<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 9, 1995
Registration No. 33-
==============================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
_________________
HORIZON/CMS HEALTHCARE CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 91-1346899
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6001 INDIAN SCHOOL ROAD, N.E., SUITE 530
ALBUQUERQUE, NEW MEXICO 87110
(Address of principal executive offices, including zip code)
_________________
CONTINENTAL MEDICAL SYSTEMS, INC. 1986 STOCK OPTION PLAN
CONTINENTAL MEDICAL SYSTEMS, INC. 1989 NON-EMPLOYEE
DIRECTORS' STOCK OPTION PLAN
CONTINENTAL MEDICAL SYSTEMS, INC. 1992 CEO STOCK OPTION PLAN
CONTINENTAL MEDICAL SYSTEMS, INC. 1993 NONQUALIFIED STOCK OPTION PLAN
CONTINENTAL MEDICAL SYSTEMS, INC. 1994 STOCK OPTION PLAN
(Full title of the plans)
COPIES TO:
SCOT SAUDER WILLIAM E. JOOR III
SECRETARY AND GENERAL COUNSEL VINSON & ELKINS L.L.P.
HORIZON/CMS HEALTHCARE CORPORATION 2300 FIRST CITY TOWER
6001 INDIAN SCHOOL ROAD, N.E., SUITE 530 1001 FANNIN
ALBUQUERQUE, NM 87110 HOUSTON, TEXAS 77002-6760
(505) 881-4961 (713) 758-2582
(Name, address and telephone number,
including area code, of agent for service)
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==================================================================================================
Title of Proposed maximum Proposed maximum
securities to be Amount to be offering price aggregate Amount of
registered registered per share(1) offering price(1) registration fee
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value
$.001 per share(2)....... 3,765,586 $22.44 $84,499,750 $29,138
==================================================================================================
<FN>
(1) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457(h) on the basis of the price of securities
of the same class, as determined in accordance with Rule 457(c), using
the average of the high and low prices reported on the New York Stock
Exchange for the Registrant's Common Stock on August 4, 1995.
(2) This Registration Statement also pertains to rights to purchase shares
of Series A Junior Participating Preferred Stock of the Registrant.
One right is attached to and trades with each share of Common Stock
of the Registrant. Until the occurrence of certain events, the
rights are not exercisable and will not be evidenced or transferred
apart from the Common Stock.
</TABLE>
==============================================================================
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The following documents, which have been filed with the Securities
and Exchange Commission (the "Commission") by Horizon/CMS Healthcare
Corporation, a Delaware corporation (the "Company"), are incorporated herein
by reference and made a part hereof:
(a) Annual Report on Form 10-K for the fiscal year ended
May 31, 1994, as amended by Amendment No. 1 on
Form 10-K/A dated October 25, 1994, Amendment No. 2
on Form 10-K/A dated April 10, 1995 and Amendment No. 3
on Form 10-K/A dated June 2, 1995;
(b) Quarterly Report on Form 10-Q for the quarter ended
August 31, 1994, as amended by Amendment No. 1 on
Form 10-Q/A dated June 2, 1995;
(c) Quarterly Report on Form 10-Q for the quarter ended
November 30, 1994, as amended by Amendment No. 1 on
Form 10-Q/A dated June 2, 1995;
(d) Quarterly Report on Form 10-Q for the quarter ended
February 28, 1995, as amended by Amendment No. 1 on
Form 10-Q/A dated May 18, 1995, Amendment No. 2 on
Form 10-Q/A dated May 19, 1995 and Amendment No. 3 on
Form 10-Q/A dated June 2, 1995;
(e) Current Reports on Form 8-K dated August 12, 1994 (as
amended by Amendment No. 1 on Form 8-K/A dated October 10,
1994 and Amendment No. 2 on Form 8-K/A dated June 2, 1995),
September 16, 1994, April 10, 1995, June 23, 1995 (as
amended by Amendment No. 1 on Form 8-K/A dated August 8,
1995), July 25, 1995 and July 25, 1995;
(f) Description of the Company's Common Stock, par value $.001
per share, contained in the Company's Registration Statement
on Form 8-A dated March 17, 1987, as amended by Amendment
No. 1 on Form 8-A/A dated June 23, 1994 and Amendment No. 2
on Form 8-A/A dated September 22, 1994; and
(g) Description of rights to purchase the Company's Series A
Junior Participating Preferred Stock, par value $.001 per
share, contained in the Company's Registration Statement
on Form 8-A dated September 16, 1994.
All documents filed by the Company pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), subsequent to the effective date of this Registration
Statement, prior to the filing of a post-effective amendment to this
Registration Statement indicating that all securities offered hereby have
been sold or deregistering all securities then remaining unsold, shall be
deemed to be incorporated by reference herein and to be a part hereof from
the date of filing of such documents. Any statement contained herein or in
any 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 in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement
so modified or superseded shall not be deemed to constitute a part of this
Registration Statement, except as so modified or superseded.
ITEM 4. DESCRIPTION OF SECURITIES.
Not applicable.
2
<PAGE>
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
None.
The audited consolidated financial statements and schedules of the
Company incorporated by reference in this Registration Statement, to the
extent and for the periods indicated in their reports, have been audited by
Arthur Andersen LLP, independent public accountants, and are included herein
in reliance upon the authority of said firm as experts in giving said reports.
The combined financial statements of peopleCARE Heritage Group
incorporated by reference in this Registration Statement have been audited by
BDO Seidman LLP, independent certified public accountants, to the extent and
for the periods set forth in their report incorporated herein by reference,
and are incorporated herein in reliance upon such report given upon the
authority of said firm as experts in auditing and accounting.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under Section 145 of the General Corporation Law of the State of
Delaware (the "DGCL"), a Delaware corporation has the power, under specified
circumstances, to indemnify its directors, officers, employees and agents in
connection with threatened, pending or completed actions, suits or
proceedings, whether civil, criminal, administrative or investigative (other
than an action by or in right of the corporation), brought against them by
reason of the fact that they were or are such directors, officers, employees
or agents, against expenses, judgments, fines and amounts paid in settlement
actually and reasonably incurred in any such action, suit or proceeding.
Article XIV of the Company's Restated Certificate of Incorporation together
with Article IX of its Bylaws provide for indemnification of each person who
is or was made a party to any actual or threatened civil, criminal,
administrative or investigative action, suit or proceeding because such
person is or was an officer or director of the Company or is a person who is
or was serving at the request of the Company as a director, officer, employee
or agent of another corporation or of a partnership, joint venture trust or
other enterprise, including service relating to employee benefit plans, to
the fullest extent permitted by the DGCL as it existed at the time the
indemnification provisions of the Company's Restated Certificate of
Incorporation and the Bylaws were adopted or as may be thereafter amended.
Article IX of the Company's Bylaws and Article XIV of its Restated
Certificate of Incorporation expressly provide that they are not the
exclusive methods of indemnification.
Article IX of the Bylaws and Article XIV of the Company's Restated
Certificate of Incorporation also provide that the Company may maintain
insurance, at its own expense, to protect itself and any director, officer,
employee or agent of the Company or of another entity against any expense,
liability or loss, regardless of whether the Company would have the power to
indemnify such person against such expense, liability or loss under the DGCL.
Section 102(b)(7) of the DGCL provides that a certificate of
incorporation may contain a provision eliminating or limiting the personal
liability of a director to the corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director, provided that such
provision shall not eliminate or limit the liability of a director (i) for
any breach of the director's duty of loyalty to the corporation 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 Section 174
of the DGCL (relating to liability for unauthorized acquisitions or
redemptions of, or dividends on, capital stock) or (iv) for any transaction
from which the director derived an improper personal benefit. Article XI of
the Company's Restated Certificate of Incorporation contains such a provision.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not applicable.
3
<PAGE>
ITEM 8. EXHIBITS.
3.1 Restated Certificate of Incorporation of the Company dated
March 6, 1987, together with Certificate of Amendment of
Certificate of Incorporation dated January 6, 1992
(incorporated by reference to Exhibit 3.1 to the Company's
Annual Report on Form 10-K for the year ended May 31, 1994).
3.2 Certificate of Amendment of Restated Certificate of
Incorporation dated September 12, 1994 (incorporated by
reference to Exhibit 4.2 to the Company's Registration
Statement on Form S-8 filed with the Securities and Exchange
Commission on September 29, 1994).
*3.3 Certificate of Amendment of Restated Certificate of
Incorporation dated July 6, 1995.
3.4 Certificate of Designation of Series A Junior Participating
Preferred Stock dated September 16, 1994 (incorporated by
reference to Exhibit 4.3 to the Company's Registration
Statement on Form S-8 filed with the Securities and Exchange
Commission on September 29, 1994).
3.5 Amended and Restated Bylaws of the Company dated as of
February 28, 1987, together with Amendment to Bylaws Section
9.1.1 dated August 30, 1993 (incorporated by reference to
Exhibit 3.2 to the Company's Annual Report on Form 10-K for
the year ended May 31, 1994).
3.6 Rights Agreement, dated as of September 15, 1994, between the
Company and Chemical Trust Company of California, as Rights
Agent, specifying the terms of the rights to purchase the
Company's Series A Junior Participating Preferred Stock, and
the exhibits thereto (incorporated by reference to Exhibit 1
to the Company's Registration Statement on Form 8-A dated
September 16, 1994).
*4.1 Continental Medical Systems, Inc. 1986 Stock Option Plan (as
amended and restated effective December 1, 1991), Amendment
No. 1 to Continental Medical Systems, Inc. 1986 Stock Option
Plan, Amendment No. 2 to Continental Medical Systems, Inc.
1986 Stock Option Plan and form of option agreement.
*4.2 Continental Medical Systems, Inc. 1989 Non-Employee
Directors' Stock Option Plan (as amended and restated
effective December 1, 1991) and form of option agreement.
*4.3 Continental Medical Systems, Inc. 1992 CEO Stock Option Plan,
Amendment No. 1 to Continental Medical Systems, Inc. 1992 CEO
Stock Option Plan and form of option agreement.
*4.4 Continental Medical Systems, Inc. 1993 Nonqualified Stock
Option Plan,Amendment No. 1 to Continental Medical Systems,
Inc. 1993 Nonqualified Stock Option Plan, Amendment No. 2 to
Continental Medical Systems, Inc. 1993 Nonqualified Stock
Option Plan and form of option agreement.
*4.5 Continental Medical Systems, Inc. 1994 Stock Option Plan and
form of option agreement.
*5.1 Opinion of Vinson & Elkins L.L.P.
23.1 Consent of Vinson & Elkins L.L.P. (set forth in Exhibit 5.1).
*23.2 Consent of Arthur Andersen LLP.
*23.3 Consent of BDO Seidman LLP.
24.1 Powers of Attorney (set forth on signature pages).
_______________
* Filed herewith.
4
<PAGE>
ITEM 9. UNDERTAKINGS
The Company hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement:
(a) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933, as amended (the "Securities Act");
(b) To reflect in the prospectus any facts or events
arising after the effective date of the Registration Statement (or the
most recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the information
set forth in this Registration Statement;
(c) To include any material information with respect to
the plan of distribution not previously disclosed in this Registration
Statement or any material change to such information in this
Registration Statement;
PROVIDED, HOWEVER, that paragraphs (1)(a) and (1)(c) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Company pursuant to
Section 13 or Section 15(d) of the Exchange Act that are incorporated by
reference in this Registration Statement.
(2) That, for the purpose of determining any liability under
the Securities Act, each such post-effective amendment 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.
(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.
(4) That, for the purposes of determining any liability under
the Securities Act, each filing of the Company's annual report pursuant to
Section 13(a) or Section 15(d) of the Exchange Act (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 this
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered herein, 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 may be permitted to directors, officers and controlling
persons of the Company pursuant to the foregoing provisions, or otherwise,
the Company has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Company of expenses incurred or paid by a director, officer or controlling
person of the Company 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 Company 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
Securities Act and will be governed by the final adjudication of such issue.
5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Company
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 Albuquerque, State of New Mexico, on August 9,
1995.
HORIZON/CMS HEALTHCARE CORPORATION
By: /s/ Ernest A. Schofield
-----------------------------------
Ernest A. Schofield
Senior Vice President
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Klemett L. Belt, Jr., Ernest A.
Schofield and Scot Sauder, or any of them, his true and lawful
attorney-in-fact and agent, with full power of substitution, for him and in
his name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration
Statement, and to file the same with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and
ratifying and confirming all that said attorney-in-fact and agent or his
substitute or substitutes may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act, this
Registration Statement has been signed by the following persons in the
capacities indicated on the dates indicated.
Signature Title Date
--------- ----- ----
/s/Neal M. Elliott President, Chief Executive Officer August 9, 1995
----------------------- and Chairman of the Board of Directors
Neal M. Elliott (Principal Executive Officer)
/s/Klemett L. Belt, Jr. Director August 9, 1995
-----------------------
Klemett L. Belt, Jr.
/s/Russell L. Carson Director August 9, 1995
-----------------------
Russell L. Carson
/s/Brian C. Cressey Director August 9, 1995
-----------------------
Brian C. Cressey
/s/Charles H. Gonzales Director August 9, 1995
-----------------------
Charles H. Gonzales
/s/Michael A. Jeffries Director August 9, 1995
-----------------------
Michael A. Jeffries
/s/Gerard M. Martin Director August 9, 1995
-----------------------
Gerard M. Martin
/s/Frank M. McCord Director August 9, 1995
-----------------------
Frank M. McCord
6
<PAGE>
/s/Raymond N. Noveck Director August 9, 1995
-----------------------
Raymond N. Noveck
/s/Rocco A. Ortenzio Director August 9, 1995
-----------------------
Rocco A. Ortenzio
/s/Robert A. Ortenzio Director August 9, 1995
-----------------------
Robert A. Ortenzio
/s/Barry M. Portnoy Director August 9, 1995
-----------------------
Barry M. Portnoy
/s/LeRoy S. Zimmerman Director August 9, 1995
-----------------------
LeRoy S. Zimmerman
/s/Ernest A. Schofield Senior Vice President, Chief August 9, 1995
----------------------- Financial Officer and Chief
Ernest A. Schofield Accounting Officer (Principal
Financial and Accounting
Officer)
7
<PAGE>
EXHIBIT INDEX
Exhibit Sequentially
Number Description Numbered Page
------ ----------- -------------
3.1 Restated Certificate of Incorporation of the
Company dated March 6, 1987, together with
Certificate of Amendment of Certificate of
Incorporation dated January 6, 1992
(incorporated by reference to Exhibit 3.1 to
the Company's Annual Report on Form 10-K for
the year ended May 31, 1994).
3.2 Certificate of Amendment of Restated
Certificate of Incorporation dated September 12,
1994 (incorporated by reference to
Exhibit 4.2 to the Company's Registration
Statement on Form S-8 filed with the
Securities Exchange Commission on
September 29, 1994).
*3.3 Certificate of Amendment of Restated
Certificate of Incorporation dated July 6,
1995.
3.4 Certificate of Designation of Series A Junior
Participating Preferred Stock dated September 16,
1994 (incorporated by reference to
Exhibit 4.3 to the Company's Registration
Statement on Form S-8 filed with the
Securities Exchange Commission on
September 29, 1994).
3.5 Amended and Restated Bylaws of the Company
dated as of February 28, 1987, together with
Amendment to Bylaws Section 9.1.1 dated
August 30, 1993 (incorporated by reference to
Exhibit 3.2 to the Company's Annual Report on
Form 10-K for the year ended May 31, 1994).
3.6 Rights Agreement, dated as of September 15,
1994, between the Company and Chemical Trust
Company of California, as Rights Agent,
specifying the terms of the rights to
purchase the Company's Series A Junior
Participating Preferred Stock, and the
exhibits thereto (incorporated by reference
to Exhibit 1 to the Company's Registration
Statement on Form 8-A dated September 16,
1994).
*4.1 Continental Medical Systems, Inc. 1986 Stock
Option Plan (as amended and restated
effective December 1, 1991), Amendment No. 1
to Continental Medical Systems, Inc. 1986
Stock Option Plan, Amendment No. 2 to
Continental Medical Systems, Inc. 1986 Stock
Option Plan and form of option agreement.
*4.2 Continental Medical Systems, Inc. 1989 Non-
Employee Directors' Stock Option Plan (as
amended and restated effective December 1,
1991) and form of option agreement.
*4.3 Continental Medical Systems, Inc. 1992 CEO
Stock Option Plan, Amendment No. 1 to
Continental Medical Systems, Inc. 1992 CEO
Stock Option Plan and form of option
agreement.
*4.4 Continental Medical Systems, Inc. 1993
Nonqualified Stock Option Plan, Amendment No. 1
to Continental Medical Systems, Inc. 1993
Nonqualified Stock Option Plan, Amendment No. 2
to Continental Medical Systems, Inc. 1993
Nonqualified Stock Option Plan and form of
option agreement.
8
<PAGE>
*4.5 Continental Medical Systems, Inc. 1994 Stock
Option Plan and form of option agreement.
*5.1 Opinion of Vinson & Elkins L.L.P.
23.1 Consent of Vinson & Elkins L.L.P. (set forth
in Exhibit 5.1).
*23.2 Consent of Arthur Andersen LLP.
*23.3 Consent of BDO Seidman LLP.
24.1 Powers of Attorney (set forth on signature
pages).
__________________
* Filed herewith.
9
<PAGE>
EXHIBIT 3.3
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
Horizon Healthcare Corporation, a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware
("DGCL"),
DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of Horizon Healthcare Corporation
(the "Company"), has duly adopted a resolution setting forth a proposed
amendment (the "Amendment") of the Restated Certificate of Incorporation of
the Company, declaring the Amendment to be advisable and calling for
consideration thereof at a Special Meeting of Stockholders (the "Special
Meeting").
SECOND: That the Amendment provides that Article I of the Restated
Certificate of Incorporation of the Company be amended and restated in its
entirety to read as follows:
"NAME
The name of the corporation is Horizon/CMS Healthcare Corporation."
THIRD: That on July 6, 1995, the Special Meeting was duly called and
held, upon notice and in accordance with Section 222 of the DGCL, at which
meeting the necessary number of shares as required by statute and the
Company's Restated Certificate of Incorporation were voted in favor of the
Amendment.
FOURTH: That the Amendment was duly adopted in accordance with the
provisions of Section 242 of the DGCL.
IN WITNESS WHEREOF, the Company has caused this Certificate to be signed
by Ernest A. Schofield, Senior Vice President, this 6th day of July, 1995.
