Exhibit 10.2

 

HEALTHSOUTH CORPORATION

TRANSITIONAL SEVERANCE PLAN –

CORPORATE OFFICE EMPLOYEES

 

ARTICLE I

PURPOSE, ESTABLISHMENT AND APPLICABILITY OF PLAN

 

A.          Purposes. HealthSouth Corporation (the “Company”) has announced that
it is evaluating strategic alternatives that include the spin-off, sale or other
disposition of its Surgery, Outpatient and Diagnostic Divisions. The Company’s
Board of Directors (the “Board”) recognizes that the disposition process and the
uncertainty surrounding future employment is a distraction to key employees. The
Board has determined that it is in the best interests of the Company and its
stockholders to assure the continued dedication of these Employees. The Board
has also determined that providing these Employees with financial security and
encouragement to remain employed by the Company will maximize the value of the
Company and the divisions during the disposition process

B.           Establishment of Plan. The Plan, as set forth in this document, is
hereby effective as of the Effective Date.

C.           Applicability of Plan. Subject to the terms of this Plan, the
benefits provided by this Plan shall be available to those Employees who, on or
after the Effective Date, receive a Notice of Participation and who meet the
eligibility requirements of Article III.

 

ARTICLE II

DEFINITIONS AND CONSTRUCTION

Whenever used in the Plan, the following terms shall have the meanings set forth
below.

A.          Board. Board” means the Compensation Committee of the Board of
Directors of the Company.

 

B.

Cause. “Cause” shall mean:

 

(vii)

the Employee’s act of fraud, misappropriation or embezzlement with respect to
the Company or any material affiliate;

 

(viii)

the Employee’s indictment for, conviction of or plea of guilt or no contest to
any felony (other than a minor traffic violation);

 

(ix)

in carrying out his duties, the Employee engages in conduct that constitutes
willful gross neglect or willful gross misconduct resulting, in either case, in
material harm to the Company’s business or reputation;

 

1

 

--------------------------------------------------------------------------------

 

 

 

(x)

the suspension or debarment of the Employee from participation in any federal or
state health care program as a result of any act or omission of the Employee in
connection with his employment with the Company or the suspension or debarment
of the Company or any of its affiliates, from participation in any federal or
state health care program as a result of any willful act or omission of the
Employee in connection with his employment of the Company;

 

(xi)

the Employee’s admission of liability of, or a finding by a court or the
applicable regulatory agency or body of liability for the violation of any
“Securities Laws” (but excluding any technical violations of any 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;

 

(xii)

The Employee’s failure after reasonable prior written notice from the Company to
comply with any valid and legal directive of the Board or the Employee’s
immediate supervisor.

 

C.

Code. “Code” means the Internal Revenue Code of 1986, as amended.

D.          Committee. “Committee” means the Committee appointed by the Board to
administer this Plan.

E.           Company. “Company” means HealthSouth Corporation, its affiliates
and any successor entities as provided in Article VIII hereof.

 

F.

Effective Date. “Effective Date” means October 1, 2006.

 

 

G.

Employee. “Employee” means an employee of the Company

H.          ERISA. “ERISA” means the Employee Retirement Income Security Act of
1974, as amended.

I.            Notice of Participation. “Notice of Participation” means a written
notice of participation from an authorized officer of the Company setting forth
the material terms of the severance benefits provided hereunder.

J.            Participant. “Participant” means an individual who meets the
eligibility requirements of Article III.

K            Plan. “Plan” means this HealthSouth Corporation Transitional
Severance Plan – Corporate Office Employees.

 

L.

Plan Administrator. “Plan Administrator” means the Committee.

 

 

2

 

--------------------------------------------------------------------------------

 

 

M.         Release Agreement. “Release Agreement” means a general waiver,
release and agreement a Participant must execute as a condition to receiving
severance and other benefits hereunder.

N.          Severance Payment Factor. “Severance Payment Factor” means, for each
Participant, the number of weeks of severance applicable to such Participant
based upon the Participant’s job classification as set forth in the Notice of
Participation.

O.          Termination Date. “Termination Date” means (i) the date on which the
Company delivers notice of termination to the Participant or such later date,
not to exceed ninety (90) days, specified in the notice of termination, (ii) in
the event the term of employment ends by reason of the Participant’s death, the
date of death, or (iii) if the Participant terminates his or her employment with
the Company, the date on which the Participant delivers notice of termination to
the Company.

P.           Transition Period. “Transition Period” means the period beginning
on the Effective Date and continuing until the disposition of the Company’s
Surgery, Outpatient and Diagnostic Divisions.

 

ARTICLE III

ELIGIBILITY

A.          Waiver. As a condition of receiving benefits under the Plan, an
Employee who is so requested by the Company must sign the Release Agreement.

