HEALTHSOUTH Corporation
1995 STOCK OPTION PLAN
1. Purpose of the Plan. The purpose of the 1995 Stock Option Plan
(hereinafter called the "Plan") of HEALTHSOUTH Corporation, a Delaware
corporation (hereinafter called the "Corporation"), is to provide incentive for
future endeavor and to advance the interests of the Corporation and its
stockholders by encouraging ownership of the Common Stock, par value $.01 per
share (hereinafter called the "Common Stock"), of the Corporation by its
Directors, executives and other key employees, upon whose judgment, interest and
continuing special efforts the Corporation is largely dependent for the
successful conduct of its operations, and to enable the Corporation to compete
effectively with other enterprises for the services of such new Directors,
executives and employees as may be needed for the continued improvement of the
Corporation's business, through the grant of options to purchase shares of the
Common Stock. It is intended that certain Options issued under the Plan and so
designated pursuant to Section 6(c) hereof by the Committee (as defined in
Section 5 hereof) shall qualify as "incentive stock options" (hereinafter called
"ISOs") under Section 422(b) of the Internal Revenue Code of 1986, as amended
from time to time (hereinafter called the "Code"), and, where applicable, the
terms of the Plan shall be interpreted in accordance with such intention. Other
Options may be issued under the Plan and designated by the Committee or such
Independent Stock Option Committee, as the case may be, as non-qualified stock
options (hereinafter called "NQSOs"). Any Option issued under the Plan and not
expressly designated as an ISO shall be conclusively deemed to be an NQSO.
2. Participants. Options may be granted under the Plan to Directors of
the Corporation and to such executives and key employees of the Corporation and
its subsidiaries as shall be determined by the Committee appointed by the Board
of Directors as set forth in Section 5 of the Plan; provided, however, that no
Option may be granted to any person if such grant would cause the Plan to cease
to be an "employee benefit plan" as defined in Rule 405 of Regulation C
promulgated under the Securities Act of 1933; and provided further that no ISO
may be granted to any person ineligible to be granted ISOs under Section 422(b)
of the Code.
3. Term of the Plan. The Plan shall become effective as of June 6,
1995, subject to the approval by the holders of a majority of the shares of
issued and outstanding Common Stock of the Corporation at the 1995 Annual
Meeting of Stockholders of the Corporation. The Plan shall terminate on the
earliest of (a) June 5, 2005, (b) such time as all shares of Common Stock
reserved for issuance under the Plan have been acquired through the exercise of
Options granted under the Plan, or (c) such earlier time as the Board of
Directors of the Corporation may determine. Any Option outstanding under the
Plan at the time of its termination shall remain in effect in accordance with
its terms and conditions and those of the Plan. No Option shall be granted under
the Plan after June 5, 2005.
4. Stock Subject to the Plan. (a) Subject to the provisions of Section
13, the aggregate number of shares of Common Stock for which Options may be
granted under the Plan shall not exceed 3,500,000 shares plus such number of
shares as is added pursuant to Section 4(b), and the maximum number of shares of
Common Stock for which any individual may be granted Options under the Plan
during any calendar year is 1,000,000. If, on or prior to the termination of the
Plan as provided in Section 3, an Option granted under the Plan shall have
expired or terminated for any reason without having been exercised in full, the
unpurchased shares covered thereby shall again become available for the grant of
Options under the Plan. Shares covered by Options surrendered in connection with
the
exercise of other Options pursuant to Section 9(e) shall be deemed, for purposes
of this Section 4, to have been exercised, and such shares shall not again
become available for the grant of Options under the Plan.
The shares to be delivered upon exercise of Options under the Plan
shall be made available, at the discretion of the Board of Directors, either
from authorized but previously unissued shares as permitted by the Certificate
of Incorporation of the Corporation or from shares re-acquired by the
Corporation, including shares of Common Stock purchased in the open market, and
shares held in the treasury of the Corporation.
(b) The number of shares of Common Stock for which Options may
be granted under the Plan shall automatically increase on the first trading day
of each calendar year during the term of the Plan, beginning with the 1996
calendar year, by an amount equal to 0.9% of the shares of Common Stock
outstanding on December 31 of the immediately preceding year. However, such
additional shares shall be available only for the grant of NQSOs under the Plan
and not for the grant of ISOs.
