As filed with the Securities and Exchange Commission on June 4, 1999
REGISTRATION NO. 333-______________
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM S-8
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
--------------------
HEALTHSOUTH CORPORATION
(Exact Name of Registrant as Specified in its Charter)
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DELAWARE 63-0860407
(State or Other Jurisdiction (I.R.S. Employer Identification Number)
of Incorporation or Organization)
ONE HEALTHSOUTH PARKWAY, BIRMINGHAM, ALABAMA 35243
(Address of Principal Executive Offices) (Zip Code)
1999 EXCHANGE STOCK OPTION PLAN
(Full Title of the Plan)
RICHARD M. SCRUSHY
Chairman of the Board
and Chief Executive Officer
HEALTHSOUTH Corporation
One HealthSouth Parkway
Birmingham, Alabama 35243
(Name and address of agent for service)
(205) 967-7116
(Telephone number, including area code, of agent for service)
Copy to: Copy to:
WILLIAM W. HORTON, ESQ. ROBERT E. LEE GARNER, ESQ.
Senior Vice President and Corporate Counsel MATTHEW T. FRANKLIN, ESQ.
HEALTHSOUTH Corporation HASKELL SLAUGHTER & YOUNG, L.L.C.
One HealthSouth Parkway 1200 AmSouth/Harbert Plaza
Birmingham, Alabama 35243 1901 Sixth Avenue North
(205) 967-7116 Birmingham, Alabama 35203
(205) 251-1000
--------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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TITLE OF PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED (1) PER SHARE (1) PRICE (1) FEE (1)
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<S> <C> <C> <C> <C>
Common Stock, Par 2,750,000 shares N/A $ 36,437,500 $ 10,130
Value $.01 Per Share ---------- -------
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</TABLE>
(1) In accordance with Rules 457 (c) and (h) promulgated under the Securities
Act of 1933, the maximum aggregate offering price and the registration fee
are based on a price of $13.25 per share, which represents the average of
the high and low prices for the shares of HEALTHSOUTH Common Stock as
reported on the New York Stock Exchange on June 2, 1999.
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<PAGE>
PART I
INFORMATION REQUIRED IN THE SECTION 10(A) PROSPECTUS
The document(s) containing the information specified in Part I of Form S-8 will
be sent or given to participating officers and employees as specified by Rule
428(b)(1) of the Securities Act of 1933. The documents and the documents
incorporated by reference in this Registration Statement pursuant to Item 3 of
Part II below, taken together, constitute a prospectus that meets the
requirements of Section 10(a) of the Securities Act.
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.
There are hereby incorporated by reference in this Registration
Statement, and specifically made a part hereof, the following documents
heretofore filed by HEALTHSOUTH Corporation (Commission File No. 1-10315) with
the Securities and Exchange Commission, pursuant to the Securities Exchange Act
of 1934:
1. HEALTHSOUTH's Annual Report on Form 10-K for the fiscal
year ended December 31, 1998.
2. HEALTHSOUTH's Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 1999.
3. The description of HEALTHSOUTH's capital stock contained in
HEALTHSOUTH's Registration Statement on Form 8-A filed August 26, 1989.
All documents filed by the Company pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act after the effective date of this Registration
Statement and prior to the filing of a post-effective amendment indicating that
all the securities offered hereby have been sold, or deregistering all such
securities then remaining unsold, shall be deemed to be incorporated by
reference in this Registration Statement and to be a part hereof from the date
of filing of such documents. Any statement contained in a document incorporated
or deemed to be incorporated by reference herein shall be deemed to be modified
or superseded for purposes of this Registration Statement to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Registration Statement.
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<PAGE>
ITEM 4. DESCRIPTION OF SECURITIES.