B.           Participation in Plan. Each Employee who is designated by the
Committee and who receives a Notice of Participation shall be a Participant in
the Plan. A Participant shall cease to be a Participant in the Plan upon ceasing
to be an Employee unless such Participant is entitled to benefits hereunder. A
Participant entitled to benefits hereunder shall remain a Participant in the
Plan until the full amount of the benefits have been delivered to the
Participant.

 

ARTICLE IV

TERMINATION OF EMPLOYMENT

If a Participant’s employment with the Company terminates for any reason during
the Transition Period, he or she may be entitled to severance and other benefits
as follows:

A.          Involuntary Termination. Subject to paragraph C of this Article IV,
if the Company terminates a Participant’s employment other than for Cause, then,
subject to the Participant’s obligations under the Release Agreement, if any,
the Participant shall be entitled to receive the following severance and other
benefits:

 

3

 

--------------------------------------------------------------------------------

 

 

(i)          Cash Payments. The Participant shall be entitled to severance equal
to the product obtained by multiplying the Participant’s weekly salary then in
effect times the Participant’s Severance Payment Factor. Such severance shall be
paid to the Participant in substantially equal installments in accordance with
the Company’s normal payroll practices beginning within fifteen (15) calendar
days of the Participant’s Termination Date; provided, however, that the Company
may make any payments hereunder in a lump sum.

 

(ii)         Health Plan Coverage. The Participant may elect, to the extent
eligible, to continue his or her group health insurance benefits pursuant to the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (COBRA).

 

(iii)       Other Benefits. The Participant shall be entitled to such other
benefits, if any, as may be determined by the Plan Administrator.

 

B.           Other Termination. If (i) the Participant voluntarily resigns from
the Company, (ii) the Company terminates the Participant’s employment for Cause,
or (iii) the Participant’s employment terminates by reason of his or her
Retirement, disability or death, then the Participant shall not be entitled to
receive severance or other benefits under this Plan and shall be entitled to
benefits (if any) only as may then be established under the Company’s then
existing benefit plans and policies at the time of such resignation or
termination.

C.           Comparable Employment. In the event a Participant is offered
employment by any successor to the businesses of the Surgery, Outpatient or
Diagnostic Divisions of the Company that the Committee, in its sole discretion,
determines to be comparable or better to the Participant, employment with the
Company and such position is not located more than 50 miles from the
Participant’s primary job location with the Company, no benefits shall be
payable hereunder.

 

ARTICLE V

FUNDING POLICY AND METHOD

Benefits and any administrative expenses arising in connection with the Plan
shall be paid as needed solely from the general assets of the Company. No
contributions are required from any Participant. This Plan shall not be
construed to require the Company to fund any of the benefits provided hereunder
nor to establish a trust for such purpose. Participants’ rights against the
Company with respect to severance and other benefits provided under this Plan
shall be those of general unsecured creditors. No Participant has an interest in
his or her severance or other benefits under this Plan until the Participant
actually receives a payment.

 

4

 

--------------------------------------------------------------------------------

 

 

ARTICLE VI

CLAIMS PROCEDURE

The Plan Administrator shall notify any person or entity that makes a claim
against the Plan (the “Claimant”) in writing, within 90 days of Claimant’s
written application for benefits, or his or her eligibility or noneligibility
for benefits under the Plan. If the Plan Administrator determines that the
Claimant is not eligible for benefits or full benefits, the notice shall set
forth (1) the specific reasons for such denial, (2) a specific reference to the
provisions of the Plan on which the denial is based, (3) any internal protocols
the Plan Administrator relied upon in making its determination, (4) the right to
review any documents created or received by the Plan Administrator during the
review process and documents relevant to the claim whether or not relied upon by
the Plan Administrator, (5) a description of any additional information or
material necessary for the Claimant to perfect his or her claim and a
description of why it is needed, and (6) an explanation of the Plan’s claims
review procedure and other appropriate information as to the steps to be taken
if the Claimant wishes to have the claim reviewed. If the Plan Administrator
determines that there are special circumstances requiring additional time to
make a decision, the Plan Administrator shall notify the Claimant of the special
circumstances requiring additional time to make a decision, the Plan
Administrator shall notify the Claimant of the special circumstances and the
date by which a decision is expected to be made, and may extend the time for up
to an additional 90 days.

If the Claimant is determined by the Plan Administrator not to be eligible for
benefits, or if the Claimant shall have the opportunity to have such claim
reviewed by the Plan Administrator by filing a petition for review with the Plan
Administrator within 60 days after receipt of the notice issued by the Plan
Administrator. Said petition shall state the specific reasons that the Claimant
believes entitled him or her to benefits or to greater or different benefits.
Within 60 days after receipt by the Plan Administrator of the petition, the Plan
Administrator shall afford the Claimant (and counsel, if any) an opportunity to
present his or her position to the Plan Administrator verbally or in writing,
and the Claimant (or counsel) shall have the right to review the pertinent
documents. The Plan Administrator shall notify the Claimant of its decision in
writing within such period, stating specifically the basis of its decision,
written in a manner to be understood by the Claimant and the specific provisions
of the Plan on which the decision is based. If, because of the need for a
hearing, the 60-day period is not sufficient, the decision may be deferred for
up to another 60 days at the election of the Plan Administrator, but notice of
this deferral shall be given to the Claimant.

