EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of April 1, 1998 (this "Agreement"),
between HEALTHSOUTH Corporation, a Delaware corporation (the "Company"), and
XXXXXXX X. XXXXXX, a resident of Hoover, Alabama (the "Executive").
W I T N E S S E T H:
WHEREAS, the Company provides comprehensive rehabilitative, clinical,
diagnostic and surgical healthcare services;
WHEREAS, the Executive is a founder of the Company and serves as
Executive Vice President - Administration and Secretary of the Company and as a
member of its Board of Directors; and
WHEREAS, the Company wishes to assure itself of the continued services
of the Executive so that it will have the continued benefit of his ability,
experience and services, and the Executive is willing to enter into an agreement
to that end, upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of good and valuable consideration
the receipt and sufficiency of which are hereby acknowledged, the parties hereby
covenant and agree as follows:
1. EMPLOYMENT
The Company hereby agrees to continue to employ the Executive, and the
Executive hereby agrees to remain in the employ of the Company, on and subject
to the terms and conditions of this Agreement.
2. TERM
(a) The period of this Agreement (the "Agreement Term") shall
commence as of the date hereof (the "Effective Date") and shall expire on the
third anniversary of the Effective Date. The Agreement Term shall be
automatically extended for an additional year on each anniversary of the
Effective Date, unless written notice of non-extension is provided by either
party to the other party at least 90 days prior to such anniversary.
(b) The period of the Executive's employment under this Agreement
(the "Employment Period") shall commence as of the Effective Date and shall
expire at the end of the Agreement Term, unless sooner terminated in accordance
with the terms and conditions of this Agreement.
3. POSITION, DUTIES AND RESPONSIBILITIES
(a) The Executive shall serve as, and with the title, office and
authority of, the Executive Vice President - Administration and Secretary of the
Company and as a member of the Board of Directors of the Company (the "Board")
and shall report directly to the Chief Executive Officer of the Company. The
Executive shall also hold similar titles, offices and authority with the
Company's subsidiaries and/or their successors. The Company shall use its
best efforts to cause the Executive to be nominated and elected (or renominated
and reelected, as the case may be) during the Employment Period as a director of
the Company and its subsidiaries or their successors.
(b) The Executive shall have all of the powers, authority, duties
and responsibilities usually incident to the positions and offices of Executive
Vice President Administration and Secretary of the Company.
(c) The Executive agrees to devote substantially all of his
business time, efforts and skills to the performance of his duties and
responsibilities under this Agreement; provided, however, that nothing in this
Agreement shall preclude the Executive from devoting reasonable periods required
for (i) participating in professional, educational, philanthropic, public
interest, charitable, social or community activities, (ii) serving as a director
or member of an advisory committee of any corporation or other entity that the
Executive is serving on as of the Effective Date or any other corporation or
entity that is not in direct competition with the Company or (iii) managing his
personal investments, provided that such activities do not materially interfere
with the Executive's regular performance of his duties and responsibilities
hereunder.
4. PLACE OF PERFORMANCE
The Executive shall perform his duties at the principal offices of the
Company located at Xxx XxxxxxXxxxx Xxxxxxx, Xxxxxxxxxx, Xxxxxxx, but from time
to time the Executive may be required to travel to other locations in the proper
conduct of his responsibilities under this Agreement.
5. COMPENSATION AND BENEFITS
In consideration of the services rendered by the Executive during the
Employment Period, the Company shall pay or provide the Executive the amounts
and benefits set forth below.
(a) Salary. The Company shall pay the Executive an annual base
salary (the "Base Salary") of at least $375,000. The Executive's Base Salary
shall be paid in arrears in substantially equal installments at monthly or more
frequent intervals, in accordance with the normal payroll practices of the
Company. The Executive's Base Salary shall be reviewed at least annually by the
Compensation Committee of the Board (the "Compensation Committee") for
consideration of appropriate merit increases and, once established, the Base
Salary shall not be decreased during the Employment Period.
(b) Incentive Plans. The Executive shall participate in all
annual and long-term bonus or incentive plans or arrangements in which other
senior executives of the Company of a comparable level are eligible to
participate from time to time, including, without limitation, any management
bonus pool arrangement. The Executive's incentive compensation opportunities
under such plans and arrangements shall be determined from time to time by the
Compensation Committee.
