HEALTHSOUTH Corporation
1999 EXECUTIVE EQUITY LOAN PLAN
1. PURPOSE OF THE PLAN. The purpose of the 1999 Executive Equity Loan Plan
(the 'Plan') of HEALTHSOUTH Corporation, a Delaware corporation (the
'Corporation'), is to provide incentive for future endeavor and to align the
interests of the Corporation's management and its stockholders by providing a
mechanism to enhance ownership of the Common Stock, par value $.01 per share
(the 'Common Stock'), of the Corporation by its 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 executives and employees as may be needed for the
continued improvement of the Corporation's business, through the making of loans
('Loans') to such executives and employees to purchase shares of the Common
Stock.
2. PARTICIPANTS. Loans may be made under the Plan to such executives and
key employees ('Participants') of the Corporation and its subsidiaries as shall
be determined by the Committee (as set forth in Section 5 of the Plan).
3. TERM OF THE PLAN. The Plan shall become effective as of May 20, 1999,
subject to the approval by the holders of a majority of the shares of issued and
outstanding Common Stock of the Corporation present in person or by proxy and
voting at the 1998 Annual Meeting of Stockholders of the Corporation. The Plan
shall terminate on the earlier of (a) May 19, 2009 or (b) such earlier time as
the Board of Directors of the Corporation may determine. Any Loan 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 Loan shall be
made under the Plan after May 19, 2009.
4. LOANS UNDER THE PLAN. Loans may be made under the Plan in such amounts
are as approved by the Committee, provided that the maximum aggregate principal
amount of Loans outstanding under the Plan at any time shall not exceed
$50,000,000. If, on or prior to the termination of the Plan as provided in
Section 3, the principal amount of any Loan under the Plan shall have been
repaid in whole or in part, the principal amount so repaid shall again become
available for the making of Loans under the Plan, subject to the foregoing
limitation on the maximum aggregate principal amount outstanding at any time.
5. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the Audit
and Compensation Committee of the Board of Directors of the Corporation (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 receive Loans and the principal
amount of each such Loan.
The interpretation and construction of any provision of the Plan or of any
Loan made 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 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 Loan
made under it.
The Committee may delegate responsibility for all or part of the
administration of the Plan to appropriate officers of the Corporation; provided,
however, that no such officers shall have the power or authority to make Loans
under the Plan, amend, waive or modify any provision of the Plan or forgive any
Loans, in whole or in part, without the express approval of the Committee in
each case.
The expenses of administering the Plan shall be borne by the Corporation.
6. LOANS. (a) Loans may be made 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 executives and key employees to
whom Loans shall be made and as to the principal amount of such Loans, the
Committee shall take into account the duties of the respective executives and
key employees, their present and potential contribution 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 Loan made under the Plan shall be granted pursuant to and subject
to the terms and conditions of a loan agreement to be entered into between the
Corporation and the Participant at the time of such grant. Each such loan
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 'Loan Agreement').
Any such Loan 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.
7. CERTAIN CONDITIONS OF LOANS. Loans made under this Plan shall be subject
to the following terms and conditions:
(a) The proceeds of Loans may be used only for purchases of the Common
Stock in open-market transactions, block trades or negotiated transactions. Such
purchases must be effected through a broker approved by the Corporation.
(b) Loans shall have a maturity date of seven years from the date of the
Loan, subject to acceleration and termination as provided herein. Such maturity
date may be extended for up to one additional year by the Committee, acting in
its discretion. The unpaid principal balance of each Loan shall bear interest at
a rate equal to the effective interest rate on the average outstanding balance
under the Corporation's principal credit agreement for each calendar quarter,
adjustable as of the end of each calendar quarter, which effective interest rate
shall be determined by the Controller of the Corporation. Interest shall be
compounded annually. Subject to the terms and conditions set forth below,
repayment of principal and interest may be deferred until final maturity of the
Loan.
(c) Each Loan shall be secured by a pledge of all of the shares of Common
Stock purchased with the proceeds thereof ('Loan Shares'), pursuant to which the
Participant shall grant the Corporation a first priority lien on and security
interest in the Loan Shares. The Loan Shares may not be sold for one year after
the date on which they were acquired (the 'Acquisition Date'). Thereafter,
one-third of the aggregate number of Loan Shares may be sold during each of the
second, third and fourth years after the Acquisition Date, with any unsold
portion carrying forward from year to year. The proceeds from any such sale must
be used to repay a percentage of the principal amount of the Loan equal to the
percentage of Loan Shares sold, less any amounts withheld for taxes (the
'Mandatory Prepayment Amount'). Any proceeds in excess of the Mandatory
Prepayment Amount shall be retained by the Participant.
