EXHIBIT 10.2
[EXECUTION VERSION]
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement"), made, entered into
and
effective as of March 1, 2005, is by and between HealthSouth
Corporation, a
Delaware corporation ("Corporation"), and JAMES C. FOXWORTHY, an
individual
resident of Indiana (the "Executive").
RECITALS
The Corporation desires to employ the Executive as an Executive
Vice
President and its Chief Administrative Officer effective as of the
Commencement
Date (as hereinafter defined), and the Executive desires to accept
such
employment effective as of the Commencement Date, on the terms and
conditions
set forth herein.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
Section 1. Employment. The Corporation hereby employs the
Executive,
and the Executive hereby accepts employment, all on the terms and
conditions
herein.
Section 2. Services; Extent of Services.
(a) Duties and Responsibilities. The Executive is hereby employed
as
an Executive Vice President and as the Corporation's Chief
Administrative
Officer, the authority, duties and responsibilities of which will
be as
follows: the Executive will
(i) have the oversight responsibility of the human resources,
project management organization, corporate security, support
services,
aviation and travel management functions of the Corporation;
(ii) have the oversight responsibility of the Corporation's
corporate conference center and printing / distribution center,
both
of which are located at the Corporation's headquarters complex;
and
(iii) have such other powers, duties and responsibilities
consistent with the Executive's positions as may be determined
or
directed by the Corporation's Board of Directors and/or the
Chief
Executive Officer.
The Executive will report to the Chief Executive Officer of the
Corporation and will comply with the various policies, procedures
and codes of
conduct of the Corporation in effect from time to time which apply
to other
employees and executive officers.
(b) Full Business Attention. The Executive will devote his full
business attention and energies to the business of the Corporation
during the
Term (as defined below) (excluding any periods of vacation and sick
leave to
which the Executive is entitled) and will physically report and
will render all
the Executive's services contemplated hereunder to the Corporation
at its
offices in Birmingham, Alabama or at any other location in which
the
Corporation is headquartered; provided, however, that the foregoing
requirement
to render services in Birmingham shall not apply when the Executive
is
traveling on company business.
(c) Other Activities. Notwithstanding anything to the contrary
contained in Section 2(b), the Executive will be permitted to
engage in the
following activities, provided that such activities do not
materially interfere
or conflict with the Executive's duties and responsibilities to
the
Corporation:
(i) the Executive may serve on the governing boards of, or
otherwise participate in, a reasonable number of trade
associations
and charitable organizations whose purposes are not inconsistent
with
the activities and the image of the Corporation;
(ii) the Executive may engage in a reasonable amount of
charitable activities and community affairs;
(iii) the Executive may manage his personal and family
investments; and
(iv) subject to the prior approval of the Nominating /
Corporate Governance Committee of the Board of Directors of the
Corporation (the Corporation's Board of Directors is
hereinafter
referred to as the "Board"), the Executive may serve on the board
of
directors of up to one (1) business corporations or other
for-profit
entities, provided that they do not compete, directly or
indirectly,
with the Corporation.
Section 3.
Compensation.
(a) Base Salary. In consideration of the services provided
hereunder,
the Corporation shall pay the Executive during the Term a salary of
Three
Hundred Twenty-Five Thousand and No/100 Dollars ($325,000.00) per
year (the
"Base Salary"). The Base Salary shall be subject to review by the
Compensation
Committee of the Board (the "Compensation Committee") on an annual
basis and
may, in the sole discretion of the Compensation Committee, be
increased as the
result of such review (and any such increased salary shall be the
"Base Salary"
hereunder). In no event shall the Base Salary be reduced during the
Term. The
Corporation shall pay the Base Salary in arrears in equal
installments in
accordance with the Corporation's payroll policy in effect from
time to time
for other similarly-situated officers of the Corporation. The
Executive's Base
Salary shall be prorated for 2005 based upon the portion of the
year remaining
on the Commencement Date.
(b) Bonus.
During the Term, the Executive will be entitled to receive
cash bonus payments in an amount per year targeted at 60% of the
amount of the
Base Salary in accordance with the senior management bonus plan,
which is
currently being developed for the year ended December 31, 2005.
Such bonus for
the year ended December 31, 2005 shall be no less than
$100,000.
(c) Benefits. During the Term, the Executive will be entitled to
the
following benefits:
(i) Employee Benefit and Perquisite Plans. The Executive will
be entitled to participate in all employee benefit and
perquisite
plans, programs and arrangements of the Corporation (including,
without limitation, medical and dental, life insurance, 401(k),
disability insurance, pension (qualified and non-qualified),
ESOP,
profit-sharing, and incentive and equity compensation plans) as may
be
in effect from time to time on such terms as are offered for
the
general benefit of other similarly-situated officers of the
Corporation, subject to the provisions of such plans as may be
in
effect from time to time.
(ii) Vacation; Sick Leave. The Executive will be entitled to
vacation and sick leave on such terms as are offered for the
benefit
of other similarly-situated officers of the Corporation.