ERNEST A. SCHOFIELD
By: ------------------------
Ernest A. Schofield
Senior Vice President
<PAGE>
CONTINENTAL MEDICAL SYSTEMS, INC.
1986 STOCK OPTION PLAN
(As Amended and Restated and Restated Effective December 1, 1991)
1. PURPOSE.
The 1986 Stock Option Plan (the "Plan") is intended to enable
Continental Medical Systems, Inc. (the "Company") and any subsidiary
corporation of the Company to attract and retain capable officers and other
key employees, and to provide them with incentives to promote the best
interests of the Company and its subsidiaries through the grant of incentive
stock options and nonqualified stock options (collectively, "Options").
The purpose of this amendment and restatement is to incorporate into a
single Plan document all amendments made to the Plan through November 1991,
to change references to section numbers of statutes to reflect current law,
and to reflect the 3-2 split of the Company's common stock (the "Common
Stock") in 1991.
As used in the Plan, the term "incentive stock options" means options
which are intended to qualify as incentive stock options within the meaning
of section 422 of the Internal Revenue Code of 1986, as amended from time to
time (the "Code"). The term "nonqualified stock options" means options which
are not intended to qualify as incentive stock options. The term "subsidiary"
means any corporation (whether or not in existence at the time the Plan is
adopted) which, at the time an Option is granted, is a subsidiary of the
Company under the definition of "subsidiary corporation" contained in
section 424(f) of the Code, or any similar provision hereafter enacted.
2. ADMINISTRATION.
The Plan shall be administered by the Compensation Committee of the
Company's Board of Directors if one has been established or, if not, the
entire Board of Directors (the "Committee"). Each member of the Committee,
while serving as such, shall be deemed to be acting in his capacity as a
director of the Company. No member of the Committee shall be eligible, nor
shall have been eligible at any time within one year prior to his appointment
to the Committee, for selection as a person to whom Options may be granted
pursuant to the Plan or to whom stock grants or stock options may be granted
pursuant to any other plan of the Company or any of its "affiliates," as
defined in the Securities Exchange Act of 1934, entitling the participant
therein to acquire stock, or stock options of the Company or any of its
affiliates, except that a member of the Committee may receive stock options
under the 1989 Non-Employee Directors'
<PAGE>
Stock Option Plan of the Company, as the same may be amended from time to
time.
Subject to the terms of the Plan, the Committee shall have full and
final authority in its absolute discretion to select the persons to whom
Options shall be granted under the Plan and to set the date of grant and the
other terms of such Options. The Committee also shall above the authority to
establish and rescind, from time to time, such rules and regulations, not
inconsistent with the provisions of this Plan, for the proper administration
of this Plan and Options granted hereunder, and to make such determinations
and interpretations under or in connection with this Plan as it deems
necessary or advisable. The Committee may correct any defect, supply any
omission and reconcile any inconsistency in the Plan or if any Option granted
hereunder in the manner and to the extent it shall deem desirable. All such
rules, regulations, determinations and interpretations shall be binding and
conclusive upon the Company and its subsidiaries, officers and employees
(including former officers and employees) of the Company and any subsidiary,
and upon their respective legal representatives, beneficiaries, successors and
assigns and upon all other persons claiming under or through any of them. No
member of the Board of Directors of the Company (the "Board") or of the
Committee shall be liable for any action or determination made in good faith
with respect to the Plan or any Option granted hereunder.
3. ELIGIBILITY.
The persons eligible to receive Options (the "Eligible Individuals")
under the Plan shall be the salaried officers and other key employees of the
Company and its subsidiaries who may be designated by the Committee.
4. STOCK SUBJECT TO THE PLAN.
Subject to further adjustment as provided in Section 7 hereof, 7,450,000
shares (the "Shares")(reflecting the 3-2 split of the Common Stock in 1991
and an additional 2,250,000 shares of Common Stock approved for issuance
under the Plan by the stockholders of the Company at their 1991 annual
meeting) of $.01 par value Common Stock shall be available for the grant of
Options under the Plan, which shares may be authorized but unissued Shares
or required Shares, as the Company shall determine.
If any Option granted under the Plan expires or otherwise terminates, in
whole or in part, without having been exercised, the Shares subject to the
unexercised portion of such Option shall be available for the granting of
Options under the Plan as fully as if such Shares had never been subject to
an Option.
-2-
<PAGE>
5. GRANTS, TERMS AND CONDITIONS OF OPTIONS.
From time to time until the expiration or earlier termination of the
Plan, the Committee may grant Options to Eligible Individuals (such grantees
are hereinafter referred to as "Optionees") under the Plan, provided, however,
that grants of incentive and nonqualified stock options shall be separate and
not in tandem. Options granted pursuant to the Plan shall be in such form as
the Committee shall from time to time approve, and shall be subject to the
following terms and conditions:
(a) PRICE. The option price per Share under each Option
granted under the Plan shall be determined and fixed by the
Committee in its discretion but shall not be less than (i) in the
case of an Incentive Stock Option granted to a person who owns more
than 10% of the combined voting power of all shares of stock of the
Company or any subsidiary on the date of grant, the greater of $.01
or 110% of the fair market value of the Shares on the date of grant
of such Option, and (ii) in all other cases, the greater of $.01 or
100% of the fair market value of the Shares on the date of grant of
such Option. The fair market value of a Share on any date shall
mean that amount determined by such method of determining fair
market value as shall be permitted by the Code, or the rules or
regulations thereunder, and used by the Committee from time to
time. For purposes of this Section 5 an individual shall be deemed
to own any shares of stock of the Company or any subsidiary which
are attributed to such individual under Section 424(d) of the Code.
(b) TERM. Subject to earlier termination as provided in Subsections
(d) through (g) below and in Section 7 hereof, the duration of each
Option shall not be more than 10 years from the date of grant, provided
that, in the case of an Incentive Stock Option, the duration of any
Option granted to a person who owns more than 10% of the total combined
voting power of all shares of stock of the Company or any subsidiary on
the date of grant of the Option shall not be more than five years from
the date of grant.
(c) LOANS. If an Optionee, at or after the date of grant, is
designated as an "eligible participant" by the Committee and if the
Optionee thereafter so requests, the Company will loan the Optionee the
money required to satisfy any income tax obligations (as opposed to
alternate minimum tax obligations) resulting from the exercise of any
Options. Any loan or loans to an Optionee shall be made only at the time
any such tax
-3-
<PAGE>
resulting from such exercise is due. The Committee, in its discretion,
may require an affidavit from the Optionee specifying the amount of the
tax required to be paid and the date when such tax must be paid. The
loan will be made on the Optionee's personal, negotiable, demand
promissory note, bearing interest at the lowest rate which will avoid
imputation of interest under section 7872 of the Code, and including
such other terms of the Committee prescribes.
(d) EXERCISE AND PAYMENT. Options shall be exercisable in such
installments and on such dates, not less than one year from the date of
grant, as the Committee may specify, provided, that the Committee may
determine that Options will become immediately exercisable in whole or
in part in the event of death, disability or termination of employment.
Except as otherwise provided in Subsections (e) through (g) below,
Options shall only be exercisable by an Optionee while he remains in the
employ of the Company or any subsidiary. Any Shares which may be
purchased upon exercise of an Option ("Option Shares"), the right to
the purchase of which has accrued, may be purchased at any time
up to the expiration or termination of the Option.
Options may be exercised, in whole or in part, from time to time, by
giving written notice of exercise to the Company at its principal
office, specifying the number of Shares to be purchased, and
accompanied by payment in full of the aggregate purchase price for the
Shares.
Only full Shares shall be delivered, and any fractional share which
might otherwise be deliverable upon exercise of an Option granted
hereunder shall be forfeited.
The purchase price shall be payable: (i) in cash or its equivalent,
or (ii) if the Committee, in its discretion, so provides in the stock
option agreement or, in the case of nonqualified stock options, if the
Committee, in its discretion, so determines at or prior to the time of
exercise, in whole or in part through the transfer of Common Stock
previously acquired by the Optionee, provided the Common Stock so
transferred have been held for the applicable holding period set forth
below:
(i) if such previously acquired shares of Common Stock were
acquired through exercise of an incentive stock option and are
being tendered as payment of the option price under an incentive
stock option, such Shares have been held by the
-4-
<PAGE>
Optionee for a period not less than the holding period described in
section 422(a)(1) of the Code;
(ii) if such previously acquired shares of Common Stock were
acquired through exercise of an incentive stock option or a
nonqualified stock option and are being tendered as payment of the
option price under a nonqualified stock option, such Shares have
been held by the Optionee for more than one year; or
(iii) if such previously acquired shares of Common Stock were
acquired through exercise of a nonqualified stock option and are
being tendered as payment of the option price under an incentive
stock option, such Shares have been held by the Optionee for more
than one year.
In the event such purchase price is paid, in whole or in part, with
shares of Common Stock, the portion of the purchase price so paid shall
be equal to the fair market value, as determined by, or in the manner
prescribed by, the Committee in accordance with Subsection (a) above, on
the date of exercise of the Option, of the shares of Common Stock so
tendered in payment of such purchase price.
(e) DEATH OF OPTIONEE. If an Optionee's employment is terminated by
reason of his death prior to the expiration date of his Option, or if an
Optionee whose employment is terminated (as described in Subsections (f)
and (g) below) shall die following his termination of employment but
prior to the expiration date of his Option or expiration of the period
determined under Subsections (f) and (g) below, if earlier, such Option
may be exercised by the Optionee's estate, personal representative or
beneficiary who acquired the right to exercise such Option by bequest or
inheritance or by reason of the death of the Optionee, to the extent of
the number of Shares with respect to which the Optionee could have
exercised it on the date of his death, or to any greater extent
permitted by the Committee, at any time prior to the earlier of (i) one
year following the date of the Optionee's death, or (ii) the expiration
date of such Option (which, in the case of death following a termination
of employment pursuant to Subsections (f) or (g) below, shall be deemed
to mean the expiration of the exercise period determined thereunder).
(f) DISABILITY OF OPTIONEE. If an Optionee shall become disabled
(within the meaning of section 22(e)
-5-
<PAGE>
(3) of the Code) during his employment with the Company or any
subsidiary, and his employment with the Company and all subsidiaries is
terminated as a consequence of such disability prior to the expiration
date of his Option, such Option may be exercised by the Optionee, to the
extent of the number of Shares with respect to which the Optionee could
have exercised it on the date of such termination of employment, or to
any greater extent permitted by the Committee, at any time prior to the
earlier of (i) one year following the date of the Optionee's termination
of employment, or (ii) the expiration date of such Option. In the event
of the Optionee's legal disability, such Option may be so exercised by the
Optionee's legal representative.
(g) TERMINATION OF EMPLOYMENT OF OPTIONEE. If an Optionee's
employment with the Company and all subsidiaries is terminated prior to
the expiration date of his Option, such Option may be exercised by the
Optionee, to the extent of the number of Shares with respect to which
the Optionee could have exercised it on the date of such termination, or
to any greater extent permitted by the Committee, at any time prior to
the earlier of (i) three months after the date of termination or (ii)
the expiration date of such Option; provided, however, if an Optionee's
employment is terminated voluntarily by the Optionee or by the Company
"for cause" (as defined below), the Optionee shall have no right to
exercise his Option on or after the date or such termination. As used
herein, termination of an Optionee's employment by the Company shall be
"for cause" if the Board reasonably concludes that the Optionee has
materially failed to perform his responsibilities to the Company,
materially failed to follow directives or policies established by or at
the direction of the Board, or conducted himself in a manner materially
detrimental to the interests of the Company.
(h) TRANSFERABILITY. No Option shall be assignable or transferable
by an Optionee otherwise than by will or by the laws of descent and
distribution, and during the lifetime of the Optionee, his Options shall
be exercisable only by him, or in the event of his legal disability, by
his legal representative.
(i) RIGHTS AS A STOCKHOLDER. An Optionee shall have no rights as a
stockholder with respect to any Shares covered by his Option until the
exercise of such Option and his payment for such Shares.
-6-
<PAGE>
(j) ANNUAL LIMIT ON EXERCISE OF INCENTIVE STOCK OPTIONS. Effective
for Incentive Stock Options granted after December 31, 1986, the aggregate
fair market value (determined at the time the option is granted) of the
stock with respect to which the Incentive Stock Options are exercisable
for the first time by an Eligible Individual during any calendar year
(under the Plan and any other Incentive Stock Option plan of the Company
or any parent or subsidiary corporation) shall not exceed $100,000.
(k) OPTION AGREEMENT AND FURTHER CONDITIONS. As soon as practicable
after the grant of an Option, each Optionee shall enter into, and be bound
by the terms of, a stock option agreement (the "Option Agreement") which
shall state the number of Shares to which the Option pertains and specify
whether the Option is intended to be an incentive stock option or a
nonqualified stock option. The Option Agreement shall set forth such terms,
conditions and restrictions regarding the Option not inconsistent with the
Plan (and, in the case of incentive stock options, the provisions of
section 422(b) of the Code) as the Committee shall determine. Without
limiting the generality of the foregoing, the Committee, in its discretion,
may impose further conditions upon the exercisability of the Options and
restrictions on transferability with respect to Shares issued upon exercise
of Options.
(l) WITHHOLDING. The obligations of the Company to deliver Shares
upon the exercise of any Option (or cash in lieu thereof) shall be subject
to any applicable federal, state and local tax withholding requirements.
6. LISTING AND REGISTRATION OF SHARES.
Each Option under the Plan shall be subject to the requirement
that, if at any time the Company shall determine, in its discretion, that the
listing, registration or qualification of the Option or Shares covered
thereby upon any securities exchange or under the laws of any jurisdiction,
or the consent or approval of any governmental or regulatory
body, is necessary or desirable as a condition of, or in connection with, the
granting desirable of such Option, or the exercise thereof, then no such
Option may be exercised in whole or in part unless and until such listing,
registration, qualification, consent or approval shall have been effected or
obtained, on conditions acceptable to the Company. Each Optionee, or his
legal representative or beneficiaries, also may be required to give
satisfactory assurance that Shares acquired upon exercise of an Option are
being acquired for
-7-
<PAGE>
investment and not with a view to distribution, and certificates representing
such Shares may be legended accordingly.
7. ADJUSTMENTS.
The number of Shares which may be issued under the Plan, as stated
in Section 4 hereof, and the number of Shares issuable upon exercise of
outstanding Options under the Plan (as well as the exercise price per share
under such outstanding Options), shall be equitably adjusted by the
Committee to reflect any stock dividend, stock split, share combination, or
similar change in the capitalization of the Company.
In the event of a proposed dissolution, liquidation, or sale of a
substantial portion of the assets of the Company, or of a merger or
consolidation in which holders of shares of Common Stock are to receive cash,
securities or other property, the Committee shall, in its unlimited
discretion, have the power prior to such event (i) to terminate all
outstanding Options upon at least seven days' prior notice to each Optionee
and, if the Committee deems it appropriate, to cause the Company to pay to
each Optionee an amount in cash with respect to each Share to which a
terminated Option pertains equal to the difference between the option price
and the value, as determined by the Committee in its sole discretion, of the
consideration to be received by the holders of shares of Common Stock in
connection with such transaction, or (ii) to provide for the exchange of
Options outstanding under the Plan for options to acquire securities or
other property to be delivered in connection with the transaction and in
connection therewith to make an equitable adjustment, as determined by the
Committee in its sole discretion, in the option price and number of Shares or
amount of property subject to the Option and, if deemed appropriate, provide
for a cash payment to optionees in partial consideration for such exchange.
8. ACQUISITIONS.
Notwithstanding any other provision of this Plan, Options may be
granted hereunder in substitution for options held by officers and employees
of other corporations who are about to, or have, become employees of the
Company or a subsidiary corporation as a result of a merger, consolidation,
acquisition of assets or similar transactions by the Company or a subsidiary.
The terms, including the option price, of the substitute options so granted
may vary from the terms set forth in this Plan to such extent as the
Committee may deem appropriate to conform, in whole or in part, to the
provisions of the options in substitution for which they are granted.
-8-
<PAGE>
9. AMENDMENT OR DISCONTINUANCE OF THE PLAN.
The Board at any time, and from time to time, may suspend or
discontinue the Plan or amend it and any outstanding Options in any respect
whatsoever, provided, however, that without the approval of the holders of at
least a majority of the outstanding shares of Common Stock as may be required
by applicable law: (a) the maximum number of Shares with respect to which
Options may be granted under the Plan shall not be increased except as
permitted under Section 7 hereof, (b) the lowest price at which Options may
be granted shall not be reduced, (c) the duration of the Plan under
Section 13 hereof shall not be extended, and (d) the Plan may not be amended
if such amendment would materially increase the benefits accruing to
participants under the Plan; and provided further, that no such suspension,
discontinuance or amendment shall materially impair the rights of any holder
of an outstanding Option without the consent of such holder.
10. ABSENCE OF RIGHTS.
The recommendation or selection of an Eligible Individual as a
recipient of an Option under the Plan shall not entitle such person to any
Option unless and until the grant actually has been made by appropriate
action of the Committee; and any such grant is subject to the provisions of
the Plan. Further, the granting of an Option to a person shall not entitle
that person to continued employment by the Company or a subsidiary or affect
the terms and conditions of such employment, and the Company shall have the
absolute right, in its discretion, to retire such person in accordance with
its retirement policies or otherwise to terminate his employment, whether or
not such termination may result in a partial or total termination of his
Option.
11. SHAREHOLDER APPROVAL.
This Plan was adopted by the Company on March 6, 1986 and approved
by its shareholders as of March 10, 1986.
12. NO OBLIGATION TO EXERCISE OPTION.
The granting of an Option shall impose no obligation upon an
Optionee to exercise such Option.
13. TERMINATION OF PLAN.
No Options may be granted after March 6, 1996, provided, however,
that the Plan and all outstanding Options
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<PAGE>
shall remain in effect until such Options have expired or are terminated in
accordance with the Plan.
-10-
<PAGE>
AMENDMENT NO. 1
TO
CONTINENTAL MEDICAL SYSTEMS, INC.
1986 STOCK OPTION PLAN
(As Amended and Restated and Restated Effective December 1, 1991)
Section 5(1) is hereby amended to read as follows:
(1) WITHHOLDING AND USE OF SHARES TO SATISFY TAX OBLIGATIONS. The
obligation of the Company to deliver Shares upon the exercise of any Option
(or cash in lieu thereof) shall be subject to any applicable federal, state
or local tax withholding requirements.
