8-K

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):  January 6, 2011 (December 31, 2010)

HEALTHWAYS, INC.

(Former name or former address, if changed since last report)

HEALTHWAYS, INC.

(Exact name of registrant as specified in its charter)

Delaware	000-19364	62-1117144
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

701 Cool Springs Boulevard Franklin, Tennessee	37067
(Address of principal executive offices)	(Zip Code)

(615) 614-4929

(Registrant's telephone number, including area code)

(Former name or former address, if changed since last report)

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 (see General Instruction A.2. below):

o    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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

                  As previously disclosed on December 2, 2010, Healthways, Inc. (the “Company”) announced the planned retirement of Mary A. Chaput as the Company’s Chief Financial Officer, effective December 31, 2010.  Ms. Chaput has agreed to continue as an employee of the Company through December 31, 2011 to assist with the transition of responsibilities and other projects as assigned.  The Company’s Board of Directors has selected Alfred Lumsdaine, 45, to succeed Ms. Chaput as Chief Financial Officer of the Company, effective January 1, 2011.  Mr. Lumsdaine has served as the Company’s Controller and Chief Accounting Officer since joining the Company in February 2002.

On December 31, 2010, in connection with her agreement to continue as an employee of the Company, the Company entered into a Transition Employment Agreement (the “Transition Employment Agreement”) with Ms. Chaput.  The Transition Employment Agreement includes an initial term of one year and provides for a transition salary of $100,000 in consideration of the transition services to be provided by Ms. Chaput as well as a potential completion bonus of $100,000 at the end of the initial one-year term.  In addition, in consideration of Ms. Chaput’s agreement to terminate her previous employment agreement with the Company dated December 19, 2008, the Transition Employment Agreement provides for a base salary of approximately $390,000 for 18 months as well as vesting of her outstanding long-term incentive awards on December 31, 2010. In addition, upon execution of a full release of claims in favor of the Company, Ms. Chaput may elect to receive six additional months of base salary payable at regular payroll dates following the date of termination.  In the event the Transition Employment Agreement is terminated for any reason, Ms. Chaput will be entitled to all compensation accrued under the Transition Employment Agreement through the date of termination.  Ms. Chaput is generally subject to non-compete and non-solicitation covenants under her employment agreement for a period of 18 months following the date of termination of her employment with the Company.

On December 31, 2010, in connection with his appointment as Chief Financial Officer, the Company entered into an employment agreement with Mr. Lumsdaine.  Mr. Lumsdaine’s employment agreement has a continuous term of 16 months and provides for an initial base salary of $325,000 as well as customary benefits, including bonuses, if any, pursuant to bonus plans established for the Company and long-term incentive awards pursuant to the Company’s long term incentive plans, in each case as shall be determined by the Board of Directors upon the recommendation of the Company’s Chief Executive Officer.  Mr. Lumsdaine is also entitled to participate in all benefit plans maintained by the Company for officers generally according to the terms of such plans.

If Mr. Lumsdaine dies during the term of the employment agreement, the Company will pay his base salary due through the date of his death plus a pro-rata portion of any bonus plan to which he is otherwise entitled as of the time of his death.   Further, all of Mr. Lumsdaine’s outstanding unvested equity awards shall vest and/or remain exercisable for their stated terms in accordance with the terms of the agreement governing such equity award. In addition, all amounts contributed by the Company to the Company’s Capital Accumulation Plan (“CAP”) for Mr. Lumsdaine’s benefit shall vest and thereafter be paid out in accordance with the terms of the CAP as in effect on the date of his death.

If Mr. Lumsdaine’s employment agreement is terminated by the Company or Mr. Lumsdaine due to Mr. Lumsdaine’s disability, Mr. Lumsdaine will be entitled to receive (i) all base salary and benefits due to him through the date of termination and a pro-rata portion of any bonus plan to which he is otherwise entitled as of the date of termination, (ii) his base salary for a period of 18 months to be paid at regular payroll dates following such termination, and (iii) if permitted under the Company’s group medical insurance, group medical benefits for a period of two years following the date of termination; provided, that if Mr. Lumsdaine instead elects continuation of group benefits under COBRA, the Company shall pay the full cost of premiums for two years following the date of termination. The amounts described in (ii) above will be offset by any disability insurance payments Mr. Lumsdaine receives as a result of his disability. In addition, upon execution of a full release of claims in favor of the Company, Mr. Lumsdaine may elect to receive an enhanced severance consisting of six additional months of base salary payable at regular payroll dates following the date of termination. Further, all of Mr. Lumsdaine’s outstanding unvested equity awards shall vest and/or remain exercisable for their stated terms in accordance with the terms of the agreement governing such equity incentive. In addition, all amounts contributed by the Company to the CAP for Mr. Lumsdaine’s benefit shall vest and thereafter be paid out in accordance with the terms of the CAP as in effect on the date of termination.

If Mr. Lumsdaine’s employment is terminated by the Company for cause, he will be entitled to receive all base salary and benefits to be paid or provided to him under his employment agreement through the date of termination. In addition, upon execution of a full release of claims in favor of the Company, Mr. Lumsdaine may elect to receive six additional months of base salary payable at regular payroll dates following the date of termination. Further, the vested portions of Mr. Lumsdaine’s outstanding equity awards shall remain exercisable for their stated terms in accordance with the terms of the agreement governing such equity awards. All of Mr. Lumsdaine’s unvested equity awards shall terminate on the date of termination. In addition, all amounts contributed by the Company to the CAP for Mr. Lumsdaine’s benefit t hat have vested shall be paid out in accordance with the terms of the CAP as in effect on the date of termination. Mr. Lumsdaine shall not be entitled to receive any unvested Company contributions to the CAP.

If Mr. Lumsdaine’s employment agreement is terminated by the Company without cause or by Mr. Lumsdaine for good reason, Mr. Lumsdaine will be entitled to receive (i) all base salary and benefits due to him through the date of termination and a pro-rata portion of any bonus plan to which he is otherwise entitled as of the date of termination, (ii) his base salary for a period of 18 months to be paid at regular payroll dates following such termination, and (iii) group medical benefits for a period of 18 months following the date of termination.  In addition, upon execution of a full release of claims in favor of the Company, Mr. Lumsdaine may elect to receive an enhanced severance consisting of six additional months of base salary payable at regular payroll dates following the date of termination. Further, all of Mr. Lumsda ine’s outstanding unvested equity awards shall vest and/or remain exercisable for their stated terms in accordance with the terms of the agreement governing such equity incentive. In addition, all amounts contributed by the Company to the CAP for Mr. Lumsdaine’s benefit shall vest and thereafter be paid out in accordance with the terms of the CAP as in effect on the date of termination.