(d) Notwithstanding any contrary provision in the Plan or any Loan
Agreement, a Loan shall immediately mature, and all principal and accrued but
unpaid interest thereon shall be due and payable, within 30 days after the
effective date of any termination of the Participant's employment by the
Corporation, whether voluntary or involuntary, or upon the death or disability
of the Participant. Without limiting the generality of the foregoing, the
Corporation may, but shall not be required to, repurchase the Loan Shares of a
Participant at such Participant's original acquisition cost if the Participant's
employment is terminated, voluntarily or involuntarily or by reason of death or
disability, within the first three years after the Acquisition Date, according
to the following schedule:
Percentage of Loan Shares
Year Beginning On Subject to Repurchase
--------------------- -------------------------
Acquisition Date 100%
First Anniversary of
the Acquisition Date 66 2/3%
Second Anniversary of
the Acquisition Date 33 1/3%
The terms of such repurchase shall be as set forth in the Loan Agreement.
In the event of any such repurchase, the purchase price of the shares so
repurchased shall be credited against the outstanding principal balance and
accrued but unpaid interest on the Loan, and the Participant shall be
responsible for the payment of any deficiency.
(e) Each certificate evidencing Loan Shares shall be registered in the name
of the Participant, and shall bear a legend in substantially the following form:
'The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions of the 1999
Executive Equity Loan Plan of HEALTHSOUTH Corporation and a Loan Agreement
entered into between the registered owner and HEALTHSOUTH Corporation.
Copies of such Plan and Loan Agreement are on file in the offices of the
Secretary of HEALTHSOUTH Corporation.'
(f) The Committee may adopt rules which provide that the stock certificates
evidencing Loan Shares may be held in custody by a bank or other institution, or
that the Corporation may itself hold such shares in custody until the
restrictions thereon shall have lapsed, and may require as a condition of any
Loan that the participant shall have delivered a stock power endorsed in blank
relating to the Loan Shares.
(g) Loans shall be made with full recourse, and each Participant shall be
required to repay all principal and accrued but unpaid interest upon the
maturity of the Loan (or its earlier acceleration or termination), irrespective
of whether the Participant
has sold Loan Shares or whether the proceeds of any such sale were sufficient to
repay all principal and interest with respect to the Loan. If, at any time, the
Committee determines in its reasonable discretion that the value of the Loan
Shares pledged as security for the Loan is less than the indebtedness evidenced
by the Loan, the Committee shall require the Participant to post additional
security (which may be shares of Common Stock or other collateral acceptable to
the Committee, in its reasonable discretion) in an amount sufficient to fully
secure the indebtedness of the Loan.
8. CERTAIN RIGHTS OF PARTICIPANTS. Notwithstanding any contrary provision
of the Plan or any Loan Agreement, a participant holding Loan Shares shall be
entitled to the following rights:
(a) A participant shall have with respect to Loan Shares all of the rights
of a stockholder of the Corporation, including the right to vote such shares and
receive dividends and other distributions thereon.
(b) Unless otherwise expressly provided in the Loan Agreement, any
restrictions on a participant's ability to sell any of the Loan Shares pursuant
to Section 7(c) shall terminate upon the occurrence of a Change in Control of
the Corporation. For purposes of this Section 8(b), 'Change in Control' shall
mean
(i) the acquisition (other than from the Corporation) 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
Corporation or its subsidiaries which acquires beneficial ownership of
voting securities of the Corporation) 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 Corporation's then-outstanding voting
securities entitled to vote generally in the election of Directors; or
(ii) individuals who, as of May 20, 1999, 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 Corporation) shall be,
for purposes of this Section 8(b), considered as though such person were a
member of the Incumbent Board; or
(iii) approval by the stockholders of the Corporation of a
reorganization, merger, consolidation or share exchange, in each case with
respect to which persons who were the stockholders of the Corporation
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.
Notwithstanding the foregoing, however, the pledge of the Loan Shares shall
continue in full force and effect until such time as all principal and accrued
but unpaid interest under the Loan has been repaid.
9. NO RIGHT OF CONTINUED EMPLOYMENT. Nothing in the Plan or in the Loan
Agreement shall confer upon any participant 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.
10. 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 present in person or by proxy and entitled to vote at
a meeting of the Corporation's stockholders duly called and held (or, to the
extent permitted by law, by written consent 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 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 maximum aggregate principal amount of Loans made under the Plan.
11. CHANGES IN LAW. Subject to the provisions of Section 10, the Board of
Directors shall have the power to amend the Plan and any outstanding Loans
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 Award
any new provision or change designed to comply with or take advantage of
requirements or provisions of the Internal Revenue Code of 1986, as amended, 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.
12. 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 Awards 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.
1999 Executive Equity Loan Plan - HealthSouth Corp.
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