group Employee, such award shall be converted, as of the Effective Time, into an Enhabit Restricted Stock Award, and shall, except as otherwise provided in this Section 4.02, be subject to the same terms and conditions  (including with respect to vesting) after the Effective Time as were applicable to such Encompass Restricted Stock Award immediately prior to the Effective Time; provided, however, that from and after the Effective Time, the number of Enhabit Shares subject to such Enhabit Restricted Stock Award shall be equal to the sum of all the Enhabit Shares subject to all tranches of the Award where the number of Enhabit Shares subject to each tranche is equal to the product, rounded up to the nearest whole number of shares for each such tranche, obtained by multiplying (A) the number of Encompass Shares subject to such tranche of the corresponding Encompass Restricted Stock Award immediately prior to the Effective Time, by (B) the Enhabit Ratio.

(c)          Performance Stock Unit Awards.  Each Encompass Performance Stock Unit Award that is outstanding as of immediately prior to the Effective Time shall be treated as follows:

(i)          If the holder is an Encompass Group Employee or Former Employee, such award shall be converted, as of the Effective Time, into a Post-Separation Encompass Performance Stock Unit Award, and shall, except as otherwise provided in this Section 4.02(c), be subject to the same terms and conditions (including with respect to time-based vesting) after the Effective Time as were applicable to such Encompass Performance Stock Unit Award immediately prior to the Effective Time; provided, however, that from and after the Effective Time, the number of Encompass Shares subject to such Post-Separation Encompass Performance Share Unit Award shall be equal to the sum of all the Encompass Shares subject to all tranches of the Award where the number of Encompass Shares subject to each tranche is equal to the product, rounded up to the nearest whole number of shares for each such tranche, obtained by multiplying (A) the number of Encompass Shares subject to such tranche of the corresponding Encompass Performance-Based RSU Award immediately prior to the Effective Time, by (B) the Encompass Ratio.  The applicable performance-based vesting conditions may be modified in a manner determined by the Encompass Compensation Committee prior to the Effective Time.

(ii)          If the holder is an Enhabit Group Employee, such award shall be converted, as of the Effective Time, into an Enhabit Restricted Stock Award, and shall, except as otherwise provided in this Section 4.02(c), be subject to the same terms and conditions (including with respect to time-based vesting) after the Effective Time as were applicable to such Encompass Performance Stock Unit Award immediately prior to the Effective Time; provided, however, that the Encompass Compensation Committee shall determine the number of Encompass Shares earned under such award as of immediately prior to the Effective Time based on the Encompass Compensation Committee’s determination of the level of achievement of the applicable performance objectives; and provided, further, that the number of Enhabit Shares subject to such Enhabit Restricted Stock Award shall be equal to the sum of all the Enhabit Shares subject to each tranche of the Award where the number of Shares subject to each tranche is equal to the product, rounded up to the nearest whole number of shares for each such tranche, obtained by multiplying (A) the number of Encompass Shares subject to such tranche of the corresponding Encompass Performance Share Unit Award immediately prior to the Effective Time, by (B) the Enhabit Ratio.

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(d)          RSU Awards.  Each Encompass RSU Award that is outstanding as of immediately prior to the Effective Time and held by a Director or Transferred Director shall be converted in the same manner as described in Section 4.02(b)(i) into a Post-Separation Encompass RSU Award; provided that, for each Director or Transferred Director, the conversion shall be calculated for rounding purposes by treating all Encompass RSU Awards granted to such Director or Transferred Director prior to 2014 as one single award and all Encompass RSU Awards granted to such Director or Transferred Director after 2013 as another single award, in both cases without regard to any tranches.

(e)          Miscellaneous Award Terms.  None of the Separation, the Distribution or any employment transfer described in Section 3.01(a) shall constitute a termination of employment for any Employee or termination of service for any nonemployee director for purposes of any Post-Separation Encompass Award or any Enhabit Award.  After the Effective Time, for any award adjusted under this Section 4.02, any reference to a “change in control,” “change of control” or similar definition in an award agreement, employment agreement or Encompass Omnibus Plan applicable to such award (x) with respect to Post-Separation Encompass Awards shall be deemed to refer to a “change in control,” “change of control” or similar definition as set forth in the applicable award agreement, employment agreement or Encompass Omnibus Plan, and (y) with respect to Enhabit Awards, shall be deemed to refer to a “Change in Control” as defined in the Enhabit Omnibus Plan.

(f)          Registration and Other Regulatory Requirements.  Enhabit agrees to file the appropriate registration statements with respect to, and to cause to be registered pursuant to the Securities Act, the Enhabit Shares authorized for issuance under the Enhabit Omnibus Plan, as required pursuant to the Securities Act, on or promptly following the Effective Time and in any event before the date of issuance of any Enhabit Shares pursuant to the Enhabit Omnibus Plan.  The Parties shall take such additional actions as are deemed necessary or advisable to effectuate the foregoing provisions of this Section 4.02(f), including, to the extent applicable, compliance with securities Laws and other legal requirements associated with equity compensation awards in affected non-U.S. jurisdictions.

Section 4.03. Non-Equity Incentive Practices and Plans.

(a)          Corporate Bonus Practices.

(i)          The Enhabit Group shall be responsible for determining all bonus awards that would otherwise be payable under the Enhabit Non-Equity Incentive Practices to Enhabit Group Employees or Former Enhabit Group Employees for any performance periods that are open when the Effective Time occurs.  The Enhabit Group shall also determine for Enhabit Group Employees or Former Enhabit Group Employees (A) the extent to which established performance criteria (as interpreted by the Enhabit Group, in its sole discretion) have been met, and (B) the payment level for each Enhabit Group Employee or Former Enhabit Group Employee.  The Enhabit Group shall assume all Liabilities with respect to any such bonus awards payable to Enhabit Group Employees or Former Enhabit Group Employees for any performance periods that are open when the Effective Time occurs and thereafter, and no member of the Encompass Group shall have any obligations with respect thereto.

(ii)          The Encompass Group shall be responsible for determining all bonus awards that would otherwise be payable under the Encompass Non-Equity Incentive Practices to Encompass Group Employees or Former Encompass Group Employees for any performance periods that are open when the Effective Time occurs.  The Encompass Group shall also determine for Encompass Group Employees or Former Encompass Group Employees (A) the extent to which established performance criteria (as interpreted by the Encompass Group, in its sole discretion) have been met, and (B) the payment level for each Encompass Group Employee or Former Encompass Group Employee.  The Encompass Group shall retain (or assume as necessary) all Liabilities with respect to any such bonus awards payable to Encompass Group Employees or Former Encompass Group Employees for any performance periods that are open when the Effective Time occurs and thereafter, and no member of the Enhabit Group shall have any obligations with respect thereto.

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(b)          Other Cash Incentive Plans.

(i)          No later than the Effective Time, the Encompass Group shall continue to retain (or assume as necessary) any cash incentive plan for the exclusive benefit of Encompass Group Employees and Former Encompass Group Employees, whether or not sponsored by the Encompass Group, and, from and after the Effective Time, shall be solely responsible for all Liabilities thereunder.

(ii)          No later than the Effective Time, the Enhabit Group shall continue to retain (or assume as necessary) any cash incentive plan for the exclusive benefit of Enhabit Group Employees and Former Enhabit Group Employees, whether or not sponsored by the Enhabit Group, and, from and after the Effective Time, shall be solely responsible for all Liabilities thereunder.

ARTICLE V
QUALIFIED RETIREMENT PLANS

Section 5.01. Encompass 401(k) Plan.  At the Effective Time, Encompass shall retain, and no member of the Enhabit Group shall assume or retain sponsorship of, or any Assets and Liabilities with respect to, the Encompass 401(k) Plan.

Section 5.02. Enhabit 401(k) Plan.  Each Enhabit Group Employee employed by a member of the Enhabit Group on the Distribution Date who immediately prior to the Distribution Date was an active participant in the Encompass 401(k) Plan shall be eligible to participate in the Enhabit 401(k) Plan as of the Separation Date to the extent that such Enhabit Group Employee was eligible to participate in the Encompass 401(k) Plan, as of immediately prior to the Separation Date.

Section 5.03. Rollover of Account Balances.  As soon as practical after the Effective Time, Encompass and Enhabit shall take any and all actions as may be required to permit each Enhabit Group Employee who has an account balance in the Encompass 401(k) Plan to elect to make rollover contributions of “eligible rollover distributions” (within the meaning of Section 402(c)(4) of the Code if applicable) in an amount equal to the entire eligible rollover distribution distributable to such Enhabit Group Employee from the Encompass 401(k) Plan to the Enhabit 401(k) Plan.  Such transfer shall be made in cash.

ARTICLE VI
NONQUALIFIED DEFERRED COMPENSATION PLANS

Section 6.01. Encompass Deferred Compensation Plans.  Encompass shall, or shall cause a member of the Encompass Group to, assume and retain all Liabilities and Assets with respect to the Encompass Deferred Compensation Plans and any related rabbi trusts with respect to Employees, Former Employees, Directors and Transferred Directors whether arising before, on or after the Distribution Date and no member of the Enhabit Group shall assume or retain any Liabilities and Assets with respect to the Encompass Deferred Compensation Plans and any related rabbi trusts.  Following the Effective Time, no Enhabit Group Employee, Former Enhabit Group Employee or Transferred Director shall be credited with any additional service under the Encompass Deferred Compensation Plans;  provided that, any Enhabit Group Employee who is a participant in the Encompass Health Corporation Nonqualified 401(k) Plan immediately prior to the Effective Time and has made an irrevocable salary or bonus deferral election for the 2022 calendar year with respect to such plan shall be credited under such plan with any salary or bonus deferral amounts made pursuant to such election.  In connection with the forgoing, promptly following, but in no event later than 30 days following, each Enhabit payroll period pertaining to any such salary or bonus deferral amount, Enhabit shall remit to Encompass such deferral amount.

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Section 6.02. Adjustment of Encompass Shares under the Director Deferred Compensation Plan.  All Encompass Shares notionally credited to a participant’s account under the Director Deferred Compensation Plan immediately prior to the Effective Time shall be adjusted from and after the Effective Time so that with respect to a participant in the Director Deferred Compensation Plan immediately following the Effective Time, the number of Encompass Shares notionally credited as of the Effective Time under the Director Deferred Compensation Plan shall be equal to the product, rounded up to the nearest whole number of shares, obtained by multiplying (A) the number of Encompass Shares notionally credited under such Director Deferred Compensation Plan immediately prior to the Effective Time by (B) the Encompass Ratio.

Section 6.03. Participation; Distributions.  The Parties acknowledge that none of the transactions contemplated by this Agreement, the Separation and Distribution Agreement or any Ancillary Agreement shall trigger a payment or distribution of compensation under any of the Encompass Deferred Compensation Plans for any participant and, consequently, that the payment or distribution of any compensation to which such participant is entitled under any such plan shall occur upon such participant’s separation from service from the Encompass Group or Enhabit Group or at such other time as provided in the applicable deferred compensation plan or participant’s deferral election.

Section 6.04. Deferred Compensation Notice Requirements Regarding Transferred Directors.  In the event that any Enhabit Group Employee or Transferred Director who is participant in an Enhabit Deferred Compensation Plan terminates employment or service with the Enhabit Group, written notice of such termination shall be provided by Enhabit to Encompass within thirty (30) days following such termination of employment or service.

ARTICLE VII
WELFARE BENEFIT PLANS

Section 7.01. Welfare Plans.

(a)          Coverage under Enhabit Welfare Plans.  Each Enhabit Group Employee employed by a member of the Enhabit Group on the Separation Date who immediately prior to the Separation Date was an active participant in an Encompass Welfare Plan shall be eligible to participate in the analogous Enhabit Welfare Plan as of the Separation Date to the extent that such Enhabit Group Employee was eligible to participate in each such Encompass Welfare Plan as of immediately prior to the Separation Date.

(b)          Allocation of Welfare Plan Liabilities.  All outstanding Liabilities relating to, arising out of, or resulting from health and welfare claims incurred by or on behalf of Enhabit Group Employees and Former Enhabit Group Employees under the Encompass Welfare Plans before the Distribution Date including claims incurred by not reported, shall be retained by the Encompass Welfare Plans.

Section 7.02. COBRA.  The Encompass Group shall continue to be responsible for complying with, and providing coverage pursuant to, the health care continuation requirements of COBRA, and the corresponding provisions of the Encompass Welfare Plans with respect to any Encompass Group Employees and any Former Encompass Group Employees (and their covered dependents) who experience a qualifying event under COBRA before, as of, or after the Effective Time, including, where applicable, administration of the COBRA premium assistance subsidy under the American Rescue Plan Act of 2021.  Effective as of the Effective Time, the Enhabit Group shall assume responsibility for complying with, and providing coverage pursuant to, the health care continuation requirements of COBRA, and the corresponding provisions of the Enhabit Welfare Plans with respect to any Enhabit Group Employees or Former Enhabit Group Employees (and their covered dependents) who experience a qualifying event under the Enhabit Welfare Plans and/or the Encompass Welfare Plans before, as of, or after the Effective Time.  The Parties agree that the consummation of the transactions contemplated by the Separation and Distribution Agreement shall not constitute a COBRA qualifying event for any purpose of COBRA.

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ARTICLE VIII
MISCELLANEOUS

Section 8.01. Preservation of Rights to Amend.  Except as set forth in this Agreement, the rights of each member of the Encompass Group and each member of the Enhabit Group to amend, waive, or terminate any plan, arrangement, agreement, program, or policy referred to herein shall not be limited in any way by this Agreement.

Section 8.02. Fiduciary Matters.  Encompass and Enhabit each acknowledge that actions required to be taken pursuant to this Agreement may be subject to fiduciary duties or standards of conduct under ERISA or other applicable Law, and no Party shall be deemed to be in violation of this Agreement if it fails to comply with any provisions hereof based upon its good faith determination (as supported by advice from counsel experienced in such matters) that to do so would violate such a fiduciary duty or standard.  Each Party shall be responsible for taking such actions as are deemed necessary and appropriate to comply with its own fiduciary responsibilities and shall fully release and indemnify the other Party for any Liabilities caused by the failure to satisfy any such responsibility.

Section 8.03. Information Sharing and Access.

(a)          Sharing of Information.  Subject to any limitations imposed by applicable Law, each of Encompass and Enhabit (acting directly or through members of the Encompass Group or the Enhabit Group, respectively) shall provide to the other Party and its authorized agents and vendors all information necessary (including information for purposes of determining benefit eligibility, participation, vesting, calculation of benefits) on a timely basis under the circumstances for the Party to perform its duties under this Agreement.  Such information shall include information relating to equity awards under stock plans.  To the extent that such information is maintained by a third-party vendor, each Party shall use its commercially reasonable efforts to require the third-party vendor to provide the necessary information and assist in resolving discrepancies or obtaining missing data.

(b)          Access to Records.  To the extent not inconsistent with this Agreement, the Separation and Distribution Agreement or any applicable privacy protection Laws or regulations, reasonable access to Employee-related and benefit plan related records after the Effective Time shall be provided to members of the Encompass Group and members of the Enhabit pursuant to the terms and conditions of Article VI of the Separation and Distribution Agreement.

(c)          Maintenance of Records.  With respect to retaining and destroying, all Employee-related information, Encompass and Enhabit shall comply with Section 6.4 of the Separation and Distribution Agreement (Record Retention) and the requirements of applicable Law.

(d)          Cooperation.  Each Party shall use commercially reasonable efforts to cooperate and work together to unify, consolidate and share (to the extent permissible under applicable privacy/data protection Laws) all relevant documents, resolutions, government filings, data, payroll, employment and benefit plan information on regular timetables and cooperate as needed with respect to (i) any claims under or audit of or litigation with respect to any employee benefit plan, policy or arrangement contemplated by this Agreement, (ii) efforts to seek a determination letter, private letter ruling or advisory opinion from the Internal Revenue Service or U.S. Department of Labor on behalf of any employee benefit plan, policy or arrangement contemplated by this Agreement, (iii) any filings that are required to be made or supplemented to the Internal Revenue Service, U.S. Department of Labor or any other Governmental Authority, and (iv) any audits by a Governmental Authority or corrective actions, relating to any Benefit Plan, labor or payroll practices; provided, however, that requests for cooperation must be reasonable and not interfere with daily business operations.

(e)          Confidentiality.  Notwithstanding anything in this Agreement to the contrary, all confidential records and data relating to Employees to be shared or transferred pursuant to this Agreement shall be subject to Section 6.9 of the Separation and Distribution Agreement (Confidentiality) and the requirements of applicable Law.

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Section 8.04. Third-Party Beneficiaries.  The provisions of this Agreement are solely for the benefit of the Parties and are not intended to confer upon any Person except the Parties any rights or remedies hereunder.  There are no third-party beneficiaries of this Agreement, and this Agreement shall not provide any Third Party with any remedy, claim, Liability, reimbursement, claim of action or other right in excess of those existing without reference to this Agreement.  Nothing in this Agreement is intended to amend any employee benefit plan or affect the applicable plan sponsor’s right to amend or terminate any employee benefit plan pursuant to the terms of such plan.  The provisions of this Agreement are solely for the benefit of the Parties, and no current or former Employee, officer, director, or independent contractor or any other individual associated therewith shall be regarded for any purpose as a third-party beneficiary of this Agreement.

Section 8.05. Further Assurances.  Each Party hereto shall take, or cause to be taken, any and all reasonable actions, including the execution, acknowledgment, filing and delivery of any and all documents and instruments that any other Party hereto may reasonably request to effect the intent and purpose of this Agreement and the transactions contemplated hereby.

Section 8.06. Dispute Resolution.  The dispute resolution procedures set forth in Article VII of the Separation and Distribution Agreement shall apply to any dispute, controversy or claim arising out of or relating to this Agreement.

Section 8.07. Incorporation of Separation and Distribution Agreement Provisions.  Article X of the Separation and Distribution Agreement (other than Section 10.4 (Third-Party Beneficiaries) and Section 10.19 (Ancillary Agreements)) is incorporated herein by reference and shall apply to this Agreement as if set forth herein mutatis mutandis.

[Remainder of page intentionally left blank]

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IN WITNESS WHEREOF, the Parties have caused this Employee Matters Agreement to be executed by their duly authorized representatives as of the date first written above.

 
ENCOMPASS HEALTH CORPORATION
       
 
By:
 /s/ Patrick Darby
   
Name:
Patrick Darby
   
Title:
Executive Vice President, General Counsel and Secretary
       
 
ENHABIT, INC.
       
 
By:
 /s/ Barbara A. Jacobsmeyer
   
Name:
Barbara A. Jacobsmeyer
   
Title:
President and Chief Executive Officer


Exhibit 3.1.1

CERTIFICATE OF AMENDMENT
TO THE
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION OF ENHABIT, INC.

Enhabit, Inc. (the “Corporation”), a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the “DGCL”), does hereby certify:

1.          This Certificate of Amendment (the “Certificate of Amendment”) amends the provisions of the Corporation’s Amended and Restated Certificate of Incorporation (the “Certificate”) filed with the Secretary of State on December 31, 2014 and as amended by those Certificates of Amendment filed with the Secretary of State on September 12, 2016, November 1, 2017 and March 7, 2022.

2.          This Certificate of Amendment to the Certificate was duly adopted in accordance with Section 242 of the DGCL.

3.          The Certificate is hereby amended as follows:

Article FOURTH of the Certificate is hereby amended in its entirety to read:

“ARTICLE FOURTH

(1)          Effective immediately, the total number of shares of stock which the Corporation shall be authorized to issue is Two Hundred Million (200,000,000) shares of capital stock, all of which shall be shares of common stock, par value One Cent ($0.01) per share (“Common Stock”).

(2)          Effective as of 11:59 p.m. Eastern Time on June 30, 2022 (such time, the “Recapitalization Time”), the total number of shares of Common Stock issued and outstanding immediately prior to the Recapitalization Time shall, automatically by operation of law and without any further action on the part of the Corporation or any holders of shares of capital stock of the Corporation, be subdivided and converted into a number of shares of validly issued, fully paid and non-assessable shares of the Corporation’s Common Stock authorized for issuance pursuant to this Certificate of Incorporation equal to the product of (i) the number of shares of common stock, par value $0.01 per share, of Encompass Health Corporation issued and outstanding, but not including shares held by Encompass Health Corporation as treasury stock, as of the close of business on June 24, 2022, which is the date set by the Distribution Committee of the Board of Directors of Encompass Health Corporation as the record date for the distribution of shares of Common Stock to the holders of shares of common stock, par value $0.01 per share, of Encompass Health Corporation, multiplied by (ii) 0.5.

(3)          Except as otherwise provided by law, the Common Stock shall have the exclusive right to vote for the election of directors and for all purposes.  Each share of Common Stock shall have one vote, and the Common Stock shall vote together as a single class.”

4.          The Certificate of Amendment to the Certificate shall become effective upon the filing hereof.

[The remainder of this page is left intentionally blank.]

IN WITNESS WHEREOF, the Corporation has caused this certificate to be signed on   June 30, 2022.

   
ENHABIT, INC.
     
 
By:
 /s/ Barbara A. Jacobsmeyer
   
Name: Barbara A. Jacobsmeyer
   
Title:  President and Chief Executive Officer


[Signature Page Enhabit, Inc. Certificate of Amendment to Certificate of Incorporation]
Exhibit 3.1.2

AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION

OF

ENHABIT, INC.

(a Delaware Corporation)


The undersigned, Barbara A. Jacobsmeyer certifies that she is the President and Chief Executive Officer of Enhabit, Inc., a corporation organized and existing under the laws of the State of Delaware (the “Corporation”), does hereby certify as follows:

1. The name of the Corporation is Enhabit, Inc.

2. The Corporation was originally incorporated under the name HealthSouth Home Health Holdings, Inc. The date of filing its original Certificate of Incorporation (as amended and restated from time to time, the “Certificate of Incorporation”) with the Secretary of State of Delaware was November 20, 2014.

3. The Certificate of Incorporation was previously amended and restated on December 31, 2014.

4. The Article FOURTH of the Certificate of Incorporation was amended effective as of September 12, 2016 pursuant to that certain Certificate of Amendment dated August 29, 2016.

5. The Article FIRST of the Certificate of Incorporation was amended effective as of  January 1, 2018 pursuant to that certain Certificate of Amendment dated October 31, 2017.

6. The Article FIRST of the Certificate of Incorporation was further amended effective as of March 7, 2022 pursuant to that certain Certificate of Amendment dated March 7, 2022.

7.
The Article FOURTH of the Certificate of Incorporation was further amended pursuant to that certain Certificate of Amendment filed with the Secretary of State of Delaware on June 30, 2022.

8. In accordance with the applicable provisions of Sections 141, 228, 242 and 245 of the General Corporation Law of the State of Delaware (the “DGCL”), this Amended and Restated Certificate of Incorporation has been duly adopted by the Board of Directors of the Corporation and by the written consent of its sole stockholder.

9. Effective as of July 1, 2022 at 12:00 a.m. Eastern Time, the text of the Amended and Restated Certificate of Incorporation of the Corporation shall read as herein set forth in full:

FIRST:            
The name of the Corporation is Enhabit, Inc.

SECOND:
The address of its registered office in the State of Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle, State of Delaware, 19801. The name of its registered agent at such address is The Corporation Trust Company.

THIRD:             
The nature of the business or purposes to be conducted or promoted shall be to engage in any lawful act or activity for which corporations may be organized and incorporated under the DGCL.

FOURTH:      
The total number of shares of stock which the Corporation shall have the authority to issue is Two Hundred One Million Five Hundred Thousand (201,500,000) shares, consisting of Two Hundred Million (200,000,000) shares of Common Stock, par value One Cent ($0.01) per share, and One Million Five Hundred Thousand (1,500,000) shares of Preferred Stock, par value Ten Cents ($0.10) per share.

Shares of Preferred Stock may be issued from time-to-time in one or more series, each such series to have such distinctive designation or title as may be stated and expressed in this Article FOURTH or as may be fixed by the Board of Directors prior to the issuance of any shares thereof. Each such series of Preferred Stock shall have such voting powers, full or limited, or no voting powers, and such preferences and such relative, participating, optional or other special rights (including, without limitation, the right to convert the shares of such Preferred Stock into shares of the Corporation’s Common Stock at such a rate and upon such terms and conditions as may be fixed by the Corporation’s Board of Directors), with such qualifications, limitations or restrictions of such preferences or rights as shall be stated and expressed in this Article FOURTH or in the resolution or resolutions providing for the issue of such series of Preferred Stock as may be adopted from time-to-time by the Board of Directors prior to the issuance of any shares thereof, in accordance with the laws of the State of Delaware.

Except as may be otherwise provided in this Article FOURTH or in the resolution or resolutions providing for the issue of a particular series, the Board of Directors may from time-to-time increase the number of shares of any series already created by providing that any unissued shares of Preferred Stock shall constitute part of such series, or may decrease (but not below the number of shares thereof then outstanding) the number of shares of any series already created by providing that any unissued shares previously assigned to such series shall no longer constitute part thereof.
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FIFTH:       
The Board of Directors shall have the power to make, alter or repeal the Bylaws of the Corporation at any meeting of the Board of Directors at which a quorum is present or by written consent by the affirmative vote of a majority of the whole Board of Directors.  Election of Directors need not be by written ballot.

SIXTH:
Special Meetings of the stockholders of the Corporation may be called only by the Board of Directors of the Corporation by resolution adopted by a majority of the whole Board of Directors or in writing by the holders of at least 20% of the outstanding shares of the Corporation entitled to vote in elections of Directors.

SEVENTH:
(a) Unless the conditions set forth in clauses (1) through (4) of this Article SEVENTH, Section (a) are satisfied, the affirmative vote of the holders of Sixty-Six and Two-Thirds Percent (66-2/3%) of all shares of the Corporation entitled to vote in elections of Directors, considered for the purposes of this Article SEVENTH as one class, shall be required for the adoption or authorization of a business combination (as hereinafter defined) with any other entity (as hereinafter defined) if, as of the record date for the determination of stockholders entitled to notice thereof and to vote thereon, the other entity is the beneficial owner, directly or indirectly, of more than Twenty Percent (20%) of the outstanding shares of the Corporation entitled to vote in elections of Directors, considered for the purposes of this Article SEVENTH as one class. The Sixty-Six and Two-Thirds Percent (66-2/3%) voting requirement set forth in the foregoing sentence shall not be applicable if:


 (1)
The cash, or fair market value of other consideration, to be received per share by holders of the Corporation’s Common Stock in the business combination, is at least an amount equal to (A) the highest per share price paid by the other entity in acquiring any of its holdings of the Corporation’s Common Stock plus (B) the aggregate amount, if any, by which Five Percent (5%) per annum of that per share price exceeds the aggregate amount of all dividends paid in cash, in each case since the date on which the other entity acquired the Twenty Percent (20%) interest;


(2)
After the other entity has acquired a Twenty Percent (20%) interest and prior to the consummation of the business combination: (A) the other entity shall have taken steps to ensure that the Corporation’s Board of Directors included at all times representation by continuing Director(s) (as hereinafter defined) proportionate to the stockholders of the public holders of the Corporation’s Common Stock not affiliated with the other entity (with a continuing Director to occupy any resulting fractional board position); (B) the other entity shall not have acquired any newly issued shares, directly or indirectly, from the Corporation (except upon conversion of convertible securities acquired by it prior to obtaining a Twenty Percent (20%) interest or as a result of a pro rata share dividend or share split); and (C) the other entity shall not have acquired any additional outstanding shares of the Corporation’s Common Stock or securities convertible into shares of the Corporation’s Common Stock except as a part of the transaction that resulted in the other entity’s acquiring its Twenty Percent (20%) interest;
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 (3)
The other entity shall not have (A) received the benefit, directly or indirectly (except proportionately as a stockholder), of any loans, advances, guarantees, pledges or other financial assistance or tax credits provided by the Corporation or (B) made any major change in the Corporation’s business or equity capital structure without in either case the approval of at least a majority of all the Directors and at least two-thirds of the continuing Directors prior to the consummation of the business combination; and


(4)
A proxy statement responsive to the requirements of the Securities Exchange Act of 1934 shall have been mailed to public stock holders of the Corporation for the purpose of soliciting stockholder approval of the business combination and shall have contained at the front thereof, in a prominent place, any recommendations as to the advisability (or inadvisability) of the business combination that the continuing Directors, or any of them, may choose to state and, if deemed advisable by a majority of the continuing Directors, an opinion of a reputable investment banking firm as to the fairness of the terms of the business combination, from the point of view of the remaining public stockholders of the Corporation (the investment banking firm to be selected by a majority of the continuing Directors and to be paid a reasonable fee for its services by the Corporation upon receipt of the opinion).

The provisions of this Article SEVENTH shall also apply to a business combination with any other entity that at any time has been the beneficial owner, directly or indirectly, of more than Twenty Percent (20%) of the outstanding shares of the Corporation entitled to vote in elections of Directors, considered for the purposes of this Article SEVENTH as one class, notwithstanding the fact that the other entity has reduced its shareholders below Twenty Percent (20%) if, as of the record date for the determination of stockholders entitled to notice of and to vote on the business combination, the other entity is an “affiliate” (as hereinafter defined) of the Corporation.

(b) As used in this Article SEVENTH, (1) the term “other entity” shall include any corporation, person or other entity and any other entity with which it or its “affiliate” or “associate” (as defined below) has any agreement, arrangement, or understanding, directly or indirectly, for the purpose of acquiring, holding, voting, or disposing of shares of the Corporation, or that is its “affiliate” or “associate” as those terms are defined in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934 as in effect on September 1, 1986, together with the successors and assigns of those persons in any transaction or series of transactions not involving a public offering of the Corporation’s shares within the meaning of the Securities Act of 1933; (2) an other entity shall be deemed to be the beneficial owner of any shares of the Corporation that the other entity (as defined above) has the right to acquire pursuant to any agreement or upon exercise of conversion rights, warrants or options, or otherwise; (3) the outstanding shares of any class of the Corporation shall include shares deemed owned through application of clause (2) above but shall not include any other shares that may be issuable pursuant to any agreement or upon exercise of conversion rights, warrants or options, or otherwise; (4) the term “business combination” shall include (A) the sale, exchange, lease, transfer or other disposition by the Corporation of all, or substantially all, of its assets or business to any other entity, (B) the consolidation of the Corporation with or its merger into any other entity, (C) the merger into the Corporation of any other entity, or (D) a combination or majority share acquisition in which the Corporation is the acquiring corporation and its voting shares are issued or transferred to any other entity or to stockholders of any other entity, and the term “business combination” shall also include any agreement, contract or other arrangement with another entity providing for any of the transactions described in (A) through (D) of this clause (4); (5) the term “continuing Director” shall mean either a person who was a member of the Corporation’s Board of Directors on August 15, 1986, or a person who was elected to the Corporation’s Board of Directors by the public stockholders of the Corporation prior to the time when the other entity acquired in excess of five percent (5%) of the shares of the Corporation entitled to vote in the election of Directors, considered for the purposes of this Article SEVENTH as one class, or a person recommended to succeed a continuing Director by a majority of the continuing Directors; and (6) for the purposes of Article SEVENTH, Section (a), clause (1), the term “other consideration to be received” shall mean shares of the Corporation’s Common Stock retained by its existing public stockholders in the event of a business combination with the other entity in which the Corporation is the surviving corporation.
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(c) A majority of the continuing Directors shall have the power and duty to determine for the purposes of this Article SEVENTH, on the basis of information known to them, whether (1) the other entity beneficially owns more than Twenty Percent (20%) of the outstanding shares of the Corporation entitled to vote in elections of Directors, (2) an other entity is an “affiliate” or “associate” (as defined above) of another, or (3) an other entity has an agreement, arrangement or understanding with another.

(d) Nothing contained in this Article SEVENTH shall be construed to relieve any other entity from any fiduciary obligation imposed by law.

EIGHTH:     Subject to the last sentence of this Article EIGHTH, the Corporation reserves the right to amend and repeal any provision contained in this Amended and Restated Certificate of Incorporation including, without limiting the generality of the foregoing, the addition of a provision requiring a supermajority vote of stockholders to remove Directors. The provisions set forth in Articles SIXTH, SEVENTH and this Article EIGHTH of this Amended and Restated Certificate of Incorporation may not be repealed or amended in any respect, unless such action is approved by the affirmative vote of the holders of Sixty-Six and Two-Thirds Percent (66-2/3%) of all shares of the Corporation entitled to vote in elections of Directors, considered for purposes of this Article EIGHTH as one class.

NINTH:       No Director of this Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a Director; provided, however, that this Article NINTH shall not eliminate the liability of a Director (a) for any breach of the Director’s duty of loyalty to the Corporation or its stockholders, (b) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (c) under Section 174 of the DGCL, or (d) for any transaction from which the Director derived an improper personal benefit.

Any repeal or modification of the foregoing paragraph shall not adversely affect any right or protection of a director of the Corporation existing hereunder with respect to any act or omission occurring prior to such repeal or modification.

[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, said Enhabit, Inc. has caused this Amended and Restated Certificate of Incorporation to be executed on its behalf by Barbara A. Jacobsmeyer, its President and Chief Executive Officer, and attested by Chad Knight, its General Counsel, as of this 30th day of June 2022.

 
Enhabit, Inc.
     
     
 
By:
 /s/ Barbara A. Jacobsmeyer
 
Name:
Barbara A. Jacobsmeyer
 
Title:
President and Chief Executive Officer

Attest:
  
     
     
By:
 /s/ Chad Knight  
Name:
Chad Knight
  
Title:
General Counsel
  

Exhibit 3.2


AMENDED AND RESTATED

BYLAWS

OF

ENHABIT, INC.