If Mr. Lumsdaine’s employment is terminated by Mr. Lumsdaine without good reason, he will be entitled to receive all base salary and benefits to be paid or provided to him under his employment agreement through the next payroll date following the date of termination. Further, the vested portions of Mr. Lumsdaine’s outstanding equity awards shall remain exercisable for their stated terms in accordance with the terms of the agreement governing such equity awards. All of Mr. Lumsdaine’s unvested equity awards shall terminate on the date of termination. In addition, all amounts contributed by the Company to the CAP for Mr. Lumsdaine’s benefit that have vested shall be paid out in accordance with the terms of the CAP as in effect on the date of termination. Mr. Lumsdaine shall not be entitled to receive any unvested Co mpany contributions to the CAP.

If Mr. Lumsdaine’s employment agreement is terminated by the Company without cause or by Mr. Lumsdaine for good reason within 12 months following a change in control, Mr. Lumsdaine will be entitled to receive amounts as described above in the event of termination without cause by the Company or a termination for good reason by Mr. Lumsdaine payable in a lump sum no later than 60 days following the date of termination, as well as certain tax reimbursement payments.  In addition, upon execution of a full release of claims in favor of the Company, Mr. Lumsdaine may elect to receive an enhanced severance consisting of six additional months of base salary payable at regular payroll dates following the date of termination. Further, all of Mr. Lumsdaine’s outstanding unvested equity awards shall vest and/or remain exercisa ble for their stated terms in accordance with the terms of the agreement governing such equity incentive. In addition, all amounts contributed by the Company to the CAP for Mr. Lumsdaine’s benefit shall vest and thereafter be paid out in accordance with the terms of the CAP as in effect on the date of termination.

Mr. Lumsdaine is generally subject to non-compete and non-solicitation covenants under his employment agreement for a period of 18 months following the date of his termination. In the event Mr. Lumsdaine terminates his employment without good reason, the non-compete and non-solicitation covenants shall remain in effect for 24 months; however, Mr. Lumsdaine may reduce the term of the non-compete and non-solicitation covenants from 24 months to 18 months by executing a full release of claims in favor of the Company.

The foregoing descriptions of the Transition Employment Agreement and Mr. Lumsdaine’s employment agreement are subject in all respects to the terms and conditions of the Transition Employment Agreement and Mr. Lumsdaine’s employment agreement, which are attached hereto as Exhibit 10.1 and 10.2, respectively.

Item 9.01. Financial Statements and Exhibits.

(c) Exhibits:
Exhibit 10.1	Transition Employment Agreement dated December 31, 2010 between the Company and Mary A. Chaput
Exhibit 10.2	Employment Agreement dated December 31, 2010 between the Company and Alfred Lumsdaine

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.

HEALTHWAYS, INC.
By:	/s/ Alfred Lumsdaine
	Alfred Lumsdaine
	Chief Financial Officer

Date:  January 6, 2011

EXHIBIT INDEX

Exhibit 10.1	Transition Employment Agreement dated December 31, 2010 between the Company and Mary A. Chaput
Exhibit 10.2	Employment Agreement dated December 31, 2010 between the Company and Alfred Lumsdaine

EX-10.1

Exhibit 10.1

TRANSITION EMPLOYMENT AGREEMENT

This Transition Employment Agreement (the “Agreement”) is made and entered into effective as of December 31, 2010 (the “Effective Date”) by and between Healthways, Inc., a Delaware corporation (“Healthways”) and Mary A. Chaput (“Employee”).  Healthways and Employee are sometimes referred to herein individually as a “Party” and collectively as the “Parties”.

WITNESSETH:

WHEREAS, Healthways desires to hire Employee to perform certain transition services for Healthways identified in Exhibit A attached hereto, as may be amended from time to time by agreement of the Parties (the “Transition Services”); and

WHEREAS, Employee has the experience and qualifications necessary to provide the Transition Services.

NOW, THEREFORE, in consideration of the mutual covenants and conditions hereinafter expressed, and other good and valuable consideration, the receipt of which is hereby acknowledged, the parties agree as follows:

SECTION 1.

AT WILL EMPLOYEE STATUS; DUTIES AND RESPONSIBILITIES

1.1At Will Employee Status: Employee and Healthways acknowledge and agree that the Amended and Restated Employment Agreement dated as of December 19, 2008 by and between Healthways and Employee (the “Employment Agreement”) is hereby terminated, effective as of the Effective Date, and neither Party has any further obligation thereunder.  Employee acknowledges that his or her employment with Healthways constitutes at-will employment, and that either Employee or Healthways can terminate this relationship at any time, with or without cause and with or without notice, and in all such events without any liability to Healthways, except as expressly set forth in this Agreement.

1.2Transition Services. Healthways hereby employs Employee, and Employee hereby accepts employment with Healthways, to provide the Transition Services. Employee, in performing the Transition Services, shall have the duties and responsibilities assigned to him or her from time to time by Healthways, including, but not limited to, those described in the attached Exhibit A and as may be amended from time to time by the mutual agreement of the Parties.

1.3Time Commitment. From the Effective Date of this Agreement to the termination of this Agreement, Employee agrees to devote such time and effort to performing such duties as shall be reasonably required in connection with the Transition Services. Employee shall maintain records with respect to the time spent in the performance of Employee’s duties and responsibilities hereunder and shall submit such records to Healthways as reasonably requested.

1.4Compliance with Law and Standards. Employee shall at all times comply with all material applicable laws, rules and regulations of any and all governmental authorities and the applicable standards, bylaws, rules, compliance programs, policies and procedures of Healthways that are disclosed or made available to Employee.  Employee further agrees that Employee will not engage in any conduct which, in the reasonable determination of Healthways, adversely affects the image or business of Healthways or would impair in any material respect Employee’s ability to carry out Employee’s duties hereunder except as other wise required by a court, law, governmental agency or regulation.

1.5Ownership of Intellectual Property. Employee acknowledges and agrees that all of the work product or deliverables produced or developed by Employee during his or her employment with Healthways, either alone or in conjunction with others, including, without limitation, all technology of any nature whatsoever, all notes, records, drawings, designs, inventions, improvements, developments, discoveries, trade secrets, and patentable or copyrightable material which relate, directly or indirectly, in any manner to the subject matter of this Agreement, including any derivative works of any of the foregoing (collectively the “Work Product”), is the sole and exclusive property of Healthways. Employee agrees that the development of the Work Product is a “work made for hire” within the meaning of the Copyright Act of 1976, as amended. Employee hereby assigns to Healthways, without further compensation, all of its right, title and interest (whether arising prior to this Agreement, now in existence or hereafter arising) in and to the Work Product, in the United States and elsewhere. Upon request, Employee will sign all applications, assignments, instruments and papers and perform all acts necessary or desired by Healthways to assign the Work Product, or any portion thereof, fully and completely to Healthways and to enable Healthways, its successors and assigns to secure and enjoy the full and exclusive benefits and advantages thereof The Work Product shall be subject to Employee’s obligations of confidentiality contained in Section 5.1 hereof.

