UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): March 1, 2005
HEALTHSOUTH Corporation
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(Exact Name of Registrant as Specified in its Charter)
Delaware
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(State or Other Jurisdiction of Incorporation)
1-10315 63-0860407
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(Commission File Number) (IRS Employer Identification No.)
One HEALTHSOUTH Parkway, Birmingham, Alabama 35243
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(Address of Principal Executive Offices, Including Zip Code)
(205) 967-7116
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(Registrant's Telephone Number, Including Area Code)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
ITEM 1.01. Entry into a Material Definitive Agreement.
Senior Management Bonus Program
On March 23, 2005, the Special Committee of the Board of Directors of
HEALTHSOUTH Corporation (the "Company") approved, upon the recommendation of
the Compensation Committee of the Board of Directors of the Company, payment of
cash bonuses for the 2004 fiscal year to eligible participants under the
Company's Senior Management Bonus Program (the "Senior Management Bonus
Program"). The Senior Management Bonus Program is designed to reward senior
management in an equitable manner based on a combination of corporate,
divisional and individual goals.
Under the Senior Management Bonus Program, bonus payments to eligible
participants are based on achieving goals in two or three different areas, as
applicable (1) corporate fiscal goals, (2) divisional or regional goals and (3)
individual goals. For eligible participants in an operational position, the
bonus payments are based on achieving all three goals. For eligible
participants in a corporate position, the bonus payments are based on achieving
the (1) corporate fiscal goals and (2) individual goals. Each of the categories
are assigned a percentage of the total target bonus. The weightings among the
areas vary according to the degree to which an eligible participant can
influence the result.
The corporate financial goal is dependent on the Company meeting a
pre-determined "EBITDA" target for the Company as a whole that is determined at
the beginning of each such fiscal year. The Company defines "EBITDA" as
earnings from continuing operations before interest expense, income tax,
depreciation, amortization and "Restructuring Charges". The Company classifies
as "Restructuring Charges" any of the following costs incurred by the Company
prior to June 2005: (1) professional fees associated with litigation, financial
restructuring, government investigations, forensic accounting, creditor
advisors, accounting reconstruction, audit and tax work associated with the
restatement, and Sarbanes-Oxley implementation; (2) recruiting fees; (3)
severance costs; (4) lease buy-outs; and (5) non-ordinary course charges
incurred after March 19, 2003 and related to the our overall corporate
restructuring. The divisional or regional goals are established in accordance
with specific targets set for particular regions or divisions in which the
eligible participant works. The individual goals are determined between the
individual and their immediate supervisor.
For the 2004 fiscal year, the Company approved awards under the Senior
Management Bonus Program to eligible participants of approximately $6.1 million
in the aggregate. The named executive officers of the Company received awards
in the following amounts:
Name Award
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Jay Grinney, Chief Executive Officer $500,000
Michael Snow, Executive Vice President and Chief
Operating Officer $240,000
John Workman, Executive Vice President and Chief
Financial Officer $196,175
John Markus, Executive Vice President and Chief
Compliance Officer $152,460
Gregory L. Doody, Executive Vice President and
General Counsel $147,000
On March 23, 2005, the Special Committee also approved, upon the
recommendation of the Compensation Committee, the goals and target awards under
the Senior Management Bonus Program for fiscal year 2005. The named executive
officers of the Company are eligible to receive awards under the Senior
Management Bonus Program as set forth below depending on the attainment of the
established goals for fiscal year 2005:
Range of
Target Award
Name (as a percent of Base Salary)
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Jay Grinney, Chief Executive Officer 0% - 90%
Michael Snow, Executive Vice President and Chief
Operating Officer 0% - 80%
John Workman, Executive Vice President and Chief
Financial Officer 0% - 70%
John Markus, Executive Vice President and Chief
Compliance Officer 0% - 60%
Gregory L. Doody, Executive Vice President and
General Counsel 0% - 60%
The Compensation Committee reviews the results of the Company and the
performance of each participant in accordance with the terms of the Senior
Management Bonus Program in order to determine the actual amount of the award
to be paid, subject to the maximum award limits under the Senior Management
Bonus Program. Participants must be employed by the Company at a time of payout
in order to be eligible for their bonus payment.
Restricted Stock Award Grants
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In recognition of the outstanding contributions to the Company of Joel
C. Gordon and Robert P. May (each, a "Director" and, collectively, the
"Directors") for serving as (i) Interim Chairman of the Board of Directors from
March 2003 through June 2004 and (ii) Interim Chairman of the Board of
Directors from March 2003 through May 2004, respectively, the Special Committee
of the Board of Directors of the Company approved, upon the recommendation of
the Compensation Committee, a grant to each of the Directors of 26,270 shares
of restricted stock of the Company having a value of $150,000 as of March 1,
2005, the effective date of the grant. Each of the restricted stock grants were
made pursuant to a restricted stock agreement (each, a "Restricted Stock
Agreement" and collecitvely, the "Restricted Stock Agreements") between the
Company and the Director.
Pursuant to the terms of the Restricted Stock Agreements, no shares of
restricted stock may be sold, assigned, transferred or pledged until they
become vested and the applicable holding period has expired. The period during
which such restrictions are applicable is referred to as the "Restricted
Period." Except as set forth below, if a Director ceases to be a director of
the Company within the Restricted Period for any reason, the shares of
restricted stock that have not become fully vested shall be forfeited and
cancelled.
The Restricted Stock Agreements provide that one-third of the shares
of restricted stock vest and become nonforfeitable on March 1st of each year
following the effective date of grant, subject to the Director's remaining in
the continuous service as a director during such period. In addition, all of
the shares of restricted stock immediately vest and become nonforfeitable in
the event of (i) a Change in Control (as deinfed in the Restricted Stock
Agreement) of the Company, or (ii) the Director's death, disability or
mandatory retirement from service as a member of the Board pursuant to the
Company's policies while in the continued service as a director of the Company.
If a Director ceases to serve as a director by reason of director misconduct
(as defined in the Restricted Stock Agreement) during the course of the
Director's term, the Director's rights to any shares of restricted stock are
forfeited as of such date.
The restricted stock is also subject to a holding period during the
course of the Director's term and for a period of twelve months thereafter.
However, the holding period ceases automatically in the event (i) a Change in
Control of the Company, or (ii) the Director's death, disability or mandatory
retirement from service as a member of the Board pursuant to the Company's
policies while in the continued service as a director of the Company.
Upon the grant of the restricted stock, Directors have all of the
rights of a stockholder with respect to the shares of restricted stock,
including the right to vote such shares and receive any dividends that may be
paid thereon.
The foregoing description of the Restricted Stock Agreements is
qualified in its entirety to the Restricted Stock Agreements, a form of which
is attached hereto as Exhibit 10 and incorporated herein by reference.
ITEM 9.01. Financial Statements and Exhibits.
(c) Exhibits.
See Exhibit Index.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Current Report on Form 8-K to be signed on
its behalf by the undersigned hereunto duly authorized.
HEALTHSOUTH CORPORATION
By: /s/ Gregory L. Doody
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Name: Gregory L. Doody
Title: Executive Vice President,
General Counsel and Secretary
Dated: April 11, 2005
EXHIBIT INDEX
Exhibit No. Description
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10 Form of Restricted Stock Agreement, between the Company
and each of Joel C. Gordon and Robert P. May, dated as of
March 1, 2005.