(a Delaware corporation)












Amended and Restated Bylaws of Enhabit, Inc., July 1, 2022
TABLE OF CONTENTS*

Page
     
ARTICLE I
     
OFFICES
     
Section 1.1
Registered Office
1
Section 1.2
Change of Location
1
     
ARTICLE II
     
MEETINGS OF STOCKHOLDERS
     
Section 2.1
Annual Meeting
1
Section 2.2
Special Meetings
1
Section 2.3
List of Stockholders Entitled to Vote
2
Section 2.4
Notice of Meetings
2
Section 2.5
Adjourned Meetings and Notice Thereof
2
Section 2.6
Quorum
3
Section 2.7
Voting
3
Section 2.8
Action by Consent of Stockholders
3
Section 2.9
Nature of Business at Annual Meetings of Stockholders
4
     
ARTICLE III
     
BOARD OF DIRECTORS
     
Section 3.1
General Powers
6
Section 3.2
Number of Directors
6
Section 3.3
Qualification
6
Section 3.4
Election
6
Section 3.5
Term
11
Section 3.6
Resignation and Removal
12
Section 3.7
Vacancies
12
Section 3.8
Quorum and Voting
12
Section 3.9
Regulations
12
Section 3.10
Annual Meeting
13
Section 3.11
Regular Meetings
13
Section 3.12
Special Meetings
13
Section 3.13
Notice of Meetings; Waiver of Notice
13
Section 3.14
Committees of Directors
14
Section 3.15
Powers and Duties of Committees
14
Section 3.16
Compensation of Directors
14
Section 3.17
Action Without Meeting
14
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ARTICLE IV
     
OFFICERS
     
Section 4.1
Establishment of Offices
15
Section 4.2
Term of Office
15
Section 4.3
Delegation of Duties of Officers
15
Section 4.4
Removal of Officers
15
Section 4.5
Resignations
15
Section 4.6
Chairman and Vice Chairman of the Board
16
Section 4.7
Chief Executive Officer
16
Section 4.8
Chief Financial Officer
16
Section 4.9
President
16
Section 4.10
Chief Operating Officer
16
Section 4.11
Vice Presidents
17
Section 4.12
Secretary
17
Section 4.13
Treasurer
17
Section 4.14
Controller
17
     
ARTICLE V
     
CAPITAL STOCK
     
Section 5.1
Issuance of Certificates of Stock; Uncertificated Stock
17
Section 5.2
Signatures on Stock Certificates
17
Section 5.3
Stock Ledger
18
Section 5.4
Regulations Relating to Transfer
18
Section 5.5
Transfers
18
Section 5.6
Cancellation
18
Section 5.7
Lost, Destroyed, Stolen and Mutilated Certificates
18
Section 5.8
Fixing of Record Dates
19
     
ARTICLE VI
     
INDEMNIFICATION
     
Section 6.1
Indemnification
20
Section 6.2
Indemnification Insurance; Advancement of Expenses
20
     
ARTICLE VII
     
MISCELLANEOUS PROVISIONS
     
Section 7.1
Corporate Seal
21
Section 7.2
Fiscal Year
21
Section 7.3
Waiver of Notice
21
Section 7.4
Execution of Instruments, Contracts, Etc.
21
Section 7.5
Forum for Adjudication of Certain Disputes
22
Section 7.6
Severability
22
     
ARTICLE VIII
     
AMENDMENTS
     
Section 8.1
By Stockholders
23
Section 8.2
By Directors
23

* The Table of Contents appears here for convenience only and should not be considered a part of the Amended and Restated Bylaws.
ii


AMENDED AND RESTATED

BYLAWS

OF

ENHABIT, INC.

ARTICLE I

OFFICES

Section 1.1          Registered Office. The address of the registered office of Enhabit, Inc. (the “Corporation”) in the State of Delaware and the name of the registered agent at such address shall be as specified in the Amended and Restated Certificate of Incorporation, as amended (the “Certificate of Incorporation”), or as specified in the most recent Statement of Change filed pursuant to law. The Corporation may also have other offices at such places within or without the State of Delaware as the Board of Directors may from time to time designate or as the business of the Corporation may require.

Section 1.2          Change of Location. In the manner permitted by law, the Board of Directors or the registered agent may change the address of the Corporation’s registered office in the State of Delaware and the Board of Directors may make, revoke or change the designation of the registered agent.

ARTICLE II

MEETINGS OF STOCKHOLDERS

Section 2.1          Annual Meeting. The annual meeting of the stockholders of the Corporation for the election of Directors and for the transaction of such other business as may properly come before the meeting shall be held at such place within or without the State of Delaware as the Board of Directors may fix by resolution or as set forth in the notice of the meeting. The annual meeting shall be held on such date and at such time as shall be designated from time to time by the Board of Directors.

Section 2.2          Special Meetings. Special meetings of stockholders, unless otherwise prescribed by law, may be called at any time in accordance with the requirements of the Certificate of Incorporation. Special meetings of stockholders prescribed by law for the election of Directors shall be called by the Board of Directors, the Chairman of the Board, the President, or the Secretary whenever required to do so pursuant to applicable law. Special meetings of stockholders shall be held at such time and such place, within or without the State of Delaware, as shall be designated in the notice of meeting. Only such business as shall have been brought before the meeting by or at the direction of the Board of Directors shall be conducted at a special meeting of stockholders.


Section 2.3          List of Stockholders Entitled to Vote. The officer who has charge of the stock ledger of the Corporation shall prepare, or cause to be prepared, at least ten days before every meeting of stockholders, a complete list, based upon the record date for such meeting determined pursuant to Section 5.8, of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting for a period of at least ten days prior to the meeting: (i) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (ii) during ordinary business hours, at the principal place of business of the corporation. If the meeting is to be held at a place, then the list shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. If the meeting is to be held solely by means of remote communication, then the list shall also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting.

The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list of stockholders entitled to vote at any meeting, or to inspect the books of the Corporation, or to vote in person or by proxy at any meeting of stockholders.

Section 2.4          Notice of Meetings. Written notice of each annual and special meeting of stockholders, other than any meeting the giving of notice of which is otherwise prescribed by law, stating the place, if any, date and hour of the meeting, the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered or mailed, in writing, at least ten but not more than fifty days before the date of such meeting, to each stockholder entitled to vote thereat. If mailed, such notice shall be deposited in the United States mail, postage prepaid, directed to such stockholder at his address as the same appears on the records of the Corporation. An affidavit of the Secretary, an Assistant Secretary or the transfer or other agent of the Corporation that notice has been duly given shall be evidence of the facts stated therein.

Section 2.5          Adjourned Meetings and Notice Thereof. Any meeting of stockholders may be adjourned to another time or place, if any, and the Corporation may transact at any adjourned meeting any business which might have been transacted at the original meeting. The person presiding over a meeting of stockholders shall have the power to adjourn the meeting at the request of the Board of Directors if the Board of Directors determines that adjournment is necessary or appropriate to enable stockholders to fully consider information which the Board of Directors determines has not been made sufficiently or timely available to stockholders or is otherwise in the best interest of stockholders. Notice need not be given of the adjourned meeting if the time and place, if any, thereof and the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such adjourned meeting are announced at the meeting at which the adjournment is taken, unless (a) any adjournment or series of adjournments caused the original meeting to be adjourned for more than thirty days after the date originally fixed therefor, or (b) a new record date is fixed for the adjourned meeting. If notice of an adjourned meeting is given, such notice shall be given to each stockholder of record entitled to vote at the adjourned meeting in the manner prescribed in Section 2.4 for the giving of notice of meetings.
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Section 2.6          Quorum. At any meeting of stockholders, except as otherwise expressly required by law or by the Certificate of Incorporation, the holders of record of at least a majority of the outstanding shares of capital stock entitled to vote or act at such meeting shall be present or represented by proxy in order to constitute a quorum for the transaction of any business, but less than a quorum shall have power to adjourn any meeting until a quorum shall be present. When a quorum is once present to organize a meeting, the quorum cannot be destroyed by the subsequent withdrawal or revocation of the proxy of any stockholder. Shares of capital stock owned by the Corporation or by another corporation, if a majority of the shares of such other corporation entitled to vote in the election of Directors is held by the Corporation, shall not be counted for quorum purposes or entitled to vote.

Section 2.7          Voting. At any meeting of stockholders, each stockholder holding, as of the record date for determining the stockholders entitled to vote at such meeting, shares of stock entitled to be voted on any matter at such meeting shall have one vote on each such matter submitted to vote at such meeting for each such share of stock held by such stockholder, as of such record date, as shown by the list of stockholders entitled to vote at the meeting, unless the Certificate of Incorporation provides for more or less than one vote for any share, on any matter, in which case every reference in these Bylaws to a majority or other proportion of stock shall refer to such majority or other proportion of the votes of such stock.

Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for him or her by proxy, provided that no proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. A duly executed proxy shall be irrevocable if it states that it is irrevocable and if, and only so long as, it is coupled with an interest, whether in the stock itself or in the Corporation generally, sufficient in law to support an irrevocable power.

In advance of any meeting of the stockholders, the Board of Directors, the Chairman of the Board, the President or the person presiding at a meeting of stockholders shall appoint one or more inspectors to act at the meeting and make a written report thereof. One or more other persons may be designated as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate is able to act at a meeting of the stockholders, the person presiding at the meeting shall appoint one or more inspectors to act at the meeting. Unless otherwise required by applicable law, inspectors may be officers, employees or agents of the Corporation. Each inspector, before entering upon the discharge of the duties of inspector, shall take and sign an oath to execute faithfully the duties of inspector with strict impartiality and according to the best of such inspector’s ability. The inspector shall have the duties prescribed by law and shall take charge of the polls and, when the vote is completed, shall make a certificate of the result of the vote taken and of such other facts as may be required by applicable law.

Section 2.8          Action by Consent of Stockholders. Unless otherwise provided in the Certificate of Incorporation, whenever any action by the stockholders at a meeting thereof is required or permitted by law, the Certificate of Incorporation, or these Bylaws, such action may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by all of the holders of the outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of such action without a meeting and by less than unanimous written consent shall be given to those stockholders who have not consented in writing.
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Section 2.9          Nature of Business at Annual Meetings of Stockholders.

Only such business that is a proper matter for stockholder action under Delaware law (other than nominations for election to the Board of Directors, which must comply with the provisions of Section 3.4(b)) may be transacted at an annual meeting of stockholders as is either (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors (or any duly authorized committee thereof), (b) otherwise properly brought before the annual meeting by or at the direction of the Board of Directors (or any duly authorized committee thereof), or (c) otherwise properly brought before the annual meeting by any stockholder of the Corporation (i) who is a stockholder of record on the date of the giving of the notice provided for in this Section 2.9 and on the record date or dates for the determination of stockholders entitled to notice of and to vote at such annual meeting and (ii) who complies with the notice procedures set forth in this Section 2.9.

In addition to any other applicable requirements, for business to be properly brought before an annual meeting by a stockholder, (a) such stockholder must have given timely notice thereof in proper written form to the Secretary of the Corporation and (b) such stockholder must have timely updated and supplemented such notice as required by these Bylaws. For avoidance of doubt, this Section 2.9 shall be the exclusive means for a stockholder to propose business (other than business included in the Corporation’s proxy materials pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) at an annual meeting of stockholders.

To be timely, a stockholder’s notice must be delivered to or be mailed and received by the Secretary at the principal executive offices of the Corporation not less than ninety days nor more than one hundred twenty days prior to the first anniversary date of the immediately preceding annual meeting of stockholders; provided, however, that in the event that the annual meeting is called for a date that is not within thirty days before or after such anniversary date, notice by the stockholder in order to be timely must be so received not later than the close of business on the tenth day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure of the date of the annual meeting was made, whichever first occurs. In no event shall the adjournment or postponement of an annual meeting, or the public announcement of such an adjournment or postponement, commence a new time period (or extend any time period) for the giving of a stockholder’s notice as described above.

To be in proper written form, a stockholder’s notice to the Secretary must set forth the following information: (a) as to each matter such stockholder proposes to bring before the annual meeting, a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, and (b) as to the stockholder giving notice and the beneficial owner, if any, on whose behalf the proposal is being made, (i) the name and address of such person, (ii) (A) the class or series and number of all shares of stock of the Corporation which are owned beneficially or of record by such person and any affiliates or associates of or others acting in concert with such person (collectively, “Affiliates”), (B) the name of each nominee holder of shares of all stock of the Corporation owned beneficially but not of record by such person or any Affiliates, and the number of such shares of stock held by each such nominee holder, (C) whether and the extent to which any derivative instrument, swap, option, warrant, short interest, hedge or profit interest or other transaction has been entered into by or on behalf of such person or any Affiliates with respect to a security issued by the Corporation and (D) whether and the extent to which any other transaction, agreement, arrangement or understanding (including any short position or any borrowing or lending of shares of stock of the Corporation) has been made by or on behalf of such person, or any Affiliates, the effect or intent of any of the foregoing being to mitigate loss to, or to manage risk or benefit of price changes for, such person or any Affiliates or to increase or decrease the voting power or pecuniary or economic interest of such person or any Affiliates with respect to a security issued by the Corporation; (iii) a description of all agreements, arrangements, or understandings (whether written or oral) between or among such person or any Affiliates and any other person or persons (including their names) in connection with the proposal of such business and any material interest of such person or any Affiliates, in such business, including any anticipated benefit therefrom to such person or any Affiliates; (iv) a representation that the stockholder giving notice intends to appear in person or by proxy at the annual meeting to bring such business before the meeting; and (v) any other information relating to such person that would be required to be disclosed in a proxy statement or other filing required to be made in connection with the solicitation of proxies by such person with respect to the proposed business to be brought by such person before the annual meeting pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder.
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A stockholder providing notice of business proposed to be brought before an annual meeting shall further update and supplement such notice, if necessary, so that the information provided or required to be provided in such notice pursuant to this Section 2.9 shall be true and correct as of the record date or dates for determining the stockholders entitled to receive notice of and to vote at the annual meeting and any update and supplement to such information shall be delivered to or be mailed and received by the Secretary at the principal executive offices of the Corporation not later than four business days after (i) the record date for determining the stockholders entitled to receive notice of the annual meeting and (ii) a date that is ten days prior to the annual meeting.

No business (other than nominations for election to the Board of Directors) shall be conducted at the annual meeting of stockholders except business brought before the annual meeting in accordance with the procedures set forth in this Section 2.9; provided, however, that, once business has been properly brought before the annual meeting in accordance with such procedures, nothing in this Section 2.9 shall be deemed to preclude discussion by any stockholder of any such business. If the chairman of an annual meeting determines that business was not properly brought before the annual meeting in accordance with the foregoing procedures, the chairman shall declare to the meeting that the business was not properly brought before the meeting and such business shall not be transacted.

Nothing contained in this Section 2.9 shall be deemed to affect any rights of stockholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act.
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ARTICLE III

BOARD OF DIRECTORS

Section 3.1          General Powers. The property, business and affairs of the Corporation shall be managed by or under the direction of a Board of Directors. In addition to the powers and authorities by these Bylaws expressly conferred upon them, the Board of Directors may exercise all such powers of the Corporation and have such authority and do all such lawful acts and things as are permitted by law, the Certificate of Incorporation or these Bylaws.

Section 3.2          Number of Directors. The Board of Directors of the Corporation shall consist of one or more members. The exact number of Directors which shall constitute the whole Board of Directors shall be fixed from time to time by resolution adopted by a majority of the whole Board of Directors. Until the number of Directors has been so fixed by the Board of Directors, the number of Directors constituting the whole Board of Directors shall be three. After fixing the number of Directors constituting the whole Board of Directors, the Board of Directors may, by resolution adopted by a majority of the whole Board of Directors, from time to time change the number of Directors constituting the whole Board of Directors.

Section 3.3          Qualification. Directors must be natural persons but need not be stockholders of the Corporation. Directors who willfully neglect or refuse to produce a list of stockholders entitled to vote at any meeting for the election of Directors shall be ineligible for election to any office at such meeting.

Section 3.4          Election.

(a)           Except as otherwise provided by law, the Certificate of Incorporation or these Bylaws, after the first meeting of the Corporation at which Directors are elected, Directors of the Corporation shall be elected in each year at the annual meeting of stockholders, or at a special meeting in lieu of the annual meeting called for such purpose, by the vote of the majority of the votes cast at any meeting for the election of Directors at which a quorum is present; provided, however, that Directors shall be elected by a plurality of the votes cast at any meeting of stockholders for which (i) the Secretary of the Corporation received a notice that a stockholder has nominated a person for election to the Board of Directors in compliance with the advance notice requirements for stockholder nominees for Director set forth in Section 3.4(b) of these Bylaws and (ii) such nomination has not been withdrawn by such stockholder on or prior to the tenth (10th) day preceding the date the Corporation first mails its notice of meeting for such meeting to the stockholders. For purposes of this Bylaw, a majority of votes cast shall mean that the number of shares voted “for” a nominee exceeds fifty percent (50%) of the number of votes cast with respect to such nominee. Votes cast with respect to a nominee shall include votes against and to withhold authority and exclude abstentions with respect to such nominee. The voting on Directors at any such meeting shall be by written ballot unless otherwise provided in the Certificate of Incorporation.

(b)          To be eligible to be a candidate for election as a Director of the Corporation at an annual or special meeting, a candidate must be nominated in the manner prescribed in this Section 3.4(b), and the candidate for nomination, whether nominated by the Board of Directors or by a stockholder of record, must have previously delivered (in accordance with the time period prescribed for delivery in a notice to such candidate given by or on behalf of the Board of Directors), to the Secretary at the registered office of the Corporation, (a) a completed written questionnaire (in a form provided by the Corporation) with respect to the background, qualifications, stock ownership and independence of such proposed nominee and (b) a written representation and agreement (in a form provided by the Corporation) that such candidate for nomination (i) is not and, if elected as a Director during such director’s term of office, will not become a party to any agreement, arrangement or understanding with, and has not given and will not give any commitment or assurance to, any person or entity as to how such proposed nominee, if elected as a Director of the Corporation, will act or vote on any issue or question (a “Voting Commitment”), including any Voting Commitment that could limit or interfere with such proposed nominee’s ability to comply, if elected as a Director of the Corporation, with such proposed nominee’s fiduciary duties under applicable law, (ii) is not, and will not become a party to, any agreement, arrangement or understanding with any person or entity other than the Corporation with respect to any direct or indirect compensation or reimbursement for service as a Director that has not been disclosed therein and (iii) if elected as a Director of the Corporation, will comply with all applicable corporate governance, conflict of interest, confidentiality, stock ownership and trading and other policies and guidelines of the Corporation applicable to Directors and in effect during such person’s term in office as a Director (and, if requested by any candidate for nomination, the Secretary of the Corporation shall provide to such candidate for nomination all such policies and guidelines then in effect).
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Only persons who are nominated in accordance with the following procedures shall be eligible for election as Directors of the Corporation, except as may be otherwise provided in the Certificate of Incorporation with respect to the right of holders of preferred stock of the Corporation to nominate and elect a specified number of Directors in certain circumstances. Nominations of persons for election to the Board of Directors may be made at any annual meeting of stockholders, or at any special meeting of stockholders called for the purpose of electing Directors, (a) by or at the direction of the Board of Directors (or any duly authorized committee thereof) or (b) by any stockholder of the Corporation (i) who is a stockholder of record on the date of the giving of the notice provided for in this Section 3.4(b) and on the record date for the determination of stockholders entitled to notice of and to vote at such annual meeting or special meeting and (ii) who complies with the notice procedures set forth in this Section 3.4(b).

In addition to any other applicable requirements, for a nomination to be made by a stockholder, (a) such stockholder must have given timely notice thereof in proper written form to the Secretary of the Corporation and (b) such stockholder must have timely updated and supplemented such notice as required by these Bylaws.
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To be timely, a stockholder’s notice to the Secretary must be delivered to or be mailed and received at the principal executive offices of the Corporation (a) in the case of an annual meeting, not less than ninety days nor more than one hundred twenty days prior to the first anniversary date of the immediately preceding annual meeting of stockholders; provided, however, that in the event that the annual meeting is called for a date that is not within thirty days before or after such anniversary date, notice by the stockholder in order to be timely must be so received not later than the close of business on the tenth day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure of the date of the annual meeting was made, whichever first occurs; and (b) in the case of a special meeting of stockholders called for the purpose of electing Directors, not later than the close of business on the tenth day following the day on which notice of the date of the special meeting was mailed or public disclosure of the date of the special meeting was made, whichever first occurs. In no event shall the adjournment or postponement of an annual meeting or a special meeting called for the purpose of electing Directors, or the public announcement of such an adjournment or postponement, commence a new time period (or extend any time period) for the giving of a stockholder’s notice as described above.

To be in proper written form, a stockholder’s notice to the Secretary must set forth the following information: (a) as to each person whom the stockholder proposes to nominate for election as a Director (i) the name, age, business address and residence address of such person, (ii) the principal occupation or employment of such person, (iii) (A) the class or series and number of all shares of stock of the Corporation which are owned beneficially or of record by such person and any Affiliates, (B) the name of each nominee holder of shares of all stock of the Corporation owned beneficially but not of record by such person or any Affiliates and the number of such shares of stock of the Corporation held by each such nominee holder, (C) whether and the extent to which any derivative instrument, swap, option, warrant, short interest, hedge or profit interest or other transaction has been entered into by or on behalf of such person or any Affiliates with respect to a security issued by the Corporation and (D) whether and the extent to which any other transaction, agreement, arrangement or understanding (including any short position or any borrowing or lending of shares of stock of the Corporation) has been made by or on behalf of such person or any Affiliates with the effect or intent of any of the foregoing being to mitigate loss to, or to manage risk or benefit of price changes for, such person or any Affiliates or to increase or decrease the voting power or pecuniary or economic interest of such person or any Affiliates with respect to a security issued by the Corporation; and (iv) any other information relating to such persons that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for a contested election of Directors pursuant to Section 14 of the Exchange Act, and the rules and regulations promulgated thereunder; and (b) as to the stockholder giving the notice, and the beneficial owner, if any, on whose behalf the nomination is being made, (i) the name and record address of such person; (ii) (A) the class or series and number of all shares of stock of the Corporation which are owned beneficially or of record by such person and any Affiliates, (B) the name of each nominee holder of shares of the Corporation owned beneficially but not of record by such person or any Affiliates and the number of shares of stock of the Corporation held by each such nominee holder, (C) whether and the extent to which any derivative instrument, swap, option, warrant, short interest, hedge or profit interest or other transaction has been entered into by or on behalf of such person or any Affiliates with respect to a security issued by the Corporation and (D) whether and the extent to which any other transaction, agreement, arrangement or understanding (including any short position or any borrowing or lending of shares of stock of the Corporation) has been made by or on behalf of such person or any Affiliates with the effect or intent of any of the foregoing being to mitigate loss to, or to manage risk or benefit of price changes for, such person or any Affiliates or to increase or decrease the voting power or pecuniary or economic interest of such person or any Affiliates with respect to a security issued by the Corporation; (iii) a description of all agreements, arrangements, or understandings (whether written or oral) between such person or any Affiliates and any proposed nominee or any other person or persons (including their names) pursuant to which the nomination(s) are being made by such person, and any material interest of such person or any Affiliates in such nomination, including any anticipated benefit therefrom to such person or any Affiliates; (iv) a representation that the stockholder giving notice intends to appear in person or by proxy at the annual meeting or special meeting to nominate the persons named in its notice; and (v) any other information relating to such person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with the solicitation of proxies for election of Directors pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder. Such notice must be accompanied by a written consent of each proposed nominee to being named as a nominee and to serve as a Director if elected.
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A stockholder providing notice of any nomination proposed to be made at an annual meeting or special meeting shall further update and supplement such notice, if necessary, so that the information provided or required to be provided in such notice pursuant to this Section 3.4(b) shall be true and correct as of the record date or dates for determining the stockholders entitled to receive notice of and to vote at the annual meeting or special meeting and any update and supplement to such information shall be delivered to or be mailed and received by the Secretary at the principal executive offices of the Corporation not later than four business days after (i) the record date for determining the stockholders entitled to receive notice of such meeting and (ii) a date that is ten days prior to such meeting.

No person shall be eligible for election as a Director of the Corporation unless nominated in accordance with the procedures set forth in this Section 3.4(b). If the chairman of the meeting determines that a nomination was not made in accordance with the foregoing procedures, the chairman shall declare to the meeting that the nomination was defective and such defective nomination shall be disregarded.

(c)(i)          
Following the annual meeting, the Board of Directors shall cause the Corporation to reimburse the Expenses that a stockholder or group of stockholders (the “Nominating Stockholders”) has incurred in connection with nominating a candidate (the “Nominee”) for election to the Board of Directors (the “Nomination”) if the following conditions are met:

(A)          
None of the Nominating Stockholders shall have nominated for election to the Board of Directors at the annual meeting any individual other than the Nominee;

(B)          
None of the Nominating Stockholders shall have engaged in a “solicitation” within the meaning of Rule 14a-1(l) of the Exchange Act in support of the election of any individual as a Director at the annual meeting other than the Nominee (or a nominee of the Board of Directors), and shall not have distributed to any stockholder any form of proxy for the annual meeting other than a form including only the Nominee and individuals nominated by the Board of Directors;

(C)          
Each Nominating Stockholder and the Nominee shall have otherwise complied with all of the provisions of these Bylaws applicable to the nomination of a candidate for election to the Board of Directors;

(D)          
The election of fewer than 30% of the Directors to be elected shall be contested in the election (rounded down to the nearest whole number but not less than one);

(E)          
Each Nominating Stockholder shall have been the Beneficial Owner of shares of capital stock of the Corporation entitled to vote in the election of Directors (the “Required Voting Interest”) from the date that is one year prior to the date on which the Corporation receives notice of the Nomination through the conclusion of the annual meeting at which the Nomination was made (such period, the “Holding Period”);
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(F)          
None of the Nominating Stockholders shall have received reimbursement of proxy expenses from the Corporation, pursuant to this Bylaw or otherwise, in any of the preceding three calendar years;

(G)          
The Nominee shall have received a number of votes cast in favor of his or her election equal to at least 40% of the number of all votes cast, including “for,” “against” and “withheld” votes, for the nominee receiving the most such votes of any nominee in the election of Directors (such number of votes, the “Total Votes Cast”);

(H)          
The Nominee shall not have been included on the proxy cards solicited by the Corporation or by any person other than the Nominating Stockholders who nominated the Nominee;

(I)           
The Nominee shall be Independent;

(J)          
The proxy statement included in the proxy materials solicited by or on behalf of any Nominating Stockholder (the “Proxy Materials”) shall include a statement disclosing each member of the Nominating Stockholders group and the other information required to be delivered to the Secretary pursuant to Section 3.4(b); and

(K)        
During the Holding Period, none of the Nominating Stockholders nor the Nominee shall have Beneficially Owned any securities of the Corporation for the purpose, or with the effect, of changing or influencing the control of the Corporation, or in connection with or as a participant in any transaction having that purpose or effect, including any transaction referred to in Rule 13d–3(b) of the Exchange Act, other than solely by reason of seeking the election as a Director of the Nominee.

(ii)          
If a Nominating Stockholder is eligible for reimbursement under this Section 3.4(c), then (A) if the Nominee is not elected, the proportion of the Expenses reimbursed shall equal the proportion of votes that the Nominee received in favor of his or her election to the Total Votes Cast, and (B) if the Nominee is elected, all Expenses shall be reimbursed; provided, however, in each case, the other terms and conditions of this Section 3.4(c) are satisfied. In no event shall the amount paid to a Nominating Stockholder pursuant to this Section 3.4(c) exceed the amount of corresponding expenses incurred by the Corporation in soliciting proxies in connection with the election of Directors at the same annual meeting. The Corporation shall pay at the direction of the Nominating Stockholders the amount due under this Section 3.4(c) after receipt of reasonably detailed, written invoices documenting the Expenses, as well as any documentation reasonably requested by the Corporation demonstrating their eligibility for reimbursement. Notwithstanding any other provision hereof, there shall be no reimbursement under this Section 3.4(c) in the event the Board of Directors determines that any such reimbursement is not in the best interests of the Corporation or would result in a breach of the fiduciary duties of the Board of Directors to the Corporation and its stockholders or that making such a payment would render the Corporation insolvent or cause it to breach a material obligation incurred without reference to the obligations imposed by this Section 3.4(c).
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(iii)          For purposes of this Section 3.4(c):

(A)          “Expenses” shall mean the actual costs of printing and mailing the Proxy Materials and the fees and expenses of one law firm for reviewing the Proxy Materials and one proxy solicitor for conducting the related proxy solicitation (in each case, only such costs, fees and expenses that are reasonably incurred by the Nominating Stockholders), so long as: (x) the Nominating Stockholders shall be liable for such amounts regardless of the outcome of the election of Directors or the receipt of reimbursement by the Corporation; and (y) any party to which such amounts are payable is not an Affiliate or Associate (wherever used in this Section 3.4(c), as defined in the Exchange Act) of any of the Nominating Stockholders.

(B)          A person shall be the “Beneficial Owner” of or “Beneficially Own” only those shares of common stock of the Corporation as to which the person possesses both (x) the full voting rights pertaining to the shares and (y) after giving effect to any swap, hedging, derivative or synthetic ownership contract or arrangement with respect to securities of the Corporation or its Affiliates to which the person or any of its Affiliates or Associates is a party or is bound or is the beneficiary, the full economic interest in (including the right to dispose of and the opportunity for profit and risk of loss on) such shares. A person shall Beneficially Own shares held in the name of a nominee or other intermediary so long as the person retains the right to instruct how the shares are voted with respect to the election of Directors and possesses the full economic interest in the shares. A person’s Beneficial Ownership of shares shall be deemed to continue during any period in which the person has delegated any voting power by means of a proxy, power of attorney or other instrument or arrangement which is revocable at any time by the person or in which any fiduciary, attorney-in-fact or distributee succeeds to or otherwise acts for such person by reason of the death, disability, liquidation or occurrence of a comparable event with respect to such person. The percentage of shares Beneficially Owned by a stockholder in connection with a Nomination shall be based upon the number of outstanding voting securities most recently disclosed, prior to the delivery of the notice of nomination by the Nominating Stockholders to the Corporation in accordance with Section 3.4(b) of these Bylaws, by the Corporation in a filing with the Securities and Exchange Commission (the “Commission”).

(C)          “Independent” with respect to a Nominee shall mean (a) that the Nominee would be considered an independent director in accordance with the listing standards of the principal U.S. securities market in which the common stock of the Corporation trades or, if no such listing standards are applicable at the time, in accordance with the standards used by the Board of Directors or a duly authorized committee thereof in determining and disclosing the independence of the Corporation’s Directors in accordance with the rules of the Commission and (b) the Nominee is not an employee or officer of, or consultant to, and is not party to any agreement providing such Nominee compensation from, the Nominating Stockholders or any of their respective Affiliates or Associates and has no other material association, by agreement, understanding or familial or other relationship, with the Nominating Stockholders or any of their respective Affiliates or Associates.

Section 3.5          Term. Each Director shall hold office until (a) the next annual election of Directors and (b) such Director’s successor is duly elected and qualified, except in the event of the earlier termination of such Director’s term of office by reason of death, resignation, removal or other reason.
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Section 3.6          Resignation and Removal. Any Director may resign at any time upon written notice to the Board of Directors, the Chairman of the Board, the President or the Secretary. The resignation of any Director shall take effect upon receipt of notice thereof or at such later time as shall be specified in such notice, and unless otherwise specified therein or in the Corporate Governance Guidelines then in effect, the acceptance of such resignation shall not be necessary to make it effective.

Any Director or the entire Board of Directors may be removed, with or without cause, by the affirmative vote of the holders of a majority of the shares of capital stock then entitled to vote at an election of Directors, except as otherwise provided by applicable law.

Section 3.7          Vacancies. Vacancies in the Board of Directors and newly created Directorships resulting from any increase in the authorized number of Directors shall be filled by the vote of a majority of the Directors then in office, though less than a quorum, or by a sole remaining Director, and Directors so chosen shall hold office for a term expiring at the next annual meeting of stockholders and until any such Director’s successor shall have been duly elected and qualified or until any such Director’s earlier death, resignation, removal or other reason.

If one or more Directors shall resign from the Board of Directors effective at a future date, a majority of the Directors then in office, including those who have so resigned at a future date, shall have power to fill such vacancy or vacancies, the vote thereon to take effect and the vacancy to be filled when such resignation or resignations shall become effective, and each Director so chosen shall hold office as provided in this Section 3.7 in the filling of other vacancies.

Section 3.8          Quorum and Voting. Unless the Certificate of Incorporation or these Bylaws provide otherwise, at all meetings of the Board of Directors, a majority of the total number of Directors shall be present to constitute a quorum for the transaction of business. A Director interested in a contract or transaction may be counted in determining the presence of a quorum at a meeting of the Board of Directors which authorizes the contract or transaction. In the absence of a quorum, a majority of the Directors present may adjourn the meeting until a quorum shall be present.

Unless the Certificate of Incorporation provides otherwise, members of the Board of Directors or any committee designated by the Board of Directors may participate in a meeting of the Board of Directors or such committee by means of a conference telephone or other communications means by which all persons participating in the meeting can hear each other and be heard, and participation in such a meeting shall constitute presence in person at such meeting.

The vote of the majority of the Directors present at a meeting at which a quorum is present shall be the act of the Board of Directors unless the Certificate of Incorporation or these Bylaws shall require a vote of a greater number.