SECTION 2.

COMPENSATION

2.1Compensation.

2.1.1In consideration of Employee’s agreement to terminate the Employment Agreement, for a period beginning on the Effective Date and ending on the date that is 18 months after the Effective Date, Healthways will pay employee a Base Salary equal to $390,173.68 per annum (“Base Salary”), payable periodically at regular payroll intervals in accordance with Healthways’ payroll policies as in effect from time to time.  In addition, the Employee will receive an additional amount consisting of six (6) additional months of the Employee’s Base Salary (payable periodically at regular payroll intervals in accordance with Healthways’ payroll policies as in effect from time to time) upon her executi on of a full release of claims in favor of Healthways (the “Release”) upon the termination of Employee’s employment with Healthways.  In addition, (i) all of Employee’s outstanding stock options, restricted stock, restricted stock units and any other unvested equity incentives (collectively “Awards”) shall vest, effective as of the Effective Date, and all stock options so vested shall remain exercisable as provided for in the applicable Award agreements by reason of Early Retirement (as defined in the 2007 Stock Incentive Plan, as amended), (ii) all amounts contributed by Healthways to Healthways’ Capital Accumulation Plan (“CAP”) as of December 31, 2010 for the benefit of Employee shall vest and thereafter be paid out in accordance with the terms of the CAP as in effect from time to time, and (iii) Healthways shall deem an Accelerated Vesting Event (as defined in the applicable Performance Cash Award Agreement) with respect to performance cash awards previously granted to Employee to have occurred for all amounts earned by Employee through the Performance Cycles (as defined in the applicable Performance Cash Award Agreement) ended December 31, 2009 and December 31, 2010.  Employee shall not be eligible to receive any new long-term incentive awards or participate in long-term incentive plans, including but not limited to stock options, restricted stock, restricted stock units, other equity incentives, performance cash, and CAP, for periods beginning after the Effective Date.

2.1.2Employee shall be entitled to receive such bonus, if any, for fiscal 2010 as shall be determined upon the recommendation of Chief Executive Officer by the Board of Directors of Healthways (or any designated Committee of the Board of Directors comprised solely of independent directors), which shall be paid in accordance with the terms and conditions of the bonus plan established for Healthways.  Employee shall not be entitled to earn any bonus award for periods beginning after the Effective Date.

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2.1.3For a period beginning as of the Effective Date and ending on the date that is 18 months after the Effective Date, Employee shall be entitled to participate if permitted under Healthways’ group medical insurance and group medical benefits at the same rate as then in effect for Healthways’ other employees; provided, that Employee shall be entitled to participate under such plans for an additional six months in the event Employee executes the Release.

2.1.4During the Initial Term of this Agreement, Healthways will pay Employee a transition salary at a rate equal to $100,000 per annum at regular payroll intervals in accordance with Healthways’ payroll policies as in effect from time to time.  At the end of the Initial Term of this Agreement and in consideration of the services performed by Employee hereunder, Healthways shall pay Employee a completion bonus in an amount equal to $100,000 for the successful achievement, as determined by the Chief Executive Officer of the Company in his sole discretion, of the Transition Services (the “Bonus”) payable no later than January 31, 2012; provided that if this Agreement is terminated by either party prior to th e end of the Initial Term, then the amount of Bonus that shall be payable shall be determined by the Chief Executive Officer of the Company in his sole discretion.

2.2Expenses. For approved out-of-pocket properly documented expenses, Employee shall remit receipts at the end of each month for timely reimbursement.

SECTION 3.

INDEMNIFICATION

3.1Employee shall fully, completely and unconditionally indemnify and hold Healthways and its directors, officers, employees, agents, shareholders and affiliates, if any, harmless from and against any damage, suit, action, proceeding, claim, demand, judgment, expenses (including without limitation costs of judgments, settlements, court costs and reasonable attorneys’ fees and costs) and liability of any kind arising out of or relating to any negligence, omission, act or willful misconduct of in connection with the performance of the Transition Services under this Agreement.

SECTION 4.

TERM AND TERMINATION

4.1Term. The term of this Agreement shall begin on the Effective Date and shall end on December 31, 2011 (the “Initial Term”), unless terminated sooner as provided herein. Thereafter, if mutually agreed in writing, this Agreement shall renew on a month-to-month basis (each, a “Renewal Term”, the Initial Term and any Renewal Term shall be referred to collectively as the “Term”).

4.2Termination by Healthways for Cause. Healthways may terminate this Agreement at any time upon the occurrence of any of the following: (a) Employee’s repeated failure to perform timely any of the duties as set forth in this Agreement; (b) Employee’s conviction of any crime punishable as a felony; commission of any act or omission involving dishonesty or fraud with respect to Healthways, any of its affiliates or any of their respective customers or suppliers, (c) Employee’s professional misconduct tending to bring Healthways or any of its affiliates into public disgrace or disrepute, (d) the death, disability or mental incompetence of Employee; or (e) suspension or exclusion of Employee from any federal or state health care program.

4.3Termination Without Cause. This agreement may be terminated by Healthways at any time for any reason and without cause, upon thirty (30) days written Notice and all transition salary through such date due to Employee under Section 2.1.4 will be reconciled and paid with no further obligations on either party.

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4.4Payments Upon Termination. Upon a termination of this Agreement for any reason whatsoever pursuant to this Section 4, Employee shall be entitled to (i) all compensation accrued hereunder through the Termination Date (including any payments that are being made in arrears); and (ii) expense reimbursement pursuant to Section 2 through the date of termination with no further payment obligation hereunder on the part of Healthways.

4.5Obligations. Upon termination, each Party’s obligations shall cease with regard to the other, except for Healthways’ obligations under Sections 2.1.1, 2.1.2, and 2.1.3, and Healthways shall be obligated to pay, within thirty (30) days of the Termination Date, any unpaid amounts owed to Employee for Transition Services performed pursuant to this Agreement prior to termination.

SECTION 5.

CONFIDENTIALITY, NON-COMPETITION, NON-SOLICITATION

5.1Confidentiality, Non-competition, Non-solicitation:

5.1.1Employee acknowledges that (a) the business of providing care support services and health support services in which Healthways is engaged (the “Business”) is intensely competitive and that Employee’s employment by Healthways will require that Employee have access to and knowledge of confidential information of Healthways relating to its business plans, financial data, marketing programs, client information, contracts and other trade secrets, in each case other than as and to the extent such information is generally known or publicly available through no violation of this Agreement by Employee; (b)  the use or disclosure of such information other than in furtherance of the Business may place Healthway s at a competitive disadvantage and may do damage, monetary or otherwise, to the Business; and (c) the engaging by Employee in any of the activities prohibited by this Section shall constitute improper appropriation and/or use of such information. Employee expressly acknowledges the trade secret status of Healthways’ confidential information and that the confidential information constitutes a protectable business interest of Healthways. Other than as may be required in the performance of his or her duties, Employee expressly agrees not to divulge such confidential information to anyone outside Healthways without prior permission.