If the exercise of any Option is subject to the withholding requirements
of applicable federal tax law, an Optionee may satisfy the federal
withholding tax, in whole or in part, by electing to have the Company
withhold Shares subject to the exercise (or by returning previously acquired
Shares or other Common Stock to the Company); provided, however, that with
respect to an Optionee who is subject to section 16 of the Securities Exchange
Act of 1934, any such amount of federal taxes required to be withheld shall
be satisfied automatically by withholding Shares subject to the exercise. The
Company may not withhold Shares in excess of the number necessary to satisfy
the minimum federal income tax withholding requirements. Shares or other
Common Stock shall be valued, for purposes of this Subsection (1), at its
fair market value on the date the amount attributable to the exercise of the
Option is incalculable in the income of the Optionee under section 83 of the
Code (the "Determination Date").
If Shares or other Common Stock acquired by the exercise of an incentive
stock option is used to satisfy the withholding requirement described above,
such Shares or other Common Stock must have been held by the Optionee for a
period of not less that the holding period described in section
<PAGE>
422(a)(1) of the Code as of the Determination Date. If Shares or other Common
Stock acquired by the exercise of a nonqualified stock option or of an option
under a similar plan is used to satisfy such withholding requirement, such
option must have been granted to the Optionee at least six months prior to
the Determination Date.
The Committee shall adopt such withholding rules as it deems necessary
to carry out the provisions of this Section.
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<PAGE>
AMENDMENT NO. 2
TO
CONTINENTAL MEDICAL SYSTEMS, INC.
1986 STOCK OPTION PLAN
(AS AMENDED AND RESTATED EFFECTIVE DECEMBER 1, 1991)
In accordance with Section 9, "Amendment or Discontinuance of the Plan",
the holders of a majority of the outstanding shares of Common Stock, par
value $.01 per share, of CMS, at the Annual Meeting of Stockholders of CMS
held on November 20, 1992, approved an amendment to Section 4, "Stock
Subject to the Plan" by increasing the number of shares of Common Stock of
CMS available for grant under the CMS 1986 Stock Option Plan to 7,450,000.
<PAGE>
CONTINENTAL MEDICAL SYSTEMS, INC.
1986 STOCK OPTION PLAN
INCENTIVE STOCK OPTION AGREEMENT
INCENTIVE STOCK OPTION AGREEMENT, dated as of the day of
(the "Grant Date"), between CONTINENTAL MEDICAL
SYSTEMS, INC., a Delaware Corporation (the "Company"), and (the "Optionee"),
a key employee of the Company and/or its wholly owned subsidiaries.
WHEREAS, the Company desires to afford the Optionee an opportunity to
purchase shares of Common Stock, $.01 par value per share, of the Company
("Shares") as hereinafter provided, in accordance with the provisions of the
Continental Medical Systems, Inc. 1986 Stock Option Plan (the "Plan"), a copy
of which is attached hereto. Except as otherwise provided herein, terms used
herein shall have the same meanings as in the Plan.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth and for other good and valuable consideration the legal sufficiency of
which is hereby acknowledged, the parties hereto, intending to be legally
bound hereunder, agree as follows:
1. GRANT OF OPTION. The Company hereby grants to the Optionee the right
and option to purchase all or any part of an aggregate of Shares (the
"Option"), which Option is intended to qualify as an "incentive stock option"
under section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"). The Option is in all respects limited and conditioned as
hereinafter provided, and is subject in all respects to the Plan's terms and
conditions now in effect and as they may be amended from time to time in
accordance with the Plan (which terms and conditions are and automatically
shall be incorporated herein by reference and made a part hereof and shall
control in the event of any conflict with any other terms of this Agreement).
2. PURCHASE PRICE. The purchase price per share (the "Option Price") of
the Shares covered by the Option (the "Option Shares") shall be ,
which price was the low quote for the Company's Common Stock on the New York
Stock Exchange on the Grant Date.
3. TERM. Unless earlier terminated pursuant to any provision hereof or
of the Plan, the Option shall expire on (the "Expiration
Date").
1
<PAGE>
4. EXERCISE OF OPTION. Except where permitted by the Plan, the right
of the Optionee to exercise any installment of the Option is subject to the
condition that the Optionee be employed as key employee of the Company, or
any subsidiary of the Company, as defined by section 424(f) of the Code,
on the date such installment becomes exercisable. The Option shall become
exercisable in four (4) installments; and the Optionee shall have the right to
purchase from the Company, on and after the following dates, the following
number of Shares:
<TABLE>
<CAPTION>
Date Installment Becomes
Exercisable Number of Option Shares
------------------------ -----------------------
<S> <C>
Shares
an additional Shares
an additional Shares
an additional Shares
</TABLE>
The right of the Optionee to purchase the Option Shares which are the subject
of any installment of the Option which has become exercisable may be
exercised in whole or in part at any time or times prior to the expiration or
other termination of the Option.
The foregoing provisions of this Paragraph 4 notwithstanding, the
exercisability of the Option is subject to the terms and conditions of the
Plan.
5. METHOD OF EXERCISING OPTION. Subject to the terms and conditions of
this Option Agreement and the Plan, the Option may be exercised by written
notice to the Company at its principal office, which is presently located at
600 Wilson Lane, Mechanicsburg, Pennsylvania 17055. Such notice (a suggested
form of which is attached hereto) shall state the election to exercise the
Option and the number of Option Shares with respect to which it is being
exercised; shall be signed by the person or persons so exercising the option;
shall, if the Company so requests, be accompanied by the investment
certificate referred to in Section 6 of the Plan; and shall be accompanied by
payment of the full Option Price of such Option Shares. The Option Price
shall be paid in cash, or by check, bank draft, or postal or express money
order, or in Shares previously acquired by the Optionee (provided that if
such Shares were acquired through exercise of an incentive stock option, such
Shares shall have been held by the Optionee for a period not less than the
holding period described in section 422(a)(1) of the Code; or if such Shares
were acquired through exercise of a non-qualified stock option, such Shares
have been held by the Optionee for more than one year) or in a combination of
cash (or its equivalent) and Shares. Upon receipt of such notice and payment,
the Company, as promptly as practicable, shall deliver or cause to be
delivered a certificate or certificates representing the Shares with respect
to
2
<PAGE>
which the Option is so exercised. The certificate or certificates for such
Shares shall be registered in the name of the person or persons so exercising
the Option (or, if the Option is exercised by the Optionee and if the
Optionee shall so request in the notice exercising the Option, shall be
registered in the name of the Optionee and his or her spouse, jointly, with
right of survivorship) and shall be delivered as provided above to or upon
the written order of the person or persons exercising the Option. In the event
the Option shall be exercised by any person or persons after the death or
legal disability of the Optionee, such notice shall be accompanied by
appropriate proof of the right of such person or persons to exercise the
Option. All Shares that shall be purchased upon the exercise of the option as
provided herein shall be fully paid and nonassessable by the Company.
6. NON-TRANSFERABILITY OF OPTION. The Option is not assignable or
transferable, in whole or in part, by the Optionee, otherwise than by will or
by the laws of descent and distribution. During the lifetime of the Optionee,
the Option shall be exercisable only by the Optionee or, in the event of
legal disability, by the Optionee's legal representative.
7. DISQUALIFYING DISPOSITION OF OPTION SHARES. The Optionee agrees to
give written notice to the Company, at its principal office, if a
"disposition" of the Shares acquired through exercise of the Option granted
hereunder occurs at any time within two years after the Grant Date or within
one year after the transfer to the Optionee of such Shares. For purposes of
this Paragraph, the term "disposition" shall have the meaning assigned to
such term by section 424(c) of the Code.
8. WITHHOLDING OF TAXES. The obligation of the Company to deliver Shares
upon the exercise of the Option shall be subject to applicable federal, state
and local tax withholding requirements.
9. GOVERNING LAW. This Agreement shall, to the maximum extent possible,
be construed in a manner consistent with the Code provisions concerning
incentive stock options, and its interpretation shall otherwise be governed
by Delaware law.
3
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Incentive Stock Option
Agreement to be executed by a duly authorized officer, and the Optionee has
hereunto set his hand and seal, all as of the day and year first above
written.
CONTINENTAL MEDICAL SYSTEMS, INC.
BY:____________________________
________________________________
Optionee
4
<PAGE>
CONTINENTAL MEDICAL SYSTEMS, INC.
1986 STOCK OPTION PLAN
Notice of Exercise of Incentive Stock Option
I hereby exercise the incentive stock option granted to me as of
by Continental Medical Systems, Inc., with respect to the following number
of shares of Continental Medical Systems, Inc. Common Stock, $.01 par value
per share, ("Shares") covered by said option:
Number of Shares to be purchased ___________________
Option price per share $__________________
Total option price $__________________
Enclosed is my check in the amount of $_____________ (and/or
________________ Shares(1) in full payment for such Shares.
Please have the certificate or certificates representing the purchased
Shares registered in the following name or names(2) ____________________
____________________________________________________________________ and
sent to _________________________________________________________________
DATED: _______________, _______
_____________________________________
Optionee's Signature
_____________________
(1) The option price may be paid in whole or in part by delivery of
Shares, subject to the terms of the Continental Medical Systems,
Inc. 1986 Stock Option Plan and the Optionee's Incentive Stock
Option Agreement.
(2) Certificates may be registered in the name of the Optionee alone
or in the joint names of the Optionee and his or her spouse.
5
<PAGE>
CONTINENTAL MEDICAL SYSTEMS, INC.
1989 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
(AS AMENDED AND RESTATED EFFECTIVE DECEMBER 1, 1991)
1. PURPOSE
The 1989 Non-Employee Directors' Stock Option Plan (the "Plan") is intended
to enable Continental Medical Systems, Inc. (the "Company") to attract and
retain capable independent directors and to provide them with incentives to
promote the best interests of the Company through the grant of nonqualified
stock options ("Options").
The purpose of this amendment and restatement is to incorporate into a
single Plan document all amendments made to the Plan through 1991, to change
references to section numbers of statutes to reflect current law, and to
reflect the 3-2 split of the Company's common stock (the "Common Stock") in
November 1991.
As used in the Plan, the term "nonqualified stock options" means options
which are NOT intended to qualify as incentive stock options within the
meaning of section 422 of the Internal Revenue Code of 1986, as amended from
time to time (the "Code"). The term "subsidiary" means any corporation
(whether or not in existence at the time the Plan is amended and restated)
which, at the time and Option is granted, is a subsidiary of the Company
under the definition of "subsidiary corporation" contained in section 424(f)
of the Code, or any similar provision hereafter enacted.
2. ADMINISTRATION
The Plan shall be administered by the Compensation Committee of the
Board of Directors (the "Committee") which shall consist of not less than
three directors of the Company. Committee members shall be appointed by, and
shall serve at the pleasure of, the Board of Directors of the Company (the
"Board"). Each member of the Committee, while serving as such, shall be
deemed to be acting in his capacity as a director of the Company.
Subject to the terms of the Plan, the Committee shall have full and
final authority to interpret the Plan, but shall have no discretion with
respect to the selection of directors to receive Options, the number of
Shares (as defined below) subject to the Plan or to each grant hereunder, or
the purchase price for Shares subject to an Option. The Committee shall have
the authority to establish and rescind, from time to time, such rules and
regulations, not inconsistent with the provisions of this Plan, for the
proper administration of this Plan and Options granted
<PAGE>
hereunder, and to make such determinations and interpretations under or in
connection with this Plan as it deems necessary or advisable. The Committee
may correct any defect, supply any omission and reconcile any inconsistency
in this Plan or in any Option granted hereunder in the manner and to the
extent it shall deem desirable. All such rules, regulations, determinations
and interpretations shall be binding and conclusive upon the Company and its
non-employee directors (including former non-employee directors) and upon
their respective legal representatives, beneficiaries, successors and assigns
and upon all other persons claiming under or through any of them. No member
of the Board or of the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any Option
granted hereunder.
3. ELIGIBLE DIRECTORS.
The persons eligible to receive Options under the Plan (the "Eligible
Directors") are those directors of the Company who (i), are not salaried
employees of the Company or any subsidiary of the Company; and (ii) have not
been salaried employees of the Company or any subsidiary of the Company
during the immediately preceding 12-month period.
4. STOCK SUBJECT TO THE PLAN.
Subject to further adjustment as provided in Section 7 hereof, 150,000
shares (the "Shares") (reflecting the 3-2 split of the Common Stock in
November 1991) of $0.01 par value common stock of the Company shall be
available for the grant of Options under the Plan, which shares may be
authorized but unissued Shares or reacquired Shares, as the Company shall
determine.
If any Option granted under the Plan expires or otherwise terminates, in
whole or in part, without having been exercised, the Shares subject to the
unexercised portion of such Option shall be available for the granting of
Options under the Plan as fully as if such Shares had never been subject to
an Option.
5. GRANTS, TERMS AND CONDITIONS OF OPTIONS.
Each new Eligible Director elected to the Board from time to time (such
an Eligible Director is hereinafter referred to as an "Optionee") shall
automatically be granted an option to purchase 7,500 shares of Common Stock
of the Company on the date of his first election by the stockholders of the
Company. On the first business day of each fiscal year of the Company
beginning after the date of an Optionee's initial election, the Optionee
shall automatically be granted an Option to purchase 3,750 shares of Common
Stock of the Company. Options granted pursuant to the Plan shall be in such
form as the Committee shall from time to
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<PAGE>
time approve, and shall be subject to the following terms and conditions:
(a) PRICE. The option price per Share under each Option granted under
the Plan shall be the greater of $.01 or 100% of the fair market value of the
Common Stock on the date of grant of such Option. The fair market value of a
share of Common Stock shall mean the lowest quoted sales price on the date in
question (or, if there is no reported sale on such date, on such date, on the
last preceding date on which any reported sale occurred) of a share of Common
Stock quoted on the New York Stock Exchange or, if the Common Stock is no
longer so quoted, the lowest quoted sales price on the date in question (or,
if there is no reported sale on such date, on the last preceding date on
which any reported sale occurred) of a share of Common Stock on the
principal United States securities exchange registered under the Securities
Exchange Act of 1934 on which the Common Stock is listed or admitted to
trading, or, if the Common Stock is not listed or admitted to trading on any
such exchange, the fair market value on such date of a share of Common Stock
as the Board of Directors shall determine.
(b) TERM. Subject to earlier termination as provided in Subsections (d)
through (f) below and in Section 7 hereof, the duration of each Option shall
be five years from the date of grant.
(c) EXERCISE AND PAYMENT. Options shall become exercisable in four equal
annual installments over the four-year period beginning on the date of grant,
with the first installment becoming exercisable one year from the date of
grant. Except as otherwise provided in Subsections (d) through (f) below,
Options shall only be exercisable by an Optionee while he remains a director
of the Company. Any Shares which may be purchased upon exercise of an Option
("Option Shares"), the right to the purchase of which has accrued, may be
purchased at any time up to the expiration or termination of the Option.
Options may be exercised, in whole or in part, from time to time, by giving
written notice of exercise to the Company at its principal office, specifying
the number of Shares to be purchased, and accompanied by payment in full of
the aggregate purchase price for the Shares. Only full Shares shall be
delivered, and any fractional share which might otherwise be deliverable upon
exercise of an Option granted hereunder shall be forfeited.
The purchase price shall be payable: (i) in cash or its equivalent, or
(ii) unless in the opinion of counsel to the Company to do so may result in a
possible violation of law, in whole or in part through the transfer of Common
Stock previously acquired by the Optionee, provided the Common Stock so
transferred has been held by the Optionee for more than one year on the date
of transfer.
-3-
<PAGE>
In the event such purchase price is paid, in whole or in part,
with shares of Common Stock, the portion of the purchase price
so paid shall be equal to the fair market value, as determined in
accordance with Subsection (a) above, on the date of exercise of
the Option, of the shares of Common Stock so tendered in payment of
such purchase price.
(d) DEATH OF OPTIONEE. If an Optionee ceases to be a director
of the Company by reason of his death prior to the expiration date
of his Option of if an Optionee who ceases to be a director for
reasons described in Subsections (e) and (f) below shall die
following his ceasing to be a director but prior to the earlier of
(i) the expiration date of his Option or (ii) the expiration of the
period determined under Subsections (e) or (f) below, such Option
may be exercised by the Optionee's estate, personal representative
or beneficiary who acquired the right to exercise such Option by
bequest or inheritance or by reason of the death of the Optionee, to
the extent of the number of Shares with respect to which the
Optionee could have exercised it on the date of his death, at any
time prior to the earlier of (i) one year following the date of the
Optionee's death, or (ii) the expiration date of such Option
(which, in the case of death following the Optionee's termination
as a director for reasons described in Subsections (e) or (f) below,
shall be deemed to mean the expiration of the exercise period
determined thereunder).
(e) DISABILITY OF OPTIONEE. If an Optionee shall become
disabled (within the meaning of section 22(e)(3) of the Code)
during the period in which he is a director with the Company and
his position as director with the Company is terminated as a
consequence of such disability prior to the expiration date of his
Option, such Option may be exercised by the Optionee, to the extent
of the number of Shares with respect to which the Optionee could
have exercised it on the date he ceased to be a director, at any
time prior to the earlier of (i) one year following the date of the
Optionee's ceasing to be a director, or (ii) the expiration date of
such Option. In the event of the Optionee's legal disability, such
Option may be so exercised by the Optionee's legal representative.
(f) EXPIRATION OF TERM OR REMOVAL OF OPTIONEE AS DIRECTOR. If
an Optionee's service as a director with the Company terminates
prior to the expiration date of his Option for any reason (such as,
without limitation, failure to be reelected by the stockholders)
other than those set forth in Subsections (d) and (e) above, such
Option may be exercised by the Optionee, to the extent of the
number of Shares with respect to which the Optionee could have
exercised it on the date of such termination, at any time prior to
the earlier of (i) 30 days after the date of termination or (ii)
the expiration date of such Option.
-4-
<PAGE>
(g) TRANSFERABILITY. No Option shall be assignable or
transferable by an Optionee otherwise than by will or by the laws of
descent and distribution, and during the lifetime of the Optionee,
his Options shall be exercisable only by him, or in the event of
his legal disability, by his legal representative.
(h) RIGHTS AS A STOCKHOLDER. An Optionee shall have no rights
as a stockholder with respect to any Shares covered by his Option
until the exercise of such Option and his payment for such Shares.