Section 3.9          Regulations. The Board of Directors may adopt such rules and regulations for the conduct of the business and management of the Corporation, not inconsistent with law or the Certificate of Incorporation or these Bylaws, as the Board of Directors may deem proper. The Board of Directors may hold its meetings and cause the books and records of the Corporation to be kept at such place or places within or without the State of Delaware as the Board of Directors may from time to time determine. A member of the Board of Directors, or a member of any committee designated by the Board of Directors shall, in the performance of his duties, be fully protected in relying in good faith upon the books of account or reports made to the Corporation by any of its officers, by an independent certified public accountant, or by an appraiser selected with reasonable care by the Board of Directors or any committee of the Board of Directors or in relying in good faith upon other records of the Corporation.
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Section 3.10          
Annual Meeting. An annual meeting of the Board of Directors shall be called and held for the purpose of organization, election of officers and transaction of any other business. If such meeting is held promptly after and at the place specified for the annual meeting of stockholders, no notice of the annual meeting of the Board of Directors need be given. Otherwise, such annual meeting shall be held at such time (not more than thirty days after the annual meeting of stockholders) and place as may be specified in a notice of the meeting.

Section 3.11          
Regular Meetings. Regular meetings of the Board of Directors shall be held at the time and place, within or without the State of Delaware, as shall from time to time be determined by the Board of Directors. After there has been such determination and notice thereof has been given to each member of the Board of Directors, no further notice shall be required for any such regular meeting. Except as otherwise provided by law, any business may be transacted at any regular meeting.

Section 3.12          
Special Meetings. Special meetings of the Board of Directors may, unless otherwise prescribed by law, be called from time to time by the Chairman of the Board of Directors or the President, and shall be called by the Chairman of the Board of Directors, the President or the Secretary upon the written request of a majority of the whole Board of Directors directed to the Chairman of the Board of Directors, the President or the Secretary. Except as provided below, notice of any special meeting of the Board of Directors, stating the time, place and purpose of such special meeting, shall be given to each Director in accordance with Section 3.13 of these Bylaws.

Section 3.13          
Notice of Meetings; Waiver of Notice. Unless otherwise provided in these Bylaws, notice of any meeting of the Board of Directors shall be deemed to be duly given to a Director (i) if mailed to such Director addressed to him or her at his or her address as it appears upon the books of the Corporation, or at the address last made known in writing to the Corporation by such Director as the address to which such notices are to be sent, at least five days before the day on which such meeting is to be held, or (ii) if sent to him or her by electronic mail, facsimile, or other means of electronic transmission not later than the day before the day on which such meeting is to be held, or (iii) if delivered to him or her personally or orally, by telephone or otherwise, not later than the day before the day on which such meeting is to be held. Each such notice shall state the time and place of the meeting and the purposes thereof.

Notice of any meeting of the Board of Directors need not be given to any Director if waived by him or her in writing (or by electronic mail, facsimile, or other means of written electronic transmission) whether before or after the holding of such meeting, or if such Director is present at such meeting. Any meeting of the Board of Directors shall be a duly constituted meeting without any notice thereof having been given if all Directors then in office shall be present thereat or if those not present waive notice of the meeting in accordance with Section 7.3 of these Bylaws.
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Section 3.14          Committees of Directors. The Board of Directors may, by resolution or resolutions passed by a majority of the whole Board of Directors, designate one or more committees, each committee to consist of one or more of the Directors of the Corporation.

Except as hereinafter provided, vacancies in membership of any committee shall be filled by the vote of a majority of the whole Board of Directors. The Board of Directors may designate one or more Directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of any member of a committee (and his alternate appointed pursuant to the immediately preceding sentence, if any), the member or members thereof present at any meeting and not disqualified from voting, whether or not he, she or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Members of a committee shall hold office for such period as may be fixed by a resolution adopted by a majority of the whole Board of Directors, subject, however, to removal at any time by the vote of a majority of the whole Board of Directors.

Section 3.15          Powers and Duties of Committees. Any committee, to the extent provided in the resolution or resolutions creating such committee and subject to limitations imposed by applicable law, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it. No such committee shall have the power or authority with regard to amending the Certificate of Incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation’s property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of a dissolution, or amending the Bylaws. The Board of Directors may, in the resolution creating a committee, grant to such committee the power and authority to declare a dividend or authorize the issuance of stock.

Each committee may adopt its own rules of procedure and may meet at stated times or on such notice as such committee may determine. Except as otherwise permitted by these Bylaws, each committee shall keep regular minutes of its proceedings and report the same to the Board of Directors when required.

Section 3.16          Compensation of Directors. Each Director shall be entitled to receive for attendance at each meeting of the Board of Directors or any duly constituted committee thereof which he or she attends, such fee as is fixed by the Board and in connection therewith shall be reimbursed by the Corporation for travel expenses. The fees to such Directors may be fixed in unequal amounts among them, taking into account their respective relationships to the Corporation in other capacities. These provisions shall not be construed to preclude any Director from receiving compensation in serving the Corporation in any other capacity.

Section 3.17          Action Without Meeting. Unless otherwise restricted by the Certificate of Incorporation, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if all members of the Board of Directors or committee, as the case may be, consent thereto in writing, or by electronic transmission (including by e-mail) and the writing or writings or electronic transmission or transmissions are filed with the minutes of proceedings of the Board of Directors or committee, as the case may be.
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ARTICLE IV

OFFICERS

Section 4.1          Establishment of Offices. The Board of Directors shall elect the following officers: a Chief Executive Officer, a President, a General Counsel, a Treasurer, and a Secretary and may, at the discretion of the Board of Directors, also elect as an officer a Chairman of the Board, a Vice Chairman of the Board, a Chief Financial Officer, a Chief Operating Officer, a Chief Accounting Officer, and a Controller. The Board or the Chief Executive Officer may also elect, appoint, or provide for the appointment of such other officers, including one or more group or division officers (including division presidents and group financial officers) or one or more vice presidents (including senior vice presidents, executive vice presidents or other classifications of vice presidents), and agents as may from time to time appear necessary or advisable in the conduct of the affairs of the Corporation. One person may hold the offices and perform the duties of any two or more of said offices except the offices and duties of President and Vice President or of Chairman of the Board or President and Secretary. None of the officers need be Directors of the Corporation. The Board of Directors may delegate to any officer the power, from time to time, to appoint officers, except a Chairman of the Board, a Chief Executive Officer, a President, a General Counsel, a Treasurer, a Secretary, a Vice Chairman of the Board, a Chief Financial Officer, a Chief Operating Officer, a Chief Accounting Officer, or a Controller, or agents of the Corporation and to prescribe their respective terms of office, authority and duties.

Section 4.2          Term of Office. The officers of the Corporation shall be elected by the Board of Directors and shall hold office until his successor is duly elected and qualified, or until his earlier death, resignation, removal, or other reason.

Section 4.3          Delegation of Duties of Officers. The Board of Directors may delegate the duties and powers of any officer of the Corporation to any other officer or to any Director for a specified period of time for any reason that the Board of Directors may deem sufficient.

Section 4.4          Removal of Officers. Any officer of the Corporation elected by the Board of Directors may be removed from office, with or without cause, by resolution adopted by a majority of the Directors then in office at any regular or special meeting of the Board of Directors or by a written consent signed by all of the Directors then in office. Any other officer may be removed from such position at any time by the Board (as set forth above), the Chief Executive Officer, or the person making such appointment or his/her successor, either with or without cause. No elected officer shall have any contractual rights against the Corporation for compensation by virtue of such election beyond the date of the election of his or her successor, his or her death, or his or her resignation or removal, whichever event shall first occur, except as otherwise provided in an employment contract or under an employee deferred compensation plan.

Section 4.5          Resignations. Any officer may resign at any time by giving written notice of resignation to the Board of Directors, to the Chairman of the Board, to the President or to the Secretary. Any such resignation shall take effect upon receipt of such notice or at any later time specified therein. Unless otherwise specified in the notice, the acceptance of a resignation shall not be necessary to make the resignation effective.
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Section 4.6          
Chairman and Vice Chairman of the Board. The Chairman of the Board shall preside at all meetings of stockholders and of the Board of Directors at which that person is present. The Chairman of the Board shall have such other powers and perform such other duties as may be assigned to him or her from time to time by the Board of Directors. In the absence of the Chairman, a Vice Chairman, if one has been elected, shall preside at all meetings of the Board of Directors and stockholders and exercise and perform such other powers and duties as from time to time may be assigned by the Board of Directors.

Section 4.7          
Chief Executive Officer. Subject to the oversight of the Board of Directors, the Chief Executive Officer shall, in the absence of the Chairman and the Vice Chairman (if a Vice Chairman has been elected) of the Board, preside at all meetings of the stockholders and of the Board of Directors at which he or she is present. The Chief Executive Officer shall have general supervision over the business and affairs of the Corporation and shall be responsible for carrying out the policies and objectives established by the Board of Directors. The Chief Executive Officer shall have and perform all powers and duties usually incident to the office of chief executive officer and which may be required by applicable law, except as specifically limited by a resolution of the Board of Directors. The Chief Executive Officer shall have such other powers and perform such other duties as may be assigned to him or her from time to time by the Board of Directors.

Section 4.8         
Chief Financial Officer. The Chief Financial Officer shall exercise direction and control of the financial affairs of the Corporation, including the preparation of the Corporation’s financial statements. The Chief Financial Officer shall have the general powers and duties usually vested in the office of the chief financial officer of a corporation and such other powers and duties as may be assigned by the Board of Directors or the Chief Executive Officer.

Section 4.9         
President. In the absence or disability of the Chief Executive Officer or if the office of Chief Executive Officer be vacant, the President shall perform all of the duties of the Chief Executive Officer and when so acting shall have all the powers and be subject to all the restrictions upon the Chief Executive Officer, including the power to sign all instruments and to take all actions that the Chief Executive Officer is authorized to perform by the Board of Directors or these Bylaws. A President shall have the general powers and duties usually vested in the office of president of a corporation and such other powers and duties as may be assigned by the Board of Directors or the Chief Executive Officer.

Section 4.10          
Chief Operating Officer. Subject to the oversight of the Chief Executive Officer and the President, the Chief Operating Officer shall exercise direction and control over the day-to-day operations of the Corporation. The Chief Operating Officer shall have the general powers and duties of management usually vested in the office of the chief operating officer of a corporation and such other powers and duties as from time to time may be assigned to the Chief Operating Officer by the Board of Directors or the Chief Executive Officer.
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Section 4.11          Vice Presidents. The Vice Presidents shall perform the duties and exercise the powers as shall be assigned to such Vice President by the Board of Directors, the Chief Executive Officer or the President. The Vice Presidents shall generally assist the President in such manner as the President shall direct.

Section 4.12          Secretary. The Secretary shall act as Secretary of all meetings of stockholders and of the Board of Directors at which he or she is present, shall record all the proceedings of all such meetings in a book to be kept for that purpose, shall have supervision over the giving and service of notices of the Corporation, and shall have supervision over the care and custody of the records and seal of the Corporation. The Secretary shall be empowered to affix the corporate seal to documents, the execution of which on behalf of the Corporation under its seal is duly authorized, and when so affixed may attest the same. The Secretary shall have all powers and duties usually incident to the office of Secretary, except as specifically limited by a resolution of the Board of Directors. The Secretary shall have such other powers and perform such other duties as may be assigned to him or her from time to time by the Board of Directors, the Chief Executive Officer or the President.

Section 4.13          Treasurer. The Treasurer shall have general supervision over the care and custody of the funds and over the receipts and disbursements of the Corporation and shall cause the funds of the Corporation to be deposited in the name of the Corporation in such banks or other depositaries as the Board of Directors may designate. The Treasurer shall have supervision over the care and safekeeping of the securities of the Corporation. The Treasurer shall have all powers and duties usually incident to the office of Treasurer, except as specifically limited by a resolution of the Board of Directors. The Treasurer shall have such other powers and perform such other duties as may be assigned to him or her from time to time by the Board of Directors, the Chief Executive Officer or the President.

Section 4.14          Controller. The Controller shall have all powers and duties usually incident to the office of Controller, except as specifically limited by a resolution of the Board of Directors. The Controller shall have such other powers and perform such other duties as may be assigned to him or her from time to time by the Board of Directors, the Chief Executive Officer or the President.

ARTICLE V

CAPITAL STOCK

Section 5.1          Uncertificated Stock. Unless otherwise provided by resolution of the Board of Directors, each class or series of the shares of capital stock in the Corporation shall be issued in uncertificated form.

Section 5.2          Signatures on Stock Certificates. Shares of capital stock of the Corporation represented by certificates (if any) shall be signed by, or in the name of the Corporation by, the Chairman of the Board, the President or a Vice President and by, or in the name of the Corporation by, the Secretary, the Treasurer, an Assistant Secretary or an Assistant Treasurer. Any of or all the signatures on the certificates may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, such certificate may be issued by the Corporation with the same effect as if such signer were such officer at the date of issue.
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Section 5.3          Stock Ledger. A record of all shares of all capital stock issued by the Corporation shall be kept by the Secretary or any other officer or employee of the Corporation designated by the Secretary or by any transfer clerk or transfer agent appointed pursuant to Section 5.4 hereof. Such record shall show the name and address of each person, firm or corporation in which capital stock is registered, and the number of shares owned by such person, firm or corporation.

The Corporation shall be entitled to treat the holder of record of shares of capital stock as shown on the stock ledger as the owner thereof and as the person entitled to receive dividends thereon, to vote such shares and to receive notice of meetings, and for all other purposes. The Corporation shall not be bound to recognize any equitable or other claim to or interest in any share of capital stock on the part of any other person whether or not the Corporation shall have express or other notice thereof.

Section 5.4          Regulations Relating to Transfer.

(a)          If the Board of Directors authorizes any class of capital stock of the Corporation to be issued in certificated form, it may make such rules and regulations as it may deem expedient, not inconsistent with law, the Certificate of Incorporation or these Bylaws, concerning issuance, transfer and registration of certificates for shares of capital stock of the Corporation. The Board of Directors may appoint, or authorize any officer to appoint, one or more transfer clerks or one or more transfer agents and one or more registrars and may require all certificates for capital stock to bear the signature or signatures of any of them.

(b)          The Board of Directors may make such rules and regulations as it may deem expedient, not inconsistent with law, the Certificate of Incorporation or these Bylaws, concerning issuance, transfer and registration of uncertificated shares of capital stock of the Corporation.

Section 5.5          Transfers. Transfers of certificated shares of capital stock shall be made on the books of the Corporation only upon delivery to the Corporation or its transfer agent of (i) a written direction of the registered holder named in the certificate or such holder’s attorney lawfully constituted in writing, (ii) the certificate for the shares of capital stock being transferred, and (iii) a written assignment of the shares of capital stock evidenced thereby. Transfers of uncertificated shares of capital stock shall be made on the books of the Corporation upon receipt of proper transfer instructions from the registered holder of the shares or by such person's attorney duly authorized in writing, and upon compliance with appropriate procedures for transferring shares in uncertificated form.

Section 5.6          Cancellation. Each certificate for capital stock surrendered to the Corporation for exchange or transfer shall be canceled and no new certificate or certificates (or substitutive uncertificated shares) shall be issued in exchange for any existing certificate (other than pursuant to Section 5.7) until such existing certificate shall have been canceled.

Section 5.7          Lost, Destroyed, Stolen and Mutilated Certificates. In the event that any certificate for shares of capital stock of the Corporation shall be mutilated, the Corporation may issue a new certificate or uncertificated shares in place of such mutilated certificate. In case any such certificate shall be lost, stolen or destroyed, the Corporation may, in the discretion of the Board of Directors or a committee designated thereby with power so to act, issue a new certificate for capital stock or uncertificated shares in the place of any such lost, stolen or destroyed certificate. The applicant for any substituted certificate or certificates (or substitutive uncertificated shares) shall surrender any mutilated certificate or, in the case of any lost, stolen or destroyed certificate, furnish satisfactory proof of such loss, theft or destruction of such certificate and of the ownership thereof. The Board of Directors or such committee may, in its discretion, require the owner of a lost or destroyed certificate, or his representatives, to furnish to the Corporation a bond with an acceptable surety or sureties and in such sum as will be sufficient to indemnify the Corporation against any claim that may be made against it on account of the lost, stolen or destroyed certificate or the issuance of such new certificate. A new certificate or uncertificated shares may be issued without requiring a bond when, in the judgment of the Board of Directors, it is proper to do so.
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Section 5.8          Fixing of Record Dates.

(a)          The Board of Directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of any meeting of stockholders, nor more than sixty days prior to any other action, for the purpose of determining stockholders entitled to notice of such meeting of stockholders or any adjournment thereof, or to receive payment of any dividend or other distribution or allotment of any rights, or to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action. If the Board of Directors fixes a record date for the purpose of determining stockholders entitled to notice of such meeting of stockholders or any adjournment thereof, such date shall also be the record date for determining the stockholders entitled to vote at such meeting unless the Board of Directors determines, at the time it fixes such record date, that a later date on or before the date of such meeting shall be the date for making such determination.

(b)          Except as provided in Section 5.8(c), if no record date is fixed by the Board of Directors, (i) the record date for determining stockholders entitled to notice of and to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held and (ii) the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.

(c)          In order that the Corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which date shall not be more than ten days after the date upon which the resolution fixing the record date is adopted by the Board of Directors. Any stockholder of record seeking to have the stockholders authorize or take corporate action by written consent shall, by written notice to the Secretary of the Corporation, request the Board of Directors to fix a record date. The Board of Directors shall promptly, but in all events within ten days after the date on which such a request is received, adopt a resolution fixing the record date. If no record date has been fixed by the Board of Directors within ten days of the date on which such a request is received, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is required by applicable law, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of the stockholders are recorded, to the attention of the Secretary of the Corporation. Delivery made to the Corporation’s registered office shall be by hand or by certified or registered mail, return receipt requested. If no record date has been fixed by the Board of Directors and prior action by the Board of Directors is required by applicable law, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the date on which the Board of Directors adopts the resolution taking such prior action.

(d)          A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided that the Board of Directors may fix a new record date for the adjourned meeting.
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ARTICLE VI

INDEMNIFICATION

Section 6.1          Indemnification. The Corporation shall, to the full extent permitted by applicable law, indemnify any person (and the heirs, executors and administrators of such person) who, by reason of the fact that he or she is or was a Director, officer, employee or agent of the Corporation or of a constituent corporation absorbed by the Corporation in a consolidation or merger or is or was serving at the request of the Corporation or such constituent corporation as a director, officer, employee or agent of any other corporation, partnership, joint venture, trust or other enterprise, was or is a party or is threatened to be a party to:

(a)          any threatened, pending or completed action, suit or proceeding (a “Proceeding”), whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation), against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with any such Proceeding, or

(b)          any threatened, pending or completed Proceeding by or in the right of the Corporation to procure a judgment in its favor, against expenses (including attorneys’ fees) actually and reasonably incurred by him or her in connection with the defense or settlement of such Proceeding.

Any indemnification by the Corporation pursuant hereto shall be made only in the manner and to the extent authorized by applicable law and the Certificate of Incorporation, and any such indemnification shall not be deemed exclusive of any other rights to which those seeking indemnification may otherwise be entitled.

Section 6.2          Indemnification Insurance; Advancement of Expenses.

(a)          The Corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a Director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a Director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him or her and incurred by him or her in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify him or her against such liability under applicable law.

(b)          The Corporation may, to the extent authorized from time to time by the Board of Directors or the Chief Executive Officer, grant rights to advancement of expenses incurred in connection with any Proceeding in advance of its final disposition, to any current or former officer, employee or agent of the Corporation to the fullest extent permitted by applicable law.
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ARTICLE VII

MISCELLANEOUS PROVISIONS

Section 7.1          Corporate Seal. The seal of the Corporation shall be circular in form with the name of the Corporation in the circumference and the words “Corporate Seal, Delaware” in the center. Whenever the Corporation is permitted or required to affix its seal to a document, it shall be sufficient to meet the requirements of any law, rule or regulation relating to a seal to place the designation “(SEAL)” adjacent to the signature of the person authorized to execute the document on behalf of the Corporation. Additionally, the seal may be used by causing it to be affixed or impressed, or a facsimile thereof may be reproduced or otherwise used in any other manner as the Board of Directors may determine.

Section 7.2          Fiscal Year. The fiscal year of the Corporation shall be from January 1 to December 31, inclusive, in each year, or such other twelve consecutive months as the Board of Directors may designate.

Section 7.3          Waiver of Notice. Whenever any notice is required to be given under any provision of law, the Certificate of Incorporation, or these Bylaws, a written waiver thereof, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders, Directors, or members of a committee of Directors, need be specified in any written waiver of notice unless so required by the Certificate of Incorporation.

Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.

Section 7.4          Execution of Instruments, Contracts, Etc.

(a)          All checks, drafts, bills of exchange, notes or other obligations or orders for the payment of money shall be signed in the name of the Corporation by any officers or other persons, as the Board of Directors may from time to time designate.

(b)          Except as otherwise provided by law, the Board of Directors, any committee given specific authority in the premises by the Board of Directors, or any committee given authority to exercise generally the powers of the Board of Directors during the intervals between meetings of the Board of Directors, may authorize any officer, employee or agent, in the name of and on behalf of the Corporation, to enter into or execute and deliver deeds, bonds, mortgages, contracts and other obligations or instruments, and such authority may be general or confined to specific instances.
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(c)          All applications, written instruments and papers required by or filed with any department of the United States Government or any state, county, municipal or other governmental official or authority, may, if permitted by applicable law, be executed in the name of the Corporation by any officer of the Corporation, or, to the extent designated for such purpose from time to time by the Board of Directors, by an employee or agent of the Corporation. Such designation may contain the power to substitute, in the discretion of the person named, one or more other persons.

Section 7.5          Forum for Adjudication of Certain Disputes. Unless the Corporation consents in writing to the selection of an alternative forum (an “Alternative Forum Consent”), to the fullest extent permitted by law:

(a)          the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer, stockholder, employee or agent of the Corporation to the Corporation or the Corporation’s stockholders, (iii) any action asserting a claim against the Corporation or any director, officer, stockholder, employee or agent of the Corporation arising out of or relating to any provision of the General Corporation Law of Delaware or the Corporation’s Certificate of Incorporation or Bylaws, or (iv) any action asserting a claim against the Corporation or any director, officer, stockholder, employee or agent of the Corporation governed by the internal affairs doctrine of the State of Delaware; provided, however, that, in the event that the Court of Chancery of the State of Delaware lacks subject matter jurisdiction over any such action or proceeding, the sole and exclusive forum for such action or proceeding shall be another state or federal court located within the State of Delaware, in each such case, unless the Court of Chancery (or such other state or federal court located within the State of Delaware, as applicable) has dismissed a prior action by the same plaintiff asserting the same claims because such court lacked personal jurisdiction over an indispensable party named as a defendant therein.

(b)          the federal district courts of the United States shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act of 1933, as amended. This exclusive forum provision does not apply to claims arising under the Securities Exchange Act of 1934, as amended.

Any person or entity purchasing or otherwise acquiring any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of this Section 7.5. The existence of any prior Alternative Forum Consent shall not act as a waiver of the Corporation’s ongoing consent right as set forth above in this Section 7.5 with respect to any current or future actions or claims.

Section 7.6          Severability. If any provision or provisions of these Bylaws shall be held to be invalid, illegal or unenforceable for any reason whatsoever:  (1) the validity, legality and enforceability of the remaining provisions of these Bylaws (including, without limitation, each portion of any paragraph of these Bylaws containing any such provision held to be invalid, illegal or unenforceable, that is not itself held to be invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby; and (2) to the fullest extent possible, the provisions of these Bylaws (including, without limitation, each such portion of any paragraph of these Bylaws containing any such provision held to be invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable.
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ARTICLE VIII

AMENDMENTS

Section 8.1          By Stockholders. These Bylaws may be amended, altered or repealed, or new Bylaws may be adopted, at any meeting of stockholders by the vote of the holders of not less than a majority of the outstanding shares of stock entitled to vote thereat, provided that, in the case of a special meeting, notice that an amendment is to be considered and acted upon shall be inserted in the notice or waiver of notice of said meeting.

Section 8.2          By Directors. To the extent permitted by the Certificate of Incorporation, these Bylaws may be amended, altered or repealed, or new Bylaws may be adopted, at any regular or special meeting of the Board of Directors by the affirmative vote of a majority of the Board of Directors.

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Exhibit 10.1


ENHABIT, INC.
2022 OMNIBUS PERFORMANCE INCENTIVE PLAN

ARTICLE 1
PURPOSE

1.1.          General.  The purpose of the Enhabit, Inc. 2022 Omnibus Performance Incentive Plan (the “Plan”) is to promote the success, and enhance the value, of Enhabit, Inc. (the “Company”) and its subsidiaries, by linking the personal interests of their employees, officers and directors to those of Company stockholders and by providing such persons with an incentive for outstanding performance.  The Plan is further intended to provide flexibility to the Company by increasing its ability to motivate, attract, and retain the services of employees, officers and directors upon whose judgment, interest, and special effort the successful conduct of the Company’s operation is largely dependent.  Accordingly, the Plan permits the grant of cash and equity incentive awards from time to time to selected employees, officers and directors.

ARTICLE 2
EFFECTIVE DATE

2.1.          Effective Date.  The Plan shall be effective upon the date on which the Spin-Off is completed (the “Effective Date”).  Unless terminated earlier by the Board, the Plan shall have a term of ten (10) years commencing upon the Effective Date; provided, however, termination of the Plan shall not cancel any Awards previously granted thereunder and provided, further, that the applicable provisions of the Plan shall remain in effect according to the terms of such Awards.

ARTICLE 3
DEFINITIONS

3.1.          Definitions.  When a word or phrase appears in the Plan with the initial letter capitalized, and the word or phrase does not commence a sentence, the word or phrase shall generally be given the meaning ascribed to it in this Section or in Section 1.1 unless a clearly different meaning is required by the context.  The following words and phrases shall have the following meanings:

(a)          “Assumed Spin-Off Award” means any award granted under the EHC Omnibus Plan that is converted into an Award in respect of Stock in connection with the Spin-Off, pursuant to the terms of the Employee Matters Agreement.

(b)          “Award” means any grant or award of Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Shares, Performance Units, Dividend Equivalents, Other Stock-Based Award, Cash Award, or any other right or interest relating to Stock or cash, granted to a Participant under the Plan.  For the avoidance of doubt, the term “Award” includes each Assumed Spin-Off Award.

(c)          “Award Agreement” means an agreement, contract, other instrument or document or other evidence approved by the Committee evidencing an Award.  An Award Agreement may be in an electronic medium, may be solely evidenced by a notation on the Company’s books and records, and need not be signed by a representative of the Company or a Participant.  An Award Agreement may be in the form of individual award agreements or certificates or a document describing the terms and provisions of an Award or series of Awards under the Plan.

(d)          “Board” means the Board of Directors of the Company.

(e)          “Cash Award” means any grant or award that confers the right to receive cash with the amount of such cash subject to achievement of one or more specified Performance Goals and subject to such other restrictions and conditions as may be established by the Committee.

(f)          “Cause” means a conviction or no contest plea to a felony or moral turpitude crime or an act of dishonesty, moral turpitude, an intentional, negligent, or grossly negligent act detrimental to the best interests of the Company or a Subsidiary, failure to perform assigned duties, poor performance of assigned duties, breach of fiduciary duties to the Company, or violations of Company policies or code of conduct as in effect and amended from time to time, all as determined by the Committee; provided that, if a Participant is a participant in an executive severance plan adopted by the Company, then “Cause” for purposes of the Plan shall have the meaning set forth in such executive severance plan.

(g)          “Change in Control” means any of the following events:

(i)          the acquisition (other than from the Company) by any person, entity or “group” (within the meaning of Section 13(d)(3) or 14(d)(2) of the 1934 Act, but excluding, for this purpose, the Company or its subsidiaries, or any employee benefit plan of the Company or its subsidiaries which acquires beneficial ownership of voting securities of the Company) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the 1934 Act) of 30% or more of either the then-outstanding shares of Common Stock or the combined voting power of the Company’s then-outstanding voting securities entitled to vote generally in the election of Directors; or

(ii)          during any period of up to twenty-four (24) consecutive months, individuals who at the beginning of such period constituted the Board (together with any new directors whose election by the Board or whose nomination for election by the stockholders of the Company was approved by a vote of a majority of the directors of the Company then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease to constitute at least a majority of the Board; or

(iii)          the Company is liquidated or dissolved or adopts a plan of liquidation or dissolution; or

(iv)          the consummation of a merger or consolidation of the Company with or into another person or the merger of another person with or into the Company, or the sale of all or substantially all the assets of the Company (determined on a consolidated basis) to another person, other than a transaction following which (A) in the case of a merger or consolidation transaction, holders of securities that represented 100% of the combined voting power entitled to vote generally in the election of directors of the Company immediately prior to such transaction (or other securities into which such securities are converted as part of such merger or consolidation transaction) own directly or indirectly at least a majority of the combined voting power entitled to vote generally in the election of directors of the surviving person in such transaction immediately after such transaction and (B) in the case of a sale of assets, each transferee is owned by holders of securities that represented at least a majority of the combined voting power entitled to vote generally in the election of directors of the Company immediately prior to such sale.
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(h)         “Code” means the Internal Revenue Code of 1986, as amended from time to time.

(i)          “Committee” means the Compensation and Human Capital Committee of the Board, or any successor thereto.

(j)          “Company” means Enhabit, Inc., a Delaware corporation, or any successor corporation.

(k)          “Disability” means, except as otherwise provided in an Award Agreement, a physical or mental condition which is expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months and which renders the Participant incapable of performing the work for which he is employed or similar work, as evidenced by eligibility for and actual receipt of benefits payable under a group disability plan or policy maintained by the Company or any of its Subsidiaries that is by its terms applicable to the Participant.

(l)           “Dividend Equivalent” means a right granted to a Participant under Article 11.

(m)         “Effective Date” has the meaning assigned such term in Section 2.1.

(n)          “EHC” means Encompass Health Corporation.

(o)          “EHC Omnibus Plan” means the HealthSouth Corporation 2016 Omnibus Performance Incentive Compensation Plan sponsored by EHC.

(p)          “Employee Matters Agreement” means the Employee Matters Agreement between the Company and EHC.

(q)          “Fair Market Value” means (i) as of any given date, the closing price at which the shares of stock were traded (or if no transactions were reported on such date on the next preceding date on which transactions were reported) on the New York Stock Exchange on such date, or, if different, the principal exchange or automated quotation system on which such stock is traded, or (ii) should the Committee elect, the average selling price or volume-weighted average price (“VWAP”) on a given trading day or the VWAP over a series of pre-established trading days preceding or following such given date.  If the shares are neither listed on the NYSE or another public exchange nor quoted on an inter-dealer quotation system or if the term is being applied to property other than stock, the amount determined by the Committee in its sole discretion to be the fair market value thereof.
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(r)          “Full Value Award” means an Award other than in the form of an Option or SAR which is settled by the issuance of stock.

(s)          “Good Reason” shall mean, when used with reference to any Participant, any of the following actions or failures to act, but in each case only if it occurs while such Participant is employed by the Company and then only if it is not consented to by such Participant in writing:

(i)          assignment of a position that is of a lesser rank than held by the Participant prior to the assignment and that results in a material adverse change in such Participant’s reporting position, duties or responsibilities or title or elected or appointed offices as in effect immediately prior to the effective date of such change;

(ii)          a material reduction in such Participant’s total compensation from that in effect immediately prior to the Change in Control.  For purposes of this clause (ii), “total compensation” shall mean the sum of base salary, target bonus opportunity and the opportunity to receive compensation in the form of equity in the Company.  Notwithstanding the foregoing, a reduction will not be deemed to have occurred hereunder on account of (A) any change to a plan term other than ultimate target bonus opportunity or target equity opportunity, (B) the actual payout of any bonus amount or equity amount, (C) any reduction resulting from changes in the market value of securities or other instruments paid or payable to the Participant, or (D) any reduction in the total compensation of a group of similarly situated Participants that includes such Participant;

(iii)          any change in a Participant’s status as a participant under any Change in Control compensation plan of the Company if such change in status occurs during the period beginning six (6) months prior to a Change in Control and ending twenty-four (24) months after a Change in Control; or

(iv)          any change of more than fifty (50) miles in the location of the principal place of employment of such Participant immediately prior to the effective date of such change.

For purposes of this definition, none of the actions described in clauses (i) through (iv) above shall constitute “Good Reason” if taken for Cause.  Additionally, none of the actions described in clauses (i) through (iv) above shall constitute “Good Reason” with respect to any Participant if remedied by the Company within thirty (30) days after receipt of written notice thereof given by such Participant (or, if the matter is not capable of remedy within thirty (30) days, then within a reasonable period of time following such thirty (30) day period, provided that the Company has commenced such remedy within said thirty (30) day period); provided that “Good Reason” shall cease to exist for any action described in clauses (i) through (iv) above on the sixtieth (60th) day following the later of the occurrence of such action or the Participant’s knowledge thereof, unless such Participant has given the Company written notice thereof prior to such date.
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(t)          “Grant Date” means the date specified by the Committee on which a grant of an Award shall become effective, which shall not be earlier than the date on which the Committee takes action with respect thereto.

(u)         “Incentive Stock Option” means an Option that meets the requirements of Section 422 of the Code or any successor provision thereto.

(v)         “Non-Employee Director” means a director of the Company who is not an employee of the Company or an affiliate.

(w)        “Non-Qualified Stock Option” means an Option that is not intended to be an Incentive Stock Option.

(x)         “Option” means a right granted to a Participant under Article 7 of the Plan to purchase Stock at a specified price during specified time periods.  An Option under the Plan shall be a Non-Qualified Stock Option or an Incentive Stock Option.

(y)         “Other Stock-Based Award” means a right, granted to a Participant under Article 13, which relates to or is valued by reference to Stock or other Awards relating to Stock.

(z)         “Parent” means a corporation which owns or beneficially owns a majority of the outstanding voting stock or voting power of the Company.