(d) Expense Reimbursement. The Corporation shall reimburse the
Executive, in accordance with the Corporation's policies, for all
reasonable
business expenses incurred by the Executive in connection with the
performance
of the Executive's obligations hereunder. Most relocation expenses
are
classified as taxable income under applicable sections of the
Internal Revenue
Code. The Corporation will "gross-up" reimbursements for relocation
expenses,
to the extent the Corporation determines that the Executive is
subject to
federal, state or local tax on all or any portion of such
reimbursement, in an
amount equal to the amount of federal, state and local taxes that
the Executive
is required to pay with respect to such reimbursement.
(e) Taxes. All payments made by the Corporation under this
Agreement
will be subject to withholding of such amounts as is required
pursuant to any
applicable law or regulation.
(f) Equity Incentives. The Corporation agrees to provide the
Executive
with equity incentives commensurate with the incentives provided
to
similarly-situated officers of the Corporation, upon terms no less
favorable
than those applicable to such similarly-situated officers. The
Corporation
agrees that under the Corporation's existing equity incentive
program the
Executive is targeted to receive an annual grant of 30,000 shares
of restricted
stock and an annual option to purchase 65,000 shares of the
Corporation's
common stock, par value $0.01.
(g) Relocation Expenses. The Corporation shall reimburse the
Executive
for the following expenses (to the extent they are reasonable and
appropriately
documented in accordance with the Corporation's relocation
reimbursement
policies) incurred by the Executive in connection with such
relocation:
(i) two house hunting trips for the Executive and his spouse
for the purpose of searching for a new primary residence;
(ii) temporary living and weekly commuting expenses (e.g.,
for either Executive to return to his current home or for his
spouse
to travel to the Birmingham, Alabama metropolitan area) for a
period
of six (6) months from the Commencement Date;
(iii) transportation of household goods and vehicles to a new
primary residence;
(iv) storage of household goods for a period of six (6)
months from the Commencement Date;
(v) closing costs, including legal fees, incurred in
connection with the purchase of the primary residence in
Birmingham,
Alabama or surrounding communities; and
(vi) closing costs, including real estate agency commissions
relating to the sale of the Executive's primary residence in
Indiana.
(h) Special Equity Award. Effective as of the Commencement Date,
the
Corporation shall grant the Executive
(i) 30,000 shares of restricted stock (the "Restricted
Stock") pursuant to the Corporation's 1998 Restricted Stock
Plan.
Except as otherwise expressly provided herein, (A) the
Restricted
Stock award shall vest and cease to be restricted only if the
Executive is employed by the Corporation on the third anniversary
of
the Commencement Date and (B) the Executive will immediately
forfeit
the Restricted Stock if he ceases to be employed by the
Corporation
prior to the third anniversary of the Commencement Date; and
(ii) a stock option (the "Option") to purchase an aggregate
of 65,000 shares of the Corporation's common stock, par value
$0.01
(the "Shares"), pursuant to the Corporation's 1995 Stock Option
Plan.
The Option shall have a term of ten (10) years from the date of
grant,
subject to earlier expiration as provided herein. The per Share
exercise price of the Shares underlying the Option shall be equal
to
the last reported sales price for a Share on the Commencement Date
(or
the immediately preceding trading day if the Commencement Date is
not
a trading day) as quoted by brokers and dealers trading in the
Shares
in the over-the-counter market. Except as otherwise expressly
provided
herein, the Option shall vest and become exercisable with respect
to
one-third of the Shares on each of the first three anniversaries
of
the Commencement Date
(i.e., 21,666 Shares vest on the first
anniversary, 21,666 Shares vest on the second anniversary and
21,667
Shares vest on the third anniversary) provided the Executive is
employed by the Corporation on each such date.
Except as otherwise provided herein, the Restricted Stock award and
Option
shall be governed by the terms of the equity incentive plan(s)
and/or
agreements pursuant to which the Restricted Stock award and Option
are granted.
Section 4. Term. The term of this Agreement will commence on March
1,
2005 (the "Commencement Date") and will continue for a term of
three (3) years
following the Commencement Date (the "Term"), unless earlier
terminated
pursuant to the provisions of Section 5 below.
Section 5.
Termination of Employment.
(a) Termination by Corporation for Cause. The Executive's
employment
by the Corporation will terminate immediately upon written notice
to the
Executive if the Corporation elects to discharge the Executive for
Cause (as
hereinafter defined). For purposes hereof, "Cause" means:
(i) the Corporation's procurement of evidence of the
Executive's act of fraud, misappropriation, or embezzlement
with
respect to the Corporation;
(ii) the Executive's indictment for, conviction of, or plea
of guilt or no contest to, any felony (other than a minor
traffic
violation);
(iii) the suspension or debarment of the Executive or of the
Corporation or any of its affiliated companies or entities as a
direct
result of any willful or grossly negligent act or omission of
the
Executive in connection with his employment with the Corporation
from
participation in any Federal or state health care program;
(iv) the Executive's admission of liability of, or finding by
a court or the Securities Exchange Commission (or a similar agency
of
any applicable state) of liability for, the violation of any
"Securities Laws" (as hereinafter defined) (excluding any
technical
violations of the Securities Laws which are not criminal in
nature).