(i) OPTION AGREEMENT AND FURTHER CONDITIONS. As soon as
practicable after the grant of an Option, each Optionee shall enter
into, and be bound by the terms of, a stock option agreement (the
"Option Agreement") which shall state the number of Shares to which
the Option pertains and shall set forth such terms, conditions
and restrictions regarding the Option not inconsistent with the Plan
as the Committee shall determine. Without limiting the generality
of the foregoing, the Committee may impose further conditions upon
the exercisability of Options and restrictions on transferability
with respect to Shares issued upon exercise of Options.
(j) WITHHOLDING. The obligation of the Company to deliver
Shares upon the exercise of any Option (or cash in lieu thereof)
shall be subject to any applicable federal, state and local tax
withholding requirements.
6. LISTING AND REGISTRATION OF SHARES.
Each Option under the Plan shall be subject to the requirement
that, if at any time the Company shall determine, in its
discretion, that the listing, registration or qualification of the
Option or Shares covered thereby upon any securities exchange or
under the laws of any jurisdiction, or the consent or approval of
any governmental or regulatory body, is necessary or desirable as
a condition of, or in connection with, the granting of such Option,
or the exercise thereof, then no such Option may be exercised in
whole or in part unless and until such listing, registration,
qualification, consent or approval shall have been effected or
obtained, on conditions acceptable to the Company. Each Optionee,
his legal representative or beneficiaries, also may be
required to give satisfactory assurance that Shares acquired upon
exercise of an Option are being acquired for investment and not
with a view to distribution, and certificates representing such
Shares may be legended accordingly.
7. ADJUSTMENT.
The number of Shares which may be issued under the Plan, as
stated in Section 4 hereof, and the number of Shares issuable
-5
<PAGE>
upon exercise of outstanding Options under the Plan (as well as the
exercise price per share under such outstanding Options), shall
be equitably adjusted by the Committee to reflect any stock
dividend, stock split, share combination, or similar change in the
capitalization of the Company.
In the event of a proposed dissolution, liquidation, or sale
of a substantial portion of the assets of the Company, or of a
merger or consolidation in which holders of shares of Common Stock
are to receive cash, securities or other property, and provision is
not made for the continuance and assumption of Options under the
Plan, or the substitution for such options of new options to
acquire securities or other property to be delivered in connection
with the transaction, the Committee shall terminate all outstanding
Options upon at least seven days' prior notice to each Optionee and
cause the Company to pay to each Optionee an amount in cash with
respect to each Share to which a terminated Option pertains equal to
the difference between the option price and the value, as
determined by the Committee in the manner prescribed in Section
5(a) hereof, of the consideration to be received by the holders of
shares of Common Stock in connection with such transaction. In
connection with any continuance, assumption, or substitution of
Options as noted above, the Committee may make an equitable
adjustment in the option price and number of Shares or amount of
property subject to the Option and, if deemed appropriate, provide
for a cash payment to optionees in partial consideration for such
exchange.
8. AMENDMENT OR DISCONTINUANCE OF THE PLAN.
The Board at any time, and from time to time, may suspend or
discontinue the Plan; provided, however, that an amendment to the
Plan shall require the approval of the holders of at least a
majority of the securities of the Company present, or represented,
and entitled to vote at a meeting duly held if such amendment would
(a) materially increase the benefits accruing to participants under
the Plan; (b) materially increase the number of Shares which may be
issued under the Plan; or (c) materially modify the requirements as
to eligibility for participation in the Plan. The Board may also
amend the Plan from time to time, provided, however, that no
such suspension, discontinuance or amendment shall materially
impair the rights of any holder of an outstanding Option
without the consent of such holder, and provided further, that the
directors eligible to receive Options under this Plan, the timing
of the grants of such Options, and the method or methods for
determining the amount of Options to be granted to each Eligible
Director shall not be amended more than once every six months.
-6-
<PAGE>
9. ABSENCE OF RIGHTS.
The granting of an Option to a person shall not entitle that person to
continue to serve as a director of the Company or a subsidiary or affect the
terms and conditions of such service.
10. STOCKHOLDER APPROVAL.
This Plan was adopted by the Board of Directors of the Company on May 4,
1989 and approved by its stockholders as of November 20, 1989.
11. NO OBLIGATION TO EXERCISE OPTION.
The granting of an Option shall impose no obligation upon an Optionee to
exercise such Option.
12. TERMINATION OF PLAN.
No Options may be granted after December 31, 1999, provided, however,
that all Options outstanding on that date shall remain in effect until such
Options have expired or are terminated in accordance with the Plan.
-7-
<PAGE>
CONTINENTAL MEDICAL SYSTEMS, INC.
1989 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
NON-QUALIFIED STOCK OPTION AGREEMENT
NON-QUALIFIED STOCK OPTION AGREEMENT, dated as of the day of
(the "Grant Date") between Continental Medical Systems, Inc., a Delaware
Corporation (the "Company"), and (the "Optionee"), a non-employee
director of the Company.
WHEREAS, the Company desires to afford the Optionee an opportunity to
purchase shares of Common Stock, $.01 par value per share, of the Company
("Shares") as hereinafter provided, in accordance with the provisions of the
Continental Medical Systems, Inc. 1989 Non-Employee Directors' Stock Option
Plan, as amended (the "Plan"), a copy of which is attached hereto (except as
otherwise provided herein, terms used herein shall have the same meanings as
in the Plan);
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth and for other good and valuable consideration the legal sufficiency of
which is hereby acknowledged, the parties hereto, intending to be legally
bound hereunder, agree as follows:
1. GRANT OF OPTION. The Company hereby grants to the Optionee the right
and option to purchase all or any part of an aggregate of Shares (the
"Option"), which Option is intended to be a non-qualified stock option. The
Option is not intended to qualify as an "incentive stock option", as defined
by section 422 of the Internal Revenue Code of 1986, as amended (the "Code").
The Option is in all respects limited and conditioned as hereinafter
provided, and is subject in all respects to the Plan's terms and conditions
now in effect and as they may be amended from time to time in accordance with
the Plan (which terms and conditions are and automatically shall be
incorporated herein by reference and made a part hereof and shall control in
the event of any conflict with any other terms of this Agreement).
2. PURCHASE PRICE. The purchase price per share (the "Option Price") of
the Shares covered by the Option (the "Option Shares") shall be $ , which
price was the closing quote for the Company's Common Stock on the New York
Stock Exchange on the Grant Date.
1
<PAGE>
3. TERM. Unless earlier terminated pursuant to any provision hereof
or of the Plan, the Option shall expire on (the "Expiration Date").
4. EXERCISE OF OPTION. Except where permitted by the Plan, the right of
the Optionee to exercise any installment of the Option is subject to the
condition that the Optionee by in service as a non-employee director of the
Company on the date such installment becomes exercisable. The Option shall
become exercisable in four (4) installments; and the Optionee shall have the
right to purchase from the Company, on and after the following dates, the
following number of Option Shares:
<TABLE>
<CAPTION>
Date Installment Becomes
Exercisable Number of Option Shares
------------------------ -----------------------
<S> <C>
Shares
an additional Shares
an additional Shares
an additional Shares
</TABLE>
The right of the Optionee to purchase the Option Shares which are the subject
of any installment of the Option which has become exercisable may be
exercised in whole or in part at any time or times prior to the expiration or
other termination of the Option.
The foregoing provisions of this Paragraph 4 notwithstanding, the
exercisability of the Option is subject to the terms and conditions of the
Plan.
5. METHOD OF EXERCISING OPTION. Subject to the terms and conditions of
this Option Agreement and the Plan, the Option may be exercised by written
notice to the Company at its principal office, which is presently located at
600 Wilson Lane, Mechanicsburg, Pennsylvania 17055. Such notice (a suggested
form of which is attached hereto) shall state the election to exercise the
Option and the number of Option Shares with respect to which it is being
exercised; shall be signed by the person or persons so exercising the Option;
shall, if the Company so requests, be accompanied by the assurance of
non-investment referred to in Section 6 of the Plan; and shall be accompanied
by payment of the full Option Price of such Option Shares. The Option Price
shall be paid in cash, or by check, bank draft, or postal or express money
order, or, unless in the opinion of counsel for the Company to do so may
result in a possible violation of law, in whole or in part through the
transfer of shares of Common Stock previously acquired by the Optionee,
2
<PAGE>
provided the shares of Common Stock so transferred have been held by the
Optionee for more than one year on the date of transfer, or in a combination
of cash (or its equivalent) and shares of Common Stock. Upon receipt of such
notice and payment, the Company, as promptly as practicable, shall deliver or
cause to be delivered a certificate or certificates representing the Option
Shares with respect to which the Option is so exercised. The certificate or
certificates for such Option Shares shall be registered in the name of the
person or persons so exercising the Option (or, if the Option is exercised by
the Optionee and if the Optionee shall so request in the notice exercising
the Option, shall be registered in the name of the Optionee and his or her
spouse, jointly, with right of survivorship) and shall be delivered as
provided above to or upon the written order of the person or persons
exercising the Option. In the event the Option shall be exercised by any
person or persons after the death or legal disability of the Optionee, such
notice shall be accompanied by appropriate proof of the right of such person
or persons to exercise the Option. All Option Shares that shall be purchased
upon the exercise of the Option as provided herein shall be fully paid and
nonassessable by the Company.
6. NON-TRANSFERABILITY OF OPTION. The Option is not assignable or
transferable, in whole or in part, by the Optionee, otherwise than by will or
by the laws of descent and distribution. During the lifetime of the Optionee,
the Option shall be exercisable only by the Optionee or, in the event of
legal disability, by the Optionee's legal representative.
7. WITHHOLDING OF TAXES. The obligation of the Company to deliver Option
Shares upon the exercise of the Option shall be subject to applicable
federal, state and local tax withholding requirements.
8. GOVERNING LAW. This Agreement shall, to the maximum extent possible,
be construed in a manner consistent with the Code provisions concerning
non-qualified stock options, and its interpretation shall otherwise be
governed by Delaware law.
3
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Non-Qualified Stock
Option Agreement to be executed by a duly authorized officer, and the
Optionee has hereunto set his hand and seal, all as of the day and year first
above written.
CONTINENTAL MEDICAL SYSTEMS, INC.
BY: ________________________________
____________________________________
Optionee
4
<PAGE>
CONTINENTAL MEDICAL SYSTEMS, INC.
1989 NON-EMPLOYEE DIRECTORS'
STOCK OPTION PLAN
Notice of Exercise of Non-Qualified Stock Option
I hereby exercise the Non-Qualified stock option granted to me as
of by Continental Medical Systems, Inc., with respect to the following
number of shares of Continental Medical Systems, Inc. Common Stock, $.01 par
value per share, ("Shares") covered by said option:
Number of Shares to be purchased
___________________________
Option price per Share
$__________________________
Total option price
$__________________________
Enclosed is my check in the amount of $_______ (and/or _________
Shares(1) in full payment for such Shares.
Please have the certificate or certificates representing the purchased
Shares registered in the following name or names(2) ___________________________
_______________________________________________________________________ and
sent to ______________________________________________.
DATED:_________________,_____
__________________________________
Optionee's Signature
__________________________________
__________________________________
__________________________________
Home Address
__________________________________
Social Security No.
________________
(1) The option price may be paid in whole or in part by delivery of Shares,
subject to the terms of the Continental Medical Systems, Inc. 1989
Non-Employee Directors Stock Option Plan and the Optionee's Non-Qualified
Stock Option Agreement.
(2) Certificates may be registered in the name of the Optionee alone or in
the joint names of the Optionee and his or her spouse.
5
<PAGE>
AMENDMENT NO. 1
TO
CONTINENTAL MEDICAL SYSTEMS, INC.
1992 CEO STOCK OPTION PLAN
Section 5(k) is hereby amended to read as follows:
(k) WITHHOLDING AND USE OF SHARES TO SATISFY TAX OBLIGATIONS. The
obligation of the Company to deliver Shares upon the exercise of any Option
(or cash in lieu thereof) shall be subject to any applicable federal, state
or local tax withholding requirements.
If the exercise of any Option is subject to the withholding requirements
of applicable federal tax law, an Optionee may satisfy the federal
withholding tax, in whole or in part, by electing to have the Company
withhold Shares subject to the exercise (or by returning previously acquired
Shares or other Common Stock to the Company); provided, however, that with
respect to an Optionee who is subject to section 16 of the Securities
Exchange Act of 1934, any such amount of federal taxes required to be
withheld shall be satisfied automatically by withholding Shares subject to
the exercise. The Company may not withhold Shares in excess of the number
necessary to satisfy the minimum federal income tax withholding requirements.
Shares or other Common Stock shall be valued, for purposes of this Subsection
(k), at its fair market value on the date the amount attributable to the
exercise of the Option is includable in the income of the Optionee under
section 83 of the Code (the "Determination Date").
If Shares or other Common Stock acquired by the exercise of an incentive
stock option is used to satisfy the withholding requirement described above,
such Shares or other Common Stock must have been held by the Optionee for a
period of not less than the holding period described in section 422(a)(1) of
the Code as of the Determination Date. If Shares or other Common
<PAGE>
Stock acquired by the exercise of a nonqualified stock option or of an option
under a similar plan is used to satisfy such withholding requirement, such
option must have been granted to the Optionee at least six months prior to
the Determination Date.
The Committee shall adopt such withholding rules as it deems necessary
to carry out the provisions of this Section.
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<PAGE>
CONTINENTAL MEDICAL SYSTEMS, INC.
1992 CEO STOCK OPTION PLAN
1. PURPOSE.
The 1992 CEO Stock Option Plan (the "Plan") is intended to enable
Continental Medical Systems, Inc. (the "Company") to provide its chief
executive officer, in connection with the amendment and extension of his
Employment Agreement, with incentive to promote the best interests of the
Company and its subsidiaries through the grant of a nonqualified stock option
(the "Option").
The term "nonqualified stock option" means an option which is not
intended to qualify as an incentive stock option within the meaning of
section 422 of the Internal Revenue Code of 1986, as amended from time to
time (the "Code"). The term "subsidiary" means any corporation (whether or
not in existence at the time the Plan is adopted) which, at the time an
Option is granted, is a subsidiary of the Company under the definition of
"subsidiary corporation" contained in section 424(f) of the Code, or any
similar provision hereafter enacted.
2. ADMINISTRATION.
The Plan shall be administered by the Compensation Committee of the
Company's Board of Directors if one has been established or, if not, the
entire Board of Directors (the "Committee"). Each member of the Committee,
while serving as such, shall be deemed to be acting in his capacity as a
director of the Company. No member of the Committee shall be eligible, nor
shall have been eligible at any time within one year prior to his appointment
to the Committee, for selection as a person to whom Options may be granted
pursuant to the Plan or to whom stock grants or stock options may be granted
pursuant to any other plan of the Company or any of its "affiliates," as
defined in the Securities Exchange Act of 1934, entitling the participant
therein to acquire stock, or stock options of the Company or any of its
affiliates, except that a member of the Committee may receive stock options
under the 1989 Non-Employee Directors' Stock Option Plan of the Company, as
the same may be amended from time to time.
Subject to the terms of the Plan, the Committee shall have full and final
authority in its absolute discretion to grant or not to grant the Option and
to set the date of grant and the other terms of the Option. The Committee
also shall have the authority to establish and rescind, from time to time,
such rules and regulations, not inconsistent with the provisions of this
Plan, for the proper administration of this Plan and the Option
<PAGE>
granted hereunder, and to make such determinations and interpretations under
or in connection with this Plan as it deems necessary or advisable. The
Committee may correct any defect, supply any omission and reconcile any
inconsistency in this Plan or in the Option in the manner and to the extent
it shall deem desirable. All such rules, regulations, determinations and
interpretations shall be binding and conclusive upon the Company and its
subsidiaries, officers and employees (including former officers and
employees) of the Company and any subsidiary, and upon their respective legal
representatives, beneficiaries, successors and assigns and upon all other
persons claiming under or through any of them. No member of the Board of
Directors of the Company (the "Board") or of the Committee shall be liable
for any action or determination made in good faith with respect to the Plan
or any Option granted hereunder.
3. ELIGIBILITY.
The person eligible to receive the Option shall be the chief executive
officer of the Company on May 26, 1992, provided that he is still so serving
on the date of grant.
4. STOCK SUBJECT TO THE PLAN.
Subject to further adjustment as provided in Section 7 hereof, 500,000
shares of $.01 par value Common Stock of the Company (the "Shares") shall be
available for the grant of the Option, which shares may be authorized but
unissued Shares or reacquired Shares, as the Company shall determine.
If the Option expires or otherwise terminates, in whole or in part,
without having been exercised, the Shares subject to the unexercised portion
of such Option shall no longer be reserved or available for the granting of
Options under the Plan.
5. GRANTS, TERM AND CONDITIONS OF OPTIONS.
Under the expiration or earlier termination of the Plan, the Committee
may grant the Option to the aforesaid chief executive officer (the
"Optionee"). The Option shall be in such form as the Committee shall approve,
and shall be subject to the following terms and conditions:
(a) PRICE. The option price per Share under the Option shall be
determined and fixed by the Committee in its discretion but
shall not be less than the greater of $.01 or 100% of the fair
market value of the Shares on the date of grant of such Option.
The fair market value of a Share on any date shall mean that
amount determined by such method of determining fair market
value as shall be permitted by the Code, or the
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<PAGE>
rules or regulations thereunder, and used by the Committee from
time to time.
(b) TERM. Subject to earlier termination as provided in
Subsections (e) through (g) below and in Section 7 hereof, the
duration of the Option shall not be more than 10 years from the
date of grant.
(c) LOANS. If the Optionee, at or after the date of
grant, is designated as an "eligible participant" by the
Committee and if the Optionee thereafter so requests, the
Company will loan the Optionee the money required to satisfy
any income tax obligations (as opposed to alternate minimum
tax obligations) resulting from any exercise of the Option.
Any loan or loans to the Optionee shall be made only at the
time any such tax resulting from such exercise is due. The
Committee, in its discretion, may require an affidavit from
the Optionee specifying the amount of the tax required to be
paid and the date when such tax must be paid. The loan will be
made on the Optionee's personal, negotiable, demand promissory
note, bearing interest at the lowest rate which will avoid
imputation of interest under section 7872 of the Code, and
including such other terms of the Committee prescribes.
(d) EXERCISE AND PAYMENT. The Option shall be
exercisable in such installments and on such dates, not less
than one year from the date of grant, as the Committee may
specify, provided, that the Committee may determine that the
Option will become immediately exercisable in whole or in part.
