Vice President of Human Resources Employment Agreement

Exhibit 10.32

Employment Agreement

THIS EMPLOYMENT AGREEMENT (this " Agreement" ), is made as of this 1 st day of May, 2006, by and between LIFECARE MANAGEMENT SERVICES, L.L.C. , a Louisiana limited liability company (" LifeCare" ), and CATHERINE CONNER (" Employee" ). LifeCare and Employee are collectively referred to in this Agreement as the " Parties."

Recitals: LifeCare has employed Employee as its Senior Vice President of Human Resources of LifeCare Management Services and the Parties desire to set forth the terms and conditions of Employee' s employment with LifeCare. This Agreement is intended to supersede any prior understandings or agreements, whether written or oral, concerning Employee' s employment with LifeCare, LifeCare Holdings, Inc. (" Parent" ), or any of their respective subsidiaries or affiliates.

Agreement: NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:

1. EMPLOYMENT . LifeCare hereby employs Employee to devote her personal services to the business and affairs of LifeCare, and Employee hereby accepts such employment, on the terms and conditions stated in this Agreement.

1.1 Duties . Employee' s title and position shall be Senior Vice President of Human Resources of LifeCare Management Services. Employee' s duties will be those customarily performed by persons acting in that capacity, and those that may be designated by the President or the Board of Managers of LifeCare (the " Board" ) consistent with the title and position of Senior Vice President of Human Resources.

1.2 Full-Time Employee . Employee shall devote her full time (except for reasonable vacation time and absence for any disability), attention, and best efforts to the performance of her duties described in Article 1.1. Employee may, however, engage in civic, charitable, and professional or trade activities so long as those activities do not interfere with the performance of her duties under this Agreement.

2. TERM . The term of Employee' s employment under this Agreement (the " Term" ) shall be as follows: 2.1 Initial Term . The initial term shall commence on the date of this Agreement and end at 11:59:59 p.m., Central Time, on the day preceding the first anniversary of the date of this Agreement unless: (i) terminated earlier pursuant to Article 5.1; or (ii) extended pursuant to Article 2.2.


1 2.2 Extended Term . Upon the expiration of the initial term described in Article 2.1, or of any subsequent extended term described in this Article 2.2, the one-year term shall be extended, without the need for any action by either Party, for an additional consecutive year, unless either Party gives notice to the other, at least 90 days before the expiration date, that the notifying Party does not wish to extend the term. If such a notice is timely given, the Term will expire at the end of the initial term or renewal term in effect at the time of that notice.

3. COMPENSATION . As compensation for the services rendered by Employee under this Agreement, LifeCare shall, during the Term, pay or provide Employee during the Term the following:

3.1 Base Salary . LifeCare shall pay Employee during the Term a base salary equal to $200,000 per annum, payable in arrears, in accordance with LifeCare' s regular and routine payroll dates, or at such intervals as may otherwise be agreed upon by the Parties, and in accordance with any other payroll procedures of LifeCare. Base salary shall be prorated (on a daily basis) for any partial payroll period of employment under this Agreement. The amount of base salary may be increased from time to time at the sole discretion of the Board.

3.2 Bonus Compensation . Employee shall be eligible to receive additional cash compensation at the end of each fiscal year of LifeCare during the Term, as a bonus, incentive, or other similar payment in accordance with LifeCare' s management incentive plan. The additional cash compensation, however, is not guaranteed and is dependent upon both: (i) achieving predefined goals for the fiscal year as determined by and in the sole discretion of the Board; and (ii) the discretion of the Board in awarding the bonus, regardless of whether the predefined goals were achieved. The amount or amounts of cash compensation which Employee potentially may earn by that participation will be determined by the Board (or a committee or other persons appointed by the Board to administer that plan); however Employee' s initial target bonus percent will be 50%. Employee must be currently employed by LifeCare at the time that bonuses are distributed to receive any bonus compensation. Employee will not receive a bonus following termination of employment for any reason. To the extent that the terms and conditions of my written bonus or retention plan in which Employee participates conflict with the terms and provisions of this Article 3.2, the terms of such written bonus or retention plan shall control.

3.3 Savings and Retirement Plans . Employee shall be eligible to participate in any executive savings, deferred compensation, retirement or pension, or death benefit plan adopted by LifeCare for its executives having positions similar to Employee' s position and in effect during the Term. The extent to which Employee may participate in any such plan will be determined, by the Board (or a committee or other persons appointed by the Board to administer that plan) in its sole discretion.


2 3.4 Welfare Benefit Plans . Employee shall be eligible to participate in any life insurance, medical, dental, and hospitalization insurance, disability insurance benefit, or other similar employee welfare benefit plan or program adopted by LifeCare covering its employees generally or its executives having positions similar to Employee' s position and in effect during the Term. 3.5 Paid Time Off. Employee shall be entitled to paid vacation or time off (" EPTO" ) per fiscal year of LifeCare, in accordance with LifeCare' s EPTO policies, practices, and procedures. Such EPTO shall, however, be prorated in any fiscal year during which Employee is employed under this Agreement for less than the entire fiscal year, in accordance with the number of days in that fiscal year during which Employee is so employed.

