Employment Agreement - HealthSouth Corp. and James P. Bennett
EMPLOYMENT AGREEMENT, dated as of April 1, 1998 (this "Agreement"),
between HEALTHSOUTH Corporation, a Delaware corporation (the "Company"), and
JAMES P. BENNETT, a resident of Birmingham, 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 serves as President and Chief Operating Officer
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, President and Chief Operating Officer 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 or such other person
designated from time to time by 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.
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(b) The Executive shall have all of the powers, authority, duties and
responsibilities usually incident to the positions and offices of President and
Chief Operating Officer 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 One HealthSouth Parkway, Birmingham, Alabama, 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 $650,000. 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 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.
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(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 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.
(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 of $500
per month;
(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
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,
(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 or (iii) the Executive is found to have committed a deliberate
violation of Company policy. 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
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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(d) 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).
(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:
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(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) a 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(d) and 5(e) 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 a period
of five years following termination of employment or to the end of the
original term of such options, if earlier. 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. 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:
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(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 8(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.
9. 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 or 8 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.
10. 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 8 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 requiredto be made.
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11. 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 that the Executive is entitled to receive severance payments
pursuant to Section 7(c) hereof, 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 11(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 11.
12. SUCCESSORS
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 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 12 or which otherwise becomes bound by all the terms and provisions
of this Agreement by operation of law.
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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.
13. 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.
14. 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.
15. 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.
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16. 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 certified mail, return receipt requested, or by
air courier, to the Executive at:
Mr. James P. Bennett
3732 Shady Grove Drive
Birmingham, Alabama 35243
with a copy to:
Frederick W. Kanner, Esq.
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, New York 10019
and shall be sent in the manner described above to the Secretary of the Company
at the Company's principal executives offices at One HealthSouth Parkway,
Birmingham, Alabama 35243, 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.
17. 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.
18. 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.
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19. 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.
IN WITNESS WHEREOF, the Company and the Executive have executed this
Agreement as of the date first above written.
EXECUTIVE
/s/ James P. Bennett
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James P. Bennett
HEALTHSOUTH CORPORATION
By /s/ Richard M. Scrushy
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Richard M. Scrushy
Chairman of the Board and
Chief Executive Officer
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