 

 

5

 

--------------------------------------------------------------------------------

 

 

ARTICLE VII

EMPLOYMENT STATUS; WITHHOLDING

A           Employment Status. This Plan does not constitute a contract of
employment or impose on the Participant or the Company any obligation to retain
the Participant as an Employee, to change the status of the Participant’s
employment, or to change the Company’s policies regarding termination of
employment. The Participant’s employment is and shall continue to be at-will, as
defined under applicable law. If the Participant’s employment with the Company
or a successor entity terminates for any reason, the Participant shall not be
entitled to any payments, benefits, damages, awards or compensation other than
as provided by this Plan, or as may otherwise be available in accordance with
the Company’s established employee plans and practices or other agreements with
the Company at the time of termination.

B.           Taxes. All payments made pursuant to this Plan shall be subject to
all applicable reporting obligations and any tax or other contributions required
to be withheld under Federal, state or local law.

 

ARTICLE VIII

SUCCESSORS TO COMPANY AND PARTICIPANTS

A.          Company’s Successors. Any successor to the Company (whether direct
or indirect and whether by purchase, lease, merger, consolidation, liquidation
or otherwise) to all or substantially all of the Company’s business or assets
shall assume the obligations under this Plan and agree expressly to perform the
obligations under this Plan by executing a written agreement. For all purposes
under this Plan, the term “Company” shall include any successor to the Company’s
business and/or assets which executes and delivers the assumption agreement
described in this subsection or which becomes bound by the terms of this Plan by
operation of law.

B.           Participant’s Successors. All rights of the Participant hereunder
shall inure to the benefit of, and be enforceable by, the Participant’s personal
or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.

 

ARTICLE IX

DURATION, AMENDMENT AND TERMINATION

 

A.

Duration. This Plan shall terminate at the end of the Transition Period.

B.           Plan Amendment. The Board shall have the discretionary authority to
amend the Plan in any respect by resolution adopted by a majority of the Board;
provided, however, that the Board may not amend the Plan in any way that is
adverse to a Plan Participant without the Participant’s written consent.

 

6

 

--------------------------------------------------------------------------------

 

 

ARTICLE X

NOTICE

A.          General. Notices and all other communications contemplated by this
Plan shall be in writing and shall be deemed to have been duly given when
personally delivered or when mailed by U.S. registered or certified mail, return
receipt requested and postage prepaid. In the case of the Participant, mailed
notices shall be addressed to him or her at the home address which he or she
most recently communicated to the Company in writing. In the case of the
Company, mailed notices shall be addressed to its corporate headquarters, and
all notices shall be directed to the attention of its Interim General Counsel.

B.          Notice of Termination by the Company. Any termination by the Company
of the Participant’s employment with the Company during the Transition Period
shall be communicated by a notice of termination to the Participant. Such notice
shall indicate the specific termination provision or provisions in this Plan
relied upon (if any), shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination under the provision or
provisions so indicated, and shall specify the Termination Date.

 

ARTICLE XI

MISCELLANEOUS PROVISIONS

A.          Severability. The invalidity or unenforceability of any provision or
provisions of this Plan shall not affect the validity or enforceability of any
other provision hereof, which shall remain in full force and effect.

B.           No Assignment of Benefits. The rights of any person to payments or
benefits under this Plan shall not be made subject to option or assignment,
either by voluntary or involuntary assignment or by operation of law, including
(without limitation) bankruptcy, garnishment, attachment or other creditor’s
process, and any action in violation of this subsection shall be void.

 

 

7

 

--------------------------------------------------------------------------------

 

 

ARTICLE XII

ERISA REQUIRED INFORMATION

 

 

A.

Plan Sponsor. The Plan sponsor is:

 

 

 

 

 

 

 

 

 

HealthSouth Corporation

One HealthSouth Parkway

Birmingham, Alabama 35242

 

 

 

 

 

 

 

 

B.

Designated Agent. Designated agent for service of process:

 

 

 

 

 

 

 

 

 

Interim General Counsel

HealthSouth Corporation

One HealthSouth Parkway

Birmingham, Alabama 35242

 

 

 

 

 

 

 

 

C.

Plan Records. Plan records are kept on a calendar year basis.

 

 

 

 

 

 

 

 

D.

Plan Funding. The Plan is funded from the Company’s general assets.

 

 

 

 

 

8