As used herein, the term "Securities Laws" means any Federal or
state
law, rule or regulation governing the issuance or exchange of
securities, including without limitation the Securities Act of
1933,
the Securities Exchange Act of 1934 and the rules and
regulations
promulgated thereunder;
(v) a formal indication from any agency or instrumentality of
any state or the United States of America, including but not
limited
to the United States Department of Justice, the United Securities
and
Exchange Commission or any committee of the United States
Congress
that the Executive is a target or the subject of any investigation
or
proceeding into the actions or inactions of the Executive
(collectively, the "Investigations) for a violation of any
Securities
Laws in connection with his employment by the Corporation
(excluding
any technical violations of the Securities Laws which are not
criminal
in nature);
(vi) the Executive's failure after reasonable prior written
notice from the Corporation to comply with any valid and legal
directive of the Chief Executive Officer or the Board that is
not
remedied within thirty (30) days of the Executive being
provided
written notice thereof from the Corporation; or
(vii) Other than as provided in Sections 5(a)(i) - (vi)
above, the Executive's material breach of any material provision
of
this Agreement that is not remedied within thirty (30) days of
the
Executive being provided written notice thereof from the
Corporation.
Repeated breaches of a similar nature, such as the failure to
report to work,
perform duties, or follow directions, all as provided herein, shall
not require
additional notices as provided Section 5(a)(vi) or (vii).
(b) Termination by Corporation Without Cause. The Corporation
may
terminate this Agreement Without Cause upon at least thirty (30)
days' prior
written notice to the Executive. Any termination of this Agreement
by the
Corporation for a reason other than for Cause shall be considered a
termination
Without Cause.
(c) Death or Disability. The Executive's employment by the
Corporation
will immediately terminate upon the Executive's death and, at the
option of
either the Executive or the Corporation, exercisable upon written
notice to the
other party, may terminate upon the Executive's Disability (as
hereinafter
defined). For purposes of this Agreement, "Disability" will occur
if (i) the
Executive becomes eligible for full benefits under a long-term
disability
policy provided by the Corporation, if any, or (ii) the Executive
has been
unable, due to physical or mental illness or incapacity, to
substantially
perform the essential duties of his employment with reasonable
accommodation
for a continuous period of ninety (90) days or an aggregate of
one-hundred
eighty (180) days during any consecutive twelve (12) month
period.
(d) Termination by the Executive for Good Reason. The Executive
may
terminate this Agreement at any time upon thirty (30) days' prior
written
notice to the Corporation and the Corporation fails to cure such
event within
such thirty-day period (any such termination referenced in clauses
(i)-(iii)
below, constituting termination for "Good Reason"):
(i) if the Corporation fails to make all or any portion of
any payment, or offer all or any portion any benefits, as provided
in
Section 3 hereof when such payments or benefits are due;
(ii) if the Corporation materially modifies the senior
management bonus plan or equity incentive plan such that the
targeted
cash bonus levels and targeted incentive compensation levels
applicable to the Executive are materially lower than those levels
of
other similarly-situated executive officers of the Corporation;
(iii) except as otherwise set forth in clauses (i) or (ii)
above, if the Corporation materially breaches any of its other
duties,
obligations or agreements hereunder (including, without limitation,
a
material diminution in the Executive's duties, authority or
responsibilities).
(e) Termination by the Executive without Good Reason. The
Executive
may terminate this Agreement without Good Reason upon at least
thirty (30)
days' prior written notice to the Corporation.
(f) Change in Control. The Executive may terminate this
Agreement
within sixty (60) days following a "Change in Control" (as
hereinafter
defined). For purposes of this Agreement, a "Change in Control"
will be deemed
to have taken place if, whether in a single transaction or a series
of
transactions:
(i) any person or entity, including a "group" as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended,
other than the Corporation, or any employee benefit plan of the
Corporation or any of its subsidiaries, becomes the beneficial
owner,
directly or indirectly, of the Corporation's securities having
fifty
percent (50%) or more of the combined voting power of the then
outstanding securities of the Corporation that may be cast for
the
election of directors of the Corporation or otherwise has the
ability
to elect the directors of the Corporation (other than as a result
of
the issuance of securities initiated by the Corporation in the
ordinary course of business);
(ii) as the result of, or in connection with, any cash tender
or exchange offer, merger or other business combination, or any
combination of the foregoing transactions, the holders of all
the
Corporation's securities entitled to vote generally in the election
of
directors of the Corporation immediately prior to such
transaction
constitute, following such transaction, less tha