(aa)       “Participant” means a person who, as an employee, officer or director of the Company or any Subsidiary, has been granted an Award under the Plan.
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(bb)          “Performance Objectives” means the performance goals or objectives, if any, established pursuant to the Plan for Participants who have been granted Awards under the Plan.  Performance Objectives may be described in terms of Company-wide objectives or objectives that are related to the performance of the individual Participant or the Subsidiary, division, region, department or function within the Company or Subsidiary in which the Participant is employed.  Performance Objectives may be specified in absolute terms, in percentages, or in terms of growth from period to period or growth rates over time, as well as measured relative to an established or specially-created index of Company competitors or peers.  Performance Objectives need not be based upon an increase or positive result under a business criterion and could include, for example, the maintenance of the status quo or the limitation of economic losses (measured, in each case, by reference to a specific business criterion).  Performance Objectives may be based on any performance criteria including specified levels of or changes in the following metrics which may or may not, at the Committee’s discretion and as applicable, be calculated in accordance with generally accepted accounting principles in the United States:  (1) earnings (including, but not limited to, earnings per share); (2) profit (including, but not limited to, net profit, gross profit, operating profit, economic profit, profit margins or other profit measures); (3) net or operating income; (4) revenue; (5) stock price or performance; (6) stockholder return; (7) return measures (including, but not limited to, return on assets, capital, equity or revenue); (8) EBITDA; (9) operating or EBITDA margins; (10) market share; (11) expenses (including, but not limited to, expense management, expense efficiency ratios or other expense measures); (12) business expansions or consolidation (including but not limited to, acquisitions and divestitures); (13) internal rate of return; (14) planning accuracy (as measured by comparing planned results to actual results); (15) year-over-year patient volume growth; (16) year-over-year changes in expense line items; (17) cash flow measures (including, but not limited to, free cash flow); (18) prevention of failures of internal controls or compliance; and (19) quality of care metrics (including, but not limited to, PEM Score, functional improvement measures, patient satisfaction and other metrics tracked by Medicare or Medicaid).  Where applicable, those metrics may be measured on the basis of the consolidated Company, a Subsidiary, or a region or other subdivision of the business of the Company.  If the Committee determines that a change in the business, operations, corporate structure or capital structure of the Company, or the manner in which it conducts its business, or other events, circumstances or accounting entries that are unusual, nonrecurring or unrelated to the performance of the Participant render the Performance Objectives unsuitable (including, but not limited to, asset write-downs or impairment charges, litigation or claim judgments or settlements, changes in tax laws, material legislation changes, acquisitions and divestures, accounting principles or other laws or provisions affecting reported results, unusual or infrequently occurring items as described in Accounting Standards Codification Topic 225-20 or Accounting Standards Update (ASU) 2015-01 (or any successor pronouncement thereto) and/or management’s discussion and analysis of financial condition and results of operations appearing in the Company’s annual report to stockholders for the applicable year, foreign exchange gains and losses, or any other identifiable event of a nonrecurring or extraordinary nature), the Committee may modify or adjust such Performance Objectives or the related minimum acceptable level of achievement, in whole or in part, as the Committee deems appropriate and equitable.  Notwithstanding the foregoing, the calculation of the performance result for any metric may be subject to adjustment for such pre-established items or events if the Committee deems appropriate and equitable.
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(cc)         “Performance Share” means a bookkeeping entry that records the equivalent of one share of Stock awarded pursuant to Article 9.

(dd)         “Performance Unit” means a bookkeeping entry that records a unit equivalent to $1.00 awarded pursuant to Article 9.

(ee)         “Plan” means the Enhabit, Inc. 2022 Omnibus Performance Incentive Plan, as amended from time to time.

(ff)          “Plan Year” means the twelve-month period beginning January 1 and ending December 31.

(gg)         “Restricted Stock” means Stock granted to a Participant under Article 10 that is subject to certain restrictions and to risk of forfeiture.

(hh)         “Restricted Stock Unit” or “RSU” means a bookkeeping entry that records a unit equivalent to one share of Stock awarded pursuant to Article 12.

(ii)           “Retirement” means, except as otherwise provided in an Award Agreement, the voluntary termination of employment by a Participant after attaining (a) age 65 or (b) in the event that the Participant has been employed by the Company for ten (10) or more years on the date of such termination, age 60.

(jj)           “Specified Employee” means a specified employee as defined in Code Section 409A or authoritative guidance thereunder.

(kk)         “Spin-Off” means the distribution of shares of Stock to the shareholders of EHC in 2022 pursuant to the Separation and Distribution Agreement between the Company and EHC entered into in connection with such distribution.

(ll)           “Stock” means the $0.01 par value Common Stock of the Company, and such other securities of the Company as may be substituted for Stock pursuant to Article 16.

(mm)       “Stock Appreciation Right” or “SAR” means a right granted to a Participant under Article 8 to receive a payment equal to the difference between the Fair Market Value of a share of Stock as of the date of exercise of the SAR over the grant price of the SAR, all as determined pursuant to Article 8.

(nn)          “Subsidiary” means a corporation or other entity in which the Company has a direct or indirect ownership or other equity interest.

(oo)          “1933 Act” means the Securities Act of 1933, as amended from time to time.

(pp)          “1934 Act” means the Securities Exchange Act of 1934, as amended from time to time.
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ARTICLE 4
ADMINISTRATION

4.1.          Committee.  The Plan shall be administered by the Committee or, at the discretion of the Board from time to time, by the Board.  The Committee shall consist of three or more members of the Board.  It is intended that the directors appointed to serve on the Committee shall be “non-employee directors” (within the meaning of Rule 16b-3 promulgated under the 1934 Act) to the extent that Rule 16b-3 is applicable.  However, the mere fact that a Committee member shall fail to qualify under the foregoing requirement shall not invalidate any Award made by the Committee which Award is otherwise validly made under the Plan.  During any time that the Board is acting as administrator of the Plan, it shall have all the powers of the Committee hereunder, and any reference herein to the Committee (other than in this Section 4.1) shall include the Board.

4.2.          Authority of Committee.  The Committee has the exclusive power, authority and discretion to:

(a)          Designate Participants;

(b)          Determine the type or types of Awards to be granted to each Participant;

(c)          Determine the number of Awards to be granted and the number of shares of Stock to which an Award will relate;

(d)          Determine the terms and conditions of any Award granted under the Plan, including but not limited to, the exercise price, grant price, or purchase price, any restrictions or limitations on the Award (including forfeiture provisions), any schedule or provisions for lapse of forfeiture restrictions or restrictions on the exercisability of an Award, and accelerations or waivers of vesting or forfeiture provisions, based in each case on such considerations as the Committee in its sole discretion determines;

(e)          Determine whether, to what extent, and under what circumstances an Award may be settled in, or the exercise price of an Award may be paid in, cash, Stock, other Awards, or other property, or an Award may be canceled, forfeited, or surrendered;

(f)          Prescribe the form of each Award Agreement, which need not be identical for each Participant and which may be in the form of a document evidencing multiple Awards to one or more Participants;

(g)          Decide all other matters that must be determined in connection with an Award;

(h)          Establish, adopt or revise any rules and regulations as it may deem necessary or advisable to administer the Plan;

(i)          Make all other decisions, determinations and interpretations that may be required or authorized under the Plan or as the Committee deems necessary or advisable to administer the Plan;

(j)          Amend the Plan or any Award Agreement as provided herein; and

(k)          Adopt such modification, procedures, and subplans as may be necessary or desirable to comply with provisions of the laws of non-U.S. jurisdictions in which the Company or a Subsidiary may operate, in order to assure the viability of the benefits of Awards granted to Participants located in such other jurisdictions and to meet the objectives of the Plan.

Notwithstanding the above, the Board or the Committee may, by resolution, delegate to officers, employees or directors of the Company or any of its Subsidiaries the authority to determine individuals to be recipients of Awards under the Plan, as well as the authority to determine the number of Shares of Stock to be subject to such Awards and the terms of such Awards; provided, however, that such delegation of duties and responsibilities may not be made with respect to the grant of Awards to individuals who are subject to Section 16(a) of the 1934 Act at the Grant Date.  The acts of such delegates shall be treated hereunder as acts of the Committee and such delegates shall report regularly to the Board and the Committee regarding the delegated duties and responsibilities and any Awards so granted.
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4.3.          Decisions Binding.  The Committee’s interpretation of the Plan, any Awards granted under the Plan, any Award Agreement and all decisions and determinations by the Committee with respect to the Plan are final, binding, and conclusive on all parties.

4.4.          Award Agreements.  Each Stock-based Award shall be evidenced by an Award Agreement.  Each Award Agreement shall include such provisions, not inconsistent with the Plan, as may be specified by the Committee.

ARTICLE 5
SHARES SUBJECT TO THE PLAN

5.1.          Number of Shares.  Subject to adjustment as provided in Sections 5.3(a) and 17.1, the aggregate number of shares of Stock reserved and available for Awards under the Plan shall be seven million (7,000,000) shares.  The total number of shares that may be granted as Incentive Stock Options is seven million (7,000,000) shares.  For the avoidance of doubt, Assumed Spin-Off Awards will be counted against the limits in this Section 5.1.

5.2.          Share Counting.

(a)          The following shall not reduce, or may be added back to, the number of authorized shares of Stock available for issuance under the Plan:

(1)          Common Stock reserved for issuance upon exercise or settlement, as applicable, of Awards granted under the Plan to the extent the Awards expire or are forfeited, canceled or surrendered;

(2)          Restricted Stock granted under the Plan, to the extent such Restricted Stock is forfeited under Section 16.8 or is otherwise surrendered to the Company before the restricted period expires;

(3)          Awards, to the extent the payment is actually made in cash;

(4)          Shares reserved for issuance upon grant of Performance Share or Performance Unit or Other Stock-Based Award, to the extent the number of reserved shares exceeds the number of shares actually issued upon determination of the satisfaction of the related Performance Objectives;

(5)          Shares reserved for issuance upon grant of RSUs, to the extent the number of reserved shares exceeds the number of shares actually issued upon settlement of RSUs; and

(6)          Shares withheld by, or otherwise remitted to, the Company to satisfy a Participant’s tax withholding obligations upon the lapse of restrictions on Full Value Awards or lapse of restrictions on the exercise of Options or SARs granted under the Plan or upon any other payment or issuance of shares under the Plan.
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(b)          The following shares of Stock shall not become available for issuance under the Plan:

(1)          Shares withheld by, or otherwise remitted to, the Company as full or partial payment of the exercise price of an Option granted under the Plan;

(2)          Shares remaining available for issuance (and not associated with previous grants or awards) under any prior plan of the Company after the Effective Date; and

(3)          Shares reacquired by the Company in the open market or otherwise using cash proceeds from the exercise of Options or, after the Effective Date, options under any prior plan.

(c)          Substitute Awards granted pursuant to Section 16.10 of the Plan shall not count against the shares of Stock otherwise available for issuance under the Plan under Section 5.1.

(d)          Shares available under a stockholder approved plan of an entity which is acquired by, or merged with and into, the Company (as such shares are appropriately adjusted to reflect the financial effect of the transaction in accordance with relevant legal requirements), shall (subject to applicable stock exchange requirements) be available for the granting of Awards hereunder, and shall not count against the shares of Stock otherwise available for issuance under Section 5.1.

5.3.          Annual Award Limits.  The following limits (each an “Annual Award Limit,” and collectively, “Annual Award Limits”) shall, subject to adjustment as provided in Section 17.1, apply to grants of Awards under the Plan (except that such limits shall not apply to Assumed Spin-Off Awards):

(a)          Options:  The maximum aggregate number of shares of Stock subject to Options which may be granted in any period consisting of two consecutive Plan Years to any one Participant shall be 1,000,000.

(b)          SARs:  The maximum aggregate number of shares of Stock subject to SARs which may be granted in any period consisting of two consecutive Plan Years to any one Participant shall be 1,000,000.

(c)          Performance Shares:  For Awards of Performance Shares, the maximum aggregate number of shares of Stock subject to Awards of Performance Shares which may be granted in any period consisting of two consecutive Plan Years to any one Participant shall be 1,000,000.
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(d)          Performance Units:  The maximum aggregate amount that may be granted to any one Participant in any period consisting of two consecutive Plan Years shall be $10,000,000 of associated bookkeeping entry value.  If, after an amount has been earned with respect to a Cash Award, the delivery of such amount is deferred, any additional amount attributable to earnings during the deferral period shall be disregarded for purposes of this limitation.

5.4.          Stock Distributed.  Any Stock distributed pursuant to an Award may consist, in whole or in part, of authorized and unissued Stock, Stock held in treasury, or Stock purchased on the open market.

5.5.          Minimum Vesting Requirements.  Except with respect to (a) Full Value Awards accounting for not greater than 5% of the aggregate number of shares of Stock reserved and available for Awards under Section 5.1, (b) Assumed Spin-Off Awards, or (c) as otherwise provided in Section 16.6, Full-Value Awards granted under the Plan to an employee shall either (i) be subject to a minimum vesting period of one year , or (ii) be granted solely in lieu of cash compensation.

ARTICLE 6
ELIGIBILITY

6.1.          General.  Awards may be granted only to individuals who are employees, officers or directors of the Company or employees or officers of a Parent or Subsidiary.

ARTICLE 7
STOCK OPTIONS

7.1.          General.  The Committee is authorized to grant Options to Participants on the following terms and conditions:

(a)          Exercise Price.  The exercise price per share of Stock at which an Option is granted shall be determined by the Committee, provided that the exercise price for any Option (other than an Option issued as a substitute Award pursuant to Section 16.10 or an Option issued as an Assumed Spin-Off Award) shall not be less than the Fair Market Value as of the Grant Date.  Except in connection with a corporate transaction involving the Company (including, without limitation, any stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination, or exchange of shares), the terms of outstanding Options may not be amended to reduce the exercise price or to cancel or replace outstanding underwater Options in exchange for cash, other awards or Options with an exercise price that is less than the exercise price of the corresponding original Options without stockholder approval.

(b)          Time and Conditions of Exercise.  The Award Agreement shall specify the time or times at which an Option may be exercised in whole or in part.  The Award Agreement shall specify the performance or other conditions, if any, that must be satisfied before all or part of an Option may be exercised.  The Committee may waive any exercise provisions at any time in whole or in part based upon factors as the Committee may determine in its sole discretion so that the Option becomes exercisable at an earlier date.  The Award Agreement may provide that an Option shall automatically exercise by means of a net settlement on a given date in the event that the expiration date occurs at a time that the participant is prohibited by law or Company policy from trading in security of the Company and such Option is in the money.
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(c)          Lapse of Option.  The Option shall lapse ten (10) years after it is granted, unless an earlier option expiration date is set forth in the Award Agreement, and unless an earlier lapse occurs under Section 16.8.  The original term of an Option may not be extended without the prior approval of the Company’s stockholders.

(d)          Payment.  The Award Agreement shall specify the methods by which the exercise price of an Option may be paid, the form of payment, including, without limitation, cash, shares of Stock, or other property (including “cashless exercise” arrangements) and the methods by which shares of Stock shall be delivered or deemed to be delivered to Participants.

(e)          Evidence of Grant.  All Options shall be evidenced by an Award Agreement between the Company and the Participant.  The Award Agreement shall include such provisions, not inconsistent with the Plan, as may be specified by the Committee.

ARTICLE 8
STOCK APPRECIATION RIGHTS

8.1.          Grant of SARs.  The Committee is authorized to grant SARs to Participants on the following terms and conditions:

(a)          Right to Payment.  Upon the exercise of a SAR, the Participant to whom it is granted has the right to receive the excess, if any, of:

(1)          The Fair Market Value of one share of Stock on the date of exercise; over

(2)          The grant price of the SAR as determined by the Committee, which shall not be less than the Fair Market Value of one share of Stock on the Grant Date except in connection with a SAR issued as a substitute Award pursuant to Section 16.10 or in connection with an Assumed Spin-Off Award.  Except in connection with a corporate transaction involving the Company (including, without limitation, any stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination, or exchange of shares), the terms of outstanding SARs may not be amended to reduce the exercise price or to cancel or replace outstanding underwater SARs in exchange for cash, other awards or SARs with an exercise price that is less than the exercise price of the corresponding original SARs without stockholder approval.

(b)          Other Terms.  All awards of SARs shall be evidenced by an Award Agreement.  The terms, methods of exercise, methods of settlement, form of consideration payable in settlement, and any other terms and conditions of any SAR shall be determined by the Committee at the time of the grant of the Award and shall be reflected in the Award Agreement.
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(c)          Freestanding SARs.  A SAR which is not granted in tandem with an Option or a similar right granted under any other plan of the Company shall be subject to the following:

(1)          Each grant shall specify in respect of each freestanding SAR the grant price of the SAR;

(2)          Successive grants may be made to the same Participant regardless of whether any freestanding SAR previously granted to such Participant remain unexercised; and

(3)          Each grant shall specify the period or periods of continuous employment of the Participant by the Company or any Subsidiary that are necessary before the freestanding SARs or installments thereof shall become exercisable, and any grant may provide for the earlier exercise of such rights in the event of acceleration under Article 16.

(d)          Payment in Cash or Shares.  Any grant may specify that the amount payable upon the exercise of a SAR may be paid by the Company in cash, shares of Stock or any combination thereof and may (i) either grant to the Participant or reserve to the Committee the right to elect among those alternatives or (ii) preclude the right of the Participant to receive and the Company to issue shares of Stock or other equity securities in lieu of cash.

(e)          Exercise Period.  Any grant may specify (i) a waiting period or periods before SARs shall become exercisable and (ii) permissible dates or periods on or during which SARs shall be exercisable.  No SAR granted under the Plan may be exercised more than ten years from the Grant Date.  The original term of an SAR may not be extended without the prior approval of the Company’s stockholders.

ARTICLE 9
PERFORMANCE SHARES OR PERFORMANCE UNITS

9.1.          Grant of Performance Shares or Performance Units.  The Committee is authorized to grant Performance Shares or Performance Units to Participants on such terms and conditions as may be selected by the Committee.  The grant of a Performance Share to a Participant will entitle the Participant to receive at a specified later time a specified number of shares, or the equivalent cash value if the Committee so provides, if the Performance Objectives established by the Committee are achieved and the other terms and conditions thereof are satisfied.  The grant of a Performance Unit to a Participant will entitle the Participant to receive at a specified later time a specified dollar value in cash or other property (including shares) as determined by the Committee, if the Performance Objectives in the Award are achieved or attained and the other terms and conditions thereof are satisfied.  All Awards of Performance Shares or Performance Units shall be evidenced by an Award Agreement.  The Award Agreement shall specify the number of Performance Shares or Performance Units to which it pertains; provided that such number may be adjusted to reflect changes in compensation or other factors.  Further, the Award Agreement shall state that the Performance Shares or Performance Units are subject to all of the terms and conditions of the Plan and such other terms and provisions as the Committee may determine consistent with the Plan.
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9.2.          Right to Payment.  A grant of Performance Shares or Performance Units gives the Participant rights, valued as determined by the Committee, and payable to, or exercisable by, the Participant to whom the Performance Shares or Performance Units are granted, in whole or in part, as the Committee shall establish at grant or thereafter.  The Committee shall set Performance Objectives and other terms or conditions to payment of the Performance Shares or Performance Units in its discretion which, depending on the extent to which they are met, will determine the number and value of Performance Shares or Performance Units that will be paid to the Participant.

9.3.          Performance Period.  The performance period with respect to each Performance Share or Performance Unit shall commence on the date specified in the Award Agreement and may be subject to earlier termination in the event of an acceleration under Article 16.

9.4.          Threshold Performance Objectives.  Each grant may specify in respect of the specified Performance Objectives a minimum acceptable level of achievement or attainment below which no payment will be made and may set forth a formula for determining the amount of any payment to be made if performance is at or above such minimum acceptable level but falls short of the maximum achievement of the specified Performance Objectives.

9.5.          Payment of Performance Shares and Performance Units.  Awards of Performance Shares or Performance Units may be payable in cash, Stock, Restricted Stock, or Restricted Stock Units in the discretion of the Committee, and have such other terms and conditions as determined by the Committee and reflected in the Award Agreement.  For purposes of determining the number of shares of Stock to be used in payment of a Performance Unit denominated in cash but payable in whole or in part in Stock or Restricted Stock, the number of shares to be so paid will be determined by dividing the cash value of the Award to be so paid by the Fair Market Value of a share of Stock on the date of determination by the Committee of the amount of the payment under the Award.

ARTICLE 10
AWARDS OF RESTRICTED STOCK

10.1.          Grant of Restricted Stock.  The Committee is authorized to make Awards of Restricted Stock to Participants in such amounts and subject to such terms and conditions as may be selected by the Committee.  All Awards of Restricted Stock shall be evidenced by an Award Agreement setting forth the terms, conditions and restrictions applicable to the Award.  Each grant of Restricted Stock shall constitute an immediate transfer of the ownership of Stock to the Participant in consideration of the performance of services, subject to the substantial risk of forfeiture and restrictions on transfer hereinafter referred to.

10.2.          Issuance and Restrictions.  Restricted Stock shall be subject to such restrictions on transferability as the Committee may impose.  Such restrictions may include, without limitation, limitations on the right to vote Restricted Stock or the right to receive dividends on the Restricted Stock, and provisions subjecting the Restricted Stock to a continuing risk of forfeiture in the hands of any transferee.  These restrictions may lapse separately or in combination at such times, under such circumstances, in such installments, upon the satisfaction of Performance Objectives or otherwise, as the Committee determines at the time of the grant of the Award or thereafter.
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10.3.          Consideration.  Each grant may be made without additional consideration from the Participant or in consideration of a payment by the Participant that is less than the Fair Market Value on the Grant Date.

10.4.          Dividends, Voting and Other Ownership Rights.  Unless otherwise provided in an Award Agreement or any special Plan document governing an Award, an Award of Restricted Stock shall entitle the Participant to all of the rights of a stockholder with respect to Restricted Stock (including voting and other ownership rights) throughout the restricted period; provided, dividends (including the proceeds of reinvested dividends) shall be paid with respect to a performance-based Restricted Stock Award only to the extent the underlying Award has vested in accordance with the Plan and the applicable Award Agreement, and all other dividends rights shall be forfeited.  Participants may only be entitled to dividends if permissible under the agreements or instruments governing the Company’s indebtedness.

10.5.          Performance-Based Restricted Stock.  Any Award or the vesting thereof of Restricted Stock may be predicated on or further conditioned upon the achievement or attainment of Performance Objectives established by the Committee.

10.6.          Reinvesting.  Any grant may require that any or all dividends (if permitted under the agreements or instruments governing the Company’s indebtedness) or other distributions paid on the Restricted Stock during the period of such restrictions be automatically sequestered and reinvested in additional shares of Stock, which may be subject to the same restrictions as the underlying Award or such other restrictions as the Committee may determine.

10.7.          Issuance of Restricted Stock.  Restricted Stock issued under the Plan following vesting shall be evidenced in a manner authorized by the General Corporation Law of the State of Delaware and may be evidenced in any such manner as the Committee shall determine.  If certificates representing shares of Restricted Stock are registered in the name of the Participant, certificates must bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Restricted Stock or otherwise must be subject to reasonable precautions intended to prevent unauthorized transfer.

ARTICLE 11
DIVIDEND EQUIVALENTS

11.1.          Grant of Dividend Equivalents.  The Committee is authorized to grant Dividend Equivalents to Participants with respect to Full Value Awards, and only Full Value Awards, granted hereunder, subject to such terms and conditions as may be selected by the Committee (if permitted under agreements or instruments governing the Company’s indebtedness).  Dividend Equivalents shall entitle the Participant to receive payments equal to dividends with respect to all or a portion of the number of shares of Stock subject to a Full Value Award, as determined by the Committee.  The Committee may provide that Dividend Equivalents be paid or distributed when accrued or be deemed to have been reinvested in additional shares of Stock, or otherwise reinvested; provided, dividends (including the proceeds of reinvested dividends) shall be paid or distributed with respect to a performance-based Award only to the extent the underlying Award has vested in accordance with the Plan and the applicable Award Agreement, and all other dividends rights shall be forfeited.
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ARTICLE 12
RESTRICTED STOCK UNITS

12.1.          Grant of RSUs.  The Committee is authorized to make Awards of RSUs to Participants in such amounts and subject to such terms and conditions as may be selected by the Committee.  All Awards of Restricted Stock shall be evidenced by an Award Agreement setting forth the terms, conditions and restrictions applicable to the Award.

ARTICLE 13
OTHER STOCK-BASED AWARDS

13.1.          Grant of Other Stock-Based Awards.  The Committee is authorized, subject to limitations under applicable law and the provisions of the Plan, to grant to Participants such other Awards that are payable in, valued in whole or in part by reference to, or otherwise based on or related to shares of Stock, as deemed by the Committee to be consistent with the purposes of the Plan, including without limitation shares of Stock awarded purely as a “bonus” and not subject to any restrictions or conditions, convertible or exchangeable debt securities, other rights convertible or exchangeable into shares of Stock, and Awards valued by reference to book value of shares of Stock or the value of securities of or the performance of specified Parents or Subsidiaries.  The Committee shall determine the terms and conditions of such Awards; provided, if dividend equivalent rights are granted, no payment, distribution or reinvestment of an accrued dividend on an Award shall be made unless and until each applicable Performance Objective, if any, has been achieved or satisfied in accordance with the Plan and the applicable Award Agreement.

ARTICLE 14
CASH AWARDS

14.1.          Grant of Cash Awards.  The Committee is authorized to make Cash Awards to Participants in such amounts and subject to such terms and conditions as may be selected by the Committee.  Cash Awards may be evidenced by an Award Agreement setting forth the terms, conditions and restrictions applicable to the Award.  The Committee shall determine the terms and conditions of Cash Awards.
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ARTICLE 15
CODE SECTION 409A

15.1.          Code Section 409A.  Notwithstanding anything in the Plan or in any Award Agreement to the contrary, to the extent that any amount or benefit that would constitute “nonqualified deferred compensation” (as defined in Section 409A of the Code) to a Participant would otherwise be payable or distributable under the Plan or any Award Agreement solely by reason of the occurrence of a Change in Control or on account of the Participant’s Disability or separation from service, such amount or benefit will not be payable or distributable to the Participant by reason of such circumstance unless (i) the circumstances giving rise to such Change in Control, Disability or separation from service meet the description or definition of “change in control event,” “disability” or “separation from service,” as the case may be, in Section 409A of the Code and the regulations promulgated thereunder, or (ii) the payment or distribution of such amount or benefit would be exempt from the application of Section 409A of the Code by reason of the short-term deferral exemption or otherwise.  Any payment or distribution of an amount or benefit that would constitute “nonqualified deferred compensation” (as defined in Section 409A of the Code), which is made on account of separation from service to a Participant who is a Specified Employee (as defined in Section 409A of the Code) may not be made before the date which is six (6) months after the date of the Specified Employee’s separation from service if the payment or distribution is not exempt from the application of Section 409A of the Code by reason of the short-term deferral exemption or otherwise.  This provision does not prohibit the vesting of any Award or the vesting of any right to eventual payment or distribution of any amount or benefit under the Plan or any Award Agreement.  Each payment under any Award shall be treated as a separate payment for purposes of Section 409A of the Code.  The Plan and all Awards made hereunder are intended to be exempt from the provisions of Section 409A of the Code or, to the extent subject to Section 409A of the Code, comply with Section 409A of the Code and any authoritative guidance thereunder.  The Plan and all Awards made hereunder shall be interpreted, construed and administered in accordance with these intentions.  Nothing in the Plan shall provide a basis for any person to take action against the Company or any affiliate based on matters covered by Section 409A of the Code, including the tax treatment of any amount paid or Award made under the Plan, and neither the Company nor any of its affiliates shall under any circumstances have any liability to any Participant or his beneficiary or estate for any taxes, penalties or interest due on amounts paid or payable under the Plan, including taxes, penalties or interest imposed under Section 409A of the Code.

ARTICLE 16
PROVISIONS APPLICABLE TO ALL AWARDS

16.1.          Term of Award.  The term of each Award shall be for the period as determined by the Committee, subject to the terms of the Plan.

16.2.          Limits on Transfer.

(a)          Except as provided in Section 16.2(b) below, during a Participant’s lifetime, his or her Awards shall be exercisable only by the Participant.  No Awards may be sold, pledged, assigned, or transferred in any manner other than by will or the laws of descent and distribution; no Awards shall be subject, in whole or in part, to attachment, execution or levy of any kind; and any purported transfer in violation hereof shall be null and void.  A Participant may designate a beneficiary in accordance with procedures established by the Committee pursuant to Section 16.3 below.

(b)          The Committee may, in its discretion, determine that notwithstanding Section 16.2(a), any or all Awards shall be transferable to and exercisable by such transferees, and subject to such terms and conditions, as the Committee may deem appropriate; provided, however, no Award may be transferred for value (as defined in the General Instructions to Form S-8).
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(c)          Notwithstanding Sections 16.2(a) and (b), an Award may be transferred pursuant to a domestic relations order that would satisfy Section 414(p)(1)(A) of the Code if such Section applied to an Award under the Plan, but only if the tax consequences flowing from the assignment or transfer are specified in said order, the order is accompanied by signed agreement by both or all parties to the domestic relations order, and, if requested by the Committee, an opinion is provided by qualified counsel for the Participant that the order is enforceable by or against the Plan under applicable law, and said opinion further specifies the tax consequences flowing from the order and the appropriate tax reporting procedures for the Plan.

16.3.          Beneficiaries.  Notwithstanding Section 16.2, a Participant may, in the manner determined by the Committee, designate a beneficiary to exercise the rights of the Participant and to receive any distribution with respect to any Award upon the Participant’s death.  A beneficiary, legal guardian, legal representative, or other person claiming any rights under the Plan is subject to all terms and conditions of the Plan and any Award Agreement applicable to the Participant, except to the extent the Plan and Award Agreement otherwise provide, and to any additional restrictions deemed necessary or appropriate by the Committee.  If no beneficiary has been properly designated or survives the Participant, payment shall be made to the Participant’s estate.  Subject to the foregoing, a beneficiary designation may be changed or revoked by a Participant at any time provided the change or revocation is filed with the Company.

16.4.          Stock Certificates.  All Stock issued under the Plan is subject to any stop-transfer orders and other restrictions as the Committee deems necessary or advisable to comply with federal or state securities laws, rules and regulations and the rules of any national securities exchange or automated quotation system on which the Stock is listed, quoted, or traded.  The Committee may place legends on any Stock certificate to reference restrictions applicable to the Stock.

16.5.          Acceleration Following a Change in Control.  Except as otherwise provided in the Award Agreement, upon termination of a Participant’s employment by the Company without Cause or by the Participant for Good Reason within twenty-four (24) months following the occurrence of a Change in Control or to the extent the surviving entity does not assume such Awards or substitute in lieu thereof similar awards relating to the stock of such surviving entity having an equivalent then-current value and remaining term, provided that such stock must be listed, quoted, or traded on a national securities exchange or automated quotation system, all outstanding Options, SARs, and other Awards in the nature of rights that may be exercised automatically shall become fully exercisable and all restrictions (other than Performance Objectives) on all outstanding Awards automatically shall lapse.  With respect to Performance Objectives applicable to any Award for which the performance period is not complete, the Committee shall have the discretionary authority to determine whether, and if so, the extent to which, (1) the performance period or the Performance Objectives shall be deemed to be satisfied or waived following a Change in Control, and (2) the Performance Objectives shall be modified, adjusted or changed on account of the Change in Control.

16.6.          Acceleration for any Other Reason.  Regardless of whether an event has occurred as described in Section 16.5 above, the Committee may in its sole discretion at any time accelerate the vesting provisions and/or waive the forfeiture provisions applicable to any Award or determine that all or a portion of a Participant’s Options, SARs, and other Awards in the nature of rights that may be exercised shall become fully or partially exercisable, and that all or a part of the restrictions on all or a portion of the outstanding Awards shall lapse, and that any Performance Objectives with respect to any Awards held by that Participant shall be deemed to be wholly or partially satisfied, in each case, as of such date as the Committee may, in its sole discretion, declare.  The discretion of the Committee in the preceding sentence shall be limited to the death, disability or Retirement of a Participant; provided, however, that the Committee may exercise such discretion for any reason with respect to Awards of up to five percent (5%) of the shares available for Awards under Section 5.1.  The Committee may discriminate among Participants and among Awards granted to a Participant in exercising its discretion pursuant to this Section 16.6.  Any such determinations by the Committee shall be final and binding on all parties.
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16.7.          Effect of Acceleration.  If an Award is accelerated under Section 16.5 or 16.6, the Committee may, in its sole discretion, provide (i) that the Award will expire after a designated period of time after such acceleration to the extent not then exercised, (ii) that the Award will be settled in cash rather than Stock, (iii) that the Award will be assumed by another party to the transaction giving rise to the acceleration or otherwise be equitably converted in connection with such transaction, (iv) that the Award may be settled by payment in cash or cash equivalents equal to the excess of the Fair Market Value of the underlying stock, as of a specified date associated with the transaction, over the exercise price of the Award, (v) that, in the event of a Change in Control, an Award may be cancelled without payment if Fair Market Value of the underlying Stock, as of a specified date associated with such event, does not exceed the exercise price of the Award or (vi) any combination of the foregoing.  The Committee’s determination need not be uniform and may be different for different Participants whether or not such Participants are similarly situated.

16.8.          Lapse or Forfeiture at or Following Termination of Employment.  Except as otherwise provided in an Award Agreement or as otherwise determined by the Committee pursuant to the provisions of Section 16.6, the following lapse and forfeiture provisions shall apply upon a Participant’s termination of employment.

(a)          Termination for Cause.  Any outstanding Award, including, without limitation, Awards that are unvested, vested and unexercised, or subject or not subject to restrictions, shall automatically and immediately lapse and be forfeited if the Participant’s employment is terminated by the Company for Cause.
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(b)          Other Termination-Options and SARs.  Upon a Participant’s termination for any reason, the unvested portion of any outstanding Options and SARs shall terminate and be forfeited.  The vested portion of any outstanding Options and SARs at the time of a Participant’s termination for reasons other than for Cause shall continue to be exercisable by the Participant (or the Participant’s estate in the event of the Participant’s death) during the period set forth in the following chart, but in no event later than ten years from the Grant Date.  At the end of such continuing exercise period, the unexercised Options and SARs shall terminate and be forfeited.