5. Administration of the Plan. With respect to the participation of
executives and key employees of the Corporation and its subsidiaries who are not
also Directors of the Corporation, the Plan shall be administered by the Audit
and Compensation Committee of the Board of Directors of the Corporation
(hereinafter called the "Committee"). The acts of a majority of the Committee,
at any meeting thereof at which a quorum is present, or acts reduced to or
approved in writing by a majority of the members of the Committee, shall be the
valid acts of the Committee. The Committee shall determine the executives and
key employees of the Corporation and its subsidiaries who shall be granted
Options and the number of shares of Common Stock to be subject to each Option.
With respect to the participation of non-employee Directors of the
Corporation, each non-employee Director shall receive, as an annual grant, an
NQSO to purchase 25,000 shares of Common Stock on the date of adoption of the
Plan and in each year thereafter, such Option to be granted at the Annual
Meeting of the Board of Directors. The purchase price of the shares of Common
Stock covered by each such NQSO granted to a non-employee Director shall be 100%
of the fair market value (but in no event less than the par value) of such
shares at the time the Option is granted, determined in accordance with Section
7(c) hereof.
The interpretation and construction of any provision of the Plan or of
any Option granted under it by the Committee shall be final, conclusive and
binding upon all parties, including the Corporation, its stockholders and
Directors, and the executives and employees of the Corporation and its
subsidiaries. No member of the Board of Directors or the Committee shall be
liable to the Corporation, any stockholder, any optionholder or any employee of
the Corporation or its subsidiaries for any action or determination made in good
faith with respect to the Plan or any Option granted under it. No member of the
Board of Directors may vote on any Option to be granted to him.
The expenses of administering the Plan shall be borne by the
Corporation.
6. Grant of Options. (a) Options may be granted under the Plan by the
Committee in accordance with the provisions of Section 5 at any time prior to
the termination of the Plan. In making any determination as to Directors,
executives and key employees to whom Options shall be granted and as to the
number of shares to be covered by such Options, the Committee shall take into
account the duties of the respective Directors, executives and key employees,
their present and potential contribution
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to the success of the Corporation, and such other factors as the Committee shall
deem relevant in connection with the accomplishment of the purposes of the Plan.
(b) Each Option granted under the Plan shall be granted pursuant to and
subject to the terms and conditions of a stock option agreement to be entered
into between the Corporation and the optionholder at the time of such grant.
Each such stock option agreement shall be in a form from time-to-time adopted
for use under the Plan by the Committee (such form being hereinafter called a
"Stock Option Agreement"). Any such Stock Option Agreement shall incorporate by
reference all of the terms and provisions of the Plan as in effect at the time
of grant and may contain such other terms and provisions as shall be approved
and adopted by the Committee.
(c) At the time of the grant of each Option under this Plan, the
Committee shall determine whether such Option is to be designated as an ISO. If
an Option is to be designated as an ISO, then the provisions of Sections 6(d),
7(b) and 8(b) shall apply to such Options. The Stock Option Agreement relating
to the grant of any option designated as an ISO shall reflect such designation.
(d) Notwithstanding any contrary provision contained in this Agreement,
the aggregate fair market value (determined as of the time each ISO is granted)
of the shares of Common Stock with respect to which ISOs issued to any one
person hereunder are exercisable for the first time during any calendar year
shall not exceed $100,000.
7. Option Price. (a) The purchase price of the shares of Common Stock
covered by each Option granted under the Plan shall be at least 100% of the fair
market value (but in no event less than the par value) of such shares at the
time the Option is granted, or such higher purchase price as shall be determined
by the Committee.
(b) Notwithstanding any contrary provision contained in Section 7(a)
hereof, no Option granted to any person who, at the time of such grant, owns,
taking into account the attribution rules of Section 424(d) of the Code, stock
possessing more than 10% of the total combined voting power of all classes of
the Corporation's stock or of the stock of any of its corporate subsidiaries,
may be designated as an ISO unless at the time of such grant the purchase price
of the shares of Common Stock covered by such Option is at least 110% of the
fair market value (but in no event less than the par value) of such shares.
(c) If the Common Stock is not listed upon a national securities
exchange or exchanges, such fair market value shall be as determined by the
Board of Directors of the Corporation (which determination shall be conclusive
and binding for all purposes) or, if applicable, shall be deemed to be the last
reported sale price for the Common Stock as quoted by brokers and dealers
trading in the Common Stock in the over-the-counter market (or if the Common
Stock shall be quoted by the National Association of Securities Dealers
Automated Quotation system, then such NASDAQ quote) immediately prior to the
commencement of the meeting of the Committee at which the Option is granted. If
the Common Stock is listed upon a national securities exchange or exchanges,
such fair market value shall be deemed to be the last reported sale price at
which the shares of Common Stock were traded on such securities exchange or
exchanges immediately prior to the commencement of the meeting of the Committee
at which the Option is granted, or if no sale of the Common Stock was made on
any national securities exchange on such date, then the closing price per share
of the Common Stock on such securities exchange or exchanges on the next
preceding day on which there was a sale of the Common Stock.