5.1.2Healthways (which shall be construed to include Healthways, its subsidiaries and their respective affiliates) and Employee agree that for a period of eighteen (18) months after the date of termination of Employee’s employment with Healthways:

5.1.2.1 Employee shall not engage in Competition, as defined below, with Healthways or its subsidiaries within any market where Healthways is conducting the Business at the time of termination of Employee’s employment hereunder. For purposes of this Agreement, “Competition” by Employee shall mean Employee’s being employed by or acting as a consultant or lender to, or being a director, officer, employee, principal, agent, stockholder, member, owner or partner of, or permitting him or her name to be used in connection with the activities of any entity engaged in the Business, provided that, it shall not be a violation of this sub-paragraph for Employee to become the registered or beneficial owner of less than five percent (5%) of any class of the capital stock of a ny one or more competing corporations registered under the 1934 Act, provided that, Employee does not participate in the business of such corporation until such time as this covenant expires; and

5.1.2.2  Employee further agrees that he or she will not, directly or indirectly, for his or her benefit or for the benefit of any other person or entity, do any of the following: (a) solicit from any customer, doing business with Healthways as of Employee’s termination, business of the same or of a similar nature to the Business of Healthways with such customer; (b) solicit from any known potential customer of Healthways business of the same or of a similar nature to that which, to the knowledge of Employee, has been the subject of a written or oral bid, offer or proposal by Healthways, or of substantial preparation with a view to making such a bid, proposal or offer, within eighteen (18) months prior to Employee’s termination; or (c) recruit or solicit the employ ment or services of any person who was employed by Healthways upon termination of Employee’s employment and is employed by Healthways at the time of such recruitment or solicitation.

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5.1.2.3  Employee acknowledges that the services to be rendered by him or her to Healthways are of a special and unique character, which causes this Agreement to be of significant value to Healthways, the loss of which may not be reasonably or adequately compensated for by damages in an action at law, and that a breach or threatened breach by him or her of any of the provisions contained in this Section will cause Healthways irreparable injury. Employee therefore agrees that Healthways will be entitled, in addition to any other right or remedy, to a temporary, preliminary and permanent injunction, without the necessity of proving the inadequacy of monetary damages or the posting of any bond or security, enjoining or restraining Employee from any such violation or threatened vi olations. Employee acknowledges that the terms of this Section 5.1 and its obligations are reasonable and will not prohibit him or her from being employed or employable in the health care industry.

5.1.3If 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 fullest extent permitted by law.

SECTION 6.

GENERAL PROVISIONS

6.1Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Tennessee.

6.2Waiver of Breach. The waiver by a party of any breach of any provision of this  Agreement by the other party shall not operate or be construed as a waiver of any subsequent breach of the same or any other provision hereof by that party.

6.3Severability. The invalidity or unenforceability of any provision of this Agreement will not effect the validity or enforceability of any other provision.

6.4Entire Agreement: Amendments. This Agreement and the Exhibits hereto form the entire agreement of the parties and supersede any prior agreements between them with respect to the subject matter hereof.

6.5Waiver. Waiver of any term or provision of this Agreement or forbearance to enforce any term or provision by either party shall not constitute a waiver as to any subsequent breach or failure of the same term or provision or a waiver of any other term or provision of this Agreement. Amendments may be made to this Agreement only after written approval of both Healthways and Employee.

6.6Assignment. Employee shall not assign the rights, duties or obligations hereunder.

6.7Notice. Any notice required or permitted to be given under this Agreement shall be sufficient if written and delivered in person, by fax or sent by Registered Mail, return receipt requested, as follows:

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If to Healthways:	If to Employee:
Healthways, Inc. 701 Cool Springs Blvd. Franklin, TN 37067 Attn: Ben Leedle

6.8Litigation. In the event that a dispute between the parties results in litigation, in addition  to any other relief to which it may be entitled, the prevailing party shall be reimbursed for reasonable attorneys’ fees and all other reasonable costs of that litigation.

6.9Binding Effect. This Agreement shall be binding upon and inure to the benefit of the parties, their successors and their permitted assigns.

6.10Non-Solicitation. During the term of this Agreement and for one (1) year thereafter, neither party shall solicit for employment or otherwise grant employment to any employee of the other.

6.11Survival.  The provisions of Sections 1.1, 1.4, 5.1, 6.1, 6.10 and 6.11 hereof shall survive the termination for any reason or expiration of this Agreement for the period described or referenced in each such Section or, if no period is described or referenced in such Section, indefinitely.

[Signature page follows]

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first written above.

       HEALTHWAYS, INC.

By:  /s/ Ben R. Leedle, Jr.                     

Name:  Ben R. Leedle, Jr.                       

Title:   CEO                                              

Date:  12/31/2010                                    

EMPLOYEE

/s/ Mary A. Chaput                             

 Mary A. Chaput

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EXHIBIT A

SCOPE OF WORK

Employee will provide professional services as determined or requested by the Chief Executive Officer.

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EX-10.2

Exhibit 10.2

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT dated as of December 31, 2010 (the “Agreement”), is by and between Healthways, Inc., a Delaware corporation (the “Company”), and Alfred Lumsdaine (the “Executive”). This Agreement replaces and supersedes any other agreement between the Company and Executive.

WHEREAS, the Company desires that the Executive serve or continue to serve as Vice President and Chief Financial Officer (“CFO”) and the Executive desires to hold such position under the terms and conditions of this Agreement; and

WHEREAS, the parties desire to enter into this Agreement setting forth the terms and conditions of the employment relationship of the Executive with the Company.

NOW, THEREFORE, intending to be legally bound hereby, the parties agree as follows:

I. EMPLOYMENT. The Company hereby employs the Executive and the Executive hereby accepts employment with the Company, upon the terms and subject to the conditions set forth herein.

II. TERM. Subject to termination as stated in Section VI, the term of employment of the Executive pursuant to this Agreement (as the same may be extended, the “Term”) shall commence on January 1, 2011 (the “Effective Date”), and shall have a continuous term of sixteen (16) months thereafter.

III. POSITION. During the Term, the Executive shall serve as CFO of the Company performing duties commensurate with the position and such additional duties as the Company shall determine. If asked, the Executive agrees to serve, without any additional compensation, as a director on the Board of Directors of the Company (the “Board”) and/or the board of directors of any subsidiary of the Company, and/or in one or more officer positions with the Company and/or any subsidiary of the Company. If the Executive’s employment is terminated for any reason, whether such termination is voluntary or involuntary, the Executive shall resign as a director and officer of the Company (and any of its subsidiaries), such resignation to be effective no later than the date of termination of the Executive’s employment with the Company.