 
Reason for
Termination
  
Continuing
Exercise Period
  
 
Disability
  
1 year following termination
  
 
Death (Including death during the applicable continuing exercise period following termination for another reason)
  
1 year following death
  
 
Retirement
  
Lesser of the Original Term of Option or SAR or 3 Years
  
 
Reason Other Than Death, Disability, Retirement or Cause
  
90 days following termination
  

(c)          Other Terminations – Restricted Stock, Performance Shares, Performance Units or other Awards.  The following shall apply with respect to outstanding Awards of Restricted Stock, Performance Shares, Performance Units or other Awards which are unvested, unused or otherwise not immediately distributable at the time of a Participant’s termination of employment for reasons other than Cause:

(i)          If the Participant’s employment is terminated by reason of death or Disability, then all restrictions (other than Performance Objectives) shall lapse, and, subject to the attainment of applicable Performance Objectives (which may be waived or modified by the Committee to the extent set forth below), the unearned or unvested portion of the Award shall become immediately vested, earned and nonforfeitable, and shall be distributed to the Participant (or the Participant’s beneficiary in the event of the Participant’s death) as soon as reasonably practical following such termination, and in any event within 90 days thereof or of the end of the performance period, as applicable.

(ii)          If the Participant’s employment is terminated by reason of Retirement, then the restrictions (other than Performance Objectives) shall lapse, and, subject to the attainment of applicable Performance Objectives (which may be waived or modified by the Committee to the extent set forth below), the unearned or unvested portion of the Award shall become partially vested, earned and nonforfeitable according to the following formula:  The portion that becomes vested, earned and nonforfeitable shall equal the number of shares of Stock granted as of the Grant Date multiplied by the ratio of (i) the number of full months that have elapsed from the Grant Date to the date of the Participant’s Retirement, to (ii), the number of full months contained in the original term of the Award.

(iii)          If the Participant’s employment is terminated for any reason other than by reason of death, Disability, or Retirement then the restricted, unvested or unearned portion of the Award shall automatically and immediately be cancelled and forfeited.
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With respect to any Award subject to Performance Objectives, the Committee shall have the discretion, in the event of a termination described in (i) or (ii) above during the applicable Performance Period, to waive and/or modify the Performance Objectives based on any conditions that the Committee deems reasonable, including but not limited to the formula in (ii) above or the performance status as of the termination date.  Any Restricted Stock resulting from determination of performance pursuant to this paragraph shall vest and all other restrictions thereon shall lapse at the time the performance is determined.

(d)          Determinations upon Leaves of Absence.  Whether military, government or other service or other leave of absence shall constitute a termination of employment shall be determined in each case by the Committee at its discretion, and any determination by the Committee shall be final and conclusive.  The Committee may in its sole discretion take any further action that it deems to be equitable under the circumstances or in the best interests of the Company, including, without limitation, waiving or modifying any limitation or requirement with respect to any Award under the Plan.  The period of any leave of absence shall not be credited for vesting purposes unless otherwise determined by the Committee.

(e)          Cancellation for Violation of Non-Compete.  Without limiting the Committee’s discretion to cancel any Award at any time, the Committee shall have full power and authority to cancel an Award if the Participant, while employed by the Company or a Subsidiary or within a period which begins on the date of termination of employment and ends on the date which is one year later, engages in any activity which is in direct competition with the Company or solicits other employees or customers of the Company or its Subsidiaries in a competitive business venture.  Whether a Participant has engaged in such conduct shall be determined by the Committee in its sole discretion, taking into account any determination by the Company that the Participant has acted in violation of a non-compete or non-solicitation agreement with or obligation to the Company or a Subsidiary.

16.9.          Performance Objectives.  The Committee may determine that any Award granted pursuant to the Plan to a Participant (including, but not limited to, Participants who are Covered Employees) shall be determined solely or partially on the basis of Performance Objectives.  Any payment of an Award granted with Performance Objectives shall be conditioned on the determination of the Committee in each case that the Performance Objectives and any other material conditions have been satisfied.  The Committee’s determination shall be reflected in the Committee’s minutes.

If a Participant is promoted, demoted or transferred to a different business unit or function during a performance period, the Committee may determine that the specified Performance Objectives are no longer appropriate and may (i) modify, adjust, change or eliminate the Performance Objectives or the applicable performance period as it deems appropriate to make such criteria and period comparable to the initial Performance Objectives and period, or (ii) make a cash payment to the Participant in an amount determined by the Committee.
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16.10.          Substitute Awards.  The Committee may grant Awards under the Plan in substitution for stock and stock-based awards held by employees of another entity who become employees of the Company or a Subsidiary as a result of a merger or consolidation of the former employing entity with the Company or a Subsidiary or the acquisition by the Company or a Subsidiary of property or stock of the former employing entity.  The Committee may direct that the substitute awards be granted on such terms and conditions as the Committee considers appropriate in the circumstances.

16.11.          Assumed Spin-Off Awards.  Notwithstanding anything in this Plan to the contrary, each Assumed Spin-Off Award shall be subject to the terms and conditions of the EHC Omnibus Plan and award agreement to which such Assumed Spin-Off Award was subject immediately prior to the Spin-Off, subject to the adjustment of such Assumed Spin-Off Award by the Compensation and Human Capital Committee of the EHC board of directors and the terms of the Employee Matters Agreement, provided that following the date of the Spin-Off, each such Assumed Spin-Off Award shall relate solely to Stock and be administered by the Committee in accordance with the administrative procedures in effect under this Plan.

ARTICLE 17
CHANGES IN CAPITAL STRUCTURE

17.1.          General.  In the event an extraordinary cash dividend, stock dividend, stock-split or a combination or consolidation of the outstanding stock of the Company into a lesser number of shares is declared upon the Stock, the authorization limits under Sections 5.1 and 5.3 shall be increased or decreased proportionately, and the shares of Stock then subject to each Award shall be increased or decreased proportionately without any change in the aggregate purchase price therefore; provided if the Committee elects to grant Dividend Equivalents with respect to an extraordinary cash dividend, the associated Awards shall not be adjusted pursuant to this Section.  In the event the Stock shall be changed into or exchanged for a different number or class of shares of stock or securities of the Company or of another corporation, whether through reorganization, recapitalization, reclassification, share exchange, spin-off, stock split-up, combination or exchange of shares, merger or consolidation, the authorization limits under Sections 5.1 and 5.3 shall be adjusted proportionately, and there shall be substituted for each such share of Stock then subject to each Award the number and class of shares into which each outstanding share of Stock shall be so exchanged, all without any change in the aggregate purchase price for the shares then subject to each Award.

Notwithstanding anything to the contrary, upon the occurrence or in anticipation of such an event, the Committee may, in its sole discretion, provide (i) that Awards will be settled in cash rather than Stock, (ii) that Awards will be assumed by another party to a transaction or otherwise be equitably converted or substituted in connection with such transaction, (iii) that outstanding Awards may be settled by payment in cash or cash equivalents equal to the excess of the Fair Market Value of the underlying Stock, as of a specified date associated with the transaction, over the exercise price of the Award, or (iv) any combination of the foregoing.  The Committee’s determination need not be uniform and may be different for different Participants whether or not such Participants are similarly situated.
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ARTICLE 18
AMENDMENT, MODIFICATION AND TERMINATION

18.1.          Amendment, Modification and Termination.  The Committee shall have the power to amend, suspend or terminate the Plan at any time, provided that any such termination of the Plan shall not adversely affect Awards outstanding under the Plan at the time of termination.  Notwithstanding the foregoing, an amendment will be contingent on approval of the Company’s stockholders to the extent required by law or by the rules of any stock exchange or automated quotation system on which the Company’s securities are traded or to the extent it relates to the repricing limitations set forth in Section 7.1(a) or 8.1(a)(2) of the Plan.

18.2.          Awards Previously Granted.  The Committee may amend any outstanding Award in whole or in part from time to time.  Any such amendment which the Committee determines, in its sole discretion, to be necessary or appropriate to conform the Award to, or otherwise satisfy, any legal requirement (including without limitation the provisions of Code Section 409A or the regulations or rulings promulgated thereunder, as well as any securities laws and the rules of any applicable securities exchanges), may be made retroactively or prospectively and without the approval or consent of the Participant.  Additionally, the Committee may, without the approval or consent of the Participant, make adjustments in the terms and conditions of an Award in recognition of unusual or nonrecurring events affecting the Company or the financial statements of the Company in order to prevent the dilution or enlargement of the benefits intended to be made available pursuant to the Award.  Any materially adverse amendments or adjustments to Awards not expressly contemplated in the two preceding sentences may be made by the Committee with the consent of the affected Participant(s).

ARTICLE 19
GENERAL PROVISIONS

19.1.          Recoupment.  Awards granted hereunder, any Stock and/or cash distributed to a Participant pursuant to the exercise or vesting of an Award, and any proceeds received by a Participant upon the sale of any such Stock, shall be subject to recoupment by the Company pursuant to, and in accordance with, the terms of any applicable compensation recoupment policy of the Company, as it may be amended from time to time, which policy is hereby incorporated in the Plan by reference.

19.2.          No Rights to Awards.  No eligible individual shall have any claim to be granted any Award under the Plan, and neither the Company nor the Committee is obligated to treat eligible individuals uniformly, and determinations made under the Plan may be made by the Committee selectively among eligible individuals who receive, or are eligible to receive, Awards.

19.3.          No Stockholder Rights.  No Award gives the Participant any of the rights of a stockholder of the Company unless and until shares of Stock are in fact issued to such person in connection with such Award.

19.4.          Tax Withholding.  Participants shall be responsible to make appropriate provision for all taxes required to be withheld in connection with any Award or the transfer of shares of Stock pursuant to the Plan.  The Company or any Parent or Subsidiary shall have the authority and the right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy federal, state, and local or foreign taxes (including the Participant’s FICA obligation) required by law to be withheld with respect to any taxable event arising as a result of the Plan.  Accordingly, the Company shall have the right to retain from the payment under an Award the number of shares of Stock or a portion of the value of such Award equal in value to the amount of any required withholdings.  With respect to withholding required upon any taxable event under the Plan, the Committee may, at the time the Award is granted or thereafter, require or permit, including at the Participant’s election, that any such withholding requirement be satisfied, in whole or in part, by withholding shares of Stock having a Fair Market Value on the date of withholding equal to the amount required to be withheld for tax purposes, all in accordance with such procedures as the Committee establishes.  Additionally, if the Committee so determines, the Participant may deliver to the Company unrestricted shares which have been held by the Participant for at least six (6) months, or any other shorter or longer period as necessary to avoid the recognition of an expense under generally accepted accounting principles, to satisfy any additional tax obligations owed by the Participant.  The Company shall have the authority to require a Participant to remit cash to the Company in lieu of the surrender or withholding of shares of Stock for taxes if the surrender or withholding for such purpose would result in adverse tax or accounting implications for the Company.
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19.5.          No Right to Continued Service.  Nothing in the Plan or any Award Agreement shall interfere with or limit in any way the right of the Company or any Parent or Subsidiary to terminate any Participant’s employment or status as an officer or director at any time, nor confer upon any Participant any right to continue as an employee, officer or director of the Company or any Parent or Subsidiary, whether for the duration of the Participant’s Award or otherwise.

19.6.          Unfunded Status of Awards.  The Plan is intended to be an “unfunded” plan for incentive and deferred compensation.  With respect to any payments not yet made to a Participant pursuant to an Award, nothing contained in the Plan or any Award Agreement shall give the Participant any rights that are greater than those of a general creditor of the Company or any Parent or Subsidiary.  The Plan is not intended to be subject to the Employee Retirement Income Security Act of 1974.

19.7.          Indemnification.  To the extent allowable under applicable law, each member of the Committee and the Board and any employee of the Company acting pursuant to delegated authority and any counsel or advisor to the foregoing persons shall be indemnified and held harmless by the Company from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by such persons in connection with or resulting from any claim, action, suit, or proceeding to which such person may be a party or in which he may be involved by reason of any action or failure to act under the Plan (except for willful misconduct) and against and from any and all amounts paid by such person in satisfaction of judgment in such action, suit, or proceeding against him provided he gives the Company an opportunity, at its own expense, to handle and defend the same before he undertakes to handle and defend it on his own behalf.  The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such person may be entitled under the Company’s Articles of Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless.

19.8.          Relationship to Other Benefits.  No payment under the Plan shall be taken into account in determining any benefits under any pension, retirement, savings, profit sharing, group insurance, welfare or benefit plan of the Company or any Parent or Subsidiary unless provided otherwise in such other plan.

19.9.          Expenses.  The expenses of administering the Plan shall be borne by the Company and its Parents or Subsidiaries.
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19.10.          No Fiduciary Relationship.  Nothing contained in the Plan, and no action taken pursuant to the provisions of the Plan, shall create or shall be construed to create a trust of any kind, or a fiduciary relationship between the Committee, the Company or its affiliates, or their officers or other representatives or the Board, on the one hand, and the Participant, the Company, its Affiliates or any other person or entity, on the other.

19.11.          Fractional Shares.  No fractional shares of Stock shall be issued and the Committee shall determine, in its discretion, whether cash shall be given in lieu of fractional shares or whether such fractional shares shall be eliminated by rounding up or down.

19.12.          Government and Other Regulations.  The obligation of the Company to make payment of Awards in Stock or otherwise shall be subject to all applicable laws, rules, and regulations, and to such approvals by government agencies as may be required.  The Company shall be under no obligation to register under the 1933 Act, or any state securities act, any of the shares of Stock paid under the Plan.  The shares paid under the Plan may in certain circumstances be exempt from registration under the 1933 Act, and the Company may restrict the transfer of such shares in such manner as it deems advisable to ensure the availability of any such exemption.  Payment of an Award hereunder may be delayed in the sole discretion of the Committee if the Committee reasonably anticipates that payment of the Award would violate Federal securities law or other applicable law; provided that payment shall be made at the earliest date that the Committee reasonably anticipates that making the payment will not cause such violation.

19.13.          Governing Law.  To the extent not governed by federal law, the Plan and all Award Agreements shall be construed in accordance with and governed by the laws of the State of Delaware.

19.14.          Additional Provisions.  Each Award Agreement may contain such other terms and conditions as the Committee may determine; provided that such other terms and conditions are not inconsistent with the provisions of the Plan.

19.15.          Foreign Participants.  In order to facilitate the making of any grant or combination of grants under the Plan, the Committee may provide for such special terms for Awards to Participants who are foreign nationals, or who are employed by or perform services for the Company or any Subsidiary outside of the United States of America, as the Committee may consider necessary or appropriate to accommodate differences in local law, tax policy or custom.  Moreover, the Committee may approve such supplements to, or amendments, restatements or alternative versions of, the Plan as it may consider necessary or appropriate for such purposes without thereby affecting the terms of the Plan as in effect for any other purpose, provided that no such supplements, amendments, restatements or alternative versions shall include any provisions that are inconsistent with the terms of the Plan, as then in effect, unless the Plan could have been amended to eliminate such inconsistency without further approval by the stockholders of the Company.

19.16.          No Limitations on Rights of Company.  The grant of any Award shall not in any way affect the right or power of the Company to make adjustments, reclassification or changes in its capital or business structure or to merge, consolidate, dissolve, liquidate, sell or transfer all or any part of its business or assets.  The Plan shall not restrict the authority of the Company, for proper corporate purposes, to draft or assume Awards, other than under the Plan, to or with respect to any person.  If the Committee so directs, the Company may issue or transfer shares of Stock to a Subsidiary or a Parent, for such lawful consideration as the Committee may specify, upon the condition or understanding that the Subsidiary or Parent will transfer such shares of Stock to a Participant in accordance with the terms of an Award granted to such Participant and specified by the Committee pursuant to the provisions of the Plan.
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19.17.          Limitations on Awards Granted to Non-Employee Directors.  The maximum Grant Date Fair Market Value, as determined by the Committee, of the equity Awards granted to any Non-Employee Director in any Plan Year shall not exceed $375,000.  The maximum aggregate amount, as determined by the Committee, of the Cash Awards granted to any Non-Employee Director in any Plan Year also shall not exceed $375,000.  The equity and cash award limits shall be applied separately, so that the aggregate Grant Date Fair Market Value of all Awards granted to a Non-Employee Director in any Plan Year shall not exceed $750,000; provided, however, such limits shall not apply to any compensation resulting from non-preferential dividends or dividend equivalents associated with outstanding equity awards.

19.18.          Payment Deferrals.  The Committee, either at the time of grant or by subsequent amendment, may require or permit deferral of the payment of Awards under such rules and procedures as it may establish; provided, however, that any Options, SARs, and similar Other Stock-Based Awards that are not otherwise subject to Section 409A of the Code but would be subject to Section 409A of the Code if a deferral were permitted, shall not be subject to any deferral.  The Committee also may provide that deferred settlements include the payment or crediting of interest or other earnings on the deferred amounts, or the payment or crediting of Dividend Equivalents where the deferred amounts are denominated in Stock equivalents.  Any deferral and related terms and conditions shall comply with Section 409A of the Code and any authoritative guidance thereunder.

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Exhibit 10.2
 
ENHABIT, INC.
 
CHANGE IN CONTROL
 
BENEFITS PLAN
 
Enhabit, Inc., a Delaware corporation (the “Company”), has adopted the Enhabit, Inc. Change in Control Benefits Plan (the “Plan”), to be as of the date on which the Company becomes a separate publicly traded company in connection with its separation from Encompass Health Corporation for the benefit of certain Participant employees of the Company and its subsidiaries, on the terms and conditions hereinafter stated.
 
The Plan is intended to help retain qualified employees, maintain a stable work environment and provide financial security to certain Participant employees of the Company and its subsidiaries in the event of a Change in Control. The Plan is intended to be a plan that “is unfunded and is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees” within the meaning of Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA. To the maximum extent permitted by law, the Plan is not intended to provide for any “deferral of compensation,” as defined in Section 409A of the Code (“Section 409A”) and authoritative Department of Treasury regulations and other interpretive guidance issued thereunder (including the Proposed Treasury Regulations issued June 22, 2016, to the extent the application of such proposed regulations facilitates the administration of this Plan in accordance with the intentions set forth in this paragraph). Instead, payments and benefits under the Plan are intended to fall within the exceptions for “short-term deferrals,” as set forth in Treasury Regulations Section 1.409A-1(b)(4), and “separation pay due to involuntary separation from service or participation in a window program,” as set forth in Treasury Regulations Section 1.409A-1(b)(9)(iii) and it is further intended that each Participant’s benefits shall be payable only upon a Participant’s “separation from service” under Treasury Regulations Section 1.409A-1(h). For purposes of Treasury Regulations Section 1.409A-2(b)(2)(iii), the right to each payment under the Plan shall be treated as the right to a separate payment. The Plan shall be administered and interpreted to the extent possible in a manner consistent with these intentions.
 
ARTICLE I
 
DEFINITIONS AND INTERPRETATIONS
 
Section 1.01      Definitions. Capitalized terms used in the Plan shall have the following respective meanings, except as otherwise provided or as the context shall otherwise require:
 
“Annual Salary” shall mean the base salary paid to a Participant immediately prior to his or her Termination Date on an annual basis exclusive of any bonus payments or additional payments under any Benefit Plan.
 
“Average Bonus” shall mean the average of the actual bonuses paid to the Participant by the Company and/or Encompass Health Corporation, or their respective subsidiaries, as applicable, for the three (3) years preceding the Termination Date; provided that in the case of a Participant who has not been paid a bonus for any year prior to the Termination Date, the Average Bonus shall be equal to on the Participant’s target bonus in effect immediately prior to the Termination Date.
 
“Award” means any grant or award of Options, Stock Appreciation Rights or any other right or interest relating to Common Stock or cash, granted to a Participant pursuant to an equity compensation plan of the Company.
 
“Benefit Plan” shall mean any “employee benefit plan” (including any employee benefit plan within the meaning of Section 3(3) of ERISA), program, arrangement or practice maintained, sponsored or provided by the Company or any of its subsidiaries, including those relating to compensation, bonuses, profit sharing, stock option, or other stock-related rights or other forms of incentive or deferred compensation, paid time-off benefits, insurance coverage (including any self-insured arrangements) health or medical benefits, Disability benefits, workers’ compensation, supplemental unemployment benefits, severance benefits and post-employment or retirement benefits (including:  compensation, pension, health, medical or life insurance, or other benefits).
 
“Board” shall mean the Board of Directors of the Company.
 
“Cause” shall have the meaning set forth in any individual employment, severance or similar agreement between the Company (or any of its subsidiaries) and a Participant, or in the event that a Participant is not a party to such an agreement, Cause shall mean:
 
(i)      the Company’s procurement of evidence of the Participant’s act of fraud, misappropriation, or embezzlement with respect to the Company or any of its subsidiaries;
 
(ii)      the Participant’s indictment for, conviction of, or plea of guilty or no contest to, any felony (other than a minor traffic violation);
 
(iii)     the suspension or debarment of the Participant or of the Company or any of its affiliated companies or entities as a direct result of any willful or grossly negligent act or omission of the Participant in connection with his or her employment with the Company or any of its subsidiaries from participation in any Federal or state health care program. For purposes of this clause (iii), the Participant shall not have acted in a “willful” manner if the Participant acted, or failed to act, in a manner that he or she believed in good faith to be in, or not opposed to the best interests of the Company or any of its subsidiaries;
 
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(iv)     the Participant’s admission of liability of, or finding by a court or the SEC (or a similar agency of any applicable state) of liability for, the violation of any “Securities Laws” (as hereinafter defined) (excluding any technical violations of the securities laws which are not criminal in nature). As used herein, the term “securities laws” means any federal or state law, rule or regulation governing the issuance or exchange of securities, including, without limitation, the Securities Act and the Exchange Act;
 
(v)      a formal indication from any agency or instrumentality of any state or the United States of America, including, but not limited to, the United States Department of Justice, the SEC or any committee of the United States Congress that the Participant is a target or the subject of any investigation or proceeding into the actions or inactions of the Participant for a violation of any Securities Laws in connection with his or her employment by the Company or any of its subsidiaries (excluding any technical violations of the securities law which are not criminal in nature);
 
(vi)     the Participant’s failure after reasonable prior written notice from the Company or any of its subsidiaries to comply with any valid and legal directive of the Chief Executive Officer or the Board that is not remedied within thirty (30) days of the Participant being provided written notice thereof from the Company; or
 
(vii)   other than as provided in clauses (i) through (vi) above, the Participant’s breach of any material provision of any employment agreement, if applicable, or the Participant’s breach of the material duties of the Participant’s job that is not remedied within thirty (30) days or repeated breaches of a similar nature, such as the failure to report to work, perform duties, or follow directions, all as provided herein, which shall not require additional notices as provided in clauses (i) through (vi) above.
 
Cause shall be determined by the affirmative vote of at least fifty percent (50%) of the members of the Board (excluding the Participant, if a Board member, and excluding any member of the Board involved in events leading to the Board’s consideration of terminating the Participant for Cause).
 
“Change in Control” shall mean
 
(i)      the acquisition (other than from the Company) by any person, entity or “group” (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act, but excluding, for this purpose, the Company or its subsidiaries, or any employee benefit plan of the Company or its subsidiaries which acquires beneficial ownership of voting securities of the Company) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of thirty percent (30%) or more of either the then-outstanding shares of Common Stock or the combined voting power of the Company’s then-outstanding voting securities entitled to vote generally in the election of directors; or
 
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(ii)     during any period of up to twenty-four (24) consecutive months, individuals who at the beginning of such period constituted the Board (together with any new directors whose election by the Board or whose nomination for election by the stockholders of the Company was approved by a vote of a majority of the directors of the Company then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease to constitute at least a majority of the Board; or
 
(iii)     the Company is liquidated or dissolved or adopts a plan of liquidation or dissolution; or
 
(iv)    the merger or consolidation of the Company with or into another person or the merger of another person with or into the Company, or the sale of all or substantially all the assets of the Company (determined on a consolidated basis) to another person, other than a transaction following which (A) in the case of a merger or consolidation transaction, holders of securities that represented one hundred percent (100%) of the combined voting power entitled to vote generally in the election of directors of the Company immediately prior to such transaction (or other securities into which such securities are converted as part of such merger or consolidation transaction) own directly or indirectly at least a majority of the combined voting power entitled to vote generally in the election of directors of the surviving person in such transaction immediately after such transaction and (B) in the case of a sale of assets, each transferee is owned by holders of securities that represented at least a majority of the combined voting power entitled to vote generally in the election of directors of the Company immediately prior to such sale.
 
“Code” shall mean the Internal Revenue Code of 1986, as amended. Reference in the Plan to any Section of the Code shall be deemed to include any amendments or successor provisions to such Section and any regulations under such Section.
 
“Common Stock” shall mean $0.01 par value common stock of the Company, and such other securities of the Company as may be substituted for Common Stock.
 
“Compensation and Human Capital Committee” shall mean the Compensation and Human Capital Committee of the Board.
 
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“Disability” shall mean a physical or mental condition which is expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months and which renders the Participant incapable of performing the work for which he or she is employed or similar work, as evidenced by eligibility for and actual receipt of benefits payable under a group Disability plan or policy maintained by the Company or any of its subsidiaries that is by its terms applicable to the Participant.
 
“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended and the rules and regulations promulgated thereunder.
 
“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended and the rules and regulations promulgated thereunder.
 
“Fair Market Value” means (i) as of any given date, the closing price at which the shares of Common Stock were traded (or if no transactions were reported on such date on the next preceding date on which transactions were reported) on the New York Stock Exchange on such date, or, if different, the principal exchange or automated quotation system on which such stock is traded, or (ii) should the Compensation and Human Capital Committee elect, the average closing price over a pre-established series of such trading days preceding or following such given date.
 
“Good Reason” shall mean, when used with reference to any Participant, any of the following actions or failures to act, but in each case only if it occurs while such Participant is employed by the Company or any of its subsidiaries and then only if it is not consented to by such Participant in writing:
 
(i)      assignment of a position that is of a lesser rank than held by the Participant prior to the assignment and that results in a material adverse change in such Participant’s reporting position, duties or responsibilities or title or elected or appointed offices as in effect immediately prior to the effective date of such change, or in the case of a Tier 1 or Tier 2 Participant who was immediately prior to the Change in Control an executive officer of the Company, such Participant ceasing to be an executive officer of a company with securities registered under the Exchange Act;

(ii)     a material reduction in such Participant’s total compensation from that in effect immediately prior to the Change in Control. For purposes of this clause (ii), “total compensation” shall mean the sum of base salary, target bonus opportunity and the opportunity to receive compensation in the form of equity in the Company. Notwithstanding the foregoing, a reduction will not be deemed to have occurred hereunder on account of (A) any change to a plan term other than ultimate target bonus opportunity or equity opportunity, (B) the actual payout of any bonus amount or equity amount, (C) any reduction resulting from changes in the market value of securities or other instruments paid or payable to the Participant, or (D) any reduction in the total compensation of a group of similarly situated Participants that includes such Participant; or

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(iii)    any change in a Participant’s status as a Tier 1 Participant, Tier 2 Participant or Tier 3 Participant to a status that provides a lower benefit hereunder in the event of a Change in Control if such change in status occurs during the period beginning six (6) months prior to a Change in Control and ending twenty-four (24) months after a Change in Control; or

(iv)    any change of more than fifty (50) miles in the location of the principal place of employment of such Participant immediately prior to the effective date of such change.

For purposes of this definition, none of the actions described in clauses (i) through (iv) above shall constitute “Good Reason” if taken for Cause. Additionally, none of the actions described in clauses (i) through (iv) above shall constitute “Good Reason” with respect to any Participant if remedied by the Company within thirty (30) days after receipt of written notice thereof given by such Participant (or, if the matter is not capable of remedy within thirty (30) days, then within a reasonable period of time following such thirty (30) day period, provided that the Company has commenced such remedy within said thirty (30) day period); provided that “Good Reason” shall cease to exist for any action described in clauses (i) through (iv) above on the sixtieth (60th) day following the later of the occurrence of such action or the Participant’s knowledge thereof, unless such Participant has given the Company written notice thereof prior to such date. Furthermore, any benefits under the Plan resulting from the occurrence described in clause (iii) above shall be based on the status of the Participant as a Tier 1 Participant, Tier 2 Participant or Tier 3 Participant as of the date of such occurrence.
 
“Option” means a right granted pursuant to an equity compensation plan of the Company to purchase Common Stock at a specified price during specified time periods.
 
“Participant” shall mean each employee of the Company or any of its subsidiaries who are designated in writing as a participant in the Plan by the Board or the Compensation and Human Capital Committee from time to time; provided that the Chief Executive Officer may designate an employee of the Company or any of its subsidiaries (other than an executive officer) as a Tier 3 Participant and shall provide prompt notice to the Compensation and Human Capital Committee of such designation.
 
“Plan” shall mean this Enhabit, Inc. Change in Control Benefits Plan, as amended, restated, supplemented or modified from time to time in accordance with its terms.
 
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“Potential Change in Control” shall be deemed to have occurred if the event set forth in any one of the following paragraphs shall have occurred:
 
(i)       the Company enters into an agreement, the consummation of which would result in the occurrence of a Change in Control; or
 
(ii)     the Company or any person, entity or “group” (within the meaning of Sections 13(d)(3) or 14(d)(2) of the Exchange Act, but excluding, for this purpose, the Company or its subsidiaries, or any employee benefit plan of the Company or its subsidiaries which acquires beneficial ownership of voting securities of the Company) publicly announces an intention to take or to consider taking actions which, if consummated, would constitute a Change in Control; or
 
(iii)   the acquisition (other than from the Company) by any person, entity or “group” (within the meaning of Sections 13(d)(3) or 14(d)(2) of the Exchange Act, but excluding, for this purpose, the Company or its subsidiaries, or any employee benefit plan of the Company or its subsidiaries which acquires beneficial ownership of voting securities of the Company) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of fifteen (15%) or more of either the then-outstanding shares of Common Stock or the combined voting power of the Company’s then-outstanding voting securities entitled to vote generally in the election of Directors; or
 
(iv)     the Board adopts a resolution to the effect that a Potential Change in Control has occurred;
 
provided, however, that no Potential Change in Control shall be deemed pending for purposes of the Plan if such event or condition is no longer in effect or existence or is otherwise rescinded or terminated (by means of a public filing or announcement in the case of clause (ii) above).
 
“Pro-rated Portion” shall mean a fraction (i) whose numerator is the number of months elapsed from the beginning of any not yet completed performance period applicable to any cash incentive award or plan through the effective date of termination of a Participant’s employment in the circumstances described in Section 3.01 below, and (ii) whose denominator is the total number of months in such performance period under the applicable cash incentive award or plan. For purposes of this definition, the months elapsed will include the month in which the effective date of termination occurs if such date is the 16th, or a subsequent, day of that month.
 
“Stock Appreciation Right” or “SAR” means a right granted to a Participant pursuant to an equity compensation plan of the Company to receive a payment equal to the difference between the Fair Market Value of a share of Common Stock as of the date of exercise of the SAR over the grant price of the SAR.
 
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“SEC” shall mean the United States Securities Exchange Commission.
 
“Securities Act” shall mean the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
 
“Successor” shall mean a successor to all or substantially all of the business, operations or assets of the Company.
 
“Termination Date” shall mean, with respect to any Participant, the termination date specified in the Termination Notice delivered by such Participant to the Company in accordance with Section 2.02 or as set forth in any Termination Notice delivered by the Company, or as applicable, the Participant’s date of death.
 
“Termination Notice” shall mean, as appropriate, written notice from (a) a Participant to the Company purporting to terminate such Participant’s employment for Good Reason in accordance with Section 2.02 or (b) the Company to any Participant purporting to terminate such Participant’s employment for Cause or Disability in accordance with Section 2.03.
 
“Tier 1 Participant” shall mean each Participant designated writing by the  Board or the Compensation and Human Capital Committee as a Tier 1 Participant, as that designation may be amended in accordance with Section 2.01.
 
“Tier 2 Participant” shall mean each Participant designated in writing by the Board or the Compensation and Human Capital Committee as a Tier 2 Participant, as that designation may be amended in accordance with Section 2.01.
 
“Tier 3 Participant” shall mean each Participant designated in writing by the Board or the Compensation and Human Capital Committee as a Tier 3 Participant, as that designation may be amended in accordance with Section 2.01.
 
Section 1.02         Interpretation. In the Plan, unless a clear contrary intention appears, (a) the words “herein,” “hereof” and “hereunder” refer to the Plan as a whole and not to any particular Article, Section or other subdivision, (b) reference to any Article or Section, means such Article or Section hereof and (c) the words “including” (and with correlative meaning “include”) means including, without limiting the generality of any description preceding such term. The Article and Section headings herein are for convenience only and shall not affect the construction hereof.
 
ARTICLE II
 
ELIGIBILITY AND BENEFITS
 
Section 2.01         Eligible Employees.
 
(a)         Once designated as a “Participant,” by the Board, the Compensation and Human Capital Committee, or the Chief Executive Officer, as applicable, an employee of the Company or any of the subsidiaries shall continue to be a “Participant” in the Plan while he or she remains employed by the Company or any of its subsidiaries, unless such employee is given written notice of the Board’s or the Compensation and Human Capital Committee’s determination that such Participant shall cease to be a Participant as of the date specified in such notice.  Notwithstanding the foregoing, any Participant may not be removed from the Plan, nor placed in a lower tier (with Tier 1 being the highest Tier and Tier 3 being the lowest Tier), during the pendency of a Potential Change in Control or within two years following a Change in Control.
 