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(d) The exercise price of any outstanding Options shall not be reduced
during the term of such Options except by reason of an adjustment pursuant to
Section 13 hereof, nor shall the Committee or the Board of Directors cancel
outstanding Options and reissue new Options at a lower exercise price in
substitution for the canceled Options.
8. Term of Options. (a) The expiration date of an Option granted under
the Plan shall be as determined by the Committee at the time of grant, provided
that each such Option shall expire not more than ten years after the date such
Option was granted.
(b) Notwithstanding any contrary provision contained in Section 8(a)
hereof, no Option granted to any person who, at the time of such grant, owns,
taking into account the attribution rules of Section 424(d) of the Code, stock
possessing more than 10% of the total combined voting power of all classes of
the Corporation's stock or of the stock of any of its corporate subsidiaries,
may be designated as an ISO unless by its terms each such Option shall expire
not more than five years after the date such Option was granted.
9. Exercise of Options. (a) Each Option shall become exercisable in
whole or in part or in installments at such time or times as the Committee may
prescribe at the time the Option is granted and specify in the Stock Option
Agreement. No Option shall be exercisable after the expiration of ten years from
the date on which it was granted.
(b) Notwithstanding any contrary provision contained herein, unless
otherwise expressly provided in the Stock Option Agreement, any Option granted
hereunder which is, by its terms, exercisable in installments shall become
immediately exercisable in full upon the occurrence of a Change in Control of
the Corporation. For purposes of this Section 9(b), "Change in Control" shall
mean
(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 Corporation 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 Common Stock or the combined voting power of
the Company's then-outstanding voting securities entitled to vote
generally in the election of Directors; or
(ii) individuals who, as of June 6, 1995, constitute the Board
of Directors of the Corporation (as of such date, the "Incumbent
Board") cease for any reason to constitute at least a majority of the
Board of Directors; 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 9(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
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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 Corporation or the sale of all or substantially all of the assets
of the Corporation.
(c) Options may be exercised by giving written notice to the
Corporation of intention to exercise, specifying the number of shares to be
purchased pursuant to such exercise in accordance with the procedures set forth
in the Stock Option Agreement. All shares purchased upon exercise of any Option
shall be paid for in full at the time of purchase in accordance with the
procedures set forth in the Stock Option Agreement. Except as provided in
Sections 9(d) and 9(e) hereof, such payment shall be made in cash or through
delivery of shares of Common Stock or a combination of cash and Common Stock as
provided in the Stock Option Agreement. Any shares so delivered shall be valued
at their fair market value determined as of the date of exercise of the Option
under the method set forth in Section 7(c) hereof.
(d) Payment for shares purchased upon exercise of any such Option may
be made by delivery to the Corporation of a properly executed exercise notice
together with irrevocable instructions to a broker to promptly deliver to the
Corporation an amount of sale or loan proceeds sufficient to pay the exercise
price. Additionally, the Corporation will accept, in payment for shares
purchased upon exercise of any such Option, proceeds of a margin loan obtained
by the exercising optionholder from a broker, provided that the exercising
optionholder has, at the same time as delivery to the Corporation of a properly
executed exercise notice, delivered to the Corporation irrevocable instructions
to the Corporation to deliver share certificates directly to such broker upon
payment for such shares.
(e) With respect to Directors and officers of the Corporation who are
subject to reporting requirements under Section 16(a) of the Securities Exchange
Act of 1934, payment for shares purchased upon exercise of any Option granted
hereunder may be made by surrender of outstanding Options issued under this Plan
or any other stock option plan of the Corporation having a Spread (as defined
below) equal to the exercise price of the Options sought to be exercised. For
purposes of this Section 9(e), the "Spread" with respect to any unexercised
Option shall be equal to (i) the average price per share of Common Stock on the
date of exercise, as determined by the Corporation from any commercially
available reporting service reflecting trading of the Common Stock on a national
securities exchange, on the National Association of Securities Dealers Automated
Quotation System, or in the over the counter market, as applicable, less (ii)
the exercise price of the surrender of the Option. All Options so surrendered
will be deemed to have been exercised by the optionholder. Such surrender shall
be evidenced in a form satisfactory to the Secretary of the Corporation.