Not applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
Not applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 102(b)(7) of the Delaware General Corporation Law ("DGCL")
grants corporations the right to limit or eliminate the personal liability of
their directors in certain circumstances in accordance with provisions therein
set forth. Article Nine of the HEALTHSOUTH Restated Certificate of Incorporation
filed in the Office of the Secretary of the State of Delaware on May 21, 1998
(the "HEALTHSOUTH Certificate"), contains a provision eliminating or limiting
director liability to HEALTHSOUTH and its stockholders for monetary damages
arising from acts or omissions in the director's capacity as a director. The
provision does not, however, eliminate or limit the personal liability of a
director (i) for any breach of such director's duty of loyalty to HEALTHSOUTH or
its stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under the Delaware
statutory provision making directors personally liable, under a negligence
standard, for unlawful dividends or unlawful stock purchases or redemptions, or
(iv) for any transaction from which the director derived an improper personal
benefit. This provision offers persons who serve on the Board of Directors of
HEALTHSOUTH protection against awards of monetary damages resulting from
breaches of their duty of care (except as indicated above). As a result of this
provision, the ability of HEALTHSOUTH or a stockholder thereof to successfully
prosecute an action against a director for a breach of his duty of care is
limited. However, the provision does not affect the availability of equitable
remedies such as an injunction or rescission based upon a director's breach of
his duty of care. The SEC has taken the position that the provision will have no
effect on claims arising under the Federal securities laws.
Section 145 of the DGCL grants corporations the right to indemnify
their directors, officers, employees and agents in accordance with the
provisions therein set forth. Article Nine of the HEALTHSOUTH Certificate and
Article IX of the HEALTHSOUTH Bylaws provide for mandatory indemnification
rights, subject to limited exceptions, to any director, officer, employee, or
agent of HEALTHSOUTH who, by reason of the fact that he or she is a director,
officer, employee, or agent of HEALTHSOUTH, is involved in a legal proceeding of
any nature. Such indemnification rights include reimbursement for expenses
incurred by such director, officer, employee, or agent in advance of the final
disposition of such proceeding in accordance with the applicable provisions of
the DGCL.
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<PAGE>
HEALTHSOUTH has entered into agreements with all of its Directors and
its executive officers pursuant to which HEALTHSOUTH has agreed to indemnify
such Directors and executive officers against liability incurred by them by
reason of their services of a Director to the fullest extent allowable under
applicable law.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not applicable.
ITEM 8. EXHIBITS.
Exhibits numbered in accordance with Item 601 of Regulation S-K.
Exhibit No. Exhibit
----------- -------
5 Opinion of Haskell Slaughter & Young, L. L. C.
10 1999 Exchange Stock Option Plan
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Haskell Slaughter & Young, L.L.C.
(contained within Opinion of Counsel included as
Exhibit 5).
24 Powers of Attorney (See Signature Page).
ITEM 9. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement:
(i) to include any material information with respect
to the plan of distribution not previously disclosed in the
Registration Statement or any material change to such
information in the Registration Statement;
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be
deemed to be
II-3
<PAGE>
a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the Exchange
Act) that is incorporated by reference in the Registration Statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a Director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
Director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Birmingham, State of Alabama, on June 4, 1999.
HEALTHSOUTH CORPORATION
By /s/ Richard M. Scrushy
---------------------------------
Richard M. Scrushy
Chairman of the Board
and Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose name appears
below constitutes and appoints Richard M. Scrushy and Michael D. Martin, and
each of them, his attorney-in-fact, with power of substitution for him or her in
any and all capacities, to sign any amendments, supplements, subsequent
registration statements relating to the offering to which this statement
relates, or other instruments he or she deems necessary or appropriate, and to
file the same, with exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that said attorney-in-fact or his substitute may do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Capacity Date
--------- -------- ----
<S> <C> <C>
/s/ Richard M. Scrushy
- -------------------------------------- Chairman of the Board June 4, 1999
Richard M. Scrushy and Chief Executive Officer
and Director
/s/ Michael D. Martin
- -------------------------------------- Executive Vice President and June 4, 1999
Michael D. Martin Chief Financial Officer
and Director
/s/ William T. Owens Group Senior Vice President-Finance June 4, 1999
- -------------------------------------- and Controller
William T. Owens (Principal Accounting Officer)
/s/ C. Sage Givens Director June 4, 1999
- --------------------------------------
C. Sage Givens
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ Charles W. Newhall III Director June 4, 1999
- --------------------------------------
Charles W. Newhall III
/s/ George H. Strong Director June 4, 1999
- --------------------------------------
George H. Strong
/s/ Phillip C. Watkins Director June 4, 1999
- --------------------------------------
Phillip C. Watkins
/s/ John S. Chamberlin Director June 4, 1999
- --------------------------------------
John S. Chamberlin
/s/ Anthony J. Tanner Director June 4, 1999
- --------------------------------------
Anthony J. Tanner
/s/ James P. Bennett Director June 4, 1999
- --------------------------------------
James P. Bennett
/s/ P. Daryl Brown Director June 4, 1999
- --------------------------------------
P. Daryl Brown
/s/ Joel C. Gordon Director June 4, 1999
- --------------------------------------
Joel C. Gordon
/s/ Larry D. Striplin, Jr. Director June 4, 1999
- --------------------------------------
Larry D. Striplin, Jr.
