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
Percent of Shares
Subject to Option
Year Beginning Purchasable
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
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.
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.