IV. DUTIES. During the Term, the Executive shall devote his full time and attention during normal business hours to the business and affairs of the Company; provided, however, that it shall not be a violation of this Agreement for the Executive with the approval of the Company to devote reasonable periods of time to charitable and community activities and industry or professional activities, and/or to manage personal investments, so long as such activities do not interfere with the performance of the Executive’s responsibilities under this Agreement.

V.           COMPENSATION

A. Base Salary. The Executive’s initial base salary as of the Effective Date is $325,000. Effective January 1 of each calendar year after the Effective Date during the Term of this Agreement, upon the recommendation of the Chief Executive Officer (“CEO”), the Board (or a committee of the Board) shall review the Executive’s base salary and may increase such amount if and as it may deem advisable. Such initial base salary, as it may be increased during the Term, is defined as the “Base Salary.” The Base Salary shall be payable in substantially equal installments in accordance with the Company’s normal payroll practices, and is subject to all proper taxes and withholding. The Base Salary rate at which the Executive is being compensated on the Date of Termination (as defined below) shall be the Base Salary rate us ed in determining all severance amounts payable to the Executive hereunder.

B. Bonus Plan. Such bonus, if any, as shall be determined upon the recommendation of the CEO by the Board (or any designated Committee of the Board comprised solely of independent directors), shall be paid in accordance with the terms and conditions of the bonus plan established for the Company (“Bonus Plan”).

C. Long Term Incentive Awards. During the Term, upon the recommendation of the CEO, the Board (or any designated committee of the Board comprised solely of independent directors) will consider, in its sole discretion, long term incentive awards to the Executive pursuant to the Company’s equity incentive plans.

D. Other Benefits. In addition to the benefits specifically provided for herein, during the Term the Executive shall be entitled to participate in all benefit plans maintained by the Company for officers generally according to the terms of such plans.

VI. TERMINATION OF AGREEMENT. The Executive’s employment under this Agreement shall not be terminated except as set forth in this Section. Any reference to the date of delivery of a notice of termination or resignation by either the Company or the Executive in this Section VI shall constitute the “Date of Termination,” unless otherwise set forth herein.  For purposes of this Agreement, the Executive will be deemed to have terminated employment when the Executive has a “separation from service” from the Company as determined in accordance with Treasury Regulation 1.409A-1(h).

A. By Mutual Consent. The Executive’s employment pursuant to this Agreement may be terminated at any time by the mutual written agreement of the Company and the Executive upon such terms as are agreed upon between the parties.

B. Death. If Executive dies during the Term of this Agreement, the Company shall pay his Base Salary due through the date of his death to the Executive’s designated beneficiary plus a pro-rata portion of any Bonus Plan or other compensation to which he is otherwise entitled as of the time of his death, which Bonus Plan amount will be determined and paid after the end of the fiscal year for which the Bonus Plan was in place.  The amount of Base Salary due through the date of the Executive’s death shall be paid to his designated beneficiary within thirty (30) days of the Executive’s death, with the date of such payment chosen by the Company in its sole discretion. Any bonus shall be paid at such time designated in the Bonus Plan. Furthermore, all outstanding stock options, restricted stock, restricted stock units and any othe r unvested equity incentives shall vest and/or remain exercisable for their stated terms solely in accordance with the terms of the award agreements to which the Company and the Executive are parties at the time of his death. In addition, all amounts contributed by the Company to the Capital Accumulation Plan (“CAP”) for the benefit of the Executive shall vest and thereafter be paid out in accordance with the terms of the CAP as in effect at the time of the Executive’s death. The Company shall then have no further obligations to the Executive or any representative of his estate or his heirs except that Executive’s estate or beneficiaries, as the case may be, shall be paid such amounts as may be payable under the Company’s life insurance policies and other plans as they relate to benefits following death then in effect.

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C. Disability

1. The Executive’s employment may be terminated by written notice by either party to the other party, when:

a. the Executive suffers a physical or mental disability entitling the Executive to long-term disability benefits under the Company’s long-term disability plan, if any, or

b. in the absence of a Company long-term disability plan, the Executive is unable, as determined by the Board (or any designated Committee of the Board), to perform the essential functions of his regular duties and responsibilities, with or without reasonable accommodation, due to a medically determinable physical or mental illness which has lasted (or can reasonably be expected to last) for a period of six (6) consecutive months.

2. If the Executive’s employment is terminated under this Section (C), the Executive shall be entitled to receive:

a. all Base Salary and benefits due to the Executive through the Date of Termination (payable within thirty (30) days of the Date of Termination, with the date of such payment determined by the Company in its sole discretion) and a pro-rata portion of any Bonus Plan or other compensation to which he is otherwise entitled as of the Date of Termination, which Bonus Plan amount will be determined after the end of the fiscal year for which the Bonus Plan was in place and paid in accordance with the terms of such Bonus Plan;

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b. an amount equal to the Executive’s Base Salary for a total of eighteen (18) months following the Date of Termination; and

c. if permitted under the Company’s group medical insurance, group medical benefits at the same rate as then in effect for the Company’s employees for two (2) years after the Date of Termination; provided, that if the Executive instead elects continuation of group benefits under COBRA, the Company shall pay the full cost of the premiums for two (2) years following the Date of Termination.  The costs of the Company’s portion of any premiums due under this clause (c) shall be included in the Executive’s gross income to the extent the provision of such benefits is deemed to be discriminatory under Section 105(h) of the Internal Revenue Code of 1986, as amended (the “Code”).

3. The amounts in clause 2(b) above shall be reduced by any disability insurance payments the Executive receives as a result of his disability, and shall be paid to the Executive periodically at the regular payroll dates commencing as of the Date of Termination and for the remaining term of the non-compete covenant in Section IX hereof. In addition, the Executive will receive an enhanced severance amount consisting of six (6) additional months of the Executive’s Base Salary (payable periodically at regular payroll intervals) upon his or her execution of a full release of claims in favor of the Company.  Furthermore, all outstanding stock options, restricted stock, restricted stock units and any other unvested equity incentives shall vest and/or remain exercisable for their stated terms solely in accordance with the terms of the award agreements to which the Company and the Executive are parties on t he Date of Termination. In addition, all amounts contributed by the Company to the CAP for the benefit of the Executive shall vest and thereafter be paid out in accordance with the terms of the CAP as in effect on the Date of Termination.

D. By the Company for Cause

1. The Executive’s employment may be terminated by the Board upon recommendation of the CEO, both acting in good faith, by written notice to the Executive specifying the event(s) relied upon for such termination upon the occurrence of any of the following events (each of which shall constitute “Cause” for termination):

a. the continued failure by the Executive to substantially perform his duties after written notice and failure to cure within sixty (60) days;

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b. conviction of a felony or engaging in misconduct which is materially injurious to the Company, monetarily or to its reputation or otherwise, or which would damage Executive’s ability to effectively perform his duties;

c. theft or dishonesty by the Executive;

d. intoxication while on duty; or

e. willful violation of Company policies or procedures after written notice and failure to cure within thirty (30) days.