</TABLE>
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EXHIBIT 5
June 4, 1999
HEALTHSOUTH Corporation
One HealthSouth Parkway
Birmingham, Alabama 35243
Re: Registration Statement on Form S-8
Regarding 1999 Exchange Stock Option Plan
Our File No. 29075-001
Gentlemen:
We have served as counsel for HEALTHSOUTH Corporation, a Delaware
corporation (the "Company"), in connection with the registration under the
Securities Act of 1933, of an aggregate of 2,750,000 shares (the "Shares") of
the Company's authorized Common Stock, par value $.01 per share, to be issued to
participants of the above-referenced plan (the "Plan"), pursuant to the
Company's Registration Statement on Form S-8 relating thereto (the "Registration
Statement"). This opinion is furnished to you pursuant to the requirements of
Form S-8.
In connection with this opinion, we have examined and are familiar with
originals or copies (certified or otherwise identified to our satisfaction) of
such documents, corporate records and other instruments relating to the
incorporation of the Company and to the authorization and issuance of the Shares
as we have deemed necessary and appropriate.
Based upon the foregoing, and having regard for such legal
considerations we have deemed relevant, it is our opinion that:
1. The Shares have been duly authorized.
2. Upon issuance, sale and delivery of the Shares as
contemplated in the Registration Statement and the Plan, the Shares will be
legally issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
HASKELL SLAUGHTER & YOUNG, L.L.C.
By /s/ Robert E. Lee Garner
------------------------------------
Robert E. Lee Garner
EXHIBIT 10
HEALTHSOUTH CORPORATION
1999 EXCHANGE STOCK OPTION PLAN
1. PURPOSE OF THE PLAN. The purpose of the 1999 Exchange 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 certain of
its key employees, upon whose judgment, interest and continuing special efforts
the Corporation is largely dependent for the successful conduct of its
operations, through the grant of non-qualified options (hereinafter called
"Options") to purchase shares of the Common Stock on a basis providing
meaningful incentive for such employees.
2. PARTICIPANTS; ELIGIBLE EXCHANGING OPTIONS. (a) Options may be granted
under the Plan to such key employees of the Corporation who currently hold
Eligible Exchanging Options (as defined below) and who surrender such Eligible
Exchanging Options as provided herein; provided, however, that (i) 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 (ii) no Option may be granted to any Director or
executive officer of the Corporation.
(b) For purposes of the Plan, "Eligible Exchanging Option" shall mean any
stock option held by any employee of the Corporation who is eligible under the
terms of Section 2(a) above to be granted options hereunder (i) which is issued
under the terms of any other stock option plan of the Corporation, excluding
those stock option plans which were assumed by the Corporation in connection
with the acquisition of other entities, (ii) which is currently outstanding,
whether or not vested or exercisable, and (iii) which has an exercise price
equal to or greater than $16.00 per share.
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 at the
1999 Annual Meeting of Stockholders of the Corporation. The Plan shall terminate
on the earliest of (a) September 30, 1999, (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 September 30, 1999.
4. STOCK SUBJECT TO THE PLAN. 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 2,750,000 shares, 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 shall be equal to the largest number of shares
eligible for issuance to any one optionholder pursuant to Section 6(b). 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
cease to be reserved for issuance hereunder and shall revert to the status of
authorized but unissued shares.
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.
5. ADMINISTRATION OF THE PLAN. 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.
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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 at any time
prior to the termination of the Plan. All such Options shall be deemed to have
been granted on May 20, 1998.
