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): September 21, 2006
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.
On September 27, 2006, HealthSouth Corporation (the "Company") issued
a press release, a copy of which is attached hereto as Exhibit 99.1 and
incorporated herein by reference, announcing that it has entered into
definitive agreements (together, the "Settlement Agreement") with the lead
plaintiffs in the federal securities class actions and the derivative actions,
as well as certain of its insurance carriers (collectively, the "Carriers"), to
settle litigation filed against the Company, certain of its former directors
and officers and certain other parties in the United States District Court for
the Northern District of Alabama and the Circuit Court in Jefferson County,
Alabama, relating to financial reporting and related activity that occurred at
the Company during periods ended in March 2003. The Settlement Agreement
memorializes the preliminary settlement previously announced on February 23,
2006.
Pursuant to the Settlement Agreement, federal securities and fraud
claims brought in the class action against the Company and certain of its
former directors and officers will be settled for consideration consisting of
Company common stock and warrants valued at $215 million and cash payments by
certain of the Company's insurance carriers of $230 million, or aggregate
consideration of $445 million. In addition, the federal securities class action
plaintiffs will receive 25% of any net recoveries from future judgments
obtained by or on behalf of the Company with respect to certain claims against
non-settling defendants (excluding the $47 million judgment entered against
Richard Scrushy, the Company's former chief executive officer, on January 3,
2006). Securities to be issued by the Company in connection with the Settlement
Agreement will consist of an aggregate of 25,118,656 shares of its common stock
and eleven-year warrants to purchase an aggregate of 40,756,326 additional
shares of Company common stock at an exercise price of $8.28 per share, in each
case, as the same will be adjusted to give effect to the proposed 1-for-5
reverse stock split of the Company's common stock, which, subject to
stockholder approval, is expected to become effective before the end of
October. The Settlement Agreement also provides that the Company and the other
settling defendants must cooperate with the lead plaintiffs in their litigation
of claims against the remaining non-settling defendants.
The Settlement Agreement is subject to the satisfaction of a number of
conditions, including: (i) final approval of the Settlement Agreement by the
U.S. District Court; (ii) dismissal of all claims in the insurance litigation
against the settling defendants; (iii) return to the Carriers of all insurance
policy premiums tendered to the U.S. District Court or returned to insured
individuals; (iv) receipt of mutual releases from the Carriers and the Company,
including receipt of full releases from the Company of any claims under or
relating to the D&O insurance policies provided by the Carriers; and (v) the
approval of bar orders in the federal securities and derivative litigations by
the U.S. District Court and the Circuit Court that would, among other things,
preclude certain claims by the non-settling co-defendants against the Company
and the Carriers relating to matters covered by the Settlement Agreement.
Pursuant to the Settlement Agreement, the Company is required to
indemnify the Carriers for any amounts that they are legally obligated to pay
to any non-settling defendants, including certain of the defense costs and
other related expenses of the Carriers relating to such policies. Subject to
certain limitations contained in the Settlement Agreement, the Company is also
required to advance to and indemnify non-settling defendants for defense costs,
and for amounts payable in connection with any settlement or judgment in suits
brought by members of the federal securities class who opt out of the
settlement, but in each case, only to the extent that such non-settling
defendants would have been entitled to such amounts under the relevant policies
and only to the extent that such indemnification is permissible under
applicable law.
Certain matters discussed herein constitute forward-looking statements
that represent the Company's current expectations and beliefs concerning the
future events that involve risks and uncertainties which could cause actual
results to differ materially from those currently anticipated. Such information
is based on numerous assumptions and involve a number of risks and
uncertainties, many of which are beyond the Company's control.
The foregoing description of the Settlement Agreement is not complete
and is qualified in its entirety by reference to the text of the agreements
which make up the Settlement Agreement, copies of which are attached hereto as
Exhibits 10.1, 10.2 and 10.3 and are incorporated herein by reference.
ITEM 5.03. Amendment to Articles of Incorporation or Bylaws; Change in Fiscal
Year.
On September 21, 2006, the Board of Directors (the "Board") of the
Company unanimously approved the adoption of the Amended and Restated By-Laws
of the Company (the "Amended and Restated By-Laws"), which became effective as
of the date of adoption by the Board.
The Amended and Restated By-Laws add a new Section 2.9 to the
Company's by-laws to require stockholders of the Company to provide advance
notice of any stockholder proposal to be brought before an annual meeting of
stockholders, as well as a brief description of the proposed business and
certain information about the stockholder making the proposal. The Amended and
Restated By-Laws also amend Section 3.4 of the Company's by-laws to require
that stockholder nominations for election of directors at an annual meeting be
made between 90 and 120 days from the anniversary date of the previous annual
meeting date, provided that the date for the upcoming annual meeting is within
30 days of the anniversary date of the previous annual meeting. Any such
stockholder notice relating to the nomination of directors must also include
certain information regarding the nominating stockholder and their nominees.
Finally, the Amended and Restated By-Laws amend Section 5.8 of the Company's
by-laws to establish procedures for the setting of a record date for
stockholder consent solicitations.
The foregoing description of the Amended and Restated By-Laws is not
complete and is qualified in its entirety by reference to the text of the
Amended and Restated By-Laws, a copy of which is attached hereto as Exhibit 3.1
and incorporated herein by reference.
ITEM 9.01. Financial Statements and Exhibits.
(d) Exhibits.
See Exhibit Index
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
HEALTHSOUTH CORPORATION
By: \s\ John P. Whittington
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Name: John P. Whittington
Title: Interim General Counsel
and Corporate Secretary
Dated: September 27, 2006
EXHIBIT INDEX
Exhibit Number Description
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3.1 Amended and Restated By-Laws of HealthSouth
Corporation, effective as of September 21, 2006.
10.1 Stipulation of Partial Settlement dated as of
September 26, 2006, by and among HealthSouth
Corporation, the stockholder lead plaintiffs named
therein, the bondholder lead plaintiff named therein
and the individual settling defendants named therein.
10.2 Settlement Agreement and Policy Release dated as of
September 25, 2006, by and among HealthSouth
Corporation, the settling individual defendants named
therein and the settling carriers named therein.
10.3 Stipulation of Settlement with Certain Individual
Defendants dated as of September 25, 2006 by and
among HealthSouth Corporation, plaintiffs named
therein and the individual settling defendants named
therein.
99.1 Press release of HealthSouth Corporation dated
September 27, 2006.