10. Nontransferability of Options. Options granted under the Plan shall
be assignable or transferable only by will or pursuant to the laws of descent
and distribution and shall be exercisable during the optionholder's lifetime
only by him.
11. Stockholder Rights of Optionholder. No holder of any Option shall
have any rights to dividends or other rights of a stockholder with respect to
shares subject to an Option prior to the purchase of such shares upon exercise
of the Option.
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12. Termination of Option. With respect to any Option which, by its
terms, is not exercisable for one year from the date on which it is granted, if
an optionholder's employment by, or other relationship with, the Corporation or
any of its subsidiaries terminates within one year after the date an unexercised
Option containing such terms is granted under the Plan for any reason other than
death, the Option shall terminate on the date of termination of such employment
or other relationship. With respect to all Options granted under the Plan, if an
optionholder's employment by, or other relationship with, the Corporation is
terminated by reason of his death, the Option shall terminate one year after the
date of death, unless the Option otherwise expires. If an optionholder's
employment by, or other relationship with, the Corporation terminates for any
reason other than as set forth above in this Section 12, the Option shall
terminate three months after the date of termination of such employment or other
relationship unless the Option earlier expires, provided that (a) if the
optionholder dies within such three-month period, the Option shall terminate one
year after the date of his death unless the Option earlier expires; (b) the
Board of Directors may, at any time prior to any termination of such employment
or other relationship under the circumstances covered by this Section 12,
determine in its discretion that the Option shall terminate on the date of
termination of such employment or other relationship with the Corporation; and
(c) the exercise of any Option after termination of such employment or other
relationship with the Corporation shall be subject to satisfaction of the
conditions precedent that the optionholder refrain from engaging, directly or
indirectly, in any activity which is competitive with any activity of the
Corporation or any subsidiary thereof and from otherwise acting, either prior to
or after termination of such employment or other relationship, in any manner
inimical or in any way contrary to the best interests of the Corporation and
that the optionholder furnish to the Corporation such information with respect
to the satisfaction of the foregoing condition precedent as the Board of
Directors shall reasonably request. For purposes of this Section 12, a
"relationship with the Corporation" shall be limited to any relationship that
does not cause the Plan to cease to be an "employee benefit plan" as defined in
Rule 405 of Regulation C under the Securities Act of 1933. The mere ownership of
stock in the Corporation shall not be deemed to be a "relationship with the
Corporation".
Nothing in the Plan or in the Stock Option Agreement shall confer upon
any optionholder the right to continue in the employ of the Corporation or any
of its subsidiaries or in any other relationship thereto or interfere in any way
with the right of the Corporation to terminate such employment or other
relationship at any time.
A holder of an Option under the Plan may make written designation of a
beneficiary on forms prescribed by and filed with the Secretary of the
Corporation. Such beneficiary, or if no such designation of any beneficiary has
been made, the legal representative of such optionholder or such other person
entitled thereto as determined by a court of competent jurisdiction, may
exercise, in accordance with and subject to the provisions of this Section 12,
any unterminated and unexpired Option granted to such optionholder to the same
extent that the optionholder himself could have exercised such Option were he
alive or able; provided, however, that no Option granted under the Plan shall be
exercisable for more shares than the optionholder could have purchased
thereunder on the date his employment by, or other relationship with, the
Corporation and its subsidiaries was terminated.
13. Adjustment of and Changes in Capitalization. In the event that the
outstanding shares of Common Stock shall be changed in number or class by reason
of split-ups, combinations, mergers, consolidations or recapitalizations, or by
reason of stock dividends, the number or class of shares which thereafter may be
purchased through exercise of Options granted under the Plan, both in the
aggregate and as to any individual, and the number and class of shares then
subject to Options theretofore granted and the price per share payable upon
exercise of such Option shall be adjusted so as to reflect such
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change, all as determined by the Board of Directors of the Corporation. In the
event there shall be any other change in the number or kind of the outstanding
shares of Common Stock, or of any stock or other securities into which such
Common Stock shall have been changed, or for which it shall have been exchanged,
then if the Board of Directors shall, in its sole discretion, determine that
such change equitably requires an adjustment in any Option theretofore granted
or which may be granted under the Plan, such adjustment shall be made in
accordance with such determination.
Notice of any adjustment shall be given by the Corporation to each
holder of an Option which shall have been so adjusted and such adjustment
(whether or not such notice is given) shall be effective and binding for all
purposes of the Plan.
Fractional shares resulting from any adjustment in Options pursuant to
this Section 13 may be settled in cash or otherwise as the Board of Directors
may determine.