(c) Equity Incentives. The Executive shall be given
consideration, at least annually, by the Compensation Committee for the grant of
options to purchase shares of the common stock of the Company. In addition, the
Executive shall be entitled to receive awards
2
under any stock option, stock purchase or equity-based incentive compensation
plan or arrangement adopted by the Company from time to time for which other
senior executives of the Company of a comparable level are eligible to
participate. The Executive's awards under such plans and arrangements shall be
determined from time to time by the Compensation Committee.
(d) Employee Benefits. The Executive shall be entitled to
participate in all employee benefit plans, programs, practices or arrangements
of the Company in which other senior executives of the Company of a comparable
level are eligible to participate from time to time, including, without
limitation, any qualified or non-qualified pension, profit sharing and savings
plans, any death benefit and disability benefit plans, and any medical, dental,
health and welfare plans. Without limiting the generality of the foregoing, the
Company shall provide the Executive with the following:
(i) long-term disability insurance coverage paying benefits
equal to at least 60% of the Executive's Base Salary for the
duration of any permanent and total disability of the Executive;
and
(ii) continued provision of split-dollar life insurance
coverage.
(e) Fringe Benefits and Perquisites. The Executive shall be
entitled to continuation of all fringe benefits and perquisites provided to the
Executive on the Effective Date, and to all fringe benefits and perquisites
which are generally made available to other senior executives of the Company of
a comparable level from time to time. Without limiting the generality of the
foregoing, the Company shall provide the Executive with the following:
(i) provision of executive offices and secretarial staff;
(ii) vacation in accordance with Company's policy for other
senior executives of a comparable level;
(iii) provision of a non-accountable automobile allowance
equal to $500 per month; and
(iv) reimbursement of all reasonable travel and other
business expenses and disbursements incurred by the Executive in
the performance of his duties under this Agreement, upon proper
accounting in accordance with the Company's normal practices and
procedures for reimbursement of business expenses.
6. TERMINATION OF EMPLOYMENT
The Employment Period will be terminated upon the happening of any of
the following events:
(a) Resignation. The Executive may voluntarily terminate his
employment hereunder for any reason at any time.
(b) Termination for Cause. The Company may terminate the
Executive's
3
employment hereunder for Cause. For purposes of this Agreement, the Executive
shall be considered to be terminated for "Cause" only if (i) the Executive is
found, by a non-appealable order of a court of competent jurisdiction, to be
guilty of a felony under the laws of the United States or any state thereof or
(ii) the Executive is found, by a non-appealable order of a court of competent
jurisdiction, to have committed a fraud, which has a material adverse effect on
the Company. However, in no event shall the Executive's employment be considered
to have been terminated for "Cause" unless and until the Executive receives a
copy of a resolution duly adopted by the affirmative vote of a majority of the
Board at a meeting called and held for such purpose (after reasonable written
notice is provided to the Executive setting forth in reasonable detail the facts
and circumstances claimed to provide a basis of termination for Cause and the
Executive is given an opportunity, together with counsel, to be heard before the
Board) finding that the Executive is guilty of acts or omissions constituting
Cause.
(c) Termination other than for Cause. The Company shall have the
right to terminate the Executive's employment hereunder for any reason at any
time, including for any reason that does not constitute Cause, subject to the
consequences of such termination as set forth in this Agreement.
(d) Disability. The Executive's employment hereunder shall
terminate upon his Disability. For purposes of this Agreement, "Disability"
shall mean the inability of the Executive to perform his duties to the Company
on account of physical or mental illness for a period of six consecutive full
months, or for a period of eight full months during any 12-month period. The
Executive's employment shall terminate in such a case on the last day of the
applicable period; provided, however, in no event shall the Executive be
terminated by reason of Disability unless (i) the Executive is eligible for the
long-term disability benefits set forth in Section 5(e)(i) hereof and (ii) the
Executive receives written notice from the Company, at least 30 days in advance
of such termination, stating its intention to terminate the Executive for reason
of Disability and setting forth in reasonable detail the facts and circumstances
claimed to provide a basis for such termination.
(e) Death. The Executive's employment hereunder shall terminate
upon his death.
