Incentive Stock Option Agreement - HealthSouth Corp.


                             HEALTHSOUTH Corporation

                        INCENTIVE STOCK OPTION AGREEMENT
                    (Pursuant to the 1995 Stock Option Plan)

         OPTION granted in Birmingham,  Alabama on  ___________________,  199___
(the 'Date of Grant') by HEALTHSOUTH  Corporation,  a Delaware  corporation (the
'Corporation'), to ________________ (the 'Grantee').

         I. GRANT OF OPTION.  The  Corporation  hereby grants to the Grantee the
irrevocable  Option to  purchase,  on the terms and  subject  to the  conditions
herein set forth, up to ______________  fully paid and  nonassessable  shares of
the Corporation's Common Stock, par value $.01 per share, at the option price of
$_________ per share,  being not less than 100% of the fair market value of such
Common Stock on the Date of Grant.

         The Option is granted pursuant to the  Corporation's  1995 Stock Option
Plan (the 'Plan'),  a copy of which is attached hereto. The Option is subject in
its entirety to all the  applicable  provisions  of the Plan as in effect on the
Date of Grant, which are hereby incorporated herein by reference.

         II.  PERIOD OF OPTION.  Except as otherwise  provided in the Plan,  the
Option is  cumulatively  exercisable  in  installments  in  accordance  with the
following schedule:

                                                Percent of Shares
                                                Subject to Option
                 Year Beginning                   Purchasable
                 --------------                   -----------

                     1996                              None
                     1997                               25%
                     1998                               50%
                     1999                               75%
                     2000                              100%

The Option may be exercised from time to time during the option period as to the
total  number of shares  allowable  under this  Section 2, or any lesser  amount
thereof.  The Option is not  exercisable  before  __________________,  199___ or
after __________________, 200___.

         III. METHOD OF EXERCISE OF OPTION. The Option may be exercised in whole
or in part by the Grantee's  giving  written  notice,  specifying  the number of
shares which the Grantee  elects to purchase and the date on which such purchase
is to be made, to the Corporation by mail,  postage prepaid,  or delivering such
notice  by  hand to the  Corporation  at its  principal  office  in  Birmingham,
Alabama,  to the  attention  of the  Chairman  of the Board and Chief  Executive
Officer,  at least ten and not more than thirty days prior to the date specified
in such notice as the date on which such purchase is to be made.

         If such  exercise  shall be in  accordance  with the  provisions of the
Option, as specified in this Stock Option Agreement,  the Corporation  shall, on
the date  specified  in the notice and against  receipt  from the Grantee of the
option  price,  deliver,  at its  principal  office in  Birmingham,  Alabama,  a
certificate or




certificates for the shares of Common Stock so purchased and shall pay all stamp
taxes payable in connection therewith.  For purposes of this Section 3, a person
to whom the Option is transferred by will or pursuant to the laws of descent and
distribution, as contemplated by the Plan, shall be deemed to be the Grantee.

         IV.  INCENTIVE  STOCK  OPTION.  The Option is  designated an 'incentive
stock  option' and is intended  to qualify as such under  Section  422(b) of the
Internal  Revenue Code of 1986 (the  'Code').  If the shares of stock subject to
this Option are disposed of before the  expiration of two years from the Date of
Grant and one year from the date of  exercise,  the Option will cease to qualify
as an 'incentive  stock option' under Section 422(b) of the Code. In that event,
under current law, the Grantee will  recognize  ordinary  taxable  income on the
date of exercise in the amount of the difference between the market value of the
stock on that date and the option price. If the Grantee meets the Section 422(b)
holding period  requirements set forth above, under current law the Grantee will
recognize a capital  gain or loss upon  disposition  of the stock,  but will not
recognize taxable income on the date of exercise.

         V.  TRANSFERABILITY.  The Option is not transferable  otherwise than by
will or  pursuant to the laws of descent and  distribution,  and is  exercisable
during the Grantee's lifetime only by the Grantee.

         VI. BINDING  AGREEMENT.  This Stock Option  Agreement  shall be binding
upon  and  shall  inure  to  the  benefit  of any  successor  or  assign  of the
Corporation, and, to the extent herein provided, shall be binding upon and inure
to the benefit of the Grantee's  beneficiary  or legal  representatives,  as the
case may be.

         VII. ENTIRE AGREEMENT.  This Stock Option Agreement contains the entire
agreement of the parties with respect to the Option  granted  hereby and may not
be changed  orally  but only by an  instrument  in  writing  signed by the party
against whom enforcement of any change, modification or extension is sought.

         If the foregoing is in accordance with your  understanding and approved
by you,  please so confirm by signing and  returning the duplicate of this Stock
Option Agreement enclosed for that purpose.

                                                HEALTHSOUTH Corporation


                                       By       /s/Richard M. Scrushy
                                         -------------------------------------
                                                   Richard M. Scrushy
                                                  Chairman of the Board
                                                and Chief Executive Officer

         The  foregoing is in  accordance  with my  understanding  and is hereby
confirmed and agreed to as of the Date of Grant.



                                         -------------------------------------
                                                    _________________, Grantee