Employment Agreement - HealthSouth Corp. and Michael D. Martin
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of April 1, 1998 (this "Agreement"),
between HEALTHSOUTH Corporation, a Delaware corporation (the "Company"), and
MICHAEL D. MARTIN, 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 Executive Vice President, Chief
Financial Officer and Treasurer of the Company; 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, Executive Vice President, Chief Financial Officer and Treasurer of
the Company 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.
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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 Executive
Vice President, Chief Financial Officer and Treasurer 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 $400,000. 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 of directors of the Company (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 of directors of the Company (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
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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(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:
(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
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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:
(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
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(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 required to be made.
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
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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.
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
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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.
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. Michael D. Martin
5608 Canongate Lane
Birmingham, Alabama 35242
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
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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.
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.
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IN WITNESS WHEREOF, the Company and the Executive have executed this
Agreement as of the date first above written.
EXECUTIVE
/s/ Michael D. Martin
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Michael D. Martin
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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