2. If the Executive’s employment is terminated under this Section (D), the Executive shall be entitled to receive all Base Salary and benefits to be paid or provided to the Executive under this Agreement through the Date of Termination, and no more.

3. In addition, the Executive will receive an enhanced severance amount consisting of six (6) additional months of the Executive’s Base Salary (payable periodically at regular payroll intervals) upon his or her execution of a full release of claims in favor of the Company. Furthermore, all outstanding stock options, restricted stock, restricted stock units and any other vested equity incentives shall remain exercisable solely in accordance with the terms of the award agreements to which the Company and the Executive are parties on the Date of Termination. All unvested equity incentives shall terminate on the Date of Termination. In addition, all amounts contributed by the Company to the CAP for the benefit of the Executive that have vested shall be paid out in accordance with the terms of the CAP as in effect on the Date of Termination. The Executive shall not be entitled to receive any unvested Company contr ibutions to the CAP.

E. By the Company Without Cause

1. The Executive’s employment may be terminated by the Board upon recommendation of the CEO at any time without Cause by delivery of a written notice of termination to the Executive. If the Executive’s employment is terminated under this Section (E), the Executive shall be entitled to receive:

a. all Base Salary and benefits due to the Executive through the Date of Termination (payable within thirty (30) days of the Date of Termination, with the date of such payment determined by the Company in its sole discretion) and a pro-rata portion of any Bonus Plan or other compensation to which he is otherwise entitled as of the Date of Termination, which Bonus Plan amount will be determined after the end of the fiscal year for which the Bonus Plan was in place and paid in accordance with the terms of such Bonus Plan;

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b. an amount equal to the Executive’s Base Salary for a total of eighteen (18) months following the Date of Termination; and

c. group medical benefits for eighteen (18) months after the Date of Termination. The costs of the Company’s portion of any premiums due under this clause (c) shall be included in the Executive’s gross income to the extent the provision of such benefits is deemed to be discriminatory under Section 105(h) of the Internal Revenue Code of 1986, as amended (the “Code”).

2. The amount in clause 1(b) above shall be paid to the Executive periodically at the regular payroll dates commencing as of the Date of Termination and for the remaining term of the non-compete covenant in Section IX hereof.  In addition, the Executive will receive an enhanced severance amount consisting of six (6) additional months of the Executive’s Base Salary (payable periodically at regular payroll intervals) upon his or her execution of a full release of claims in favor of the Company. Furthermore, all outstanding stock options, restricted stock, restricted stock units and any other unvested equity incentives shall vest and/or remain exercisable for their stated terms solely in accordance with the terms of the award agreements to which the Company and the Executive are parties on the Date of Termination. In addition, all amounts contributed by the Company to the CAP for the benefit of the Exe cutive shall vest and thereafter be paid out in accordance with the terms of the CAP as in effect on the Date of Termination.

F. By the Executive for Good Reason

1. The Executive’s employment may be terminated by the Executive by written notice of his resignation delivered within sixty (60) days after the occurrence of any of the following events, each of which shall constitute “Good Reason” for resignation:

a. a material reduction in the Executive’s Base Salary (unless such reduction is part of an across the board reduction affecting all Company executives with a comparable title);

b. a requirement by the Company to relocate the Executive to a location that is greater than twenty-five (25) miles from the location of the office in which the Executive performs his duties hereunder at the time of such relocation;

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c. in connection with a Change in Control, a failure by the successor person or entity, or the Board, either to honor this Agreement or to present the Executive with an employment agreement containing provisions substantially similar to this Agreement or otherwise satisfactory to the Executive and which is executed by the Executive; or

d. a material reduction in the Executive’s title, or a material and adverse change in Executive’s status and responsibilities, or the assignment to Executive of duties or responsibilities which are materially inconsistent with Executive’s status and responsibilities.

2. The Executive shall give the Company written notice of his intention to resign for Good Reason (stating the reason therefor) within sixty (60) days after the occurrence of one of the events stated in subparagraphs (a), (b), (c) or (d) above (the “Good Reason Events”) and the Company shall have sixty (60) days (the “Cure Period”) thereafter to rescind the Good Reason Event(s), in which event the Executive no longer shall have the right to resign for Good Reason. If the Company fails to rescind the Good Reason Event(s) before the expiration of the Cure Period, then the Executive may resign for Good Reason and receive the benefits described below so long as the resignation for Good Reason occurs within thirty (30) days following the expiration of the Cure Period, otherwise the right to resign on the basis of that Good Reason Event(s) shall be deemed to have been waived.   If t he Executive resigns for Good Reason as defined in this Section (F), the Executive shall be entitled to receive:

a. all Base Salary and benefits due to the Executive under this Agreement through the Date of Termination (payable within thirty (30) days of the Date of Termination, with the date of such payment determined by the Company in its sole discretion) and a pro-rata portion of any Bonus Plan or other compensation to which he is otherwise entitled as of the Date of Termination, which Bonus Plan amount will be determined after the end of the fiscal year for which the Bonus Plan was in place and paid in accordance with the terms of such Bonus Plan;

b. an amount equal to Executive’s Base Salary for a total of eighteen (18) months following the Date of Termination; and

c. group medical benefits for eighteen (18) months after the Date of Termination.  The costs of the Company’s portion of any premiums due under this clause (c) shall be included in the Executive’s gross income to the extent the provision of such benefits is deemed to be discriminatory under Section 105(h) of the Internal Revenue Code of 1986, as amended (the “Code”).

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3. The amount in clause 2(b) above shall be paid to the Executive periodically at the regular payroll dates commencing as of the Date of Termination and for the remaining term of the non-compete covenant in Section IX hereof. In addition, the Executive will receive an enhanced severance amount consisting of six (6) additional months of the Executive’s Base Salary (payable periodically at regular payroll intervals) upon his or her execution of a full release of claims in favor of the Company.  Furthermore, all outstanding stock options, restricted stock, restricted stock units and any other unvested equity incentives shall vest and/or remain exercisable for their stated terms solely in accordance with the terms of the award agreements to which the Company and the Executive are parties on the Date of Termination. In addition, all amounts contributed by the Company to the CAP for the benefit of the Exe cutive shall vest and thereafter be paid out in accordance with the terms of the CAP as in effect on the Date of Termination.

G. By the Executive Without Good Reason

1. The Executive may terminate his employment at any time by delivery of a written notice of resignation to the Company no less than sixty (60) days and no more than ninety (90) days prior to the effective date of the Executive’s resignation. The Executive shall receive all Base Salary and benefits due under this Agreement through the next payroll date following the Date of Termination, and no more.