(b) Options may be granted under the Plan only in exchange for the
surrender and cancellation of Eligible Exchanging Options. Such exchange shall
be based upon the following ratios: (i) if the exercise price of an Eligible
Exchanging Option is at least $16.00 but less than $22.00 per share, such
Eligible Exchanging Option may be surrendered in exchange for an Option granted
under this Plan covering two shares of Common Stock for each three shares of
Common Stock covered by the surrendered Eligible Exchanging Option; and (ii) if
the exercise price of an Eligible Exchanging Option is $22.00 per share or
greater, such Eligible Exchanging Option may be surrendered in exchange for an
Option granted under this Plan covering three shares of Common Stock for each
four shares of Common Stock covered by the surrendered Eligible Exchanging
Option. Each participant surrendering Eligible Exchanging Options shall be
required to retain Eligible Exchanging Options covering 10% of the aggregate
number of shares covered by the total number of Eligible Exchanging Options held
by such participant (the "10% Holdback"). The 10% Holdback shall consist of
those Eligible Exchanging Options held by such participant which have the lowest
exercise price. Participants desiring to receive Options hereunder must
surrender not less than all of their Eligible Exchanging Options, less only the
10% Holdback. No Options covering fractional shares will be issued hereunder,
and any fractional shares resulting from the application of the foregoing
exchange ratios will be deemed to be surrendered and canceled. The shares
represented by surrendered Eligible Exchanging Options shall not be restored to
the stock option plan under which they were issued, but instead shall revert to
the status of authorized but unissued shares of Common Stock.
(c) 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.
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 May 20,
1999.
(b) For purposes of the Plan, the fair market value per share of the
Corporation's Common Stock at May 20, 1999 shall be conclusively deemed to be
the closing price per share of the Common Stock on the New York Stock Exchange
Composite Transactions Tape on such date.
(c) 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. The expiration date of an Option granted under the Plan
shall be identical to the expiration date of the Eligible Exchanging Option
surrendered in exchange therefor, provided that each such Option shall expire
not more than ten years after the date such Option was granted.
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<PAGE>
9. EXERCISE OF OPTIONS; VESTING. (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. Unless otherwise expressly provided in the Stock Option Agreement,
each Option shall be deemed to be vested and exercisable in the same proportion
to the total number of shares covered thereby as the relevant Eligible
Exchanging Option was so vested and exercisable at the time of surrender, and
any unvested portion of such Option shall vest and become exercisable at the
same time and in the same proportions to the total number of shares covered
thereby as previously provided with respect to the relevant Eligible Exchanging
Option.
(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 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 9(b)(ii), 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.
(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 Section 9(d) 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 a method determined by the
Committee.
(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.
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<PAGE>
10. NONTRANSFERABILITY OF OPTIONS. (a) 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, except to the extent set forth in the following paragraphs.
(b) Upon written notice to the Secretary of the Corporation, an
optionholder may, except as otherwise prohibited by applicable law, transfer
options granted under the Plan to one or more members of such optionholder's
immediate family, to a partnership consisting only of members of such
optionholder's immediate family, or to a trust all of whose beneficiaries are
members of the optionholder's immediate family. For purposes of this section, an
optionholder's "immediate family" shall be deemed to include such optionholder's
spouse, children and grandchildren only.
(c) Upon written notice to the Secretary of the Corporation, an
optionholder may transfer options to a charitable, educational or religious
entity which has been determined by the United States Internal Revenue Service
to be exempt from federal income taxation under the provisions of Section 501(c)
of the Internal Revenue Code of 1986, as amended, or any successor statutory
provision.
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.
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
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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 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
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Directors of the Corporation may, insofar as permitted by law, from time to time
with respect to any 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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Exhibit 23.1
Consent of Indenpendent Auditors
We consent to the incorporation by reference in the Registration
Statement (Form S-8) pertaining to the 1999 Exchange Stock Option Plan of our
report dated March 19, 1999, with respect to the consolidated financial
statements and schedule of HEALTHSOUTH Corporation included in its Annual Report
(Form 10-K) for the year ended December 31, 1998, filed with the Securities and
Exchange Commission.
ERNST & YOUNG LLP
Birmingham, Alabama
June 2, 1999