14. Securities Acts Requirements. No Option granted pursuant to the
Plan shall be exercisable in whole or in part, and the Corporation shall not be
obligated to sell any shares of Common Stock subject to any such Option, if such
exercise and sale would, in the opinion of counsel for the Corporation, violate
the Securities Act of 1933 or other Federal or state statutes having similar
requirements, as they may be in effect at that time. Each Option shall be
subject to the further requirement that, at any time that the Board of Directors
or the Committee, as the case may be, shall determine, in their respective
discretion, that the listing, registration or qualification of the shares of
Common Stock subject to such Option under any securities exchange requirements
or under any applicable law, or the consent or approval of any governmental
regulatory body, is necessary or desirable as a condition of, or in connection
with, the granting of such Option or the issuance of shares thereunder, such
Option may not be exercised in whole or in part unless such listing,
registration, qualification, consent or approval shall have been effected or
obtained free of any conditions not acceptable to the Board of Directors or the
Committee, as the case may be.
As a condition to the issuance of any shares upon exercise of an Option
under the Plan, the Board of Directors or the Committee, as the case may be, may
require the optionholder to furnish a written representation that he is
acquiring the shares for investment and not with a view to distribution of the
shares to the public and a written agreement restricting the transferability of
the shares solely to the Corporation, and may affix a restrictive legend or
legends on the face of the certificate representing such shares. Such
representation, agreement and/or legend shall be required only in cases where in
the opinion of the Board of Directors or the Committee, as the case may be, and
counsel for the Corporation, it is necessary to enable the Corporation to comply
with the provisions of the Securities Act of 1933 or other Federal or state
statutes having similar requirements, and any stockholder who gives such
representation and agreement shall be released from it and the legend removed at
such time as the shares to which they applied are registered or qualified
pursuant to the Securities Act of 1933 or other Federal or state statutes having
similar requirements, or at such other time as, in the opinion of the Board of
Directors or the Committee, as the case may be, and counsel for the Corporation,
the representation and agreement and legend cease to be necessary to enable the
Corporation to comply with the provisions of the Securities Act of 1933 or other
Federal or state statutes having similar requirements.
15. Amendment of the Plan. The Plan may, at any time or from time to
time, be terminated, modified or amended by the stockholders of the Corporation
by the affirmative vote of the holders of a majority of the outstanding shares
of the Corporation's Common Stock entitled to vote. The Board of Directors of
the Corporation may, insofar as permitted by law, from time to time with respect
to any
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shares of Common Stock at the time not subject to Options, suspend or
discontinue the Plan or revise or amend it in any respect whatsoever; provided,
however, that, without approval of the stockholders of the Corporation, no such
revision or amendment shall increase the number of shares subject to the Plan,
decrease the price at which the Options may be granted, permit exercise of
Options unless full payment is made at the time of exercise (except as so
provided in Section 9 hereof), extend the period during which Options may be
exercised, or change the provisions relating to adjustment to be made upon
changes in capitalization.
16. Changes in Law. Subject to the provisions of Section 15, the Board
of Directors shall have the power to amend the Plan and any outstanding Options
granted thereunder in such respects as the Board of Directors shall, in its sole
discretion, deem advisable in order to incorporate in the Plan or any such
Option any new provision or change designed to comply with or take advantage of
requirements or provisions of the Code or any other statute, or Rules or
Regulations of the Internal Revenue Service or any other Federal or state
governmental agency enacted or promulgated after the adoption of the Plan.
17. Legal Matters. Every right of action by or on behalf of the
Corporation or by any stockholder against any past, present or future member of
the Board of Directors, officer or employee of the Corporation arising out of or
in connection with this Plan shall, irrespective of the place where such action
may be brought and irrespective of the place of residence of any such Director,
officer or employee, cease and be barred by the expiration of three years from
whichever is the later of (a) the date of the act or omission in respect of
which such right of action arises, or (b) the first date upon which there has
been made generally available to stockholders an annual report of the
Corporation and a proxy statement for the Annual Meeting of Stockholders
following the issuance of such annual report, which annual report and proxy
statement alone or together set forth, for the related period, the aggregate
number of shares for which Options were granted; and any and all right of action
by any employee or executive of the Corporation (past, present or future)
against the Corporation arising out of or in connection with this Plan shall,
irrespective of the place where such action may be brought, cease and be barred
by the expiration of three years from the date of the act or omission in respect
of which such right of action arises.
This Plan and all determinations made and actions taken pursuant hereto
shall be governed by the law of Delaware, applied without giving effect to any
conflicts-of-law principles, and construed accordingly.
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