7. COMPENSATION UPON TERMINATION OF EMPLOYMENT
In the event the Executive's employment by the Company is terminated
during the Agreement Term, the Executive shall be entitled to the severance
benefits set forth below:
(a) Resignation. In the event the Executive voluntarily
terminates his employment hereunder for any reason, the Company shall pay and
provide to the Executive any Accrued Rights (as defined in paragraph (c) below).
(b) Termination for Cause. In the event the Executive's
employment hereunder is terminated by the Company for Cause, the Company shall
pay and provide to the Executive any Accrued Rights (as defined in paragraph (c)
below).
4
(c) Termination other than for Cause, Disability or Death. In the
event the Executive's employment hereunder is terminated by the Company for any
reason other than for Cause, Disability or death, the Company shall pay the
Executive and provide him with the following:
(i) Accrued Rights. The Company shall pay the Executive a
lump-sum amount equal to the sum of (A) his earned but unpaid
Base Salary through the date of termination, (B) any earned but
unpaid bonus for any completed calendar year, (C) pro-rata
payment of any bonus (based on the then-current target amount of
such bonus) for any partial year or period of service through the
date of termination and (D) any unreimbursed business expenses or
other amounts due to the Executive from the Company as of the
date of termination. In addition, the Company shall provide to
the Executive all payments, rights and benefits due as of the
date of termination under the terms of the Company's employee and
fringe benefit plans, practices, programs and arrangements
referred to in Sections 5(e) and 5(f) hereof (together with the
lump-sum payment, the "Accrued Rights").
(ii) Severance Payment. The Company shall provide the
Executive with continued payment of the Executive's Base Salary,
as in effect on the date of termination, for a period of two
years following the Executive's termination, payable at the times
and in the manner such Base Salary would have been paid if the
Executive had continued in the employment of the Company.
(iii) Equity Rights. All stock options and other
equity-based rights held by the Executive at the date of
termination shall become immediately and fully vested and
exercisable, and the Executive shall retain the right to exercise
all outstanding stock options for the duration of their original
full term (without regard to termination of employment) in
accordance with the Founder Retirement Benefit Program attached
hereto as Exhibit A (the "Founders' Program"). The Company shall
forthwith take all necessary steps to amend any relevant stock
option plans of the Company and stock option agreements to the
extent necessary to allow for the foregoing vesting and term of
exercise.
(d) Disability. In the event the Executive's employment hereunder
is terminated by reason of the Executive's Disability, the Company shall pay and
provide to the Executive any Accrued Rights, including all disability insurance
coverage.
(e) Death. In the event the Executive's employment hereunder is
terminated by reason of the Executive's death, the Company shall pay and provide
to the Executive's representative or estate any Accrued Rights, including all
life insurance coverage.
8. FOUNDERS' BENEFITS
Upon the Executive's termination of employment hereunder for any
reason, and in addition to any severance benefits payable to him under Section 7
hereof, the Company shall treat such termination as a "retirement" for purposes
of the Founders' Program, and shall provide the Executive with the benefits
outlined in the Founders' Program in recognition of his status as a founder of
the Company.
5
9. CHANGE IN CONTROL
(a) Supplemental Termination Rights. In the event of a voluntary
termination of employment by the Executive pursuant to Section 6(a) hereof that
occurs within six months following a Change in Control, the Company shall pay
the Executive and provide him with the benefits and rights described in Section
7(c) hereof.
(b) Definition. For purposes of this Agreement, a "Change in
Control" shall be deemed to have occurred by reason of:
(i) 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 Securities Exchange Act of 1934, 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 Securities Exchange Act of 1934) of
25% or more of either the then-outstanding shares of the common
stock of the Company or the combined voting power of the
Company's then-outstanding voting securities entitled to vote
generally in the election of directors; or
(ii) individuals who, as of date hereof, constitute the
Board (as of such date, the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board; provided,
however, that any person becoming a director subsequent to such
date whose election, or nomination for election, was approved by
a vote of at least a majority of the directors then constituting
the Incumbent Board (other than an election or nomination of an
individual whose initial assumption of office is in connection
with an actual or threatened election contest relating to the
election of directors of the Company) shall be, for purposes of
this Section 9(b)(ii), considered as though such person were a
member of the Incumbent Board; or
(iii) approval by the stockholders of the Company of a
reorganization, merger, consolidation or share exchange, in each
case with respect to which persons who were the stockholders of
the Company immediately prior to such reorganization, merger,
consolidation or share exchange do not, immediately thereafter,
own more than 75% of the combined voting power entitled to vote
generally in the election of directors of the reorganized,
merged, consolidated or other surviving entity's then-outstanding
voting securities, or a liquidation or dissolution of the Company
or the sale of all or substantially all of the assets of the
Company.