2. Although the Executive is not entitled to any severance amount in the event of termination pursuant to this Section (G), the Executive may reduce the term of the non-compete and non-solicitation covenants in Section IX hereof, from twenty-four (24) months to eighteen (18) months, upon execution of a full release of claims in favor of the Company. Furthermore, all outstanding stock options, restricted stock, restricted stock units and any other vested equity incentives shall remain exercisable solely in accordance with the terms of the award agreements to which the Company and the Executive are parties on the Date of Termination. All unvested equity incentives shall terminate on the Date of Termination. In addition, all amounts contributed by the Company to the CAP for the benefit of the Executive that have vested shall be paid out in accordance with the terms of the CAP as in effect on the Date of Termination. T he Executive shall not be entitled to receive any unvested Company contributions to the CAP.

H. Following a Change in Control

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1. If the Executive’s termination of employment without Cause (pursuant to Section VI(E)) or for Good Reason (pursuant to Section VI(F)) occurs within twelve (12) months following a Change in Control, then the amounts payable pursuant to Section VI(E) or Section VI(F) above, as the case may be, shall be referred to as the “Change in Control Severance Amount,” and shall be paid to Executive in a lump sum no later than sixty (60) days following the Date of Termination, with the date of such payment determined by the Company in its sole discretion.  In addition, the Executive will receive an enhanced severance amount consisting of six (6) additional months of the Executive’s Base Salary (payable periodically at regular payroll dates) upon his or her execution of a full release of claims in favor of the Company. Payments pursuant to this Section VI(H) shall be made in lieu of, but not in addition to, any payment under any other paragraph of this Section VI. Furthermore, all outstanding stock options, restricted stock, restricted stock units and any other unvested equity incentives shall vest and/or remain exercisable for their stated terms solely in accordance with the terms of the award agreements to which the Company and the Executive are parties on the Date of Termination. In addition, all amounts contributed by the Company to the CAP for the benefit of the Executive shall vest and thereafter be paid out in accordance with the terms of the CAP as in effect on the Date of Termination.

2. For the purposes of this Agreement, a “Change in Control” shall mean any of the following events:

a. any person or entity, including a “group” as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), other than the Company or a wholly-owned subsidiary thereof or any employee benefit plan of the Company or any of its subsidiaries, becomes the beneficial owner of the Company’s securities having 35% or more of the combined voting power of the then outstanding securities of the Company that may be cast for the election of directors of the Company (other than as a result of an issuance of securities initiated by the Company in the ordinary course of business);

b. as the result of, or in connection with, any cash tender or exchange offer, merger or other business combination, sales of assets or contested election, or any combination of the foregoing transactions, less than a majority of the combined voting power of the then outstanding securities of the Company or any successor corporation or entity entitled to vote generally in the election of the directors of the Company or such other corporation or entity after such transaction are held in the aggregate by the holders of the Company’s securities entitled to vote generally in the election of directors of the Company immediately prior to such transaction; or

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c. during any period of two (2) consecutive years, individuals who at the beginning of any such period constitute the Board cease for any reason to constitute at least a majority thereof, unless the election, or the nomination for election by the Company’s stockholders, of each director of the Company first elected during such period was approved by a vote of at least two-thirds of the directors of the Company then still in office who were directors of the Company at the beginning of any such period.

3. Excise Tax Payment. If, in connection with a Change in Control, the Internal Revenue Service asserts, or if the Executive or the Company is advised in writing by an established accounting firm, that any payment in the nature of compensation to, or for the benefit of, the Executive from the Company (or any successor in interest) constitutes an “excess parachute payment” under Section 280G of the Code, whether paid pursuant to this Agreement or any other agreement, and including property transfers pursuant to securities and other employee benefits that vest upon a Change in Control (collectively, the “Excess Parachute Payments”) the Company shall pay to the Executive, on demand, a cash sum equal to the amount of excise tax due under Section 4999 of the Code on the entire amount of the Excess Parachute Payments (excluding any p ayment pursuant to this Section VI(H)(3)) (the “Gross-up Amount”).  The payment of the "Gross-up Amount" due to the Executive under this Section VI(H)(3) shall be paid as soon as reasonably possible following demand of payment by the Executive, but in no event later than December 31 of the year following the year (A) any tax is paid to the Internal Revenue Service regarding this Section VI(H)(3) or (B) any tax audit or litigation brought by the Internal Revenue Service or other relevant taxing authority related to this Section VI(H)(3) is completed or resolved.

I. Delay of Payments Pursuant to Section 409A.  It is intended that (1) each installment of the payments provided under this Agreement is a separate “payment” for purposes of Section 409A of the Code and (2) that the payments satisfy, to the greatest extent possible, the exemptions from the application of Section 409A of the Code provided under Treasury Regulations 1.409A-1(b)(4), 1.409A-1(b)(9)(iii), and 1.409A-1(b)(9)(v).  Notwithstanding anything to the contrary in this Agreement, if the Company determines (i) that on the date the Executive’s employment with the Company terminates or at such other time that the Company determines to be relevant, the Executive is a “specified employee” (as such term is defined under Treasury Regulation 1.409A-1(i)) of the Company and (ii) that any payments to be prov ided to the Executive pursuant to this Agreement are or may become subject to the additional tax under Section 409A(a)(1)(B) of the Code or any other taxes or penalties imposed under Section 409A of the Code if provided at the time otherwise required under this Agreement then such payments shall be delayed until the date that is six months after the date of the Executive’s “separation from service” (as such term is defined under Treasury Regulation 1.409A-1(h)) with the Company, or, if earlier, the date of the Executive’s death.  Any payments delayed pursuant to this Section VI(I) shall be made in a lump sum on the first day of the seventh month following the Executive’s “separation from service” (as such term is defined under Treasury Regulation 1.409A-1(h)), or, if earlier, the date of the Executive’s death. In addition, to the extent that any reimbursement, fringe benefit or other, similar plan or arrangement in which the Executive participates dur ing the term of Executive’s employment under this Agreement or thereafter provides for a "deferral of compensation" within the meaning of Section 409A of the Code, (i) the amount eligible for reimbursement or payment under such plan or arrangement in one calendar year may not affect the amount eligible for reimbursement or payment in any other calendar year (except that a plan providing medical or health benefits may impose a generally applicable limit on the amount that may be reimbursed or paid), and (ii) subject to any shorter time periods provided herein or the applicable plans or arrangements, any reimbursement or payment of an expense under such plan or arrangement must be made on or before the last day of the calendar year following the calendar year in which the expense was incurred.

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VII. REPRESENTATIONS. The Executive represents and warrants that he is not a party to any agreement or instrument which would prevent him from entering into or performing his duties in any way under this Agreement.

VIII. ASSIGNMENT, BINDING AGREEMENT. This Agreement is a personal contract and the rights and interests of the Executive hereunder may not be sold, transferred, assigned, pledged, encumbered, or hypothecated by him, except as otherwise expressly permitted by the provisions of this Agreement. This Agreement shall inure to the benefit of and be enforceable by the Executive and his personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive should die while any amount would still be payable to him hereunder had the Executive continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to his devisee, legatee or other designee or, if there is no such designee, to his estate.