Except as otherwise provided in Subsections (e) through (g)
below, Options shall only be exercisable by an Optionee while
he remains in the employ of the Company or any subsidiary. Any
Shares which may be purchased upon exercise of the Option
("Option Shares"), the right to the purchase of which has
accrued, may be purchased at any time up to the expiration or
termination of the Option. The Option may be exercised, in whole
or in part, from time to time, by giving written notice of
exercise to the Company at its principal office, specifying the
number of Shares to be purchased, and accompanied by payment in
full of the aggregate purchase price for the Shares.
Only full Shares shall be delivered, and any fractional
share which might otherwise be deliverable upon exercise of an
Option granted hereunder shall be forfeited.
-3-
<PAGE>
The purchase price shall be payable: (i) in cash or its equivalent,
or (ii) if the Committee, in its discretion, so provides in the stock
option agreement, in whole or in part through the transfer of Common Stock
previously acquired by the Optionee, provided that if such previously
acquired shares of Common Stock were acquired through exercise of an
incentive stock option or a nonqualified stock option and are being
tendered as payment of the option price under a nonqualified stock option,
such shares have been held by the Optionee for more than one year.
In the event such purchase price is paid, in whole or in part, with
shares of Common Stock, the portion of the purchase price so paid shall
be equal to the fair market value, as determined by, or in the manner
prescribed by, the Committee in accordance with Subsection (a) above, on
the date of exercise of the Option, of the shares of Common Stock so
tendered in payment of such purchase price.
(e) DEATH OF OPTIONS. If the Optionee's employment is terminated
by reason of his death prior to the expiration date of his Option, or if
his employment is terminated (as described in Subsections (f) and (g)
below) or if the Optionee shall die following his termination of employment
but prior to the expiration date of his Option or expiration of the period
determined under Subsections (f) or (g) below, if earlier, such Option may
be exercised by the Optionee's estate, personal representative or
beneficiary who acquired the right to exercise such Option by bequest or
inheritance or by reason of the death of the Optionee, to the extent of the
number of Shares with respect to which the Optionee could have exercised it
on the date of his death, or to any greater extent permitted by the
Committee, at any time prior to the earlier of (i) one year following the
date of the Optionee's death, or (ii) the expiration date of such Option
(which, in the case of death following a termination of employment pursuant
to Subsections (f) or (g) below, shall be deemed to mean the expiration of
the exercise period determined thereunder).
(f) DISABILITY OF OPTIONEE. If the Optionee shall become disabled
(within the meaning of section 22(e)(3) of the Code) during his employment
with the Company or any subsidiary, and his employment with the Company
and all subsidiaries is terminated as a consequence of such disability
prior to the expiration date of his Option, such Option may be exercised
by the Optionee, to the extent of the number of Shares with
-4-
<PAGE>
respect to which the Optionee could have exercised it on the date of
such termination of employment, or to any greater extent permitted by the
Committee, at any time prior to the earlier of (i) 90 days following the
date of the Optionee's termination of employment, or (ii) the expiration
date of such Option. In the event of the Optionee's legal disability,
such Option may be so exercised by the Optionee's legal representative.
(g) TERMINATION OF EMPLOYMENT OF OPTIONEE. If an Optionee's
employment with the Company and all subsidiaries is terminated prior to
the expiration date of his Option, such Option may be exercised by the
Optionee, to the extent of the number of Shares with respect to which
the Optionee could have exercised it on the date of such termination,
or to any greater extent permitted by the Committee, at any time prior
to the earlier of (i) 90 days after the date of termination or (ii) the
expiration date of such Option; provided, however, if an Optionee's
employment is terminated voluntarily by the Optionee without "good reason"
or by the Company "for cause" (in each case as defined in the Optionee's
Employment Agreement), the Optionee shall have no right to exercise his
Option on or after the date of such termination.
(h) TRANSFERABILITY. The Option shall not be assignable or
transferable by the Optionee otherwise than by will or by the laws of
descent and distribution, and during the lifetime of the Optionee, his
Option shall be exercisable only by him, or in the event of his legal
disability, by his legal representative.
(i) RIGHTS AS A STOCKHOLDER. The Optionee shall have no rights as
a stockholder with respect to any Shares covered by his Option until the
exercise of such Option and his payment for such Shares.
(j) OPTION AGREEMENT AND FURTHER CONDITIONS. As soon as
practicable after the grant of the Option, the Optionee shall enter into,
and be bound by the terms of, a stock option agreement (the "Option
Agreement"). The Option Agreement shall set forth such terms, conditions
and restrictions regarding the Option not inconsistent with the Plan as
the Committee shall determine. Without limiting the generality of the
foregoing, the Committee, in its discretion, may impose further conditions
upon the exercisability of the Options and restrictions on transferability
with respect to Shares issued upon exercise of Options.
-5-
<PAGE>
(k) WITHHOLDING. The obligations of the Company to deliver Shares
upon the exercise of any Option (or cash in lieu thereof) shall be subject
to any applicable federal, state and local tax withholding requirements.
6. LISTING AND REGISTRATION OF SHARES.
The Option shall be subject to the requirement that, if at any time the
Company shall determine, in its discretion, that the listing, registration or
qualification of the Option or Shares covered thereby upon any securities
exchange or under the laws of any jurisdiction, or the consent or approval of
any governmental or regulatory body, is necessary or desirable as a condition
of, or in connection with, the granting of such Option, or the exercise
thereof, then the Option may not be exercised in whole or in part unless and
until such listing, registration, qualification, consent or approval shall
have been effected or obtained, on conditions acceptable to the Company. The
Optionee, or his legal representative or beneficiaries, also may be required
to give satisfactory assurance that Shares acquired upon exercise of an Option
are being acquired for investment and not with a view to distribution, and
certificates representing such Shares may be legended accordingly.
7. ADJUSTMENTS.
The number of Shares which may be issued under the Plan, as stated in
Section 4 hereof, and the number of Shares issuable upon exercise of
outstanding Options under the Plan (as well as the exercise price per share
under such outstanding Options), shall be equitably adjusted by the Committee
to reflect any stock dividend, stock split, share combination, or similar
change in the capitalizaiton of the Company.
In the event of a proposed dissolution, liquidation, or sale of a
substantial portion of the assets of the Company, or of a merger or
consolidation in which holders of shares of Common Stock are to receive cash,
securities or other property, the Committee shall, in its unlimited
discretion, have the power prior to such event (i) to terminate all
outstanding Options upon at least seven days' prior notice to each Optionee
and, if the Committee deems it appropriate, to cause the Company to pay to
each Optionee an amount in cash with respect to each Share to which a
terminated Option pertains equal to the difference between the option price
and the value, as determined by the Committee in its sole discretion, of the
consideration to be received by the holders of shares of Common Stock in
connection with such transaction, or (ii) to provide for the exchange of
Options outstanding under the Plan for options to acquire securities or other
property to be delivered in connection with the transaction and in connection
therewith to make an equitable
-6-
<PAGE>
adjustment, as determined by the Committee in its sole discretion, in the
option price and number of Shares or amount of property subject to the Option
and, if deemed appropriate, provide for a cash payment to optionees in
partial consideration for such exchange.
8. AMENDMENT OR DISCONTINUANCE OF THE PLAN.
The Board at any time, and from time to time, may suspend or
discountinue the Plan or amend it and any outstanding Options in any respect
whatsoever, provided, however, that without the approval of the holders of at
least a majority of the outstanding shares of Common Stock present, or
represented, and entitled to vote at a meeting duly held: (a) the maximum
number of Shares with respect to which Options may be granted under the Plan
shall not be increased except as permitted under Section 7 hereof, (b) the
lowest price at which Options may be granted shall not be reduced, (c) the
duration of the Plan under Section 12 hereof shall not be extended, and (d)
the Plan may not be amended if such amendment would materially increase the
benefits accruing to the Optionee or materially modify the requirements as to
eligibility for participation in the Plan; and provided further, that no such
suspension, discontinuance or amendment shall materially impair the rights of
any holder of an outstanding Option without the consent of such holder.
9. ABSENCE OF RIGHTS.
The granting of the Option shall not entitle the Optionee to continued
employment by the Company or a subsidiary or affect the terms and conditions
of such employment, and the Company shall have the absolute right, subject to
the provisions of his Employment Agreement, to retire the Optionee in
accordance with its retirement policies or otherwise to terminate his
employment, whether or not such termination may result in a partial or total
temination of his Option.
10. SHAREHOLDER APPROVAL.
This Plan was adopted by the Company on May 26, 1992 and is subject to
approval by its stockholders prior to May 26, 1993.
11. NO OBLIGATION TO EXERCISE OPTION.
The granting of the Option shall impose no obligation upon the Optionee
to exercise such Option.
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<PAGE>
12. TERMINATION OF PLAN.
No Options may be granted after May 25, 1993, provided, however, that
the Plan and all outstanding Options shall remain in effect until such
Options have expired or are terminated in accordance with the Plan.
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<PAGE>
CONTINENTAL MEDICAL SYSTEMS, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
NON-QUALIFIED STOCK OPTION AGREEMENT, dated as of the 26th day of May,
1992 (the "Grant Date") between Continental Medical Systems, Inc., a Delaware
Corporation (the "Company"), and (the "Optionee"), a
key employee of the Company and/or its wholly-owned subsidiaries.
WHEREAS, in accordance with the provisions of the Company's 1992 CEO
Stock Option Plan and the Optionee's Employment Agreement dated as of May 26,
1992 (the "Employment Agreement"), the Company desires to afford the Optionee
an opportunity to purchase shares of Common Stock, $.01 par value per share,
of the Company ("Shares") as hereinafter provided. Except as otherwise
provided herein, capitalized terms used herein and not specifically defined
herein shall have the same meanings as in the Company's 1986 Stock Option
Plan, as amended.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth and for other good and valuable consideration, the legal sufficiency of
which is hereby acknowledged, the parties hereto, intending to be legally
bound hereunder, agree as follows:
1. GRANT OF OPTION; STOCKHOLDER APPROVAL. The Company hereby grants to
the Optionee the right and option to purchase all or any part of an aggregate
of Shares (the "Option"). The Option is not intended to qualify as an
"incentive stock option", as defined by section 422A of the Internal Revenue
Code of 1986, as amended (the "Code"). Notwithstanding any other provision
hereof, the Option shall be terminated and non-exercisable if the 1991 CEO
Stock Option Plan is not expressly approved by the stockholders of the
Company prior to November 14, 1992.
2. PURCHASE PRICE. The purchase price per share (the "Option Price") of
the Shares covered by the Option (the "Option Shares") shall be $ .
3. TERM. Unless earlier terminated pursuant to any provision hereof, the
Option shall expire on (the "Expiration Date").
4. EXERCISE OF OPTION. Except as provided herein, the right of the
Optionee to exercise any installment of the Option is subject to the
condition that the Optionee be employed as a key employee of the Company, or
any subsidiary of the Company, as defined by section 425(f) of the Code, on
the date such installment becomes exercisable. The Option shall become
<PAGE>
exercisable in five (5) equal installments; and the Optionee shall have the
right to purchase from the Company, on and after the following dates, the
following number of shares:
<TABLE>
<CAPTION>
DATE INSTALLMENT BECOMES
EXERCISABLE NUMBER OF OPTION SHARES
------------------------ -----------------------
<S> <C>
an additional Shares
an additional Shares
an additional Shares
an additional Shares
an additional Shares
</TABLE>
The right of the Optionee to purchase the Option Shares which are the subject
of any installment of the Option which has become exercisable may be
exercised in whole or in part at any time or times prior to the expiration or
other termination of the Option.
Notwithstanding any other provision hereof, the right of the Optionee
to exercise this Option with respect to all of the Option Shares shall
accelerate and this Option shall become fully exercisable upon: (a) the death
of the Optionee; (b) termination of the Optionee's employment due to the
disability of the Optionee as defined in the Employment Agreement; (c) the
termination of the Optionee's employment by the Company other than for
"cause" as defined in the Employment Agreement; (d) the termination of
Optionee's employment by the Optionee for "good reason" as defined in the
Employment Agreement; or (e) the occurrence of a "Change of Control" as
defined in the Employment Agreement. This Option, accelerated to the extent
herein provided, may be exercised by the Optionee within 90 days after the
event in (a) through (e) giving rise to such acceleration except in the case
of his death in which event the exercise period shall be one year following
such death.
5. METHOD OF EXERCISING OPTION. Subject to the terms and conditions of
this Option Agreement the Option may be exercised by written notice to the
Company at its principal office, which is presently located at 600 Wilson
Lane, Mechanicsburg, Pennsylvania 17055. Such notice (in the form attached
hereto) shall state the election to exercise the Option and the number of
Option Shares with respect to which it is being exercised; shall be signed by
the person or persons so exercising the Option; and shall be accompanied by
payment of the full Option Price of such Option Shares. The Option Price
shall be paid in cash, or by check, bank draft, or postal or express money
order, or, in Shares previously acquired by the Optionee (provided that if
such Shares were acquired through exercise of an incentive stock option, such
Shares shall have been held by the Optionee for a period not less than the
holding period described in section 422A(a)(1) of the Code; or if such Shares
were acquired through exercise of a non-qualified stock option,
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<PAGE>
such Shares shall have been held by the Optionee for more than one year), or
in a combination of cash (or its equivalent) and Shares. Upon receipt of such
notice and payment, the Company, as promptly as practicable, shall deliver or
cause to be delivered a certificate or certificates representing the Shares
with respect to which the Option is so exercised. The certificate or
certificates for such Shares shall be registered in the name of the person or
persons so exercising the Option (or, if the Option is exercised by the
Optionee and if the Optionee shall so request in the notice exercising the
Option, shall be registered in the name of the Optionee and his or her
spouse, jointly, with right of survivorship) and shall be delivered as
provided above to or upon the written order of the person or persons
exercising the Option. In the event the Option shall be exercised by any
person or persons after the death or legal disability of the Optionee, such
notice shall be accompanied by appropriate proof of the right of such person
or persons to exercise the Option. All Shares that shall be purchased upon
the exercise of the Option as provided herein shall be fully paid and
nonassessable by the Company. The Optionee, or his legal representative or
beneficiaries, also may be required to give satisfactory assurance that
Shares acquired upon exercise of this Option are being acquired for
investment and not with a view to distribution, and certificates representing
such Shares may be legended accordingly.
6. NON-TRANSFERABILITY OF OPTION. The Option is not assignable or
transferable, in whole or in part, by the Optionee, otherwise than by will or
by the laws of descent and distribution. During the lifetime of the Optionee,
the Option shall be exercisable only by the Optionee or, in the event of
legal disability, by the Optionee's legal representative.
7. WITHHOLDING OF TAXES. The obligation of the Company to deliver Shares
upon the exercise of the Option shall be subject to applicable federal, state
and local tax withholding requirements.
8. GOVERNING LAW. This Agreement shall, to the maximum extent possible,
be construed in a manner consistent with the Code provisions concerning
non-qualified stock options, and its interpretation shall otherwise be
governed by Delaware law.
9. ADJUSTMENTS. The number of Option Shares, as stated in Section 1
hereof (as well as the Option Price stated in Section 2 hereof), shall be
equitably adjusted by the Board of Directors to reflect any stock dividend,
stock split, share combination or similar change in the capitalization of the
Company.
In the event of a proposed dissolution, liquidation or sale of a
substantial portion of the assets of the Company, or of
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<PAGE>
a merger or consolidation in which the holders of shares of Common Stock are
to receive cash, securities or other property, the Board of Directors
shall, in its unlimited discretion, have the power prior to such event (a) to
terminate this Option upon at least seven (7) days' prior notice to the
Optionee and, if the Board of Directors deems it appropriate, to cause the
Company to pay to the Optionee an amount in cash with respect to each Share
to which this Option pertains at the time of such termination equal to the
difference between the Option Price and the value, as determined by the Board
of Directors in its sole discretion, of the consideration to be received by
the holders of shares of Common Stock in connection with such transaction, or
(b) to provide for the exchange of this Option for options to acquire
securities or other property to be delivered in connection with the
transaction and in connection therewith to make an equitable adjustment, as
determined by the Board of Directors in its sole discretion, in the Option
Price and number of Shares or amount of property subject to the Option and,
if deemed appropriate, provide for a cash payment to the Optionee in partial
consideration for such exchange.
IN WITNESS WHEREOF, the Company has caused this Non-Qualified Stock
Option Agreement to be executed by a duly authorized officer, and the
Optionee has hereunto set his hand and seal, all as of the day and year first
above written.
CONTINENTAL MEDICAL SYSTEMS, INC.
By: ______________________________
_____________________________(SEAL)
Optionee
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<PAGE>
CONTINENTAL MEDICAL SYSTEMS, INC.
Notice of Exercise of Non-Qualified Stock Option
I hereby exercise the non-qualified stock option granted to me as of
____________________, _____ by Continental Medical Systems, Inc., with
respect to the following number of shares of Continental Medical Systems,
Inc. Common Stock, $.01 par value per share, ("Shares") covered by said
option:
Number of Shares to be purchased _________________
Option pricer per Share $________________
Total option price $________________
Enclosed is my check in the amount of $________________ (and/or
____________ Shares)(1) in full payment for such Shares.
Please have the certificate or certificates representing the purchased
Shares registered in the following name or names(2) ________________________
__________________ and sent to _____________________________________________ .
DATED: __________________, 19__.
___________________________________
Optionee's Signature
__________
1. The option price may be paid in whole or in part by delivery of Shares,
subject to the terms of the Optionee's Non-Qualified Stock Option Agreement
dated May 26, 1992.
2. Certificates may be registered in the name of the Optionee alone or in the
joint names of the Optionee and his or her spouse.
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<PAGE>
CONTINENTAL MEDICAL SYSTEMS, INC.
1993 NONQUALIFIED STOCK OPTION PLAN
(Effective February 9, 1993)
1. PURPOSE.
The 1993 Nonqualified Stock Option Plan (the "Plan") is intended to
enable Continental Medical Systems, Inc. (the "Company") and any subsidiary
of the Company to attract and retain key employees, and to provide them with
incentives to promote the best interests of the Company and its subsidiaries
through the grant of nonqualified stock options ("Options"). Incentive stock
options will not be available under the Plan.
As used in the Plan, the term "incentive stock options" means options
which are intended to qualify as incentive stock options within the meaning
of section 422 of the Internal Revenue Code of 1986, as amended from time to
time (the "Code"). The term "nonqualified stock options" means options which
are not intended to qualify as incentive stock options. The term "subsidiary"
means (i) any corporation (whether or not in existence at the time the Plan
is adopted) which, at the time an Option is granted, is a subsidiary of the
Company under the definition of "subsidiary corporation" contained in section
424(f) of the Code, or any similar provision hereafter enacted; or (ii) any
partnership (whether or not in existence at the time the Plan is adopted) in
which, at the time an Option is granted, the Company has, in the aggregate, a
50 percent or more profits interest.