10. NO MITIGATION OR OFFSET
The Executive shall not be required to seek other employment or to
reduce any severance benefit payable to him under Sections 7, 8 or 9 hereof, and
no such severance benefit shall be reduced on account of any compensation
received by the Executive from other employment. The Company's obligation to pay
severance benefits under this Agreement shall not be reduced by any amount owed
by the Executive to the Company.
6
11. TAX WITHHOLDING; METHOD OF PAYMENT
All compensation payable pursuant to this Agreement, shall be subject
to reduction by all applicable withholding, social security and other federal,
state and local taxes and deductions. Any lump-sum payments provided for in
Sections 7 or 9 hereof shall be made in a cash payment, net of any required tax
withholding, no later than the fifth business day following the Executive's date
of termination. Any payment required to be made to the Executive under this
Agreement that is not made in a timely manner shall bear interest until the date
of payment at a rate equal to 100% of the monthly compounded applicable federal
rate, as in effect under Section 1274(d) of the Internal Revenue Code of 1986,
as amended, for the month in which payment was required to be made.
12. RESTRICTIVE COVENANTS
(a) Confidential Information. During the Employment Period and at
all times thereafter, the Executive agrees that he will not divulge to anyone
(other than the Company or any persons employed or designated by the Company)
any knowledge or information of a confidential nature relating to the business
of the Company or any of its subsidiaries or affiliates, including, without
limitation, all types of trade secrets (unless readily ascertainable from public
or published information or trade sources) and confidential commercial
information, and the Executive further agrees not to disclose, publish or make
use of any such knowledge or information without the consent of the Company.
(b) Noncompetition. During the Employment Period and, for any
applicable period the Executive is entitled to severance benefits under Section
7(c) hereof following the termination of his employment, the Executive shall
not, without the prior written consent of the Company, engage in the
comprehensive rehabilitative and related healthcare services business on behalf
of any person, firm or corporation within any geographical area in which the
Company transacts such business, and the Executive shall not acquire any
financial interest (except for an equity interest in publicly-held companies
that do not exceed 5% of any outstanding class of equity of that company), in
any business that engages in the comprehensive rehabilitative and related
healthcare services business within any geographical area in which the Company
transacts such business. Notwithstanding the foregoing, upon the occurrence of a
Change in Control (whether before or after the termination of the Employment
Period), the restrictions of this Section 12(b) shall cease to apply to the
Executive for any period following his termination of employment hereunder.
(c) Enforcement. The Company shall be entitled to seek a
restraining order or injunction in any court of competent jurisdiction to
prevent any continuation of any violation of the provisions of this Section 12.
13. SUCCESSORS
(a) This Agreement shall be binding upon and shall inure to the
benefit of the Company, its successors and assigns and any person, firm,
corporation or other entity which succeeds to all or substantially all of the
business, assets or property of the Company. The Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business, assets or property of
the
7
Company, to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such succession had taken place. As used in this Agreement, the "Company"
shall mean the Company as hereinbefore defined and any successor to its
business, assets or property as aforesaid which executes and delivers an
agreement provided for in this Section 13 or which otherwise becomes bound by
all the terms and provisions of this Agreement by operation of law.
(b) This Agreement and all rights of the Executive hereunder
shall inure to the benefit of and be enforceable by the Executive's personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Executive should die while any
amounts are due and payable to him hereunder, all such amounts, unless otherwise
provided herein, shall be paid to the Executive's designated beneficiary or, if
there be no such designated beneficiary, to the legal representatives of the
Executive's estate.