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(b)        The Plan is only for the benefit of Participants, and no other employees, personnel, consultants or independent contractors shall be eligible to participate in the Plan or to receive any rights or benefits hereunder.
 
Section 2.02        Termination Notices from Participants. For purposes of the Plan, in order for any Participant to terminate his or her employment for Good Reason, such Participant must give a Termination Notice to the Company in accordance with the requirements specified under the definition of Good Reason in Section 1.01, which notice shall be signed by such Participant, shall be dated the date it is given to the Company, shall specify the Termination Date and shall state that the termination is for Good Reason and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for such Good Reason. Any Termination Notice given by a Participant that does not comply in all material respects with the foregoing requirements as well as the “Good Reason” definition provisions set forth in Section 1.01 shall be invalid and ineffective for purposes of the Plan. If the Company receives from any Participant a Termination Notice that states the termination is for Good Reason and which the Company believes is invalid and ineffective as aforesaid, it shall promptly notify such Participant of such belief and the reasons therefor. Any termination of employment by the Participant that either does not constitute Good Reason or fails to meet the Termination Notice requirements set forth above shall be deemed a termination by the Participant without Good Reason.
 
Section 2.03      Termination Notices from Company. For purposes of the Plan, in order for the Company or any of the subsidiaries to terminate any Participant’s employment for Cause, the Company must give a Termination Notice to such Participant, which notice shall be dated the date it is given to such Participant, shall specify the Termination Date and shall state that the termination is for Cause and shall set forth in reasonable detail the particulars thereof. For purposes of the Plan, in order for the Company to terminate any Participant’s employment for Disability, the Company must give a Termination Notice to such Participant, which notice shall be dated the date it is given to such Participant, shall specify the Termination Date and shall state that the termination is for Disability and shall set forth in reasonable detail the particulars thereof. Any Termination Notice given by the Company that does not comply, in all material respects, with the foregoing requirements shall be invalid and ineffective for purposes of the Plan. Any Termination Notice purported to be given by the Company to any Participant after the death or retirement of such Participant shall be invalid and ineffective.
 
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Section 2.04        Accelerated Vesting of Equity Awards.
 
(a)         Upon the occurrence of a Change in Control, notwithstanding the provisions of any Benefit Plan or agreement (except as provided in this Section 2.04):
 
(i)       with respect to outstanding Options and SARs:
 
(1)       If (x) the Company is the surviving entity and the Common Stock remains listed, quoted, or traded on a national securities exchange or automated quotation system or (y) the surviving entity assumes such Awards or substitutes in lieu thereof stock options or stock appreciation right relating to the stock of such surviving entity having an equivalent then-current value and remaining term, provided that such stock must be listed, quoted, or traded on a national securities exchange or automated quotation system (“Substitute Options/SARs”), such Awards or the Substitute Options/SARs, as applicable, shall be governed by their respective terms;
 
(2)     If (x)(i) the Company is the surviving entity and the Common Stock remains listed, quoted, or traded on a national securities exchange or automated quotation system or (ii) the surviving entity assumes such Awards or issues Substitute Options/SARs and (y) the Participant is terminated without Cause or for Good Reason within twenty-four (24) months following the date of the Change in Control, such Awards or Substitute Options/SARs, as applicable, held by the Participant that were not previously vested and exercisable shall become fully vested and exercisable effective as of the date of such termination and remain exercisable until the date that is two (2) years following the date of such termination, or the original expiration date, whichever first occurs;
 
(3)      If (x)(i) the Company is not the surviving entity or (ii) the Common Stock does not remain listed, quoted, or traded on a national securities exchange or automated quotation system and (y) the surviving entity does not assume such Awards or issue Substitute Options/SARs, each such Award shall become fully vested effective as of the date of the Change in Control and promptly cancelled in exchange for a cash payment in an amount equal to (A) the excess of Market Value per share of the Common Stock subject to the Award over the exercise or base price (if any) per share of Common Stock subject to such Award multiplied by (B) the number of shares of Common Stock subject to such Award;
 
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(ii)      with respect to other outstanding Awards not subject to performance-based objectives (other than Options or SARs) (“Time-based Awards”):
 
(1)      if (x) the Company is the surviving entity and the Common Stock remains listed, quoted, or traded on a national securities exchange or automated quotation system or (y) the surviving entity assumes such Awards or substitutes in lieu thereof time-based awards relating to the stock of such surviving entity having an equivalent then-current value and vesting date, provided that such stock must be listed, quoted, or traded on a national securities exchange or automated quotation system (“Substitute Time-based Awards”), such Awards or the Substitute Time-based Awards, as applicable, shall be governed by their respective terms;
 
(2)     if (x)(i) the Company is the surviving entity and the Common Stock remains listed, quoted, or traded on a national securities exchange or automated quotation system or (ii) the surviving entity assumes the such Awards or issues Substitute Time-based Awards and the Participant is terminated without Cause or for Good Reason within twenty-four (24) months following the Change in Control, such Awards or Substitute Time-based Awards, as applicable, held by the Participant that were not previously vested shall become fully vested immediately upon such termination;
 
(3)     If (x)(i) the Company is not the surviving entity or (ii) the Common Stock does not remain listed, quoted, or traded on a national securities exchange or automated quotation system and (y) the surviving entity does not assume the such Awards or issue Substitute Time-based Awards, such Awards shall become fully vested effective as of the date of the Change in Control and promptly cancelled in exchange for a cash payment of an amount equal to the Fair Market Value per share of the Common Stock subject to the Award immediately prior to the Change in Control multiplied by the number of shares of Common Stock subject to the Award;
 
(iii)     with respect to Awards subject to performance-based objectives (including but not limited to performance shares or performance share units), the vesting restrictions based upon achievement of the performance-based objectives shall deemed to have been met to the extent determined by the Compensation and Human Capital Committee as constituted immediately prior to the Change in Control and such achievement shall result in the deemed issuance of Time-based Awards or Substitute Time-based Awards, as applicable, with the same vesting date as provided in the original Award granted by the Company and such Awards will be subject to paragraphs (ii)(2) and (3) above, if applicable.
 
(b)         The Compensation and Human Capital Committee may, in its sole discretion, provide that: (x) an Award shall, upon the occurrence of a Change in Control, be cancelled in exchange for a payment in an amount equal to (i) the Fair Market Value per share of the Common Stock subject to the Award immediately prior to the Change in Control over the exercise or base price (if any) per share of Common Stock subject to such Award multiplied by (ii) the number of shares granted under such Award; and (y) each Award shall, upon the occurrence of a Change in Control, be cancelled without payment therefore if the Fair Market Value per share of the Common Stock subject to such Award immediately prior to the Change in Control is less than the exercise or purchase price (if any) per share of Common Stock subject to such Award.
 
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(c)         Notwithstanding the foregoing, in the event that the terms of any award under a Benefit Plan shall provide for vesting treatment of equity awards to such Participant that are more favorable than the provisions of paragraphs (a) and (b) above, the provisions of such award shall control the vesting treatment with respect to any equity awards to which such provisions are applicable.  Also notwithstanding the foregoing, payments described in this Section generally shall be made immediately following the accelerated vesting date described in this Section, and in no event later than the last day of the “applicable 2½ month period,” as defined in Treasury Regulations Section 1.409A-1(b)(4); provided, however, that payments of amounts described in this Section that are “deferrals of compensation” subject to Section 409A may be accelerated only to the extent such acceleration does not trigger a “plan failure” pursuant to Section 409A.
 
ARTICLE III
 
SEVERANCE AND RELATED TERMINATION BENEFITS

Section 3.01      Termination of Employment. In the event that a Participant’s employment is terminated within twenty-four (24) months following a Change in Control or during the pendency of a Potential Change in Control provided that a related Change in Control occurs, (x) by the Participant for Good Reason (while such Good Reason exists) or (y) by the Company or any of its subsidiaries without Cause (other than for Disability), then in each case, such Participant (or his or her beneficiary) shall be entitled to receive, and the Company shall be obligated to pay to the Participant, subject to Sections 3.02 through 3.04 hereof:
 
(a)          In the case of a Tier 1 Participant:
 
(i)       a lump sum payment within sixty (60) days following the later of such Participant’s Termination Date or the date of the Change in Control in an amount equal to 2.99 times the sum of (A) the Participant’s highest Annual Salary in the three years preceding the Termination Date plus (B) the Participant’s Average Bonus; plus
 
(ii)      a lump sum payment within sixty (60) days following the later of such Participant’s Termination Date or the date of the Change in Control in an amount equal to (A) the Pro-rated Portion of the Participant’s target cash incentive opportunity for any not yet completed incentive performance period in which the termination occurs, plus (B) in the event of termination after a completed incentive performance period but before payment of the award earned, the amount of such cash incentive award based on actual performance; plus
 
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(iii)    a lump sum payment as soon as practicable following the Termination Date in an amount equal to (A) all unused paid time off accrued by such Participant as of the Termination Date under the Company’s (or applicable subsidiary’s) paid time off policy, plus (B) all accrued but unpaid compensation, excluding any nonqualified deferred compensation, earned by such Participant as of the Termination Date to be paid by the Company ((A) and (B) together, the “Accrued Obligations”); and
 
(iv)    In addition, for a period of thirty-six months following the Termination Date, such Participant and his or her dependents shall continue to be covered by all medical, dental and vision insurance plans and programs (excluding disability) maintained by the Company or any of its subsidiaries under which the Participant was covered immediately prior to the Termination Date (collectively, the “Continued Benefits”) at the same cost sharing between the Company (or any of its subsidiaries) and Participant as a similarly situated active employee.
 
(b)         In the case of a Tier 2 Participant:
 
(i)       a lump sum payment within sixty (60) days following the later of such Participant’s Termination Date or the date of the Change in Control in an amount equal to two times the sum of (A) the Participant’s highest Annual Salary in the three years preceding the Termination Date plus (B) the Participant’s Average Bonus; plus
 
(ii)      a lump sum payment within sixty (60) days following the later of such Participant’s Termination Date or the date of the Change in Control in an amount equal to (A) the Pro-rated Portion of the Participant’s target cash incentive opportunity for any not yet completed incentive performance period in which the termination occurs, plus (B) in the event of termination after a completed incentive performance period but before payment of the award earned, the amount of such cash incentive award based on actual performance; plus
 
(iii)     a lump sum payment as soon as practicable following the Termination Date in an amount equal to all Accrued Obligations as soon as practicable following the Termination Date; and
 
(iv)     In addition, for a period of twenty-four months following the Termination Date, such Participant and his or her dependents shall receive Continued Benefits at the same cost sharing between the Company (or any of its subsidiaries) and Participant as a similarly situated active employee.
 
(c)         In the case of a Tier 3 Participant:
 
(i)       a lump sum payment within sixty (60) days following the later of such Participant’s Termination Date or the date of the Change in Control in an amount equal to the sum of (A) the Participant’s highest Annual Salary in the three years preceding the Termination Date plus (B) the Participant’s Average Bonus; plus
 
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(ii)      a lump sum payment within sixty (60) days following the later of such Participant’s Termination Date or the date of the Change in Control in an amount equal to (A) the Pro-rated Portion of the Participant’s target cash incentive opportunity for any not yet completed incentive performance period in which the termination occurs, plus (B) in the event of termination after a completed incentive performance period but before payment of the award earned, the amount of such cash incentive award based on actual performance; plus
 
(iii)     a lump sum payment as soon as practicable following the Termination Date in an amount equal to all Accrued Obligations as soon as practicable following the Termination Date; and
 
(iv)     In addition, for a period of twelve months following the Termination Date, such Participant and his or her dependents shall receive Continued Benefits at the same cost sharing between the Company(or any of its subsidiaries) and Participant as a similarly situated active employee.
 
(d)        Notwithstanding anything herein to the contrary, in the event that a Participant is deemed to be a “specified employee” for purposes of Section 409A(a)(2)(B)(i) of the Code, the lump sum severance payment, together with interest at an annual rate (compounded monthly) equal to the federal short-term rate (as in effect under Section 1274(d) of the Code on the Termination Date) shall be paid, to the extent required to avoid the application of taxes and penalties under Section 409A, to such Participant immediately following the date that is six months after the Termination Date and no later than thirty (30) days following such date. In any event, all Accrued Obligations shall be paid to the Participant no later than sixty (60) days following the Termination Date.
 
(e)        The cost of the Continued Benefits paid by the Company will be imputed as wage income to the Participant to the extent required to comply with Sections 409A and 105(h) of the Code.
 
Section 3.02        Golden Parachute Tax.
 
(a)        Anything in the Plan to the contrary notwithstanding, in the event it shall be determined that any payment or distribution to or for the benefit of any Participant or the acceleration thereof (the “Triggering Payment”) would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties with respect to such excise tax (collectively, such excise tax, together with any such interest or penalties, the “Excise Tax”) (all such payments and benefits, including any cash severance payments payable pursuant to any other plan, arrangement or agreement, hereinafter referred to as the “Total Payments”), then, after taking into account any reduction in the Total Payments provided by reason of Section 280G of the Code in such other plan, arrangement or agreement, the cash severance payments shall first be reduced, and the noncash severance payments shall thereafter be reduced, to the extent necessary so that no portion of the Total Payments is subject to the Excise Tax but only if (A) the net amount of such Total Payments, as so reduced (and after subtracting the net amount of federal, state and local income taxes on such reduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such reduced Total Payments) is greater than or equal to (B) the net amount of such Total Payments without such reduction (but after subtracting the net amount of federal, state and local income taxes on such Total Payments and the amount of Excise Tax to which the Participant would be subject in respect of such unreduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such unreduced Total Payments). For purposes of determining whether a portion of the Total Payments would be subject to the Excise Tax, the value of the Participant’s non-competition covenant contained in the Release Agreement (defined below in Section 3.03) shall be determined through independent appraisal by the independent accounting firm described in subsection (b), and a corresponding portion of the amount payable pursuant to Section 3.01 shall be allocated as reasonable compensation for the Participant’s non-competition covenant and therefore exempt from the definition of the term “parachute payment” within the meaning of Sections 280G and 4999 of the Code.
 
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(b)         All determinations required to be made under this Section 3.02 with respect to a particular Participant shall be made in writing within ten (10) business days of the receipt of notice from the Participant that there has been a Triggering Payment (or at such earlier time as is requested by the Company and the Participant) by the independent accounting firm then retained by the Company in the ordinary course of business (which firm shall provide detailed supporting calculations to the Company and such Participant) and such determinations shall be final and binding on the Company (including the Compensation and Human Capital Committee) and all Participants. Any fees incurred as a result of work performed by any independent accounting firm pursuant to this Section 3.02 shall be paid by the Company.
 
Section 3.03        Condition to Receipt of Severance Benefits. As a condition to receipt of any payment or benefits under this Article III, such Participant must enter into a restrictive covenant (non-solicitation, non-compete, non-disclosure, non-disparagement) and release agreement (a “Release Agreement”) with the Company and its affiliates substantially in the form attached hereto as Exhibit A. The Participant must execute and deliver a Release Agreement, and such Release Agreement must become effective and irrevocable in accordance with its terms, no later than sixty (60) days following such Participant’s Termination Date. If this requirement is not satisfied, the Participant shall forfeit the right to all benefits, except for the Accrued Obligations and the Continued Benefits as provided, described in this Article III. In the event such Participant’s receipt of any or all of the payment or benefits under this Article III is subject to Section 409A and such 60-day period extends into a new calendar year, the Company shall deliver such portion of the payments and benefits to the Participant on the later of the first business day of that new year or the effective date of such Release Agreement.
 
Section 3.04        Limitation of Benefits.
 
(a)        Anything in the Plan to the contrary notwithstanding, the obligation of the Company or any of its subsidiaries to provide the Continued Benefits shall cease if and when the Participant becomes employed by a third party that provides such Participant with substantially comparable health and welfare benefits.
 
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(b)         Any amounts payable under the Plan shall be in lieu of and not in addition to any other severance or termination payment under any other plan or agreement with the Company or any of its current or former affiliates. Without limiting the generality of the foregoing, in the event that a Participant becomes entitled to any payment under the Plan, such Participant shall not be entitled to receive any payment under the Company’s Executive Severance Plan (as amended, restated, supplemented or modified from time to time). As a condition to receipt of any payment under the Plan, the Participant shall waive any entitlement to any other severance or termination payment by the Company or any of its subsidiaries.
 
Section 3.05        Plan Unfunded; Participant’s Rights Unsecured. The Company shall not be required to establish any special or separate fund or make any other segregation of funds or assets to assure the payment of any benefit hereunder. The right of any Participant to receive the benefits provided for herein shall be an unsecured obligation against the general assets of the Company.
 
ARTICLE IV
 
DISPUTE RESOLUTION

Section 4.01        Claims Procedure.
 
(a)         It shall not be necessary for a Participant who has become entitled to receive a benefit hereunder to file a claim for such benefit with any person as a condition precedent to receiving a distribution of such benefit. However, any Participant or beneficiary who believes that he or she has become entitled to a benefit hereunder and who has not received, or commenced receiving, a distribution of such benefit, or who believes that he or she is entitled to a benefit hereunder in excess of the benefit which he or she has received, or commenced receiving, may file a written claim for such benefit with the Compensation and Human Capital Committee no later than ninety (90) days following the date on which he or she allegedly became entitled to receive a distribution of such benefit. Such written claim shall set forth the Participant’s or beneficiary’s name and address and a statement of the facts and a reference to the pertinent provisions of the Plan upon which such claim is based. The Compensation and Human Capital Committee shall, within ninety (90) days after such written claim is filed, provide the claimant with written notice of its decision with respect to such claim. If such claim is denied in whole or in part, the Compensation and Human Capital Committee shall, in such written notice to the claimant, set forth in a manner calculated to be understood by the claimant the specific reason or reasons for denial; specific references to pertinent provisions of the Plan upon which the denial is based; a description of any additional material or information necessary for the claimant to perfect his or her claim and an explanation of why such material or information is necessary; and an explanation of the provisions for review of claims set forth in Section 4.01(b) below.
 
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(b)        A Participant or beneficiary who has filed a written claim for benefits with the Compensation and Human Capital Committee which has been denied may appeal such denial to the Compensation and Human Capital Committee and receive a full and fair review of his or her claim by filing with the Compensation and Human Capital Committee a written application for review at any time within sixty (60) days after receipt from the Compensation and Human Capital Committee of the written notice of denial of his or her claim provided for in Section 4.01(a) above. A Participant or beneficiary who submits a timely written application for review shall be entitled to review any and all documents pertinent to his or her claim and may submit issues and comments to the Compensation and Human Capital Committee in writing. Not later than sixty (60) days after receipt of a written application for review, the Compensation and Human Capital Committee shall give the claimant written notice of its decision on review, which written notice shall set forth in a manner calculated to be understood by the claimant specific reasons for its decision and specific references to the pertinent provisions of the Plan upon which the decision is based. In the event the claimant disputes the decision of the Compensation and Human Capital Committee, the claimant may not bring suit in court with respect to such dispute under the Plan later than one hundred eighty (180) days after receiving the Compensation and Human Capital Committee’s written notice of its decision.
 
(c)         Any act permitted or required to be taken by a Participant or beneficiary under this Section 4.01 may be taken for and on behalf of such Participant or beneficiary by such Participant’s or beneficiary’s duly authorized representative. Any claim, notice, application or other writing permitted or required to be filed with or given to a party by this Article shall be deemed to have been filed or given when deposited in the U.S. mail, postage prepaid, and properly addressed to the party to whom it is to be given or with whom it is to be filed. Any such claim, notice, application, or other writing deemed filed or given pursuant to the next foregoing sentence shall in the absence of clear and convincing evidence to the contrary, be deemed to have been received on the fifth (5th) business day following the date upon which it was filed or given. Any such notice, application, or other writing directed to a Participant or beneficiary shall be deemed properly addressed if directed to the address set forth in the written claim filed by such Participant or beneficiary.
 
ARTICLE V
 
Miscellaneous Provisions
 
Section 5.01       Cumulative Benefits. Except as provided in Section 3.04, the rights and benefits provided to any Participant under the Plan are in addition to and shall not be a replacement of, all of the other rights and benefits provided to such Participant under any Benefit Plan or any agreement between such Participant and the Company (or any of its subsidiaries) except for any severance or termination benefits.
 
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Section 5.02      
No Mitigation. No Participant shall be required to mitigate the amount of any payment provided for in the Plan by seeking or accepting other employment following a termination of his or her employment with the Company,  any of its subsidiaries or otherwise. Except as otherwise provided in Section 3.04, the amount of any payment provided for in the Plan shall not be reduced by any compensation or benefit earned by a Participant as the result of employment by another employer or by retirement benefits. The Company’s obligations to make payments to any Participant required under the Plan shall not be affected by any set off, counterclaim, recoupment, defense or other claim, right or action that the Company may have against such Participant.
 
Section 5.03     
Amendment or Termination. The Board may amend or terminate the Plan at any time; provided, however, that the Plan may not be amended or terminated during the pendency of a Potential Change in Control or within two (2) years following a Change in Control. Notwithstanding the foregoing, nothing herein shall abridge the authority of the Compensation and Human Capital Committee to designate a new Participant or a new participation Tier for a current Participant or to determine that a Participant shall no longer be entitled to participate in the Plan in accordance with Section 2.01(a) hereof. The Plan shall terminate when all of the obligations to Participants hereunder have been satisfied in full.
 
Section 5.04       
Enforceability. The failure of Participants or the Company to insist upon strict adherence to any term of the Plan on any occasion shall not be considered a waiver of such party’s rights or deprive such party of the right thereafter to insist upon strict adherence to that term or any other term of the Plan.
 
Section 5.05       
Administration.
 
(a)        
The Compensation and Human Capital Committee shall have full and final authority, subject to the express provisions of the Plan, with respect to designation of Participants and administration of the Plan, including but not limited to, the authority to construe and interpret any provisions of the Plan and to take all other actions deemed necessary or advisable for the proper administration of the Plan.
 
(b)      
The Company shall indemnify and hold harmless each member of the Compensation and Human Capital Committee and any other employee of the Company that acts at the direction of the Compensation and Human Capital Committee against any and all expenses and liabilities arising out of his or her administrative functions or fiduciary responsibilities, including any expenses and liabilities that are caused by or result from an act or omission constituting the negligence of such member in the performance of such functions or responsibilities, but excluding expenses and liabilities that are caused by or result from such member’s or employee’s own gross negligence or willful cause. Expenses against which such member or employee shall be indemnified hereunder shall include, without limitation, the amounts of any settlement or judgment, costs, counsel fees, and related charges reasonably incurred in connection with a claim asserted or a proceeding brought or settlement thereof.
 
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Section 5.06       
Consolidations, Mergers, Etc. In the event of a merger, consolidation or other transaction, nothing herein shall relieve the Company from any of the obligations set forth in the Plan; provided, however, that nothing in this Section 5.06 shall prevent an acquirer of or Successor to the Company from assuming the obligations, or any portion thereof, of the Company hereunder pursuant to the terms of the Plan provided that such acquirer or Successor provides adequate assurances of its ability to meet this obligation. In the event that an acquirer of or Successor to the Company agrees to perform the Company’s obligations, or any portion thereof, hereunder, the Company shall require any person, firm or entity which becomes its Successor to expressly assume and agree to perform such obligations in writing, in the same manner and to the same extent that the Company would be required to perform hereunder if no such succession had taken place.
 
Section 5.07       
Successors and Assigns. The Plan shall be binding upon and inure to the benefit of the Company and its Successors and assigns. The Plan and all rights of each Participant shall inure to the benefit of and be enforceable by such Participant and his or her personal or legal representatives, executors, administrators, heirs and permitted assigns. If any Participant should die while any amounts are due and payable to such Participant hereunder, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of the Plan to such Participant’s devisees, legatees or other designees or, if there be no such devisees, legatees or other designees, to such Participant’s estate. In the event of the death of any Participant during the applicable period of eligibility for the Continued Benefits set forth in Section 3.01, dependents of such Participant shall be eligible during such period to continue participation in any Continued Benefits in which the Participant was enrolled at the time of death. No payments, benefits or rights arising under the Plan may be assigned or pledged by any Participant, except under the laws of descent and distribution.
 
Section 5.08     
Notices. All notices and other communications provided for in the Plan shall be in writing and shall be sent, delivered or mailed, addressed as follows: (a) if to the Company, at the Company’s principal office address or such other address as the Company may have designated by written notice to all Participants for purposes hereof, directed to the attention of the General Counsel, and (b) if to any Participant, at his or her residence address on the records of the Company or to such other address as he or she may have designated to the Company in writing for purposes hereof. Each such notice or other communication shall be deemed to have been duly given or mailed by United States certified or registered mail, return receipt requested, postage prepaid, except that any change of notice address shall be effective only upon receipt.
 
Section 5.09       
Tax Withholding. The Company and its subsidiaries shall have the right to deduct from any payment hereunder all taxes (federal, state or other) which it is required to be withhold therefrom.
 
Section 5.10      
No Employment Rights Conferred. The Plan shall not be deemed to create a contract of employment between any Participant and the Company and/or its affiliates. Nothing contained in the Plan shall (i) confer upon any Participant any right with respect to continuation of employment with the Company or any of its subsidiaries or (ii) subject to the rights and benefits of any Participant hereunder, interfere in any way with the right of the Company or any of its subsidiaries to terminate such Participant’s employment at any time.
 
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Section 5.11       
Entire Plan. The Plan contains the entire understanding of the Participants and the Company with respect to Change in Control severance arrangements maintained on behalf of the Participants by the Company. There are no restrictions, agreements, promises, warranties, covenants or undertakings between the Participants and the Company with respect to the subject matter herein other than those expressly set forth herein.
 
Section 5.12  
Prior Agreements. The Plan supersedes all prior agreements, programs and understandings (including verbal agreements and understandings) between the Participants and the Company or any of its current or former affiliates regarding the terms and conditions of Participant’s severance arrangements in the event of a Change in Control.
 
Section 5.13      
Severability. If any provision of the Plan is, becomes or is deemed to be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions of the Plan shall not be affected thereby.
 
Section 5.14      
Governing Law. The Plan shall be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to its conflict of laws rules, and applicable federal law.
 
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Exhibit A
 
RESTRICTIVE COVENANT AND RELEASE AGREEMENT
 
This Release Agreement (this “Agreement”) is entered into between [NAME] (“Executive”) and Enhabit, Inc. (together with its subsidiaries, the “Company”), pursuant-to the terms and conditions of the Enhabit, Inc. Change in Control Benefits Plan, which is attached hereto as Exhibit A (the “Plan”).

WITNESSETH
 
WHEREAS, Executive is employed by the Company as [TITLE]  and is a “Participant” in the Plan (as such term is defined in the Plan);
 
WHEREAS, Executive’s last day of employment with the Company will be [DATE], and such date shall be the “Termination Date” for purposes of this Agreement and the Plan;
 
WHEREAS, Executive is eligible to receive benefits under Section 3.01 of the Plan, subject to the terms and conditions of the Plan, including, but not limited to, Executive’s execution and delivery to the Company of this Agreement and it becoming effective;
 
WHEREAS, Executive has agreed to comply with, among other things, certain confidentiality, noncompetition and nonsolicitation provisions, which are provided below, and such provisions shall be fully enforceable by the Company; and
 
WHEREAS, Executive and the Company wish to settle, fully and finally, all matters between them under the terms and conditions exclusively set forth in this Agreement.
 
NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which is mutually acknowledged, the Company and Executive agree as follows:
 
1.           Benefits under the Plan. Provided that this Agreement becomes effective pursuant to Paragraph 4 of this Agreement:
 
(a)       The Company shall pay the amount listed on Line 1 of Exhibit B attached hereto, subject to all applicable federal, state and local withholdings, in accordance with the terms and conditions of the Plan, paid out in a lump sum within sixty (60) days of the Termination Date. In the event any of such payment is subject to Section 409A and such 60-day period extends into a new calendar year, the Company shall deliver such payment to the Participant on the later of the first business day of that new year or the effective date of this Agreement.

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(b)      Executive will continue to be eligible to participate in the Company sponsored group healthcare benefits, (excluding disability insurance but specifically including medical, dental and vision plans), under which the Executive was covered immediately prior to the Termination Date, for the number of months listed on Line 2 of Exhibit B attached hereto, after the Termination Date (the “Severance Period”), provided that Executive continues to contribute toward the premiums at the level of an active employee of the Company. Thereafter, Executive’s right to continue coverage under the Company sponsored group healthcare plan at Executive’s own expense, pursuant to the statutory scheme commonly known as “COBRA,” shall be governed by applicable law and the terms of the plans and programs, and will be explained to Executive in a packet to be sent to Executive under separate cover.
 
(c)       Executive acknowledges and agrees that the severance payments and benefits provided in subsection (a) and (b) of Section 1 are subject to forfeiture and repayment and any awards relating to Common Stock shall be cancellable and/or forfeitable in the event of a material violation by Executive of Sections 6, 7, and/or 8 of this Agreement
 
2.           Release.
 
(a)      Executive, on behalf of Executive, Executive’s heirs, executors, administrators, successors and assigns, hereby irrevocably and unconditionally releases the Company and its subsidiaries, divisions and affiliates, together with their respective owners, assigns, agents, directors, partners, officers, trustees, members, managers, employees, insurers, employee benefit programs (including, but not limited to, trustees, administrators, fiduciaries, and insurers of such programs), attorneys and representatives and any of their predecessors and successors and each of their estates, heirs and assigns (collectively, the “Company Releasees”) from any and all charges, complaints, claims, liabilities, obligations, promises, agreements, causes of action, rights, costs, losses, debts and expenses of any nature whatsoever, known or unknown, which Executive or Executive’s heirs, executors, administrators, successors or assigns ever had, now have or hereafter can, will or may have (either directly, indirectly, derivatively or in any other representative capacity) by reason of any matter, fact or cause whatsoever against the Company or any of the other Company Releasees from the beginning of time to the date upon which Executive signs this Agreement, including, but not limited to, any claims arising out of or relating to Executive’s employment with the Company and/or termination of employment from the Company. This release includes, without limitation, all claims arising out of, or relating to, Executive’s employment with the Company and the termination of Executive’s employment with the Company, including all claims for severance or termination benefits under Executive’s employment agreement with the Company, if any, and under any plan, policy or agreement (other than those benefits expressly payable hereunder) and all claims arising under any foreign, federal, state and local labor, laws including, without limitation, the Age Discrimination in Employment Act, the Older Workers Benefit Protection Act, the Employee Retirement Income Security Act of 1974, the Americans with Disabilities Act, Title VII of the Civil Rights Act of 1964, the Family and Medical Leave Act, the Civil Rights Act of 1991, the Fair Labor Standards Act, the Equal Pay Act, the Immigration and Reform Control Act, the Uniform Services Employment and Re-Employment Act, the Rehabilitation Act of 1973, Sarbanes-Oxley Act, Executive Order 11246, the Lilly Ledbetter Fair Pay Act, the False Claims Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Alabama Age Discrimination Statute and the Workers’ Adjustment and Retraining Notification Act (and any similar state or local law), each as amended.

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(b)     Nothing in this Paragraph 2 shall be deemed to release (i) Executive’s right to enforce the terms of this Agreement; (ii) Executive’s rights, if any, to any vested benefits or options under any incentive, bonus, or other benefit plan maintained by the Company; (iii) any right to indemnification under the Company’s Enhabit, Inc. certificate of incorporation or by-laws, in each case as amended and as in effect from time to time; or (iv) any claim that cannot be waived under applicable law. Nothing in this Agreement prevents Executive from initiating a complaint with or participating in any legally authorized investigation or proceeding conducted by the Equal Employment Opportunity Commission or any federal, state, or local law enforcement agency. Notwithstanding the foregoing, Executive agrees that Executive is waiving all rights to damages and all other forms of recovery arising out of any charge, complaint or lawsuit filed on behalf of Executive or any third party as to all claims waived in this Agreement.
 
(c)       Executive acknowledges and agrees that the Company has fully satisfied any and all obligations owed to Executive arising out of Executive’s employment with the Company, and no further sums are owed to Executive by the Company or by any of the other Company Releasees at any time. Executive further acknowledges and agrees that the Company has paid Executive for all earned wages and accrued but unused paid time off through the Termination Date. By entering into this Agreement, Executive explicitly waives any rights to severance or other post-termination benefits under any oral or written plan, policy, employment agreement, contract or arrangement with the Company, other than as provided in this Agreement. Executive acknowledges and agrees that, in the absence of this Agreement, the Company has no obligation to provide any of the consideration set forth in Paragraph 1 of this Agreement. Executive further acknowledges and agrees that Executive has no rights to any unvested benefits or options under any incentive, bonus or other benefit plan, except as otherwise provided in the Plan; and that all such vesting shall cease as of the Termination Date. Executive further acknowledges and agrees that any right to continue to contribute to the Company’s 401(k) plan for employees ended on the Termination Date. Furthermore, Executive acknowledges and agrees that the payments and benefits provided under Paragraph 1 of this Agreement shall not be included in any computation of earnings under the Company’s 401(k) plan or any other plan.
 
(d)     Executive represents that Executive has no lawsuits pending against the Company or any of the other Company Releasees. Executive further covenants and agrees that neither Executive nor Executive’s heirs, executors, administrators, successors or assigns will be entitled to any personal recovery in any
 
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(e)      proceeding of any nature whatsoever against the Company or any of the other Company Releasees arising out of any of the matters released in Paragraph 2.
 
3.        Consultation with Attorney/Voluntary Agreement. Executive acknowledges that (a) the Company is hereby advising Executive of Executive’s right to consult with an attorney of Executive’s own choosing prior to executing this Agreement, (b) Executive has carefully read and fully understands all of the provisions of this Agreement, and (c) Executive is entering into this Agreement, including the releases set forth in Paragraph 2 above, knowingly, freely and voluntarily in exchange for good and valuable consideration, including the obligations of the Company under this Agreement.
 