2. ADMINISTRATION.
The Plan shall be administered by the Compensation Committee (the
"Committee") of the Board of Directors of the Company (the "Board"). Each
member of the Committee, while serving as such, shall be deemed to be acting
in his capacity as a director of the Company. No member of the Committee
shall be eligible, nor shall have been eligible at any time within one year
prior to his appointment to the Committee, for selection as a person to whom
Options may be granted pursuant to the Plan or to whom stock grants or stock
options may be granted pursuant to any other plan of the Company or any of
its "affiliates," as defined in the Securities Exchange Act of 1934,
entitling the participant therein to acquire stock, or stock options of the
Company or any of its affiliates, except that a member of the Committee may
receive stock options under the 1989 Non-Employee Directors' Stock Option
Plan of the Company, as the same may be amended from time to time.
Subject to the terms of the Plan, the Committee shall have full and
final authority in its absolute discretion to
<PAGE>
select the persons to whom Options shall be granted under the Plan and to set
the date of grant and the other terms of such Options. The Committee also
shall have the authority to establish and rescind, from time to time, such
rules and regulations, not inconsistent with the provisions of this Plan, for
the proper administration of this Plan and Options granted hereunder, and to
make such determinations and interpretations under or in connection with this
Plan as it deems necessary or advisable. The Committee may correct any
defect, supply any omission and reconcile any inconsistency in this Plan or
in any Option granted hereunder in the manner and to the extent it shall deem
desirable. All such rules, regulations, determinations and interpretations
shall be binding and conclusive upon the Company and its subsidiaries,
officers and employees (including former officers and employees) of the
Company and any subsidiary, and upon their respective legal representatives,
beneficiaries, successors and assigns and upon all other persons claiming
under or through any of them. No member of the Board or of the Committee
shall be liable for any action or determination made in good faith with
respect to the Plan or any Option granted hereunder.
3. ELIGIBILITY.
The persons eligible to receive Options (the "Eligible Individuals")
under the Plan shall be the key employees of the Company and its subsidiaries
who may be designated by the Committee, excluding officers of the Company,
other than any officer not previously employed by the Company and who is
designated by the Committee to receive Options as an inducement essential to
his or her entering into an employment contract with the Company, and
directors.
4. STOCK SUBJECT TO THE PLAN.
Subject to further adjustment as provided in Section 7 hereof, 1,500,000
shares (the "Shares") of $.01 par value Common Stock shall be available for
the grant of Options under the Plan, which shares may be authorized but
unissued Shares or reacquired Shares, as the Company shall determine.
If any Option granted under the Plan expires or otherwise terminates, in
whole or in part, without having been exercised, the Shares subject to the
unexercised portion of such Option shall be available for the granting of
Options under the Plan as fully as if such Shares had never been subject to
an Option.
5. GRANTS, TERMS AND CONDITIONS OF OPTIONS.
From time to time until the expiration or earlier termination of the
Plan, the Committee may grant Options to
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<PAGE>
Eligible Individuals (such grantees are hereinafter referred to as
"Optionees") under the Plan. Options granted pursuant to the Plan shall be in
such form as the Committee shall from time to time approve, and shall be
subject to the following terms and conditions:
(a) PRICE. The option price per Share under each Option granted
under the Plan shall be determined and fixed by the Committee in its
discretion but shall not be less than the greater of $.01 or 100% of the
fair market value of the Shares on the date of grant of such Option. The
fair market value of a Share on any date shall mean that amount determined
by such method of determining fair market value as shall be permitted by
the Code, or the rules or regulations thereunder, and used by the
Committee from time to time.
(b) TERM. Subject to earlier termination as provided in
Subsections (d) through (g) below and in Section 7 hereof, the duration
of each Option shall not be more than 10 years from the date of grant.
(c) LOANS. If an Optionee, at or after the date of grant, is
designated as an "eligible participant" by the Committee and if the
Optionee thereafter so requests, the Company will loan the Optionee the
money required to satisfy any income tax obligations (as opposed to
alternate minimum tax obligations) resulting from the exercise of any
Options. Any loan or loans to an Optionee shall be made only at the time
any such tax resulting from such exercise is due. The Committee, in its
discretion, may require an affidavit from the Optionee specifying the
amount of the tax required to by paid and the date when such tax must be
paid. The loan will be made on the Optionee's personal, negotiable,
demand promissory note, bearing interest at the lowest rate which will
avoid imputation of interest under section 7872 of the Code, and including
such other terms the Committee prescribes.
(d) EXERCISE AND PAYMENT. Options shall be exercisable in such
installments and on such dates, not less than one year from the date of
grant, as the Committee may specify, provided, that the Committee may
determine that Options will become immediately exercisable in whole or in
part in the event of death, disability or termination of employment.
Except as otherwise provided in Subsections (e) through (g) below, Options
shall only be exercisable by an Optionee while he remains in the employ
of the Company or any subsidiary. Any Shares which may be purchased upon
exercise of an Option ("Option Shares"), the right to
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<PAGE>
the purchase of which has accrued, may be purchased at any time up to
the expiration or termination of the Option. Options may be exercised, in
whole or in part, from time to time, by giving written notice of exercise
to the Company at its principal office, specifying the number of Shares
to be purchased, and accompanied by payment in full of the aggregate
purchase price for the Shares.
Only full Shares shall be delivered, and any fractional share which
might otherwise be deliverable upon exercise of an Option granted
hereunder shall be forfeited.
The purchase price shall be payable: (i) in cash or its equivalent,
or (ii) if the Committee, in its discretion, so provides in the stock
option agreement or so determines at or prior to the time of exercise,
in whole or in part through the transfer of shares of Common Stock
previously acquired by the Optionee, provided that if such previously
acquired shares of Common Stock were acquired through exercise of an
incentive stock option or a nonqualified stock option, such shares have
been held by the Optionee for more than one year.
In the event such purchase price is paid, in whole or in part, with
shares of Common Stock, the portion of the purchase price so paid shall
be equal to the fair market value, as determined by, or in the manner
prescribed by, the Committee in accordance with Subsection (a) above,
on the date of exercise of the Option, of the shares of Common Stock so
tendered in payment of such purchase price.
(e) DEATH OF OPTIONEE. If an Optionee's employment is terminated
by reason of his prior to the expiration date of his Option, or if an
Optionee whose employment is terminated (as described in Subsections (f)
and (g) below) shall die following his termination of employment but
prior to the expiration date of his Option or expiration of the period
determined under Subsections (f) or (g) below, if earlier, such Option
may be exercised by the Optionee's estate, personal representative or
beneficiary who acquired the right to exercise such Option by bequest or
inheritance or by reason of the death of the Optionee, to the extent of
the number of Shares with respect to which the Optionee could have
exercised it on the date of his death, or to any greater extent permitted
by the Committee, at any time prior to the earlier of (i) one year
following the date of the
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<PAGE>
Optionee's death, or (ii) the expiration date of such Option (which, in
the case of death following a termination of employment pursuant to
Subsections (f) or (g) below, shall be deemed to mean the expiration of
the exercise period determined thereunder).
(f) DISABILITY OF OPTIONEE. If an Optionee shall become disabled
(within the meaning of section 22(e)(3) of the Code) during his
employment with the Company or any subsidiary, and his employment with
the Company and all subsidiaries is terminated as a consequence of such
disability prior to the expiration date of his Option, such Option may
be exercised by the Optionee, to the extent of the number of Shares with
respect to which the Optionee could have exercised it on the date of such
termination of employment, or to any greater extent permitted by the
Committee, at any time prior to the earlier of (i) one year following the
date of the Optionee's termination of employment, or (ii) the expiration
date of such Option. In the event of the Optionee's legal disability, such
Option may be so exercised by the Optionee's legal representative.
(g) TERMINATION OF EMPLOYMENT OF OPTIONEE. If an Optionee's
employment with the Company and all subsidiaries is terminated prior to
the expiration date of his Option, such Option may be exercised by the
Optionee, to the extent of the number of Shares with respect to which
the Optionee could have exercised it on the date of such termination,
or to any greater extent permitted by the Committee, at any time prior
to the earlier of (i) three months after the date of termination or (ii)
the expiration date of such Option; provided, however, if an Optionee's
employment is terminated voluntarily by the Optionee or by the Company
or a subsidiary "for cause" (as defined below), the Optionee shall have
no right to exercise his Option on or after the date or such termination.
As used herein, termination of an Optionee's employment by the Company or
a subsidiary shall be "for cause" if the Board reasonably concludes that
the Optionee has materially failed to perform his responsibilities to the
Company or a subsidiary, materially failed to follow directives or
policies established by or at the direction of the Board, or conducted
himself in a manner materially detrimental to the interests of the Company
or a subsidiary.
(h) TRANSFERABILITY. No Option shall be assignable or
transferable by an Optionee otherwise than by will or by the laws of
descent and distribution, and during the lifetime of the Optionee,
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<PAGE>
his Options shall be exercisable only by him, or in the event of his
legal disability, by his legal representative.
(i) RIGHTS AS A STOCKHOLDER. An Optionee shall have no rights as a
stockholder with respect to any Shares covered by his Option until the
exercise of such Option and his payment for such Shares.
(j) OPTION AGREEMENT AND FURTHER CONDITIONS. As soon as
practicable after the grant of an Option, each Optionee shall enter into,
and be bound by the terms of, a stock option agreement (the "Option
Agreement") which shall state the number of Shares to which the Option
pertains. The Option Agreement shall set forth such terms, conditions and
restrictions regarding the Option not inconsistent with the Plan as the
Committee shall determine. Without limiting the generality of the
foregoing, the Committee, in its discretion, may impose further conditions
upon the exercisability of the Options and restrictions on transferability
with respect to Shares issued upon exercise of Options.
(k) WITHHOLDING. The obligation of the Company to deliver Shares
upon the exercise of any Option (or cash in lieu thereof) shall be subject
to any applicable federal, state and local tax withholding requirements.
6. LISTING AND REGISTRATION OF SHARES.
Each Option under the Plan shall be subject to the requirement that, if
at any time the Company shall determine, in its discretion, that the listing,
registration or qualification of the Option or Shares covered thereby upon
any securities exchange or under the laws of any jurisdiction, or the consent
or approval of any governmental or regulatory body, is necessary or desirable
as a condition of, or in connection with, the granting of such Option, or the
exercise thereof, then no such Option may be exercised in whole or in part
unless and until such listing, registration, qualification, consent or
approval shall have been effected or obtained, on conditions acceptable to
the Company. Each Optionee, or his legal representative or beneficiaries,
also may be required to give satisfactory assurance that Shares acquired upon
exercise of an Option are being acquired for investment and not with a view
to distribution, and certificates representing such Shares may be legended
accordingly.
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<PAGE>
7. ADJUSTMENTS.
The number of Shares which may be issued under the Plan, as stated in
Section 4 hereof, and the number of Shares issuable upon exercise of
outstanding Options under the Plan (as well as the exercise price per share
under such outstanding Options), shall be equitably adjusted by the Committee
to reflect any stock dividend, stock split, share combination, or similar
change in the capitalization of the Company.
In the event of a proposed dissolution, liquidation, or sale of a
substantial portion of the assets of the Company, or of a merger or
consolidation in which holders of shares of Common Stock are to receive cash,
securities or other property, the Committee shall, in its unlimited
discretion, have the power prior to such event (i) to terminate all
outstanding Options upon at least seven days' prior notice to each Optionee
and, if the Committee deems it appropriate, to cause the Company to pay to
each Optionee an amount in cash with respect to each Share to which a
terminated Option pertains equal to the difference between the option price
and the value, as determined by the Committee in its sole discretion, of the
consideration to be received by the holders of shares of Common Stock in
connection with such transaction, or (ii) to provide for the exchange of
Options outstanding under the Plan for options to acquire securities or other
property to be delivered in connection with the transaction and in connection
therewith to make an equitable adjustment, as determined by the Committee in
its sole discretion, in the option price and number of Shares or amount of
property subject to the Option and, if deemed appropriate, provide for a cash
payment to Optionees in partial consideration for such exchange.
8. ACQUISITIONS.
Notwithstanding any other provision of this Plan, Options may be granted
hereunder in substitution for options held by officers and employees of other
corporations who are about to, or have, become employees of the Company or a
subsidiary as a result of a merger, consolidation, acquisition of assets or
similar transactions by the Company or a subsidiary. The terms, including the
option price, of the substitute options so granted may vary from the terms
set forth in this Plan to such extent as the Committee may deem appropriate
to conform, in whole or in part, to the provisions of the options in
substitution for which they are granted.
9. AMENDMENT OR DISCONTINUANCE OF THE PLAN.
The Board at any time, and from time to time, may suspend or discontinue
the Plan or amend it and any outstanding Options in any respect whatsoever,
provided, however, that no
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<PAGE>
such suspension, discontinuance or amendment shall materially impair the
rights of any holder of an outstanding Option without the consent of such
holder.
10. ABSENCE OF RIGHTS.
The recommendation or selection of an Eligible Individual as a recipient
of an Option under the Plan shall not entitle such person to any Option
unless and until the grant actually has been made by appropriate action of
the Committee; and any such grant is subject to the provisions of the Plan.
Further, the granting of an Option to a person shall not entitle that person
to continued employment by the Company or a subsidiary or affect the terms
and conditions of such employment, and the Company or a subsidiary shall have
the absolute right, in its discretion, to retire such person in accordance
with its retirement policies or otherwise to terminate his employment,
whether or not such termination may result in a partial or total termination
of his Option.
11. ADOPTION DATE.
This Plan was adopted by the Company on February 9, 1993.
12. NO OBLIGATION TO EXERCISE OPTION.
The granting of an Option shall impose no obligation upon an Optionee to
exercise such Option.
13. TERMINATION OF PLAN.
No Options may be granted after February 8, 2003, provided, however,
that the Plan and all outstanding Options shall remain in effect until such
Options have expired or are terminated in accordance with the Plan.
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<PAGE>
AMENDMENT NO. 1
TO
CONTINENTAL MEDICAL SYSTEMS, INC.
1993 NONQUALIFIED STOCK OPTION PLAN
Section 5(k) is hereby amended to read as follows:
(k) WITHHOLDING AND USE OF SHARES TO SATISFY TAX OBLIGATIONS. The
obligation of the Company to deliver Shares upon the exercise of any Option
(or cash in lieu thereof) shall be subject to any applicable federal, state
or local tax withholding requirements.
If the exercise of any Option is subject to the withholding requirements
of applicable federal tax law, an Optionee may satisfy the federal
withholding tax, in whole or in part, by electing to have the Company
withhold Shares subject to the exercise (or by returning previously acquired
Shares or other Common Stock to the Company); provided, however, that with
respect to an Optionee who is subject to section 16 of the Securities
Exchange Act of 1934, any such amount of federal taxes required to be
withheld shall be satisfied automatically by withholding Shares subject to
the exercise. The Company may not withhold Shares in excess of the number
necessary to satisfy the minimum federal income tax withholding requirements.
Shares or other Common Stock shall be valued, for purposes of this Subsection
(k), at its fair market value on the date the amount attributable to the
exercise of the Option is includable in the income of the Optionee under
section 83 of the Code (the "Determination Date").
If Shares or other Common Stock acquired by the exercise of an incentive
stock option is used to satisfy the withholding requirement described above,
such Shares or other Common Stock must have been held by the Optionee for a
period of not less than the holding period described in section 422(a)(1) of
the Code as of the Determination Date. If Shares or other Common
<PAGE>
Stock acquired by the exercise of a nonqualified stock option or of an option
under a similar plan is used to satisfy such withholding requirement, such
option must have been granted to the Optionee at least six months prior to
the Determination Date.
The Committee shall adopt such withholding rules as it deems necessary
to carry out the provisions of this Section.
-2-
<PAGE>
AMENDMENT NO. 2
TO
CONTINENTAL MEDICAL SYSTEMS, INC.
1993 NONQUALIFIED STOCK OPTION PLAN
In accordance with Section 9, "Amendment or Discontinuance of the Plan",
the Board of Directors of Continental Medical Systems, Inc. ("CMS"), at a
Special Meeting of the Board of Directors on January 27, 1995, amended
Section 4, "Stock Subject to the Plan" by increasing the number of shares of
Common Stock, par value $.01 per share, of CMS available for grant under the
CMS 1993 Nonqualified Stock Option Plan to 1,500,000.
<PAGE>
CONTINENTAL MEDICAL SYSTEMS, INC.
1993 NON-QUALIFIED STOCK OPTION PLAN
NON-QUALIFIED STOCK OPTION AGREEMENT
NON-QUALIFIED STOCK OPTION AGREEMENT, dated as of the day of
, (the "Grant Date") between CONTINENTAL MEDICAL SYSTEMS,
INC., a Delaware Corporation (the "Company"), and (the
"Optionee"), a key employee of the Company and/or its wholly owned
subsidiaries.
WHEREAS, the Company desires to afford the Optionee an opportunity to
purchase shares of Common Stock, $.01 par value per share, of the Company
("Shares") as hereinafter provided, in accordance with the provisions of the
Continental Medical Systems, Inc. 1993 Non-Qualified Stock Option Plan (the
"Plan"), a copy of which is attached hereto. Except as otherwise provided
herein, terms used herein shall have the same meanings as in the Plan.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth and for other good and valuable consideration the legal sufficiency of
which is hereby acknowledged, the parties hereto, intending to be legally
bound hereunder, agree as follows:
1. GRANT OF OPTION. The Company hereby grants to the Optionee the
right and option to purchase all or any part of an aggregate of Shares
(the "Option"), which Option is intended to be a non-qualified stock option.
The Option is not intended to qualify as an "incentive stock option", as
defined by section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"). The Option is in all respects limited and conditioned as hereinafter
provided, and is subject in all respects to the Plan's terms and conditions
now in effect and as they may be amended from time to time in accordance with
the Plan (which terms and conditions are and automatically shall be
incorporated herein by reference and made a part hereof and shall control in
the event of any conflict with any other terms of this Agreement).
2. PURCHASE PRICE. The purchase price per share (the "Option Price")
of the Shares covered by the Option (the "Option Shares") shall be $ ,
which price was the closing quote for the Company's Common Stock on the New
York Stock Exchange on the Grant Date.
3. TERM. Unless earlier terminated pursuant to any provision hereof or
of the Plan, the Option shall expire on (the "Expiration Date").