14. NO ASSIGNMENT
Except as to withholding of any tax under the laws of the United States
or any other country, state or locality, neither this Agreement nor any right or
interest hereunder nor any amount payable at any time hereunder shall be subject
in any manner to alienation, sale, transfer, assignment, pledge, attachment, or
other legal process, or encumbrance of any kind by the Executive or the
beneficiaries of the Executive or by his legal representatives without the
Company's prior written consent, nor shall there be any right of set-off or
counterclaim in respect of any debts or liabilities of the Executive, his
beneficiaries or legal representatives; provided, however, that nothing in this
Section shall preclude the Executive from designating a beneficiary to receive
any benefit payable on his death, or the legal representatives of the Executive
from assigning any rights hereunder to the person or persons entitled thereto
under his will or, in case of intestacy, to the person or persons entitled
thereto under the laws of intestacy applicable to his estate.
15. ENTIRE AGREEMENT
This Agreement contains the entire understanding of the parties with
respect to the subject matter hereof and, except as specifically provided
herein, cancels and supersedes any and all other agreements between the parties
with respect to the subject matter hereof. Any amendment or modification of this
Agreement shall not be binding unless in writing and signed by the Company and
the Executive.
16. SEVERABILITY
In the event that any provision of this Agreement is determined to be
invalid or unenforceable, the remaining terms and conditions of this Agreement
shall be unaffected and shall remain in full force and effect, and any such
determination of invalidity or unenforceability shall not affect the validity or
enforceability of any other provision of this Agreement.
17. NOTICES
All notices which may be necessary or proper for either the Company or
the Executive to give to the other shall be in writing and shall be delivered by
hand or sent by registered or
8
certified mail, return receipt requested, or by air courier, to the Executive
at:
Xx. Xxxxxxx X. Xxxxxx
0000 Xxxx Xxxx Xxxx
Xxxxxx, Xxxxxxx 00000
with a copy to:
Xxxxxxxxx X. Xxxxxx, Esq.
Xxxxx Xxxxxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
and shall be sent in the manner described above to the Secretary of the Company
at the Company's principal executives offices at Xxx XxxxxxXxxxx Xxxxxxx,
Xxxxxxxxxx, Xxxxxxx 00000, or delivered by hand to the Secretary of the Company,
and shall be deemed given when sent, provided that any notice required under
Section 6 hereof or notice given pursuant to Section 2 hereof shall be deemed
given only when received. Any party may by like notice to the other party change
the address at which he or they are to receive notices hereunder.
18. GOVERNING LAW
This Agreement shall be governed by and enforceable in accordance with
the laws of the State of Alabama, without giving effect to the principles of
conflict of laws thereof.
19. ARBITRATION
Any controversy or claim arising out of, or related to, this Agreement,
or the breach thereof, shall be settled by binding arbitration in the City of
Birmingham, Alabama, in accordance with the rules then obtaining of the American
Arbitration Association, and the arbitrator's decision shall be binding and
final, and judgment upon the award rendered may be entered in any court having
jurisdiction thereof.
20. LEGAL FEES AND EXPENSES
To induce the Executive to execute this Agreement and to provide the
Executive with reasonable assurance that the purposes of this Agreement will not
be frustrated by the cost of its enforcement should the Company fail to perform
its obligations under this Agreement or should the Company or any subsidiary,
affiliate or stockholder of the Company contest the validity or enforceability
of this Agreement, the Company shall pay and be solely responsible for any
attorneys' fees and expenses and court costs incurred by the Executive as a
result of a claim that the Company has breached or otherwise failed to perform
this Agreement or any provision hereof to be performed by the Company or as a
result of the Company or any subsidiary, affiliate or stockholder of the Company
contesting the validity or enforceability of this Agreement or any provision
hereof to be performed by the Company, in each case regardless of which party,
if any, prevails in the contest.
9
IN WITNESS WHEREOF, the Company and the Executive have executed this
Agreement as of the date first above written.
EXECUTIVE
/s/ Xxxxxxx X. Xxxxxx
--------------------------------
Xxxxxxx X. Xxxxxx
HEALTHSOUTH CORPORATION
By /s/ Xxxxxxx X. Xxxxxxx
------------------------------
Xxxxxxx X. Xxxxxxx
Chairman of the Board and
Chief Executive Officer
10