4.           Consideration & Revocation Period.
 
(a)       Executive acknowledges that Executive has been given at least twenty-one (21) calendar days following receipt of this Agreement to consider the terms of this Agreement, although Executive may execute it sooner.
 
(b)      Executive will have seven (7) calendar days from the date on which Executive signs this Agreement to revoke Executive’s consent to the terms of this Agreement. Such revocation must be in writing and must be addressed and sent via email as follows: Enhabit, Inc., Attention: General Counsel, email address: [●]. Notice of such revocation must be received within the seven (7) calendar days referenced above. In the event of such revocation by Executive, this Agreement shall not become effective and Executive shall not have any rights under this Agreement or the Plan.
 
(c)        Provided that Executive does not revoke this Agreement, this Agreement shall become effective on the eighth calendar day after the date on which Executive signs this Agreement (the “Effective Date”).
 
5.           Acknowledgements.
 
(a)     Executive acknowledges and agrees that: (i) the “Company Business” (as defined in Paragraph 9(a) below) is intensely competitive and that Executive’s employment by the Company required Executive to have access to, and knowledge of, “Confidential Information” (as defined in Paragraph 9(b) below); (ii) the use or disclosure of any Confidential Information could place the Company at a serious competitive disadvantage and could do serious damage, financial and otherwise, to the Company; (iii) Executive was given access to, and developed relationships with, employees, clients, patients, physicians and partners of the Company at the time and expense of the Company; and (iv) by Executive’s training, experience and expertise, Executive’s services to the Company were extraordinary, special and unique, and the Company invested in training and enhancing Executive’s skill and experience in the Company Business.

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(b)       Executive further acknowledges and agrees that (i) Executive’s experience and capabilities are such that the provisions contained in Paragraphs 6, 7, and 8 will not prevent Executive from earning a livelihood; (ii) the Company would be seriously and irreparably injured if Executive were to engage in “Competitive Activities” (as defined below), or to otherwise breach the obligations contained in Paragraphs 6, 7 and 8, no adequate remedy at-law would exist and damages would be difficult to determine; (iii) the provisions contained in Paragraphs 6, 7 and 8 are justified by and reasonably necessary to protect the legitimate business interests of the Company, including the Confidential Information and good will of the Company; and (iv) the provisions in Paragraphs 6, 7 and 8 are fair and reasonable in scope, duration and geographical limitations. Accordingly, Executive agrees to be bound fully by the restrictive covenants in this Agreement to the maximum extent permitted by law, it being the intent and spirit of the parties that the restrictive covenants and the other agreements contained herein shall be valid and enforceable in all respects.
 
6.           Confidentiality.
 
(a)      Executive acknowledges and agrees that, from and after the Termination Date, and at all times thereafter, Executive will not communicate, divulge or disclose to any “Person” (as defined in Paragraph 9(c) below) or use for Executive’s own benefit or purpose any Confidential Information of the Company, except as required by law or court order or expressly authorized in writing by the Company; provided, however, that Executive shall promptly notify the Company prior to making any disclosure required by law or court order so that the Company may seek a protective order or other appropriate remedy.
 
7.           Covenant Not to Compete.
 
From the Termination Date through the end of the Severance Period (the “Noncompetition Period”), Executive shall not, directly or indirectly, participate in the management, operation or control of, or have any financial or ownership interest in, or aid or knowingly assist anyone else in the conduct of, any business or entity that (i) engages in the Company Business in any Restricted Territory (as defined in Paragraph 9(d) below), or (ii) is, to Executive’s knowledge, making preparations for engaging in the Company Business in any Restricted Territory (collectively, “Competitive Activity”); provided, however, that (x) the “beneficial ownership” by Executive, either individually or as a member of a “group” (as such terms are used in Rule 13d of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended), of not more than one percent (1%) of the voting stock of any publicly held corporation shall not alone constitute a breach of this Paragraph 7 and (y) Executive may enter into, at arm’s length, any bona fide joint venture (or partnership or other business arrangement) with any Person who is not directly engaged in the Company Business but which is an affiliate of another Person engaged in the Company Business.

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8.          Employee Nonsolicitation; Nondisparagement.
 
(a)       Executive shall not, directly or indirectly, within the Noncompetition Period, without the prior written consent of the Company, solicit or direct any other Person to solicit any officer or other employee of the Company to: (i) terminate such officer’s or employee’s employment with the Company; or (ii) seek or accept employment or other affiliation with Executive or any Person engaged in any Competitive Activity in which Executive is directly or indirectly involved (other than, in each case, any solicitation directed at the public in general in publications available to the public in general or any contact which Executive can demonstrate was initiated by such officer, director or employee or any contact after such officer’s or employee’s employment with the Company is terminated). Executive’s obligations. under this Paragraph 8(a) with respect to new Company employees hired after the Termination Date shall be subject to the condition that Executive shall have been notified of such new employees.
 
(b)      Executive shall not, directly or indirectly, within the Noncompetition Period, without the prior written consent of the Company, solicit or direct any other Person to solicit any Person or entity in a business relationship with the Company (whether an independent contractor, joint venture partner or otherwise) to terminated such Person or entity’s business relationship with the Company.
 
(c)      Executive shall not, directly or indirectly, within the Noncompetition Period, make any statements or comments of a defamatory or disparaging nature to third parties regarding the Company or any of their members, principals, officers, managers, directors, personnel, employees, agents, services or products; provided, however, that nothing contained in this Paragraph 8(b) shall preclude Executive from providing truthful testimony in response to a valid subpoena, court order, regulatory request or as may be required by law.
 
9.          Definitions.
 
(a)       For purposes of this Agreement, “Company Business” shall mean (i) any business in competition with the Company or any of its affiliates or engaged in the same or similar business as the Company or any of its affiliates, including, but not limited to, the home health, hospice, private duty, personal care, home care, personal assistance business as well as any business or services associated with or related to the foregoing; (ii) any other business in which the Company or any of its affiliates engages during Executive’s employment and for which Executive performed any services or had any responsibility; and (iii) any business the Company or any of its affiliates seriously contemplated conducting during the last 12 months of Executive’s employment with the Company or any of its affiliates.
 
(b)       For purposes of this Agreement, “Confidential Information” includes, but is not limited to, certain or all of the Company’s and its patients’, physicians’ and third-party managed care providers’ supply agreement arrangements, regulatory packages, registration packages, data compensation packages, methods, information, systems, plans for acquisition or disposition of products, expansion plans, financial status and plans, customer lists, client data, personnel information, consulting reports, investigative reports, Personal Health Information (PHI), strategic plans and trade secrets.

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(c)       For the purposes of this Agreement, “Person” shall mean an individual, corporation, joint venture, partnership, limited liability company, association, joint stock or other company, business trust, trust or other entity or organization, including any national, federal, state, territorial agency, local or foreign judicial, legislative, executive, regulatory or administrative authority, commission, court, tribunal, any political or other subdivision, department or branch of any of the foregoing, and any self-regulatory organization or arbitrator.
 
(d)       For purposes of this Agreement “Restricted Territory” shall mean any geographical area or territory in the United States within a 75-mile radius of where the Company or any of its affiliates operates and for or within which Executive performed any services for the Company or any of its affiliates or for which Executive had any responsibility or about which Executive received Confidential Information during the last twenty-four (24) months of Executive’s employment with the Company or any of its affiliates.
 
10.       
Notice to the Company. In the event that Executive accepts employment with another party at any time during the Severance Period, Executive shall inform the Company in writing on or before the commencement date of such employment and provide the Company with such other information relating to available health and welfare benefits as a result of said employment as required by Section 3.03(a) of the Plan.
 
11.        
Duty to Inform. Executive shall inform in writing any Person, who seeks to employ or engage Executive in any capacity, of Executive’s obligations under Paragraphs 6, 7 and 8 of this Agreement, prior to accepting such employment or engagement.
 
12.      
Company Property. Executive represents that Executive has returned to the Company all property of the Company. Such property includes, but is not limited to, laptop computers, BlackBerry, printers, other computer equipment (including computers, printers and equipment paid-for by the Company for use at Executive’s residence), cellular phones and pagers, keys, security passes, passwords, work files, records, credit cards, building ID’s and all other Company property in Executive’s possession on the last day of Executive’s employment with the Company. Following the Termination Date, the Company shall also have no obligation to continue to make payments under any car loan or corporate membership provided to Executive as an employee of the Company.
 
13.        
No Admission of Wrongdoing. Nothing herein is to be deemed to constitute an admission of wrongdoing by the Company or any of the other Company Releasees.
 
14.        
Assignment. This Agreement is binding on, and will inure to the benefit of, the Company and the other Company Releasees. All rights of Executive under this Agreement shall inure to the benefit of, and be enforceable by, Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributes, devisees and legatees.

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15.        Injunctive Relief. Executive agrees that the Company would suffer irreparable harm if Executive were to breach, or threaten to breach, any provision of this Agreement and that the Company would by reason of such breach, or threatened breach, be entitled to injunctive relief in a court of appropriate jurisdiction, without the need to post any bond, and Executive further consents and stipulates to the entry of such injunctive relief in such a court prohibiting Executive from breaching this Agreement. This Paragraph 15 shall not, however, diminish the right of the Company to claim and recover damages and other appropriate relief, including but not limited to repayment of any severance payments or benefits provided to Executive, in addition to injunctive relief.
 
16.         Severability. In the event that any one or more, of the provisions of this Agreement shall be held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Moreover, if any one or more of the provisions contained in this Agreement shall be held to be excessively broad as to duration, activity or subject, such provisions shall be construed by limiting and reducing them so as to be enforceable to the maximum extent allowed by applicable law. Furthermore, a determination in any jurisdiction that this Agreement, in whole or in part, is invalid, illegal or unenforceable shall not in any way affect or impair the validity, legality or enforceability of this Agreement in any other jurisdiction.
 
17.        Waiver. The failure of either party to this Agreement to enforce any of its terms, provisions or covenants shall not be construed as a waiver of the same or of the right of such party to enforce the same. Waiver by either party hereto of any breach or default by the other party of any term or provision of this Agreement shall not operate as a waiver of any other breach or default.
 
18.        No Oral Modifications. This Agreement may not be changed orally, but may be changed only in a writing signed by Executive and a duly authorized representative of the Company.
 
19.        Governing Law; Venue. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, without regard to the application of any choice-of-law rules that would result in the application of another state’s laws. With respect to any action, suit or proceeding, each party irrevocably (i) submits to the jurisdiction of the courts of the State of Delaware and the United States District Court of the District of Delaware, and (ii) waives any objection which it may have at any time to the laying of venue of any proceeding brought in any such court, waives any claim that such proceedings have been brought in an inconvenient forum and further waives the right to object, with respect to such proceedings, that such court does not have jurisdiction over such party.

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20.       
Entire Agreement. This Agreement and any other agreements or obligations signed or undertaken by Executive that provide additional or greater rights to the Company that Executive previously entered into with the Company (including any predecessor or affiliate of the Company), are herein incorporated by reference, remain in full force and effect according to their terms, constitute the entire agreement and understanding between Executive and the Company, and fully supersede all prior and contemporaneous negotiations, understandings, representations, writings, discussions and/or agreements between Executive and the Company, whether written or oral, pertaining to or concerning the subject matter of this Agreement. Executive represents that, in executing this Agreement, Executive has not relied upon any representation or statement made by the Company or any other Company Releasees, other than those set forth herein, with regard to the subject matter, basis or effect of this Agreement or otherwise.
 
21.      
Descriptive Headings. The paragraph headings contained herein are for reference purposes only and will not in any way affect the meaning or interpretation of this Agreement.
 
22.        
Counterparts. This Agreement may be executed simultaneously in counterparts, each of which shall be an original, but all of which shall constitute but one and the same agreement.

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IN WITNESS WHEREOF, Executive and the Company have executed this Agreement on the date indicated below.

 
ENHABIT, INC.
     
    
 
By:
  
     
   
 
Date
  

 
EXECUTIVE
     
    
 
Name:
  
     
   
 
Date
  

A-10
[EXHIBIT A to the Form of Restricted Covenant and Release Agreement]

[INSERT PLAN]

A-11
EXHIBIT B

Name:
    
       
1.
Amount Payable:
$
  
       
2.
Months:
    


B-1
Exhibit 10.3

ENHABIT, INC.

EXECUTIVE SEVERANCE PLAN

Enhabit, Inc., a Delaware corporation (the “Company”), has adopted the Enhabit, Inc. Executive Severance Plan (the “Plan”), to be effective as of the date on which the Company becomes a separate publicly traded company in connection with its separation from Encompass Health Corporation, for the benefit of certain employees of the Company and its subsidiaries, on the terms and conditions hereinafter stated.

The Plan is intended to help retain qualified employees and provide financial security to certain employees of the Company and its subsidiaries whose employment with the Company and its subsidiaries may be terminated under circumstances entitling them to severance benefits as provided herein.  The Plan is intended to be a plan that “is unfunded and is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees” within the meaning of Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA. To the maximum extent permitted by law, the Plan is not intended to provide for any “deferral of compensation,” as defined in Section 409A of the Code (“Section 409A”) and authoritative Department of Treasury regulations and other interpretive guidance issued thereunder (including the Proposed Treasury Regulations issued June 22, 2016, to the extent the application of such proposed regulations facilitates the administration of this Plan in accordance with the intentions set forth in this paragraph). Instead, payments and benefits under the Plan are intended to fall within the exemptions for “short-term deferrals,” as set forth in Treasury Regulations section 1.409A-1(b)(4), and “separation pay due to involuntary separation from service or participation in a window program,” as set forth in Treasury Regulations section 1.409A-1(b)(9)(iii), and it is further intended that each Participant’s benefits shall be payable only upon a Participant’s “separation from service” under Treasury Regulations section 1.409A-1(h). For purposes of Treasury Regulations section 1.409A-2(b)(2)(iii), the right to each payment under the Plan shall be treated as the right to a separate payment. The Plan shall be administered and interpreted to the extent possible in a manner consistent with these intentions.

ARTICLE I

DEFINITIONS AND INTERPRETATIONS

Section 1.01       Definitions.  Capitalized terms used in the Plan shall have the following respective meanings, except as otherwise provided or as the context shall otherwise require:

“Annual Salary” shall mean the base salary paid to a Participant immediately prior to his or her Termination Date on an annual basis exclusive of any bonus payments or additional payments under any Benefit Plan.

“Benefit Plan” shall mean any “employee benefit plan” (including any employee benefit plan within the meaning of Section 3(3) of ERISA), program, arrangement or practice maintained, sponsored or provided by the Company and any of its subsidiaries, including those relating to compensation, bonuses, profit-sharing, stock option, or other stock related rights or other forms of incentive or deferred compensation, paid time off benefits, insurance coverage (including any self-insured arrangements) health or medical benefits, disability benefits, workers’ compensation, supplemental unemployment benefits, severance benefits and post-employment or retirement benefits (including compensation, pension, health, medical or life insurance or other benefits).

“Board” shall mean the Board of Directors of the Company.

“Cause” shall have the meaning set forth in any individual employment or similar agreement between the Company (or any of its subsidiaries) and a Participant, or in the event that a Participant is not a party to such an agreement, Cause shall mean:

(i)         the Company’s procurement of evidence of the Participant’s act of fraud, misappropriation, or embezzlement with respect to the Company or any of its subsidiaries;

(ii)        the Participant’s indictment for, conviction of, or plea of guilty or no contest to, any felony (other than a minor traffic violation);

(iii)       the suspension or debarment of the Participant or of the Company or any of its affiliated companies or entities as a direct result of any willful or grossly negligent act or omission of the Participant in connection with his employment with the Company or any of its subsidiaries from participation in any Federal or state health care program.  For purposes of this clause (iii), the Participant shall not have acted in a “willful” manner if the Participant acted, or failed to act, in a manner that he believed in good faith to be in, or not opposed to, the best interests of the Company or any of its subsidiaries;

(iv)      the Participant’s admission of liability of, or finding by a court or the SEC (or a similar agency of any applicable state) of liability for, the violation of any “Securities Laws” (as hereinafter defined) (excluding any technical violations of the Securities Laws which are not criminal in nature).  As used herein, the term “Securities Laws” means any Federal of state law, rule or regulation governing the issuance or exchange of securities, including without limitation the Securities Act and the Exchange Act;

(v)        a formal indication from any agency or instrumentality of any state or the United States of America, including but not limited to the United States Department of Justice, the SEC or any committee of the United States Congress that the Participant is a target or the subject of any investigation or proceeding into the actions or inactions of the Participant for a violation of any Securities Laws in connection with his employment by the Company or any of its subsidiaries (excluding any technical violations of the Securities law which are not criminal in nature);

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(vi)       the Participant’s failure after reasonable prior written notice from the Company or any of its subsidiaries to comply with any valid and legal directive of the Chief Executive Officer or the Board that is not remedied within thirty (30) days of the Participant being provided written notice thereof from the Company; or

(vii)      other than as provided in clauses (i) through (vi) above, the Participant’s breach of any material provision of any employment agreement, if applicable, or the Participant’s breach of or failure to perform the material duties and responsibilities of the Participant’s job, that is not remedied within thirty (30) days or repeated breaches of a similar nature, such as the failure to report to work, comply with a Company policy, perform duties when or as directed or otherwise follow directions, all as provided herein, which shall not require additional notices as provided in clauses (i) through (vi) above.

Cause shall be determined by the affirmative vote of at least fifty percent (50%) of the members of the Board (excluding the Participant, if a Board member, and excluding any member of the Board involved in events leading to the Board’s consideration of terminating the Participant for Cause).

“Code” shall mean the Internal Revenue Code of 1986, as amended. Reference in the Plan to any section of the Code shall be deemed to include any amendments or successor provisions to such section and any regulations under such section.

“Common Stock” shall mean $.01 par value common stock of the Company, and such other securities of the Company as may be substituted for Common Stock.

“Compensation and Human Capital Committee” shall mean the Compensation and Human Capital Committee of the Board.

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended and the rules and regulations promulgated thereunder.

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 “Good Reason” shall mean, when used with reference to any Participant, any of the following actions or failures to act, but in each case only if it occurs while such Participant is employed by the Company or any of its subsidiaries and then only if it is not consented to by such Participant in writing:

(i)         assignment of a position that is of a lesser rank than held by the Participant prior to the assignment and that results in a material adverse change in such Participant’s reporting position, duties or responsibilities or title or elected or appointed offices as in effect immediately prior to the effective date of such change;

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(ii)       a material reduction in such Participant’s total compensation from that in effect immediately prior to the effective date of such reduction.  For purposes of this clause (ii), “total compensation” shall mean the sum of base salary, target bonus opportunity and the opportunity to receive compensation in the form of equity in the Company.  Notwithstanding the foregoing, a reduction will not be deemed to have occurred hereunder on account of (A) any change to a plan term other than ultimate target bonus opportunity or equity opportunity, (B) the actual payout of any bonus amount or equity amount, (C) any reduction resulting from changes in the market value of securities or other instruments paid or payable to the Participant, or (D) any reduction in the total compensation of a group of similarly situated Participants that includes such Participant;

(iii)      any change of more than fifty (50) miles in the location of the principal place of employment of such Participant immediately prior to the effective date of such change; or

(iv)      the Participant receives a Removal Notice in accordance with Section 2.01(a) hereof or a notice of termination of the Plan in accordance with Section 5.04 hereof.

For purposes of this definition, none of the actions described in clauses (i) through (iv) above shall constitute “Good Reason” if taken for Cause. Additionally, none of the actions described in clauses (i) through (iv) above shall constitute “Good Reason” with respect to any Participant if remedied by the Company within thirty (30) days after receipt of written notice thereof given by such Participant (or, if the matter is not capable of remedy within thirty (30) days, then within a reasonable period of time following such thirty (30) day period, provided that the Company or any of its subsidiaries has commenced such remedy within said thirty (30) day period); provided that “Good Reason” shall cease to exist for any action described in clauses (i) through (iii) above on the sixtieth (60th) day following the later of the occurrence of such action or the Participant’s knowledge thereof, unless such Participant has given the Company written notice thereof prior to such date.  In the case of clause (iv) above, Good Reason shall cease to exist on the sixtieth (60th) day following the delivery of such notice. Furthermore, any benefits under the Plan resulting from the occurrence described in clause (iv) above shall be based on the status of the Participant as a Tier 1 Participant, Tier 2 Participant or Tier 3 Participant as of the date of such occurrence.

“Participant” shall mean each employee of the Company or any of its subsidiaries who is designated in writing as a participant in the Plan by the Board or the Compensation and Human Capital Committee from time to time; provided that the Chief Executive Officer may designate an employee of the Company or any of its subsidiaries (other than an executive officer) as a Tier 3 Participant and shall provide prompt notice to the Compensation and Human Capital Committee of such designation.

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“Plan” shall mean this Enhabit, Inc. Executive Severance Plan, as amended, supplemented or modified from time to time in accordance with its terms.

“Pro-rated Portion” shall mean, with respect to any equity-based grant or award, a fraction (i) whose numerator is the number of months elapsed from the date of grant of such Award through the effective date of termination of a Participant’s employment in the circumstances described in Section 3.01 below, and (ii) whose denominator is the total number of months over which the grant or award would have vested or had its restrictions lapse under the applicable award agreement. For purposes of this definition, the months elapsed will include the month in which the effective date of termination occurs if such date is the 16th, or a subsequent, day of that month.

“SEC” shall mean the United States Securities Exchange Commission.

“Securities Act” shall mean the Securities Act of 1933, as amended and the rules and regulations promulgated thereunder.

 “Severance Multiplier” shall mean, (i) in the case of a Tier 1 Participant, three times (3x), (ii) in the case of a Tier 2 Participant, two times (2x), and (iii) in the case of a Tier 3 Participant, one times (1x).

“Successor” shall mean a successor to all or substantially all of the business, operations or assets of the Company.

“Termination Date” shall mean, with respect to any Participant, the termination date specified in the Termination Notice delivered by such Participant to the Company in accordance with Section 2.02 or as set forth in any Termination Notice delivered by the Company.

“Termination Notice” shall mean, as appropriate, written notice from (a) a Participant to the Company purporting to terminate such Participant’s employment for Good Reason in accordance with Section 2.02 or (b) the Company to any Participant purporting to terminate such Participant’s employment for Cause or Disability in accordance with Section 2.03.

“Tier 1 Participant” shall mean each Participant designated in writing by the Board or the Compensation and Human Capital Committee as a Tier 1 Participant, as that designation may be amended in accordance with Section 2.01.

“Tier 2 Participant” shall mean each Participant designated in writing by the Board or the Compensation and Human Capital Committee as a Tier 2 Participant, as that designation may be amended in accordance with Section 2.01.

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“Tier 3 Participant” shall mean each Participant designated in writing by the Board or the Compensation and Human Capital Committee as a Tier 3 Participant, as that designation may be amended in accordance with Section 2.01.

Section 1.02         Interpretation.  In the Plan, unless a clear contrary intention appears, (a) the words “herein,” “hereof” and “hereunder” refer to the Plan as a whole and not to any particular Article, Section or other subdivision, (b) reference to any Article or Section, means such Article or Section hereof and (c) the words “including” (and with correlative meaning “include”) means including, without limiting the generality of any description preceding such term. The Article and Section headings herein are for convenience only and shall not affect the construction hereof.

ARTICLE II

ELIGIBILITY AND BENEFITS

Section 2.01         Eligible Employees.

(a)         Once designated as a “Participant,” by the Board, the Compensation and Human Capital Committee, or the Chief Executive Officer, as applicable, an employee of the Company or any of its subsidiaries shall continue to be a “Participant” in the Plan while he or she remains employed by the Company or any of its subsidiaries, unless such employee is given written notice of the Board’s or the Compensation and Human Capital Committee’s determination that such Participant shall cease to be a Participant as of the date specified in such notice (a “Removal Notice”).

(b)        The Plan is only for the benefit of Participants, and no other employees, personnel, consultants or independent contractors shall be eligible to participate in the Plan or to receive any rights or benefits hereunder.

Section 2.02       Termination Notices from Participants.  For purposes of the Plan, in order for any Participant to terminate his or her employment for Good Reason, such Participant must give a Termination Notice to the Company in accordance with the requirements specified under the definition of Good Reason in Section 1.01, which notice shall be signed by such Participant, shall be dated the date it is given to the Company, shall specify the Termination Date and shall state that the termination is for Good Reason and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for such Good Reason.  Any Termination Notice given by a Participant that does not comply in all material respects with the foregoing requirements as well as the “Good Reason” definition provisions set forth in Section 1.01 shall be invalid and ineffective for purposes of the Plan.  If the Company receives from any Participant a Termination Notice that states that the termination is for Good Reason and which the Company believes is invalid and ineffective as aforesaid, it shall promptly notify such Participant of such belief and the reasons therefor.  Any termination of employment by the Participant that either does not constitute Good Reason or fails to meet the Termination Notice requirements set forth above shall be deemed a termination by the Participant without Good Reason.

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Section 2.03       Termination Notices from Company.  For purposes of the Plan, in order for the Company or any of its subsidiaries to terminate any Participant’s employment for Cause, the Company must give a Termination Notice to such Participant, which notice shall be dated the date it is given to such Participant, shall specify the Termination Date and shall state that the termination is for Cause and shall set forth in reasonable detail the particulars thereof.  Any Termination Notice given by the Company that does not comply, in all material respects, with the foregoing requirements shall be invalid and ineffective for purposes of the Plan.  Any Termination Notice purported to be given by the Company to any Participant after the death or retirement of such Participant shall be invalid and ineffective.

ARTICLE III

SEVERANCE AND RELATED TERMINATION BENEFITS

Section 3.01         Termination of Employment.

(a)          In the event that a Participant’s employment is terminated (i) by the Participant for Good Reason (while such Good Reason exists) or (ii) by the Company or any of its subsidiaries without Cause, then in each case, subject to Sections 3.02 through 3.05 hereof:

(A)        such Participant shall be entitled to receive, and the Company shall be obligated to pay to the Participant, a lump sum payment within sixty (60) days following such Participant’s Termination Date in an amount equal to (i) the Participant’s Annual Salary on the Termination Date multiplied by the Severance Multiplier plus (ii) all unused paid time off time accrued by such Participant as of the Termination Date under the Company’s paid time off policy plus (iii) all accrued but unpaid compensation, excluding any nonqualified deferred compensation, earned by such Participant as of the Termination Date ((ii) and (iii) together, the “Accrued Obligations”);

(B)       for a period of months equal to the Participant’s Severance Multiplier multiplied by twelve (12), such Participant and his or her dependents shall continue to be covered by all medical, dental and vision insurance plans and programs (excluding disability insurance) maintained by the Company or any of its subsidiaries under which the Participant was covered immediately prior to the Termination Date (collectively, the “Continued Benefits”) at the same cost sharing between the Company (or any of its subsidiaries) and Participant as a similarly situated active employee;

(C)         a Pro-rated Portion of any unvested options and stock appreciation rights held by the Participant to purchase Company stock will become automatically vested and exercisable and shall continue to be exercisable for such time as otherwise vested options and stock appreciation rights are exercisable under the related plan and award agreement;

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(D)       the vesting restrictions based upon continued employment on a Pro-rated Portion of all other awards relating to Common Stock (including but not limited to restricted stock, restricted stock units, and awards deemed achieved pursuant to clause (E) below) held by the Participant shall immediately lapse and, in the case of restricted stock units, shall become payable at the time specified in clause (A) above, to the extent permitted by Section 409A; and

(E)        the achievement of performance criteria on any awards related to the Common Stock (including but not limited to performance shares or performance share units) held by a Participant shall deemed to have been met to the extent determined by the Compensation and Human Capital Committee.

Notwithstanding anything herein to the contrary, in the event that a Participant is deemed to be a “specified employee” for purposes of Section 409A(a)(2)(B)(i) of the Code, the lump sum severance payment, together with interest at the an annual rate (compounded monthly) equal to the federal short-term rate (as in effect under Section 1274(d) of the Code on the Termination Date) shall be paid, to the extent required to avoid the application of taxes and penalties under Section 409A, to such Participant immediately following the date that is six months after the Termination Date and no later than thirty (30) days following such date.  In any event, all Accrued Obligations shall be paid to the Participant no later than sixty (60) days following the Termination Date.

(b)        In the event that a Participant’s employment is terminated (i) by the Company or any of its subsidiaries for Cause or (ii) by the Participant other than for Good Reason, then in each case:

(A)       such Participant shall be entitled to receive, and the Company shall be obligated to pay to the Participant a lump sum payment equal to the Accrued Obligations; and

(B)        such Participant shall be entitled to continue to maintain coverage for such Participant under the provisions of Section 4980B of the Code (“COBRA”) until the expiration of eligibility under COBRA.  The Participant shall be required to make any premium payments for such coverage under the provisions of COBRA.

(c)       At the expiration of the period applicable to Continued Benefits as provided in Section 3.01(a)(B), the Participant and his or her dependents shall be entitled to continued coverage under COBRA for a period, if any, equal to the difference between the maximum coverage period applicable to such Participant or a dependent under COBRA and the period under which continued Benefits were provided pursuant to Section 3.01(a)(B).

(d)         Notwithstanding the foregoing, the failure to continue a Participant’s employment with the Company or any of its subsidiaries following the expiration of an employment agreement between the Company and the Participant shall not be treated as termination without Cause by the Company or a termination by the Participant for Good Reason.

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Section 3.02        Condition to Receipt of Severance Benefits.  As a condition to receipt of any payment or benefits under Section 3.01(a), such Participant must enter into a restrictive covenant (non-solicitation, non-compete, non-disclosure, non-disparagement) and release agreement (a “Release Agreement”) with the Company and its affiliates substantially in the form attached hereto as Exhibit A. The Participant must execute and deliver a Release Agreement, and such Release Agreement must become effective and irrevocable in accordance with its terms, no later than sixty (60) days following such Participant’s Termination Date. If this requirement is not satisfied, the Participant shall forfeit the right to receive any benefits under Section 3.01(a) and shall instead be entitled to benefits only under Section 3.01(b). In the event such Participant’s receipt of any or all of the payment or benefits under Section 3.01(a) is subject to Section 409A and such 60-day period extends into a new calendar year, the Company shall deliver such portion of the payments and benefits to the Participant on the later of the first business day of that new year or the effective date of such Release Agreement.

Section 3.03         Limitation of Benefits.

(a)          Anything in the Plan to the contrary notwithstanding, the obligation of the Company or any of its subsidiaries to provide the Continued Benefits as provided in Section 3.01(a)(B) shall cease immediately upon such Participant beginning employment with a third party that provides such Participant with substantially comparable health and welfare benefits.

(b)         Any amounts payable under the Plan shall be in lieu of and not in addition to any other severance or termination payment under any other plan or agreement with the Company or any of its current or former affiliates.  As a condition to receipt of any payment under the Plan, the Participant shall waive any entitlement to any other severance or termination payment by the Company or any of its current or former affiliates, including any severance or termination payment set forth in any employment agreement with the Company or any of its subsidiaries.  In the event a Participant is entitled to benefits under the Company’s Change of Control Plan (as amended, restated, supplemented or modified from time to time), the Participant shall not be entitled to any benefits hereunder.  Notwithstanding the foregoing, nothing in this Section 3.03(b) shall abridge the Participant’s rights with respect to vested benefits under any Benefit Plan.

Section 3.04        Plan Unfunded; Participant’s Rights Unsecured.  The Company shall not be required to establish any special or separate fund or make any other segregation of funds or assets to assure the payment of any benefit hereunder.  The right of any Participant to receive the benefits provided for herein shall be an unsecured obligation against the general assets of the Company.

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ARTICLE IV

CLAIMS PROCEDURE

Section 4.01         Claims Procedure

(a)          It shall not be necessary for a Participant who has become entitled to receive a benefit hereunder to file a claim for such benefit with any person as a condition precedent to receiving a distribution of such benefit.  However, any Participant or beneficiary who believes that he or she has become entitled to a benefit hereunder and who has not received, or commenced receiving, a distribution of such benefit, or who believes that he or she is entitled to a benefit hereunder in excess of the benefit which he or she has received, or commenced receiving, may file a written claim for such benefit with the Compensation and Human Capital Committee no later than ninety (90) days following the date on which he or she allegedly became entitled to receive a distribution of such benefit.  Such written claim shall set forth the Participant’s or beneficiary’s name and address and a statement of the facts and a reference to the pertinent provisions of the Plan upon which such claim is based.  The Compensation and Human Capital Committee shall, within ninety (90) days after such written claim is filed, provide the claimant with written notice of its decision with respect to such claim.  If such claim is denied in whole or in part, the Compensation and Human Capital Committee shall, in such written notice to the claimant, set forth in a manner calculated to be understood by the claimant the specific reason or reasons for denial; specific references to pertinent provisions of the Plan upon which the denial is based; a description of any additional material or information necessary for the claimant to perfect his or her claim and an explanation of why such material or information is necessary; and an explanation of the provisions for review of claims set forth in Section 4.01(b) below.

(b)          A Participant or beneficiary who has filed a written claim for benefits with the Compensation and Human Capital Committee which has been denied may appeal such denial to the Compensation and Human Capital Committee and receive a full and fair review of his or her claim by filing with the Compensation and Human Capital Committee a written application for review at any time within sixty (60) days after receipt from the Compensation and Human Capital Committee of the written notice of denial of his or her claim provided for in Section 4.01(a) above.  A Participant or beneficiary who submits a timely written application for review shall be entitled to review any and all documents pertinent to his or her claim and may submit issues and comments to the Compensation and Human Capital Committee in writing.  Not later than sixty (60) days after receipt of a written application for review, the Compensation and Human Capital Committee shall give the claimant written notice of its decision on review, which written notice shall set forth in a manner calculated to be understood by the claimant specific reasons for its decision and specific references to the pertinent provisions of the Plan upon which the decision is based. In the event the claimant disputes the decision of the Compensation and Human Capital Committee, the claimant may not bring suit in court with respect to such dispute under the Plan later than one hundred eighty (180) days after receiving the Compensation and Human Capital Committee’s written notice of its decision.