<PAGE>
4. EXERCISE OF OPTION. Except where permitted by the Plan, the right
of the Optionee to exercise any installment of the Option is subject to the
condition that the Optionee be employed as a key employee of the Company, or
any subsidiary of the Company, as defined by section 424(f) of the Code, on
the date such installment becomes exercisable. The Option shall become
exercisable in four (4) installments; and the Optionee shall have the right
to purchase from the Company, on and after the following dates, the following
number of Shares:
<TABLE>
<CAPTION>
DATE INSTALLMENTS BECOMES
EXERCISABLE NUMBER OF OPTION SHARES
------------------------- -----------------------
<S> <C>
Shares
an additional Shares
an additional Shares
an additional Shares
</TABLE>
The right of the Optionee to purchase the Option Shares which are the subject
of any installment of the Option which has become exercisable may be
exercised in whole or in part at any time or times prior to the expiration or
other termination of the Option.
The foregoing provisions of this Paragraph 4 notwithstanding, the
exercisability of the Option is subject to the terms and conditions of the
Plan.
5. METHOD OF EXERCISING OPTION. Subject to the terms and conditions of
this Option Agreement and the Plan, the Option may be exercised by written
notice to the Company at its principal office, which is presently located at
600 Wilson Lane, Mechanicsburg, Pennsylvania 17055. Such notice (a suggested
form of which is attached hereto) shall state the election to exercise the
Option and the number of Option Shares with respect to which it is being
exercised; shall be signed by the person or persons so exercising the Option;
shall, if the Company so requests, be accompanied by the investment
certificate referred to in Section 6 of the Plan; and shall be accompanied by
payment of the full Option Price of such Option Shares. The Option Price
shall be paid in cash, or by check, bank draft, or postal or express money
order, or, if the Committee, in its discretion, permits, in Shares previously
acquired by the Optionee (provided that if such Shares were acquired through
exercise of an incentive stock option, such Shares shall have been held by
the Optionee for a period not less than the holding period described in
section 422(a)(1) of the Code; or if such Shares were acquired through
exercise of a non-qualified stock option, such Shares have been held by the
Optionee for more than one year), or in a combination of cash (or its
equivalent) and Shares. Upon receipt of such notice and payment, the Company,
as
<PAGE>
promptly as practicable, shall deliver or cause to be delivered a certificate
or certificates representing the Shares with respect to which the Option is
so exercised. The certificate or certificates for such Shares shall be
registered in the name of the person or persons so exercising the Option (or,
if the Option is exercised by the Optionee and if the Optionee shall so
request in the notice exercising the Option, shall be registered in the name
of the Optionee and his or her spouse, jointly, with right of survivorship)
and shall be delivered as provided above to or upon the written order of the
person or persons exercising the Option. In the event the Option shall be
exercised by any person or persons after the death or legal disability of the
Optionee, such notice shall be accompanied by appropriate proof of the right
of such person or persons to exercise the Option. All Shares that shall be
purchased upon the exercise of the Option as provided herein shall be fully
paid and nonassessable by the Company.
6. NON-TRANSFERABILITY OF OPTION. The Option is not assignable or
transferable, in whole or in part, by the Optionee, otherwise than by will or
by the laws of descent and distribution. During the lifetime of the Optionee,
the Option shall be exercisable only by the Optionee or, in the event of
legal disability, by the Optionee's legal representative.
7. WITHHOLDING OF TAXES. The obligation of the Company to deliver
Shares upon the exercise of the Option shall be subject to applicable
federal, state and local tax withholding requirements.
8. GOVERNING LAW. This Agreement shall, to the maximum extent
possible, be construed in a manner consistent with the Code provisions
concerning non-qualified stock options, and its interpretation shall
otherwise be governed by Delaware law.
IN WITNESS WHEREOF, the Company has caused this Non-Qualified Stock
Option Agreement to be executed by a duly authorized officer, and the
Optionee has hereunto set his hand and seal, all as of the day and year first
above written.
CONTINENTAL MEDICAL SYSTEMS, INC.
BY:_________________________________
____________________________________
Optionee
<PAGE>
CONTINENTAL MEDICAL SYSTEMS, INC.
1993 NON-QUALIFIED STOCK OPTION PLAN
Notice of Exercise of Non-Qualified Stock Option
I hereby exercise the non-qualified stock option granted to me as of
by Continental Medical Systems, Inc., with respect to
the following number of shares of Continental Medical Systems, Inc. Common
Stock, $.01 par value per share, ("Shares") covered by said option:
Number of Shares to be purchased __________________________________
Option price per Share $_________________________________
Total option price $_________________________________
Enclosed is my check in the amount of $__________ (and/or ______________
Shares(1) in full payment for such Shares.
Please have the certificate or certificates representing the purchased
Shares registered in the following name or names(2) _________________________
_________________________________________________________________________ and
sent to _____________________________________________________________________.
DATED: ______________, _______
___________________________________
Optionee's Signature
___________________________________
___________________________________
___________________________________
Home Address
___________________________________
Social Security No.
__________________
(1) The option price may be paid in whole or in part by delivery of Shares,
subject to the terms of the Continental Medical Systems, Inc. 1993 Stock
Option Plan, and the Optionee's Non-Qualified Stock Option Agreement.
(2) Certificates may be registered in the name of the Optionee alone or in
the joint names of the Optionee and his or her spouse.
<PAGE>
EXHIBIT A
CONTINENTAL MEDICAL SYSTEMS, INC.
1994 STOCK OPTION PLAN
1. PURPOSE.
The 1994 Stock Option Plan (the "Plan") is intended to enable Continental
Medical Systems, Inc. (the "Company") and any subsidiary corporation of the
Company to attract and retain capable officers and other key employees, and
to provide them with incentives to promote the best interests of the Company
and its subsidiaries through the grant of incentive stock options and
nonqualified stock options (collectively, "Options").
As used in the Plan, the term "incentive stock options" or "ISOs" means
options which are intended to qualify as incentive stock options within the
meaning of section 422 of the Internal Revenue Code of 1986, as amended from
time to time (the "Code"). The term "nonqualified stock option" or "NQSOs"
means options which are not intended to qualify as incentive stock options.
The term "subsidiary" means any corporation (whether or not in existence at
the time the Plan is adopted) which, at the time an Option is granted, is a
subsidiary of the Company under the definition of "subsidiary corporation"
contained in section 424(f) of the Code, or any similar provision hereafter
enacted.
2. ADMINISTRATION.
The Plan shall be administered by the Compensation Committee (the
"Committee") of the Company's Board of Directors (the "Board"). Each member
of the Committee, while serving as such, shall be deemed to be acting in his
capacity as a director of the Company. No member of the Committee shall be
eligible, nor shall have been eligible at any time within one year prior to
his appointment to the Committee, for selection as a person to whom Options
may be granted pursuant to the Plan or to whom stock grants or stock options
may be granted pursuant to any other plan of the Company or any of its
"affiliates," as defined in the Securities Exchange Act of 1934, entitling
the participant therein to acquire stock, or stock options of the Company or
any of its affiliates, except that a member of the Committee may receive
stock options under the 1989 Non-Employee Directors' Stock Option Plan of
the Company, as the same may be amended from time to time.
Subject to the terms of the Plan, the committee shall have full and final
authority in its absolute discretion to select the persons to whom Options
shall be granted under the Plan and to set the date of grant and the other
terms of such Options. The Committee also shall have the authority to
establish and rescind, from time to time, such rules and regulations, not
inconsistent with the provisions of this Plan, for the proper administration
of this Plan and Options granted hereunder, and to make such determinations
and interpretations under or in connection with this Plan as it deems
necessary or advisable. The Committee may correct any defect, supply any
omission and reconcile any inconsistency in this Plan or in any Option
granted hereunder in the manner and to the extent it shall deem desirable.
All such rules, regulations, determinations and interpretations shall be
binding and conclusive upon the Company and its subsidiaries, officers and
employees (including former officers and employees) of the Company and any
subsidiary, and upon their respective legal representatives, beneficiaries,
successors and assigns and upon all other persons claiming under or through
any of them. No member of the Board or of the Committee shall be liable for
any action or determination made in good faith with respect to the Plan or any
Option granted hereunder.
A-1
<PAGE>
3. ELIGIBILITY.
The persons eligible to receive Options (the "Eligible Individuals") under
the Plan shall be the salaried officers and other key employees of the
Company and its subsidiaries who may be designated by the Committee.
4. STOCK SUBJECT TO THE PLAN.
Subject to further adjustment as provided in Section 7 hereof, 1,500,000
shares (the "Shares") of $0.01 par value Common Stock shall be available for
the grant of Options under the Plan, which shares may be authorized but
unissued Shares or reacquired Shares, as the Company shall determine.
If any Option granted under the Plan expires or otherwise terminates, in
whole or in part, without having been exercised, the Shares subject to the
unexercised portion of such Option shall be available for the granting of
Options under the Plan as fully as if such Shares had never been subject to
an Option.
5. GRANTS, TERMS AND CONDITIONS OF OPTIONS.
From time to time until the expiration or earlier termination of the Plan,
the Committee may grant Options to Eligible Individuals (such grantees are
hereinafter referred to as "Optionees") under the Plan, PROVIDED, HOWEVER,
that grants of ISOs and NQSOs shall be separate and not in tandem. Options
granted pursuant to the Plan shall be in such form as the Committee shall
from time to time approve, and shall be subject to the following terms and
conditions:
(a) PRICE. The option price per Share under each Option granted under
the Plan shall be determined and fixed by the Committee in its discretion
but shall not be less than (i) in the case of an ISO granted to a person
who owns more than 10% of the combined voting power of all shares of stock
of the Company or any subsidiary on the date of grant, the greater of $0.01
or 110% of the fair market value of the Shares on the date of grant of such
Option, and (ii) in all other cases, the greater of $0.01 or 100% of the
fair market value of the Shares on the date of grant of such Option. For
purposes of this Section, an individual shall be deemed to own any shares
of stock of the Company or any subsidiary which are attributed to such
individual under section 424(d) of the Code.
The fair market value of the optioned shares of Common Stock shall be
arrived at by a good faith determination of the Committee and shall be (i)
the mean between the highest and lowest quoted selling price, if there is a
market for the Common Stock on a registered securities exchange or on an
over-the-counter market, on the date of grant, or (ii) the weighted average
of the means between the highest and lowest sales on the nearest date
before and the nearest date after the date of grant, if there are no sales
on the date of grant but there are sales on dates within a reasonable
period both before and after the date of grant, or (iii) the mean between
the bid and asked prices, as reported by the National Quotation Bureau on
the date of grant, if actual sales are not available during a reasonable
period beginning before and ending after the date of grant, or (iv) such
other method of determining fair market value as shall be authorized by
the Code, or the rules or regulations thereunder, and adopted by the
Committee. Where the fair market value of the optioned shares of Common
Stock is determined under (ii) above, the average of the means between
the highest and lowest sales on
A-2
<PAGE>
the nearest date before and the nearest date after the date of grant is to
be weighted inversely by the respective numbers of trading days between
the selling dates and the date of grant (i.e, the valuation date), in
accordance with Treas. Reg. Section 20.2031-2(b)(1).
(b) TERM. Subject to earlier termination as provided in Subsections (d)
through (g) below and in Section 7 hereof, the duration of each Option
shall not be more than 10 years from the date of grant, provided that, in
the case of an ISO, the duration of any Option granted to a person who owns
more than 10% of the total combined voting power of all shares of stock of
the Company or any subsidiary on the date of grant of the Option shall not
be more than five years from the date of grant.
(c) LOANS. If an Optionee, at or after the date of grant, is designated
as an "eligible participant" by the Committee and if the Optionee thereafter
so requests, the Company will loan the Optionee the money required to
satisfy any income tax obligations (as opposed to alternative minimum tax
obligations) resulting from the exercise of any Options. Any loan or loans
to an Optionee shall be made only at the time any such tax resulting from
such exercise is due. The Committee, in its discretion, may require an
affidavit from the Optionee specifying the amount of the tax required to
be paid and the date when such tax must be paid. The loan will be made on
the Optionee's personal, negotiable, demand promissory note, bearing
interest at the lowest rate which will avoid imputation of interest under
section 7872 of the Code, and including such other terms as the Committee
prescribes.
(d) EXERCISE AND PAYMENT. Options shall be exercisable in such
installments and on such dates, not less than one year from the date of
grant, as the Committee may specify; provided, that the Committee may
determine that Options will become immediately exercisable in whole or in
part in the event of death, disability or termination of employment. Except
as otherwise provided in Subsections (e) through (g) below, Options shall
only be exercisable by an Optionee while he remains in the employ of the
Company or any subsidiary. Any Shares which may be purchased upon exercise
of an Option, the right to the purchase of which has accrued, may be
purchased at any time up to the expiration or termination of the Option.
Options may be exercised, in whole or in part, from time to time, by
giving written notice of exercise to the Company at its principal office,
specifying the number of Shares to be purchased, and accompanied by payment
in full of the aggregate purchase price for the Shares. Only full Shares
shall be delivered, and any fractional share which might otherwise be
deliverable upon exercise of an Option granted hereunder shall be forfeited.
The purchase price shall be payable: (i) in cash or its equivalent, or
(ii) if the Committee, in its discretion, so provides in the Option
agreement or, in the case of NQSOs, if the Committee, in its discretion,
so determines at or prior to the time of exercise, in whole or in part
through the transfer of Common Stock previously acquired by the Optionee;
provided the Common Stock so transferred has been held for the applicable
holding period set forth below:
(i) if such previously acquired shares of Common Stock were acquired
through the exercise of an ISO and are being tendered as payment of the
Option price under an ISO, such Shares have been held by the Optionee
for a period not less than the holding period described in section
422(a)(1) of the Code;
(ii) if such previously acquired shares of Common Stock were
acquired through the exercise of an ISO or a NQSO and are being
tendered as payment of the Option price under a NQSO, such Shares
have been held by the Optionee for more than six months; or
A-3
<PAGE>
(iii) if such previously acquired shares of Common Stock were
acquired through the exercise of a NQSO and are being tendered as payment
of the Option price under an ISO, such Shares have been held by the
Optionee for more than six months.
In the event such purchase price is paid, in whole or in part, with
shares of Common Stock, the portion of the purchase price so paid shall
be equal to the fair market value, as determined by, or in the manner
prescribed by, the Committee in accordance with Subsection (a) above, on
the date of exercise of the Option, of the shares of Common Stock so
tendered in payment of such purchase price.
(e) DEATH OF OPTIONEE. If an Optionee's employment is terminated by
reason of his death prior to the expiration date of his Option, or if an
Optionee whose employment is terminated (as described in Subsections (f) and
(g) below) shall die following his termination of employment but prior to the
expiration date of his Option or expiration of the period determined under
Subsection (f) or (g) below, if earlier, such Option may be exercised by the
Optionee's estate, personal representative or beneficiary who acquired the
right to exercise such Option by bequest or inheritance or by reason of the
death of the Optionee, to the extent of the number of Shares with respect to
which the Optionee could have exercised it on the date of his death, or to
any greater extent permitted by the Committee, at any time prior to the
earlier of (i) one year following the date of the Optionee's death, or (ii)
the expiration date of such Option (which, in the case of death following a
termination of employment pursuant to Subsection (f) or (g) below, shall be
deemed to mean the expiration of the exercise period determined thereunder).
(f) DISABILITY OF OPTIONEE. If an Optionee shall become disabled
(within the meaning of section 22(e)(3) of the Code) during his employment
with the Company or any subsidiary, and his employment with the Company and
all subsidiaries is terminated as a consequence of such disability prior to
the expiration date of his Option, such Option may be exercised by the
Optionee, to the extent of the number of Shares with respect to which the
Optionee could have exercised it on the date of such termination of
employment, or to any greater extent permitted by the Committee, at any time
prior to the earlier of (i) one year following the date of the Optionee's
termination of employment, or (ii) the expiration date of such Option. In the
event of the Optionee's legal disability, such Option may be so exercised by
the Optionee's legal representative.
(g) TERMINATION OF EMPLOYMENT OF OPTIONEE. If an Optionee's employment
with the Company and all subsidiaries is terminated prior to the expiration
date of his Option, such Option may be exercised by the Optionee, to the
extent of the number of Shares with respect to which the Optionee could have
exercised it on the date of such termination, or to any greater extent
permitted by the Committee, at any time prior to the earlier of (i) three
months after the date of termination or (ii) the expiration date of such
Option; provided, however, if an Optionee's employment is terminated
voluntarily by the Optionee or by the Company "for cause" (as defined
below), the Optionee shall have no right to exercise his Option on or after
the date of such termination. As used herein, termination of an Optionee's
employment by the Company shall be "for cause" if the Board reasonably
concludes that the Optionee has materially failed to perform his
responsibilities to the Company, materially failed to follow directives or
policies established by or at the direction of the Board, or conducted
himself in a manner materially detrimental to the interests of the Company.
A-4
<PAGE>
(h) TRANSFERABILITY. No Option shall be assignable or transferable by
an Optionee otherwise than by will or by the laws of descent and
distribution, and during the lifetime of the Optionee, his Options shall be
exercisable only by him, or in the event of his legal disability, by his
legal representative.
(i) RIGHTS AS A STOCKHOLDER. An Optionee shall have no rights as a
stockholder with respect to any Shares covered by his Option until the
exercise of such Option and his payment for such Shares.
(j) ANNUAL LIMIT ON EXERCISE OF ISOS. The aggregate fair market value
(determined at the time the Option is granted) of the stock with respect to
which ISOs are exercisable for the first time by an Eligible Individual
during any calendar year (under the Plan and any other ISO plan of the
Company or any parent or subsidiary corporation) shall not exceed $100,000.
(k) OPTION AGREEMENT AND FURTHER CONDITIONS. As soon as practicable
after the grant of an Option, each Optionee shall enter into, and be bound by
the terms of, a stock option agreement (the "Option Agreement") which shall
state the number of Shares to which the Option pertains and specify whether
the Option is intended to be an ISO or a NQSO. The Option Agreement shall set
forth such terms, conditions and restrictions regarding the Option not
inconsistent with the Plan (and, in the case of ISOs, the provisions of
section 422(b) of the Code) as the Committee shall determine. Without
limiting the generality of the foregoing, the Committee, in its discretion,
may impose further conditions upon the exercisability of the Options and
restrictions on transferability with respect to Shares issued upon exercise
of Options.