3.6 Tax Withholding . LifeCare may deduct from any compensation or other amount payable to Employee under this Agreement (including under Article 5) social security (FICA) taxes and all federal, state, municipal, and other taxes or governmental charges as may, in LifeCare' s judgment, be required.

3.7 Participation in Compensation and Benefit Plans . Employee' s participation during the Term in any or all of the plans or programs adopted by LifeCare described in Articles 3.2 through 3.5 (" Compensation and Benefit Plans" ) will be subject to the terms and conditions of those Compensation and Benefit Plans as they now exist or may hereafter be adopted, amended, restated, or discontinued by LifeCare, including the satisfaction of all applicable eligibility requirements and vesting provisions of those Compensation and Benefit Plans. LifeCare shall have no obligation under this Agreement to continue any or all of the Compensation and Benefit Plans that now exist or are hereafter adopted. To the extent that Employee is eligible to participate in any Compensation and Benefit Plan existing on the date of this Agreement for which a plan description or plan materials are available, LifeCare has provided to Employee, and Employee hereby acknowledges receipt of, a copy of the correct and complete written plan description or plan materials distributed to participants or prospective participants. 4. EXPENSE REIMBURSEMENT . During the Term, Employee may incur, and shall be reimbursed by LifeCare for, reasonable, ordinary and necessary, and documented business expenses to the extent that Employee complies with, and reimbursement is permitted by, LifeCare' s policies, practices, and procedures.

3 5. EXPIRATION OR TERMINATION . The Parties' respective rights and obligations upon termination of employment are, as follows:

5.1 Expiration or Termination Generally . Upon the expiration of the Term, or if Employee' s employment under this Agreement terminates for any reason, LifeCare shall pay or provide Employee the following:

5.1.1 Any base salary earned by, but not yet paid to, Employee through the effective date of termination of employment (the " Termination Date" ); 5.1.2 All benefits, or (at LifeCare' s option) the cash equivalent of all benefits, that have been earned by or vested in, and are payable to, Employee under, and subject to the terms (including all eligibility requirements) of, the Compensation and Benefit Plans in which Employee participated through the Termination Date;

5.1.3 All reimbursable expenses due, but not yet paid, to Employee as of the Termination Date under Article 4; and The amount of base salary due under Article 5.1.1 shall be paid no later than the thirty (30) business days after the Termination Date or as otherwise required by law; the amounts or benefits due under Article 5.1.2 shall be paid or provided in accordance with the terms of the Compensation and Benefit Plans under which such amounts or benefits are due to Employee; and the amounts due under Article 5.1.3 shall be paid in accordance with the terms of LifeCare' s policies, practices, and procedures regarding reimbursable expenses. Except as expressly provided below in this Article 5, upon paying or providing Employee the preceding amounts or benefits, LifeCare shall have no further obligation or liability under this Agreement for base salary or any other cash compensation or for any benefits under any of the Compensation and Benefit Plans, In this Agreement, the " Termination Date" shall be: (i) the date of expiration of the Term; (ii) the date of Employee' s death; (iii) the third business day after the date on which LifeCare gives notice of termination because of Disability; or (iv) the date of termination specified in any other notice of termination, whether for Cause (as defined below) or without Cause, or if not specified in the notice of termination, the date that notice of termination is given.

In this Agreement, " Disability" means Employee' s permanent and total disability, which shall be deemed to exist if she is unable reasonably to perform her duties under this Agreement because of any medically determinable physical or mental impairment which can be expected to result in imminent death or which has lasted or can be expected to last for at least 90 consecutive days. Any disability shall be determined in good faith by the Board or an authorized committee or representative thereof (" Representative" ), in its sole and absolute discretion, upon receipt of competent medical advice from a qualified physician selected by or acceptable to the Board or its Representative. Employee shall, if there is any question about her Disability, submit to a physical examination by a qualified physician selected by the Board or its Representative and with respect to whom Employee has no reasonable material objection.


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In this Agreement, " Cause" means any of the following: (i) Employee' s failure to substantially perform her duties under this Agreement, other than any such failure resulting from her Disability; (ii) Employee' s engaging in any action which, or omitting to engage in any action the omission of which, has been, is, or can reasonably expected to be substantially injurious (monetarily or otherwise) to LifeCare or its business or reputation; (iii) Employee' s performance of any act or omission constituting dishonesty that results, directly or indirectly, in gain or enrichment of Employee or her family or affiliates at the expense of LifeCare; or (iv) any breach by Employee of any obligation under any of Arti ...