(c)          Any act permitted or required to be taken by a Participant or beneficiary under this Section 4.01 may be taken for and on behalf of such Participant or beneficiary by such Participant’s or beneficiary’s duly authorized representative.  Any claim, notice, application or other writing permitted or required to be filed with or given to a party by this Article shall be deemed to have been filed or given when deposited in the U.S. mail, postage prepaid, and properly addressed to the party to whom it is to be given or with whom it is to be filed.  Any such claim, notice, application, or other writing deemed filed or given pursuant to the next foregoing sentence shall in the absence of clear and convincing evidence to the contrary, be deemed to have been received on the fifth (5th) business day following the date upon which it was filed or given.  Any such notice, application, or other writing directed to a Participant or beneficiary shall be deemed properly addressed if directed to the address set forth in the written claim filed by such Participant or beneficiary.

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ARTICLE V

Miscellaneous Provisions

Section 5.01       Recoupment. Nothing in the Plan, including the treatment under the Plan of awards relating to the Common Stock held by the Participant, cash distributed to a Participant pursuant thereto, or proceeds received by a Participant upon the sale of any related Common Stock, should be interpreted to alter or supersede the terms or requirements of the Company’s Compensation Recoupment Policy, as it may be amended from time to time, which policy is hereby incorporated in the Plan by reference.

Section 5.02      Cumulative Benefits.  Except as provided in Section 3.03, the rights and benefits provided to any Participant under the Plan are in addition to and shall not be a replacement of, all of the other rights and benefits provided to such Participant under any Benefit Plan or any agreement between such Participant and the Company (or any of its subsidiaries).

Section 5.03         No Mitigation.  No Participant shall be required to mitigate the amount of any payment provided for in the Plan by seeking or accepting other employment following a termination of his or her employment with the Company, any of its subsidiaries or otherwise.  Except as otherwise provided in Section 3.03, the amount of any payment provided for in the Plan shall not be reduced by any compensation or benefit earned by a Participant as the result of employment by another employer or by retirement benefits. The Company’s obligations to make payments to any Participant required under the Plan shall not be affected by any set off, counterclaim, recoupment, defense or other claim, right or action that the Company may have against such Participant.

Section 5.04         Amendment or Termination.   The Board may amend or terminate the Plan at any time upon not less than seventy-five (75) days’ notice to each then-current Participant; provided that no amendment or termination may adversely affect the rights of any Participant who is receiving benefits under the Plan at such time of amendment or termination. Notwithstanding the foregoing, nothing herein shall abridge the Compensation and Human Capital Committee’s authority to designate new Participants or to determine that a Participant shall no longer be entitled to participate in the Plan in accordance with Section 2.01(a).

Section 5.05        Enforceability.  The failure of Participants or the Company to insist upon strict adherence to any term of the Plan on any occasion shall not be considered a waiver of such party’s rights or deprive such party of the right thereafter to insist upon strict adherence to that term or any other term of the Plan.

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Section 5.06         Administration.

(a)          The Compensation and Human Capital Committee shall have full and final authority, subject to the express provisions of the Plan, with respect to designation of Participants and administration of the Plan, including but not limited to, the authority to construe and interpret any provisions of the Plan and to take all other actions deemed necessary or advisable for the proper administration of the Plan. The Compensation and Human Capital Committee may delegate any of its duties under the Plan to such individuals or entities from time to time as it may designate. The Compensation and Human Capital Committee shall utilize the records of the Company or any of its subsidiaries with respect to a Participant’s service history with the Company or any of its subsidiaries, compensation, absences, and all other relevant matters and such records shall be conclusive for all purposes under the Plan.

(b)          The Company shall indemnify and hold harmless each member of the Compensation and Human Capital Committee and any other employee of the Company that acts at the direction of the Compensation and Human Capital Committee against any and all expenses and liabilities arising out of his or her administrative functions or fiduciary responsibilities, including any expenses and liabilities that are caused by or result from an act or omission constituting the negligence of such member in the performance of such functions or responsibilities, but excluding expenses and liabilities that are caused by or result from such member’s or employee’s own gross negligence or willful cause.  Expenses against which such member or employee shall be indemnified hereunder shall include, without limitation, the amounts of any settlement or judgment, costs, counsel fees, and related charges reasonably incurred in connection with a claim asserted or a proceeding brought or settlement thereof.

Section 5.07        Consolidations, Mergers, Etc.  In the event of a merger, consolidation or other transaction, nothing herein shall relieve the Company from any of the obligations set forth in the Plan; provided, however, that nothing in this Section 5.07 shall prevent an acquirer of or Successor to the Company from assuming the obligations, or any portion thereof, of the Company hereunder pursuant to the terms of the Plan provided that such acquirer or Successor provides adequate assurances of its ability to meet this obligation.  In the event that an acquirer of or Successor to the Company agrees to perform the Company’s obligations, or any portion thereof, hereunder, the Company shall require any person, firm or entity which becomes its Successor to expressly assume and agree to perform such obligations in writing, in the same manner and to the same extent that the Company would be required to perform hereunder if no such succession had taken place.

Section 5.08        Successors and Assigns.  The Plan shall be binding upon and inure to the benefit of the Company and its Successors and assigns.  The Plan and all rights of each Participant shall inure to the benefit of and be enforceable by such Participant and his or her personal or legal representatives, executors, administrators, heirs and permitted assigns.  If any Participant should die while any amounts are due and payable to such Participant hereunder, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of the Plan to such Participant’s devisees, legatees or other designees or, if there be no such devisees, legatees or other designees, to such Participant’s estate.  In the event of the death of any Participant during the Severance Period, dependents of such Participant shall be eligible to continue participation in any Continued Benefits in which the Participant was enrolled at the time of death. No payments, benefits or rights arising under the Plan may be assigned or pledged by any Participant, except under the laws of descent and distribution.

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Section 5.09       Notices.  All notices and other communications provided for in the Plan shall be in writing and shall be sent, delivered or mailed, addressed as follows: (a) if to the Company, at the Company’s principal office address or such other address as the Company may have designated by written notice to all Participants for purposes hereof, directed to the attention of the General Counsel, and (b) if to any Participant, at his or her residence address on the records of the Company or to such other address as he or she may have designated to the Company in writing for purposes hereof.  Each such notice or other communication shall be deemed to have been duly given or mailed by United States certified or registered mail, return receipt requested, postage prepaid, except that any change of notice address shall be effective only upon receipt.

Section 5.10        Tax Withholding.  The Company and its subsidiaries shall have the right to deduct from any payment hereunder all taxes (federal, state or other) which it is required to be withhold therefrom.

Section 5.11        No Employment Rights Conferred.  The Plan shall not be deemed to create a contract of employment between any Participant and the Company and/or its affiliates.  Nothing contained in the Plan shall (a) confer upon any Participant any right with respect to continuation of employment with the Company or any of its subsidiaries or (b) subject to the rights and benefits of any Participant hereunder, interfere in any way with the right of the Company or any of its subsidiaries to terminate such Participant’s employment at any time.

Section 5.12         Entire Plan.  The Plan contains the entire understanding of the Participants and the Company with respect to the severance arrangements maintained on behalf of the Participants by the Company or any of its subsidiaries, which are provided for herein.  There are no restrictions, agreements, promises, warranties, covenants or undertakings between the Participants and the Company or any of its subsidiaries with respect to the subject matter herein other than those expressly provided for herein.

Section 5.13    Prior Agreements.  The Plan supersedes all prior agreements, programs and understandings (including verbal agreements and understandings) between the Participants and the Company and any of its current or former affiliates regarding the terms and conditions of Participant’s severance arrangements.

Section 5.14       Severability.  If any provision of the Plan is, becomes or is deemed to be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions of the Plan shall not be affected thereby.

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Section 5.15       Governing Law.  The Plan shall be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to its conflict of laws rules, and applicable federal law.

[Remainder of the Page Intentionally Left Blank]

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Exhibit A

RESTRICTIVE COVENANT AND RELEASE AGREEMENT
FOR EXECUTIVE EMPLOYEES ELIGIBLE FOR SEVERANCE

This Release Agreement (this “Agreement”) is entered into between [NAME] (“Executive”) and Enhabit, Inc. (together with its subsidiaries, the “Company”), pursuant-to the terms and conditions of the Enhabit, Inc. Executive Severance Plan, which is attached hereto as Exhibit A (the “Severance Plan”).

WITNESSETH

WHEREAS, Executive is employed by the Company as [TITLE] and is a “Participant” in the Severance Plan (as such term is defined in the Severance Plan);

WHEREAS, Executive’s last day of employment with the Company will be [DATE], and such date shall be the “Termination Date” for purposes of this Agreement and the Severance Plan;

WHEREAS, Executive is eligible to receive the severance and other benefits under Section 3.01(a) of the Severance Plan, subject to the terms and conditions of the Severance Plan, including, but not limited to, Executive’s execution and delivery to the Company of this Agreement and it becoming effective;

WHEREAS, Executive has agreed to comply with, among other things, certain confidentiality, noncompetition and nonsolicitation provisions, which are provided below, and such provisions shall be fully enforceable by the Company; and

WHEREAS, Executive and the Company wish to settle, fully and finally, all matters between them under the terms and conditions exclusively set forth in this Agreement.

NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which is mutually acknowledged, the Company and Executive agree as follows:

1.           Severance. Provided that this Agreement becomes effective pursuant to Paragraph 4 of this Agreement:

(a)         The Company shall pay the severance amount listed on Line 1 of Exhibit B attached hereto, subject to all applicable federal, state and local withholdings, in accordance with the terms and conditions of the Severance Plan, paid out in a lump sum no later than sixty (60) days following the Termination Date. In the event any of such payment is subject to Section 409A and such 60-day period extends into a new calendar year, the Company shall deliver such payment to the Participant on the later of the first business day of that new year or the effective date of this Agreement.

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(b)         Executive will continue to be eligible to participate in the Company sponsored group healthcare benefits, (excluding disability insurance but specifically including medical, dental and vision plans), under which the Executive was covered immediately prior to the Termination Date, for the number of months listed on Line 2 of Exhibit B attached hereto, after the Termination Date (the “Severance Period”), provided that Executive continues to contribute toward the premiums at the level of an active employee of the Company. Thereafter, Executive’s right to continue coverage under the Company sponsored group healthcare plan at Executive’s own expense, pursuant to the statutory scheme commonly known as “COBRA,” shall be governed by applicable law and the terms of the plans and programs, and will be explained to Executive in a packet to be sent to Executive under separate cover.

(c)          Executive acknowledges and agrees that the severance payments and benefits provided in subsection (a) and (b) of Section 1 are subject to forfeiture and repayment and any awards relating to Common Stock shall be cancellable and/or forfeitable in the event of a material violation by Executive of Sections 6, 7, and/or 8 of this Agreement.

2.            Release.

(a)      Executive, on behalf of Executive, Executive’s heirs, executors, administrators, successors and assigns, hereby irrevocably and unconditionally releases the Company and its subsidiaries, divisions and affiliates, together with their respective owners, assigns, agents, directors, partners, officers, trustees, members, managers, employees, insurers, employee benefit programs (including, but not limited to, trustees, administrators, fiduciaries, and insurers of such programs), attorneys and representatives and any of their predecessors and successors and each of their estates, heirs and assigns (collectively, the “Company Releasees”) from any and all charges, complaints, claims, liabilities, obligations, promises, agreements, causes of action, rights, costs, losses, debts and expenses of any nature whatsoever, known or unknown, which Executive or Executive’s heirs, executors, administrators, successors or assigns ever had, now have or hereafter can, will or may have (either directly, indirectly, derivatively or in any other representative capacity) by reason of any matter, fact or cause whatsoever against the Company or any of the other Company Releasees from the beginning of time to the date upon which Executive signs this Agreement, including, but not limited to, any claims arising out of or relating to Executive’s employment with the Company and/or termination of employment from the Company. This release includes, without limitation, all claims arising out of, or relating to, Executive’s employment with the Company and the termination of Executive’s employment with the Company, including all claims for severance or termination benefits under Executive’s employment agreement with the Company, if any, and under any plan, policy or agreement (other than those benefits expressly payable hereunder) and all claims arising under any foreign, federal, state and local labor,  laws including, without limitation, the Age Discrimination in Employment Act, the Older Workers Benefit Protection Act, the Employee Retirement Income Security Act of 1974, the Americans with Disabilities Act, Title VII of the Civil Rights Act of 1964, the Family and Medical Leave Act, the Civil Rights Act of 1991, the Fair Labor Standards Act, the Equal Pay Act, the Immigration and Reform Control Act, the Uniform Services Employment and Re-Employment Act, the Rehabilitation Act of 1973, Sarbanes-Oxley Act, Executive Order 11246, the Lilly Ledbetter Fair Pay Act, the False Claims Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Alabama Age Discrimination Statute and the Workers’ Adjustment and Retraining Notification Act (and any similar state or local law), each as amended.

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(b)        Nothing in this Paragraph 2 shall be deemed to release (i) Executive’s right to enforce the terms of this Agreement; (ii) Executive’s rights, if any, to any vested benefits or options under any incentive, bonus, or other benefit plan maintained by the Company; (iii) any right to indemnification under the Enhabit, Inc. certificate of incorporation or by-laws, in each case as amended and as in effect from time to time; or (iv) any claim that cannot be waived under applicable law. Nothing in this Agreement prevents Executive from initiating a complaint with or participating in any legally authorized investigation or proceeding conducted by the Equal Employment Opportunity Commission or any federal, state, or local law enforcement agency. Notwithstanding the foregoing, Executive agrees that Executive is waiving all rights to damages and all other forms of recovery arising out of any charge, complaint or lawsuit filed on behalf of Executive or any third party as to all claims waived in this Agreement.

(c)        Executive acknowledges and agrees that the Company has fully satisfied any and all obligations owed to Executive arising out of Executive’s employment with the Company, and no further sums are owed to Executive by the Company or by any of the other Company Releasees at any time. Executive further acknowledges and agrees that the Company has paid Executive for all earned wages and accrued but unused paid time off through the Termination Date.  By entering into this Agreement, Executive explicitly waives any rights to severance or other post-termination benefits under any oral or written plan, policy, employment agreement, contract or arrangement with the Company, other than as provided in this Agreement. Executive acknowledges and agrees that, in the absence of this Agreement, the Company has no obligation to provide any of the consideration set forth in Paragraph 1 of this Agreement.  Executive further acknowledges and agrees that Executive has no rights to any unvested benefits or options under any incentive, bonus or other benefit plan, except as otherwise provided in the Severance Plan; and that all such vesting shall cease as of the Termination Date. Executive further acknowledges and agrees that any right to continue to contribute to the Company’s 401(k) plan for employees ended on the Termination Date. Furthermore, Executive acknowledges and agrees that the payments and benefits provided under Paragraph 1 of this Agreement shall not be included in any computation of earnings under the Company’s 401(k) plan or any other plan.

(d)         Executive represents that Executive has no lawsuits pending against the Company or any of the other Company Releasees. Executive further covenants and agrees that neither Executive nor Executive’s heirs, executors, administrators, successors or assigns will be entitled to any personal recovery in any proceeding of any nature whatsoever against the Company or any of the other Company Releasees arising out of any of the matters released in Paragraph 2.

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3.          Consultation with Attorney/Voluntary Agreement.  Executive acknowledges that (a) the Company is hereby advising Executive of Executive’s right to consult with an attorney of Executive’s own choosing prior to executing this Agreement, (b) Executive has carefully read and fully understands all of the provisions of this Agreement, and (c) Executive is entering into this Agreement, including the releases set forth in Paragraph 2 above, knowingly, freely and voluntarily in exchange for good and valuable consideration, including the obligations of the Company under this Agreement.

4.            Consideration & Revocation Period.

(a)        Executive acknowledges that Executive has been given at least twenty-one (21) calendar days following receipt of this Agreement to consider the terms of this Agreement, although Executive may execute it sooner.

(b)         Executive will have seven (7) calendar days from the date on which Executive signs this Agreement to revoke Executive’s consent to the terms of this Agreement. Such revocation must be in writing and must be addressed and sent via email as follows: Enhabit, Inc., Attention: General Counsel, email address: [●]. Notice of such revocation must be received within the seven (7) calendar days referenced above. In the event of such revocation by Executive, this Agreement shall not become effective and Executive shall not have any rights under this Agreement or the Severance Plan.

(c)         Provided that Executive does not revoke this Agreement, this Agreement shall become effective on the eighth calendar day after the date on which Executive signs this Agreement (the “Effective Date”).

5.            Acknowledgements.

(a)          Executive acknowledges and agrees that: (i) the “Company Business” (as defined in Paragraph 9(a) below) is intensely competitive and that Executive’s employment by the Company required Executive to have access to, and knowledge of, “Confidential Information” (as defined in Paragraph 9(b) below); (ii) the use or disclosure of any Confidential Information could place the Company at a serious competitive disadvantage and could do serious damage, financial and otherwise, to the Company; (iii) Executive was given access to, and developed relationships with, employees, clients, patients, physicians and partners of the Company at the time and expense of the Company; and (iv) by Executive’s training, experience and expertise, Executive’s services to the Company were extraordinary, special and unique, and the Company invested in training and enhancing Executive’s skill and experience in the Company Business.

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(b)        Executive further acknowledges and agrees that (i) Executive’s experience and capabilities are such that the provisions contained in Paragraphs 6, 7, and 8 will not prevent Executive from earning a livelihood; (ii) the Company would be seriously and irreparably injured if Executive were to engage in “Competitive Activities” (as defined below), or to otherwise breach the obligations contained in Paragraphs 6, 7 and 8, no adequate remedy at-law would exist and damages would be difficult to determine; (iii) the provisions contained in Paragraphs 6, 7 and 8 are justified by and reasonably necessary to protect the legitimate business interests of the Company, including the Confidential Information and good will of the Company; and (iv) the provisions in Paragraphs 6, 7 and 8 are fair and reasonable in scope, duration and geographical limitations. Accordingly, Executive agrees to be bound fully by the restrictive covenants in this Agreement to the maximum extent permitted by law, it being the intent and spirit of the parties that the restrictive covenants and the other agreements contained herein shall be valid and enforceable in all respects.

6.            Confidentiality.

(a)       Executive acknowledges and agrees that, from and after the Termination Date, and at all times thereafter, Executive will not communicate, divulge or disclose to any “Person” (as defined in Paragraph 9(c) below) or use for Executive’s own benefit or purpose any Confidential Information of the Company, except as required by law or court order or expressly authorized in writing by the Company; provided, however, that Executive shall promptly notify the Company prior to making any disclosure required by law or court order so that the Company may seek a protective order or other appropriate remedy.

7.            Covenant Not to Compete.

From the Termination Date through the end of the Severance Period (the “Noncompetition Period”), Executive shall not, directly or indirectly, participate in the management, operation or control of, or have any financial or ownership interest in, or aid or knowingly assist anyone else in the conduct of, any business or entity that (i) engages in the Company Business in any Restricted Territory (as defined in Paragraph 9(d) below), or (ii) is, to Executive’s knowledge, making preparations for engaging in the Company Business in any Restricted Territory (collectively, “Competitive Activity”); provided, however, that (x) the “beneficial ownership” by Executive, either individually or as a member of a “group” (as such terms are used in Rule 13d of the General Rules and Regulations under the Exchange Act), of not more than one percent (1%) of the voting stock of any publicly held corporation shall not alone constitute a breach of this Paragraph 7 and (y) Executive may enter into, at arm’s length, any bona fide joint venture (or partnership or other business arrangement) with any Person who is not directly engaged in the Company Business but which is an affiliate of another Person engaged in the Company Business.

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8.            Employee Nonsolicitation; Nondisparagement.

(a)         Executive shall not, directly or indirectly, within the Noncompetition Period, without the prior written consent of the Company, solicit or direct any other Person to solicit any officer or other employee of the Company to: (i) terminate such officer’s or employee’s employment with the Company; or (ii) seek or accept employment or other affiliation with Executive or any Person engaged in any Competitive Activity in which Executive is directly or indirectly involved (other than, in each case, any solicitation directed at the public in general in publications available to the public in general or any contact which Executive can demonstrate was initiated by such officer, director or employee or any contact after such officer’s or employee’s employment with the Company is terminated). Executive’s obligations. under this Paragraph 8(a) with respect to new Company employees hired after the Termination Date shall be subject to the condition that Executive shall have been notified of such new employees.

(b)         Executive shall not, directly or indirectly, within the Noncompetition Period, without the prior written consent of the Company, solicit or direct any other Person to solicit any Person or entity in a business relationship with the Company (whether an independent contractor, joint venture partner or otherwise) to terminated such Person or entity’s business relationship with the Company.

(c)        Executive shall not, directly or indirectly, within the Noncompetition Period, make any statements or comments of a defamatory or disparaging nature to third parties regarding the Company or any of their members, principals, officers, managers, directors, personnel, employees, agents, services or products; provided, however, that nothing contained in this Paragraph 8(b) shall preclude Executive from providing truthful testimony in response to a valid subpoena, court order, regulatory request or as may be required by law.

9.            Definitions.

(a)        For purposes of this Agreement, “Company Business” shall mean (i) any business in competition with the Company or any of its affiliates or engaged in the same or similar business as the Company or any of its affiliates, including, but not limited to, the home health, hospice, private duty, personal care, home care, personal assistance business as well as any business or services associated with or related to the foregoing; (ii) any other business in which the Company or any of its affiliates engages during Executive’s employment and for which Executive performed any services or had any responsibility; and (iii) any business the Company or any of its affiliates seriously contemplated conducting during the last 12 months of Executive’s employment with the Company or any of its affiliates.

(b)        For purposes of this Agreement, “Confidential Information” includes, but is not limited to, certain or all of the Company’s and its patients’, physicians’ and third-party managed care providers’ supply agreement arrangements, regulatory packages, registration packages, data compensation packages, methods, information, systems, plans for acquisition or disposition of products, expansion plans, financial status and plans, customer lists, client data, personnel information, consulting reports, investigative reports, Personal Health Information (PHI), strategic plans and trade secrets.

(c)         For the purposes of this Agreement, “Person” shall mean an individual, corporation, joint venture, partnership, limited liability company, association, joint stock or other company, business trust, trust or other entity or organization, including any national, federal, state, territorial agency, local or foreign judicial, legislative, executive, regulatory or administrative authority, commission, court, tribunal, any political or other subdivision, department or branch of any of the foregoing, and any self-regulatory organization or arbitrator.

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(d)          For purposes of this Agreement “Restricted Territory” shall mean any geographical area or territory in the United States within a 75-mile radius of where the Company or any of its affiliates operates and for or within which Executive performed any services for the Company or any of its affiliates or for which Executive had any responsibility or about which Executive received Confidential Information during the last twenty-four (24) months of Executive’s employment with the Company or any of its affiliates.

10.         Notice to the Company. In the event that Executive accepts employment with another party at any time during the Severance Period, Executive shall inform the Company in writing on or before the commencement date of such employment and provide the Company with such other information relating to available health and welfare benefits as a result of said employment as required by Section 3.03(a) of the Severance Plan.

11.       Duty to Inform. Executive shall inform in writing any Person, who seeks to employ or engage Executive in any capacity, of Executive’s obligations under Paragraphs 6, 7 and 8 of this Agreement, prior to accepting such employment or engagement.

12.         Company Property.  Executive represents that Executive has returned to the Company all property of the Company. Such property includes, but is not limited to, laptop computers, smartphone, printers, other computer equipment (including computers, printers and equipment paid-for by the Company for use at Executive’s residence), cellular phones and pagers, keys, security passes, passwords, work files, records, credit cards, building ID’s and all other Company property in Executive’s possession on the last day of Executive’s employment with the Company. Following the Termination Date, the Company shall also have no obligation to continue to make payments under any car loan or corporate membership provided to Executive as an employee of the Company.

13.        No Admission of Wrongdoing.  Nothing herein is to be deemed to constitute an admission of wrongdoing by the Company or any of the other Company Releasees.

14.        Assignment.  This Agreement is binding on, and will inure to the benefit of, the Company and the other Company Releasees. All rights of Executive under this Agreement shall inure to the benefit of, and be enforceable by, Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributes, devisees and legatees.

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14.        Injunctive Relief.  Executive agrees that the Company would suffer irreparable harm if Executive were to breach, or threaten to breach, any provision of this Agreement and that the Company would by reason of such breach, or threatened breach, be entitled to injunctive relief in a court of appropriate jurisdiction, without the need to post any bond, and Executive further consents and stipulates to the entry of such injunctive relief in such a court prohibiting Executive from breaching this Agreement. This Paragraph 14 shall not, however, diminish the right of the Company to claim and recover damages and other appropriate relief, including but not limited to repayment of any severance payments or benefits provided to Executive, in addition to injunctive relief.

15.        Severability.  In the event that any one or more, of the provisions of this Agreement shall be held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Moreover, if any one or more of the provisions contained in this Agreement shall be held to be excessively broad as to duration, activity or subject, such provisions shall be construed by limiting and reducing them so as to be enforceable to the maximum extent allowed by applicable law. Furthermore, a determination in any jurisdiction that this Agreement, in whole or in part, is invalid, illegal or unenforceable shall not in any way affect or impair the validity, legality or enforceability of this Agreement in any other jurisdiction.

16.          Waiver. The failure of either party to this Agreement to enforce any of its terms, provisions or covenants shall not be construed as a waiver of the same or of the right of such party to enforce the same. Waiver by either party hereto of any breach or default by the other party of any term or provision of this Agreement shall not operate as a waiver of any other breach or default.

17.       No Oral Modifications. This Agreement may not be changed orally, but may be changed only in a writing signed by Executive and a duly authorized representative of the Company.

18.        Governing Law; Venue. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, without regard to the application of any choice-of-law rules that would result in the application of another state’s laws. With respect to any action, suit or proceeding, each party irrevocably (i) submits to the jurisdiction of the courts of the State of Delaware and the United States District Court of the District of Delaware, and (ii) waives any objection which it may have at any time to the laying of venue of any proceeding brought in any such court, waives any claim that such proceedings have been brought in an inconvenient forum and further waives the right to object, with respect to such proceedings, that such court does not have jurisdiction over such party.

19.         Entire Agreement.  This Agreement and any other agreements or obligations signed or undertaken by Executive that provide additional or greater rights to the Company that Executive previously entered into with the Company (including any predecessor or affiliate of the Company), are herein incorporated by reference, remain in full force and effect according to their terms, constitute the entire agreement and understanding between Executive and the Company, and fully supersede all prior and contemporaneous negotiations, understandings, representations, writings, discussions and/or agreements between Executive and the Company, whether written or oral, pertaining to or concerning the subject matter of this Agreement. Executive represents that, in executing this Agreement, Executive has not relied upon any representation or statement made by the Company or any other Company Releasees, other than those set forth herein, with regard to the subject matter, basis or effect of this Agreement or otherwise.

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20.        Descriptive Headings. The paragraph headings contained herein are for reference purposes only and will not in any way affect the meaning or interpretation of this Agreement.

21.        Counterparts. This Agreement may be executed simultaneously in counterparts, each of which shall be an original, but all of which shall constitute but one and the same agreement.

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IN WITNESS WHEREOF, Executive and the Company have executed this Agreement on the date indicated below.

 
ENHABIT, INC.
     
   
 
By:
  
     
   
 
Date
  

 
EXECUTIVE
     
   
 
Name:
  
     
   
 
Date
  

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EXHIBIT A
[INSERT SEVERANCE PLAN]

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EXHIBIT B

Name:
    
       
1.
Severance Amount:
$
  
       
2.
Months:
    


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Exhibit 99.2

Enhabit Home Health & Hospice Completes Spin-off from
Encompass Health

Enhabit also announces two new appointments
to its board of directors
 
DALLAS – July 1, 2022 – Enhabit Home Health & Hospice, a leading national home health and hospice provider, today announces it is now an independent, publicly traded company following the completion of its spin-off from Encompass Health Corporation. Enhabit will begin trading regular way on the New York Stock Exchange this morning, July 1, 2022, under the ticker symbol “EHAB.”
 
“Today marks a new and exciting chapter for our company, and we look forward to embarking on this next phase of growth with our team. We remain rooted in our philosophy of providing a better way to care for patients and their loved ones,” said Enhabit President and CEO Barb Jacobsmeyer. “As an independent company, we will have enhanced strategic and operational flexibility to put the interests of our patients, people, and investors first as we strive to bring high-quality, compassionate care to every patient where they are most comfortable: in their homes.”

Enhabit has more than 20 years of proven expertise, growing into one of the largest providers of home health and hospice services nationally. With over 10,000 employees at 351 locations in 34 states, Enhabit has an award-winning culture that is a key contributor to its continued success. By connecting with compassion, Enhabit’s team members strive to develop strong relationships with patients and their loved ones to help them achieve their individual care goals.

From 2020 to 2030, the number of individuals in the U.S. over the age of 65 is expected to grow by approximately 30% to 73 million people, creating a greater need for cost-efficient, in-home care options. Enhabit will continue expanding the possibilities of home-based care, driving a low cost of care while achieving superior outcomes for patients.

Upon completion of the distribution, each Encompass Health stockholder as of June 24, 2022, the record date for the distribution, received one share of Enhabit common stock for every two shares of Encompass Health common stock held as of the close of business on the record date.

Citigroup Global Markets Inc. and Goldman Sachs & Co. LLC served as financial advisors and Wachtell, Lipton, Rosen & Katz and Bradley Arant Boult Cummings LLP served as legal advisors to Enhabit in connection with the spin-off.
 
Enhabit announces appointment of two new board members
 
In addition, Enhabit is excited to announce an expansion to its board of directors with the appointment of Tina L. Brown-Stevenson and Susan A. La Monica.
Tina L. Brown-Stevenson - Ms. Brown-Stevenson is a retired executive who brings nearly three decades of experience in the national healthcare payor industry where she developed an expertise in health system analytics and data. Ms. Brown-Stevenson joined UnitedHealth Group in 2008 as the Executive Vice President of Healthcare Innovation and Information Group before being promoted to the Chief Data and Analytics Officer of OptumInsight. In 2012, Ms. Brown-Stevenson rose to the role of Senior Vice President of Health System Analytics and Decision Support, where she oversaw the analysis and management of provider and patient data to validate UnitedHealth Group’s strategy and product offerings, before her retirement in 2019. Prior to joining UnitedHealth Group, Ms. Brown-Stevenson previously held senior leadership positions at several other insurance companies, including Aetna, Cigna, and Partners Healthcare. In addition to her healthcare company experience, Ms. Brown-Stevenson currently serves on the boards of directors of several organizations, including Connecticut Children’s Medical Center and Kyruus Inc., a technology company that provides provider search and scheduling solutions to healthcare organizations. She also serves on the Advisory Board of the Commonwealth Honors College at the University of Massachusetts, Amherst. Ms. Brown-Stevenson has demonstrated her leadership and character through involvement on board roles in community and civic organizations. Ms. Brown-Stevenson also provided patient care for many years as a Registered Nurse before her retirement. As a result of her leadership roles at several large national payors in the rapidly evolving field of healthcare data and analytics and her various private board memberships, Ms. Brown-Stevenson is in a unique position to draw on her extensive experience to advise on opportunities to improve the quality of care for our patients through utilization of strategic technology.

Susan A. La Monica - Ms. La Monica is the Chief Human Resources Officer and Head of Corporate Social Responsibility for Citizens Financial Group, a publicly traded banking and financial services company, where she is responsible for developing human resource strategies to support the company’s business plan and directing its focus on environmental, social, and governance (ESG) issues as co-chair of the Citizens ESG Executive Steering Committee. Additionally, Ms. La Monica played a key role in the separation of Citizens Financial Group from the Royal Bank of Scotland in 2014. Prior to joining Royal Bank of Scotland in 2011, Ms. La Monica held several senior human resources leadership roles at JP Morgan Chase. In addition to her human resources experience, Ms. La Monica has demonstrated her leadership and character through over a decade of involvement on board roles in numerous community and civic organizations. As a result of her diverse leadership roles, Ms. La Monica is well positioned to address a full range of human capital issues, including compensation and benefits, talent acquisition and development, organizational development, and ESG matters.

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 About Enhabit Home Health & Hospice  
Enhabit Home Health & Hospice is a leading national home health and hospice provider working to expand what’s possible for patient care in the home. The company’s team of clinicians supports patients and their families where they are most comfortable, with a nationwide footprint spanning 252 home health locations and 99 hospice locations across 34 states. Enhabit leverages advanced technology and compassionate teams to deliver extraordinary patient care. For more information, visit ehab.com.
 
Forward-looking statements
Statements contained in this press release which are not historical facts, such as those relating to the timing and effects of the spin-off and rebranding of the home health and hospice business, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All such estimates, projections, and forward-looking information speak only as of the date hereof, and Enhabit undertakes no duty to publicly update or revise such forward-looking information, whether as a result of new information, future events, or otherwise. Such forward-looking statements are necessarily estimates based upon current information and involve a number of risks and uncertainties. Actual events or results may differ materially from those anticipated in these forward-looking statements as a result of a variety of factors. While it is impossible to identify all such factors, factors which could cause actual events or results to differ materially from those estimated by Enhabit include, but are not limited to, our ability to execute on our strategic plans, regulatory and other developments impacting the markets for our services, general economic conditions, and other factors which may be identified from time to time in Enhabit’s SEC filings and other public announcements, including Enhabit’s Form 10 Registration Statement filed on May 25, 2022, as amended on June 9, 2022, and June 14, 2022.

Media contact
Erin Volbeda
media@ehab.com
972-338-5141

Investor relations contact
Jennifer Hills
jennifer.hills@ehab.com
469-621-6496