(l) WITHHOLDING. The obligations of the Company to deliver Shares upon
the exercise of any Option (or cash in lieu thereof) shall be subject to any
applicable federal, state and local tax withholding requirements.
If the exercise of any Option is subject to the withholding requirements
of applicable federal tax law, an Optionee may satisfy the federal
withholding tax, in whole or in part, by electing to have the Company
withhold Shares subject to the exercise (or by returning previously acquired
Shares or other Common Stock to the Company); provided, however, that with
respect to an Optionee who is subject to section 16 of the Securities
Exchange Act of 1934, any such amount of federal taxes required to be
withheld shall be satisfied automatically by withholding Shares subject to
the exercise. The Company may not withhold Shares in excess of the number
necessary to satisfy the minimum federal income tax withholding requirements.
Shares or other Common Stock shall be valued, for purposes of this Subsection
(l), at its fair market value on the date the amount attributable to the
exercise of the Option is includable in the income of the Optionee under
section 83 of the Code (the "Determination Date").
If Shares or other Common Stock acquired by the exercise of an ISO is
used to satisfy the withholding requirement described above, such Shares or
other Common Stock must have been held by the Optionee for a period of not
less than the holding period described in section 422(a)(1) of the Code as of
the Determination Date. If Shares or other Common Stock acquired by the
exercise of a NQSO or of an option under a similar plan is used to satisfy
such withholding requirement, such option must have been granted to the
Optionee at least six months prior to the Determination Date.
The Committee shall adopt such withholding rules as it deems necessary
to carry out the provisions of this Section.
A-5
<PAGE>
6. LISTING AND REGISTRATION OF SHARES.
Each Option under the Plan shall be subject to the requirement that, if
at any time the Company shall determine, in its discretion, that the listing,
registration or qualification of the Option or Shares covered thereby upon
any securities exchange or under the laws of any jurisdiction, or the consent
or approval of any governmental or regulatory body, is necessary or desirable
as a condition of, or in connection with, the granting of such Option, or the
exercise thereof, then no such Option may be exercised in whole or in part
unless and until such listing, registration, qualification, consent or
approval shall have been effected or obtained, on conditions acceptable to
the Company. Each Optionee, or his legal representative or beneficiaries,
also may be required to give satisfactory assurance that Shares acquired upon
exercise of an Option are being acquired for investment and not with a view
to distribution, and certificates representing such Shares may be legended
accordingly.
7. ADJUSTMENTS.
The number of Shares which may be issued under the Plan, as stated in
Section 4 hereof, and the number of Shares issuable upon exercise of
outstanding Options under the Plan (as well as the exercise price per share
under such outstanding Options), shall be equitably adjusted by the Committee
to reflect any stock dividend, stock split, share combination, or similar
change in the capitalization of the Company.
In the event of a corporate transaction (as that term is described in
section 424(a) of the Code and the Treasury Regulations issued thereunder as,
for example, a merger, consolidation, acquisition of property or stock,
separation, reorganization, or liquidation), the Committee shall, in its
unlimited discretion, have the power prior to such event (i) to terminate all
outstanding Options upon at least seven days' prior notice to each Optionee
and, if the Committee deems it appropriate, to cause the Company to pay to
each Optionee an amount in cash with respect to each Share to which a
terminated Option pertains equal to the difference between the Option price
and the value, as determined by the Committee in its sole discretion, of the
consideration to be received by the holders of shares of Common Stock in
connection with such transaction, or (ii) to provide for the exchange of
Options outstanding under the Plan for options to acquire securities or other
property to be delivered in connection with the transaction and in connection
therewith to make an equitable adjustment, as determined by the Committee in
its sole discretion, in the Option price and number of Shares or amount of
property subject to the Option and, if deemed appropriate, provide for a cash
payment to Optionees in partial consideration for such exchange. Further, the
Committee, in its discretion, may accelerate, in whole or in part, the date
on which any or all Options become exercisable.
The Committee also may, in its discretion, change the terms of any
outstanding Option to reflect any such corporate transaction, provided that,
in the case of ISOs, such change is excluded from the definition of a
"modification" under section 424(h) of the Code.
8. ACQUISITIONS.
Notwithstanding any other provision of this Plan, Options may be granted
hereunder in substitution for options held by officers and employees of other
corporations who are about to become, or have become, employees of the
Company or a subsidiary corporation as a result of a
A-6
<PAGE>
merger, consolidation, acquisition of assets or similar transaction by the
Company or a subsidiary. The terms, including the option price, of the
substitute options so granted may vary from the terms set forth in this Plan
to such extent as the Committee may deem appropriate to conform, in whole or
in part, to the provisions of the options in substitution for which they are
granted.
9. AMENDMENT OR DISCONTINUANCE OF THE PLAN.
(a) The Board from time to time may suspend or discontinue the Plan or
amend it in any respect whatsoever, except that, without the approval of the
stockholders (given in the manner set forth in Subsection (b) below): (i) the
class of employees eligible to receive Options shall not be changed nor shall
any other requirement as to eligibility for participation in the Plan be
materially modified, (ii) the maximum number of shares of Common Stock with
respect to which Options may be granted under the Plan shall be materially
increased except as permitted under Section 7 hereof, (iii) the benefits
accruing to employees participating in the Plan shall not be materially
increased, and (iv) the duration of the Plan under Section 13 hereof shall
not be extended; and further provided, that no such suspension,
discontinuance, or amendment shall materially impair the rights of any
holder of an outstanding Option without the consent of such holder.
(b) (i) The approval of stockholders must be by a majority of the
outstanding shares of Common Stock present, or represented, and entitled to
vote at a meeting duly held in accordance with the applicable laws of the
State of Delaware; and
(ii) The approval of stockholders must comply with all applicable
provisions of the corporate charter, bylaws, and applicable state law
prescribing the method and degree of stockholder approval required for
the issuance of corporate stock or options. If the applicable state law
does not prescribe a method and degree of stockholder approval in such
case, the approval of stockholders must occur:
(A) By a method and in a degree that would be treated as
adequate under applicable state law in the case of an action
requiring stockholder approval (i.e., an action on which
stockholders would be entitled to vote if the action were taken at
a duly held stockholders' meeting); or
(B) By a majority of the votes cast at a duly held
stockholders' meeting at which a quorum representing a majority of
all outstanding voting stock is, either in person or by proxy,
present and voting on the plan.
10. ABSENCE OF RIGHTS.
The recommendation or selection of an Eligible Individual as a recipient
of an Option under the Plan shall not entitle such person to any Option
unless and until the grant actually has been made by appropriate action of
the Committee; and any such grant is subject to the provisions of the Plan.
Further, the granting of an Option to a person shall not entitle that person
to continued employment by the Company or a subsidiary or affect the terms
and conditions of such employment, and the Company shall have the absolute
right, in its discretion, to retire such person in accordance with its
retirement policies or otherwise to terminate his employment, whether or not
such termination may result in a partial or total termination of his Option.
A-7
<PAGE>
11. STOCKHOLDER APPROVAL
This Plan shall become effective on August 20, 1993, (the date the Plan
was adopted by the Board); provided, however, that if the Plan is not
approved by the stockholders, in the manner described in Section 9(b) hereof,
within 12 months before or after the date the Plan was adopted by the Board,
the Plan and all Options granted hereunder shall be null and void.
12. NO OBLIGATION TO EXERCISE OPTION
The granting of an Option shall impose no obligation upon a key employee
to exercise such Option.
13. TERMINATION OF PLAN
Unless earlier terminated as provided in the Plan, the Plan and all
authority granted hereunder shall terminate absolutely at 12:00 midnight on
August 19, 2003, which date is within 10 years after the date the Plan was
adopted by the Board, or the date the Plan was approved by the stockholders
of the Company, whichever is earlier, and no Options hereunder shall be
granted thereafter. Nothing contained in this Section, however, shall
terminate or affect the continued existence of rights created under Options
issued hereunder, and outstanding on the date set forth in the preceding
sentence, which by their terms extend beyond such date.
14. GOVERNING LAW
The Plan shall be governed by the applicable Code provisions to the
maximum extent possible. Otherwise, the laws of the State of Delaware shall
govern the operation of, and the rights of key employees under, the Plan, and
Options granted thereunder.
A-8
<PAGE>
CONTINENTAL MEDICAL SYSTEMS, INC.
1994 STOCK OPTION PLAN
INCENTIVE STOCK OPTION AGREEMENT
INCENTIVE STOCK OPTION AGREEMENT, dated as of the day of (the
"Grant Date"), between CONTINENTAL MEDICAL SYSTEMS, INC., a Delaware
Corporation (the "Company"), and (the "Optionee"), a key
employee of the Company and/or its wholly owned subsidiaries.
WHEREAS, the Company desires to afford the Optionee an opportunity to
purchase shares of Common Stock, $.01 par value per share, of the Company
("Shares") as hereinafter provided, in accordance with the provisions of the
Continental Medical Systems, Inc. 1994 Stock Option Plan (the "Plan"), a copy
of which is attached hereto. Except as otherwise provided herein, terms used
herein shall have the same meanings as in the Plan.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth and for other good and valuable consideration the legal sufficiency of
which is hereby acknowledged, the parties hereto, intending to be legally
bound hereunder, agree as follows:
1. GRANT OF OPTION. The Company hereby grants to the Optionee the right
and option to purchase all or any part of an aggregate of Shares (the
"Option"), which Option is intended to qualify as an "incentive stock option"
under section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"). The Option is in all respects limited and conditioned as hereinafter
provided, and is subject in all respects to the Plan's terms and conditions
now in effect and as they may be amended from time to time in accordance with
the Plan (which terms and conditions are and automatically shall be
incorporated herein by reference and made a part hereof and shall control in
the event of any conflict with any other terms of this Agreement).
2. PURCHASE PRICE. The purchase price per share (the "Option Price") of
the Shares covered by the Option (the "Option Shares") shall be $ ,
which price was the closing quote for the Company's Common Stock on the New
York Stock Exchange on the Grant Date.
3. TERM. Unless earlier terminated pursuant to any provision hereof or
of the Plan, the Option shall expire on , (the "Expiration
Date").
<PAGE>
4. EXERCISE OF OPTION. Except where permitted by the Plan, the right of
the Optionee to exercise any installment of the Option is subject to the
condition that the Optionee be employed as key employee of the Company, or
any subsidiary of the Company, as defined by section 424(f) of the Code, on
the date such installment becomes exercisable. The Option shall become
exercisable in installments; and the Optionee shall have the right to
purchase from the Company, on and after the following dates, the following
number of Shares:
<TABLE>
<CAPTION>
DATE INSTALLMENT BECOMES
EXERCISABLE NUMBER OF OPTION SHARES
------------------------ -----------------------
<S> <C>
Shares
an additional Shares
an additional Shares
an additional Shares
</TABLE>
The right of the Optionee to purchase the Option Shares which are the subject
of any installment of the Option which has become exercisable may be
exercised in whole or in part at any time or times prior to the expiration or
other termination of the Option.
The foregoing provisions of this Paragraph 4 notwithstanding, the
exercisability of the Option is subject to the terms and conditions of the
Plan.
5. METHOD OF EXERCISING OPTION. Subject to the terms and conditions of
this Option Agreement and the Plan, the Option may be exercised by written
notice to the Company at its principal office, which is presently located at
600 Wilson Lane, Mechanicsburg, Pennsylvania 17055. Such notice (a suggested
form of which is attached hereto) shall state the election to exercise the
Option and the number of Option Shares with respect to which it is being
exercised; shall be signed by the person or persons so exercising the Option;
shall, if the Company so requests, be accompanied by the investment
certificate referred to in Section 6 of the Plan; and shall be accompanied by
payment of the full Option Price of such Option Shares. The Option Price
shall be paid in cash, or by check, bank draft, or postal or express money
order, or in Shares previously acquired by the Optionee (provided that if such
Shares were acquired through exercise of an incentive stock option, such
Shares shall have been held by the Optionee for a period not less than the
holding period described in section 422(a)(1) of the Code; or if such Shares
were acquired through exercise of a non-qualified stock option, such Shares
have been held by the Optionee for more than one year), or in a combination
of cash (or its equivalent) and Shares. Upon receipt of such notice and
payment, the Company, as promptly as practicable, shall deliver or cause to
be delivered a certificate or certificates representing the Shares with
respect to
<PAGE>
which the Option is so exercised. The certificate or certificates for such
Shares shall be registered in the name of the person or persons so exercising
the Option (or, if the Option is exercised by the Optionee and if the
Optionee shall so request in the notice exercising the Option, shall be
registered in the name of the Optionee and his or her spouse, jointly, with
right of survivorship) and shall be delivered as provided above to or upon
the written order of the person or persons exercising the Option. In the
event the Option shall be exercised by any person or persons after the death
or legal disability of the Optionee, such notice shall be accompanied by
appropriate proof of the right of such person or persons to exercise the
Option. All Shares that shall be purchased upon the exercise of the Option as
provided herein shall be fully paid and nonassessable by the Company.
6. NON-TRANSFERABILITY OF OPTION. The Option is not assignable or
transferable, in whole or in part, by the Optionee, otherwise than by will or
by the laws of descent and distribution. During the lifetime of the Optionee,
the Option shall be exercisable only by the Optionee or, in the event of
legal disability, by the Optionee's legal representative.
7. DISQUALIFYING DISPOSITION OF OPTION SHARES. The Optionee agrees to
give written notice to the Company, at its principal office, if a
"disposition" of the Shares acquired through exercise of the Option granted
hereunder occurs at any time within two years after the Grant Date or within
one year after the transfer to the Optionee of such Shares. For purposes of
this Paragraph, the term "disposition" shall have the meaning assigned to
such term by section 424(c) of the Code.
8. WITHHOLDING OF TAXES. The obligation of the Company to deliver Shares
upon the exercise of the Option shall be subject to applicable federal, state
and local tax withholding requirements.
9. GOVERNING LAW. This Agreement shall, to the maximum extent possible,
be construed in a manner consistent with the Code provisions concerning
incentive stock options, and its interpretation shall otherwise be governed by
Delaware law.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Incentive Stock Option
Agreement to be executed by a duly authorized officer, and the Optionee has
hereunto set his hand and seal, all as of the day and year first above
written.
CONTINENTAL MEDICAL SYSTEMS, INC.
BY:______________________________
_________________________________
Optionee
<PAGE>
CONTINENTAL MEDICAL SYSTEMS, INC.
1994 STOCK OPTION PLAN
Notice of Exercise of Incentive Stock Option
I hereby exercise the incentive stock option granted to me as of
by Continental Medical Systems, Inc., with respect to the following number of
shares of Continental Medical Systems, Inc. Common Stock, $.01 par value per
share, ("Shares") covered by said option:
Number of Shares to be purchased ________________________________
Option price per Share $_______________________________
Total option price $_______________________________
Enclosed is my check in the amount of $__________ (and/or _____________
Shares(1) in full payment for such Shares.
Please have the certificate or certificates representing the purchased
Shares registered in the following name or names(2) ______________________
______________________________________________________________________ and
sent to ____________________________________________________ .
DATED: ____________, _______
_________________________________
Optionee's Signature
_________________________________
_________________________________
_________________________________
Home Address
_________________________________
Social Security No.
_____________
(1) The option price may be paid in whole or in part by delivery of Shares,
subject to the terms of the Continental Medical Systems, Inc. 1994 Stock
Option Plan and the Optionee's Incentive Stock Option Agreement.
(2) Certificates may be registered in the name of the Optionee alone or in
the joint names of the Optionee and his or her spouse.
<PAGE>
EXHIBIT 5.1
VINSON & ELKINS L.L.P. LETTERHEAD
August 8, 1995
Horizon/CMS Healthcare Corporation
6001 Indian School Road, N.E., Suite 530
Albuquerque, N.M. 87110
Ladies and Gentlemen:
We have acted as counsel for Horizon/CMS Healthcare Corporation,
a Delaware corporation (the "Company"), in connection with the Company's
Registration Statement on Form S-8 (the "Registration Statement") relating
to the offering and sale of up to 3,765,586 shares (the "Shares") of common
stock, par value $.001 per share, of the Company pursuant to the Continental
Medical Systems, Inc. 1986 Stock Option Plan, the Continental Medical
Systems, Inc. 1989 Non-Employee Directors' Stock Option Plan, the Continental
Medical Systems, Inc. 1992 CEO Stock Option Plan, the Continental Medical
Systems, Inc. 1993 Nonqualified Stock Option Plan and the Continental Medical
Systems, Inc. 1994 Stock Option Plan (as each has been amended to
the date hereof, collectively, the "Plans").
Before rendering our opinion, we examined the Registration Statement,
the Restated Certificate of Incorporation, as amended, and bylaws of the
Company and certain resolutions of the Board of Directors of the Company.
Based upon the foregoing, we are of the opinion that the Shares to be
issued pursuant to the Plans have been validly authorized for issuance and,
when the Registration Statement has become effective under the Securities Act
of 1933, as amended (the "Act"), and the Shares are issued and paid for in
accordance with the terms of the Plans, the Shares so issued will be validly
issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. By giving such consent, we do not admit that we are
within the category of persons whose consent is required under Section 7 of
the Act or the rules and regulations of the Securities and Exchange Commission
issued thereunder. For purposes of this opinion, we assume that the
securities to be issued pursuant to the Registration Statement will be issued
in compliance with all applicable state securities or Blue Sky laws.
Very truly yours,
/s/ VINSON & ELKINS L.L.P.
<PAGE>
Exhibit 23.2
CONSENT OF
INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference in this Registration Statement of our reports
dated July 22, 1994 included in Horizon Healthcare Corporation's Form 10-K
for the year ended May 31, 1994 and the amendments thereto and to all
references to our Firm included in this Registration Statement.
/s/ARTHUR ANDERSEN LLP
Albuquerque, New Mexico ARTHUR ANDERSEN LLP
August 9, 1995
<PAGE>
Exhibit 23.3
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
Horizon/CMS Healthcare Corporation
Albuquerque, New Mexico
We hereby consent to the incorporation by reference into this
Registration Statement of our reports dated February 25, 1994, relating to
the combined financial statements of peopleCARE Heritage Group appearing in
Amendment No. 1 on Form 8-K/A dated October 10, 1994 and Amendment No. 2 on
Form 8-K/A dated June 2, 1995 to Horizon's Current Report on Form 8-K dated
August 12, 1994.
We also consent to the reference to us under the caption "Item 5.
Interests of Named Experts and Counsel" in this Registration Statement.
/s/BDO Siedman LLP
Dallas, Texas BDO Siedman LLP
August 4,1995