IX.           CONFIDENTIALITY, NON-COMPETITION, NON-SOLICITATION

A. The Executive acknowledges that:

1. the business of providing care support services and health support services in which the Company is engaged (the “Business”) is intensely competitive and that the Executive’s employment by the Company will require that the Executive have access to and knowledge of confidential information of the Company relating to its business plans, financial data, marketing programs, client information, contracts and other trade secrets, in each case other than as and to the extent such information is generally known or publicly available through no violation of this Agreement by the Executive;

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2. the use or disclosure of such information other than in furtherance of the Business may place the Company at a competitive disadvantage and may do damage, monetary or otherwise, to the Business; and

3. the engaging by the Executive in any of the activities prohibited by this Section shall constitute improper appropriation and/or use of such information. The Executive expressly acknowledges the trade secret status of the Company’s confidential information and that the confidential information constitutes a protectable business interest of the Company. Other than as may be required in the performance of his duties, Executive expressly agrees not to divulge such confidential information to anyone outside the Company without prior permission.

B. The “Company” (which shall be construed to include the Company, its subsidiaries and their respective affiliates) and the Executive agree that for a period of eighteen (18) months after the Date of Termination if the Executive’s employment is terminated under Sections VI(C), (D), (E), (F) or (H), and for a period of twenty-four (24) months after the Date of Termination if the Executive’s employment is terminated under Section VI(G), the Executive shall not:

1. engage in Competition, as defined below, with the Company or its subsidiaries within any market where the Company is conducting the Business at the time of termination of the Executive’s employment hereunder. For purposes of this Agreement, “Competition” by the Executive shall mean the Executive’s being employed by or acting as a consultant or lender to, or being a director, officer, employee, principal, agent, stockholder, member, owner or partner of, or permitting his name to be used in connection with the activities of any entity engaged in the Business, provided that, it shall not be a violation of this sub-paragraph for the Executive to become the registered or beneficial owner of less than five percent (5%) of any class of the capital stock of any one or more competing corporations registered under the 1934 Act, provided that, the Executive does not participate in the business of su ch corporation until such time as this covenant expires; and

2. The Executive further agrees that he will not, directly or indirectly, for his benefit or for the benefit of any other person or entity, do any of the following:

a. solicit from any customer, doing business with the Company as of the Executive’s termination, business of the same or of a similar nature to the Business of the Company with such customer;

b. solicit from any known potential customer of the Company business of the same or of a similar nature to that which, to the knowledge of the Executive, has been the subject of a written or oral bid, offer or proposal by the Company, or of substantial preparation with a view to making such a bid, proposal or offer, within eighteen (18) months prior to the Executive’s termination; or

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c. recruit or solicit the employment or services of any person who was employed by the Company upon termination of the Executive’s employment and is employed by the Company at the time of such recruitment or solicitation.

3. The Executive acknowledges that the services to be rendered by him to the Company are of a special and unique character, which causes this Agreement to be of significant value to the Company, the loss of which may not be reasonably or adequately compensated for by damages in an action at law, and that a breach or threatened breach by him of any of the provisions contained in this Section will cause the Company irreparable injury. The Executive therefore agrees that the Company will be entitled, in addition to any other right or remedy, to a temporary, preliminary and permanent injunction, without the necessity of proving the inadequacy of monetary damages or the posting of any bond or security, enjoining or restraining the Executive from any such violation or threatened violations. The Executive acknowledges that the terms of this Section IX and its obligations are reasonable and will not prohibit him from being employed or employable in the health care industry.

C. 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 fullest extent permitted by law.

X. ENTIRE AGREEMENT. This Agreement, together with Exhibit A attached hereto, contains all the understandings between the parties pertaining to the matters referred to herein, and supersedes any other undertakings and agreements, whether oral or written, previously entered into by them with respect thereto. The Executive represents that, in executing this Agreement, he does not rely and has not relied upon any representation or statement not set forth herein made by the Company with regard to the subject matter or effect of this Agreement or otherwise and that Executive has had the opportunity to be represented by counsel of his choosing.

XI. AMENDMENT OR MODIFICATION; WAIVER. No provision of this Agreement may be amended or waived, unless such amendment or waiver is agreed to in writing, signed by the Executive and by a duly authorized officer of the Company. No waiver by any party hereto of any breach by another party hereto of any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of a similar or dissimilar condition or provision at the same time, any prior time or any subsequent time.

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XII. NOTICES. Any notice to be given hereunder shall be in writing and shall be deemed given when delivered personally, sent by courier, facsimile or registered or certified mail, postage prepaid, return receipt requested, addressed to the party concerned at the address indicated below or to such other address as such party may subsequently give notice in writing:

           To the Executive at:                                                                           To the Company at:

Alfred Lumsdaine                                                                             Chief Executive Officer

                                                                            Healthways, Inc.

                                                                                            701 Cool Springs Boulevard

                                 Franklin, TN 37067

Any notice delivered personally or by courier shall be deemed given on the date delivered. Any notice sent by facsimile, registered or certified mail, postage prepaid, return receipt requested, shall be deemed given on the date transmitted by facsimile or mailed.

XIII. SEVERABILITY. If any provision of this Agreement or the application of any such provision to any party or circumstances shall be determined by any court of competent jurisdiction to be invalid and unenforceable to any extent, the remainder of this Agreement or the application of such provision to such person or circumstances other than those to which it is so determined to be invalid and unenforceable, shall not be affected thereby, and each provision hereof shall be validated and shall be enforced to the fullest extent permitted by law.

XIV. SURVIVORSHIP. The respective rights and obligations of the parties hereunder shall survive any termination of this Agreement to the extent necessary to the intended preservation of such rights and obligations.

XV. GOVERNING LAW; VENUE. This Agreement will be governed by and construed in accordance with the laws of the State of Tennessee, without regard to the principles of conflicts of law thereof, and venue shall be the United States District Court for the Middle District of Tennessee.

XVI. HEADINGS. All descriptive headings of sections and paragraphs in this Agreement are intended solely for convenience, and no provision of this Agreement is to be construed by reference to the heading of any section or paragraph.

XVII. COUNTERPARTS. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

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IN WITNESS WHEREOF, the parties hereto have executed this Employment Agreement effective as of date set forth above.

                                                                                       HEALTHWAYS, INC.

By:  /s/ Ben R. Leedle, Jr.                     

Name:  Ben R. Leedle, Jr.                       

Title:   CEO                                              

Date:  12/31/2010                                    

EXECUTIVE

/s/ Alfred Lumsdaine
Alfred Lumsdaine

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EXHIBIT A

Exceptions

Notwithstanding anything in the Agreement to the contrary, the following terms are also part of the Agreement and supersede any contradictory term contained therein:

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