Document:

Non-Qualified Stock Option Agreement

 EXHIBIT 10.11.2 
  
 HEALTHSOUTH Corporation 
  
 NON-QUALIFIED STOCK OPTION AGREEMENT 
 (Pursuant to the 2002 Non-Executive Stock Option Plan) 
  
 OPTION granted in Birmingham, Alabama on                      (the “Date of Grant”), by HEALTHSOUTH
Corporation, a Delaware corporation (the “Corporation”), to                      (the “Grantee”). 

 
 1. GRANT OF OPTION. The Corporation hereby grants to the Grantee
the irrevocable Option to purchase, on the terms and subject to the conditions herein set forth, up to              fully paid and nonassessable shares of the
Corporation’s Common Stock, par value $.01 per share, at the option price of              per share, being not less than 100% of the fair market value of such Common Stock on
the Date of Grant. 
  
 The Option is granted pursuant to the
Corporation’s 2002 Non-Executive Stock Option Plan (the “Plan”), a copy of which is attached hereto. The Option is subject in its entirety to all the applicable provisions of the Plan as in effect on the Date of Grant, which are
hereby incorporated herein by reference. 
  
 2. PERIOD OF
OPTION. Except as otherwise provided in the Plan, the Option is cumulatively exercisable in installments in accordance with the following schedule: 
  

			
	 Year Beginning

	  	 Percent of Shares
 Subject to Option
 Purchasable

	 2002
	  	None
	 2003
	  	25%
	 2004
	  	50%
	 2005
	  	75%
	 2006
	  	100%

  
 The Option may be exercised from time
to time during the option period as to the total number of shares allowable under this Section 2, or any lesser amount thereof. The Option is not exercisable before
                     or after
                    . 
  
 3. METHOD OF EXERCISE OF OPTION. The Option may be exercised in whole or in part by the Grantee’s giving written notice, specifying the number
of shares which the Grantee elects to purchase and the date on which such purchase is to be made, to the Corporation by mail, postage prepaid, or delivering such notice by hand to the Corporation at its principal office in Birmingham, Alabama, to
the attention of the Chairman of the Board, President and Chief Executive Officer, at least ten and not more than thirty days prior to the date specified in such notice as the date on which such purchase is to be made. Alternatively, this Option may
be exercised in any other manner as to which the Corporation gives the Grantee written notice from time to time. 

 If such exercise shall be in accordance with the provisions of the Option, as specified in this Stock
Option Agreement, the Corporation shall, on the date specified in the notice and against receipt from the Grantee of the option price, deliver, at its principal office in Birmingham, Alabama, a certificate or certificates for the shares of Common
Stock so purchased and shall pay all stamp taxes payable in connection therewith. For purposes of this Section 3, a person to whom the Option is transferred by will or pursuant to the laws of descent and distribution, as contemplated by the Plan,
shall be deemed to be the Grantee. 
  
 4. TRANSFERABILITY.
Except for transfers permitted under Section 10 of the Plan, the Option is not transferable otherwise than by will or pursuant to the laws of descent and distribution, and is exercisable during the Grantee’s lifetime only by the Grantee.

  
 5. BINDING AGREEMENT. This Stock Option Agreement shall
be binding upon and shall inure to the benefit of any successor or assign of the Corporation, and, to the extent herein provided, shall be binding upon and inure to the benefit of the Grantee’s beneficiary or legal representatives, as the case
may be. 
  
 6. ENTIRE AGREEMENT. This Stock Option
Agreement contains the entire agreement of the parties with respect to the Option granted hereby and may not be changed orally but only by an instrument in writing signed by the party against whom enforcement of any change, modification or extension
is sought. 
  
 If the foregoing is in accordance with your
understanding and approved by you, please so confirm by signing and returning the duplicate of this Stock Option Agreement enclosed for that purpose. 
  

					
	HEALTHSOUTH Corporation
		
	By	 	

	 	 	Its	 	  

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

	
	  

	                                    ,
Grantee2004 Director Incentive Plan

 EXHIBIT 10.12 
  
 HEALTHSOUTH CORPORATION 
  
 2004 DIRECTOR INCENTIVE PLAN 
  
 1. PURPOSE OF THE PLAN. The purpose of the 2004 Director Incentive Option Plan (hereinafter called the “Plan”) of HEALTHSOUTH
Corporation, a Delaware corporation (hereinafter called the “Corporation”), is to provide incentive for future endeavor and to advance the interests of the Corporation and its stockholders by encouraging ownership of the Common Stock, par
value $.01 per share (hereinafter called the “Common Stock”), of the Corporation by its directors who are not employees of the Corporation1 and who are members of the Special Committee of the Board of Directors (hereinafter called the “Outside Directors”) as designated by the Board of Directors of the Corporation (hereinafter
called the “Board”) and upon whose judgment, interest and continuing special efforts the Corporation is largely dependent for the successful conduct of its operations, and to enable the Corporation to compete effectively with other
enterprises for the services of such Outside Directors as may be needed for the continued improvement of the Corporation’s business, through the award of restricted shares of Common Stock (hereinafter called the “Restricted Stock”).

  
 2. PARTICIPANTS. Restricted Stock shall be granted
under the Plan to Outside Directors of the Corporation as set forth herein. 
  
 3. TERM OF THE PLAN. The Plan shall become effective as of January 1, 2004. No shares of Restricted Stock shall be granted under the Plan after the earliest of (a) January 20, 2005, (b) such time as all shares
of Common Stock reserved for issuance under the Plan have been acquired through the issuance of Restricted Stock granted under the Plan or (c) such earlier time as the Board may determine. Restricted Stock granted under the Plan at the time of its
termination shall continue in effect in accordance with its terms and conditions and those of the Plan. 
  
 4. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 11, the aggregate number of shares of Common Stock for which Restricted Stock
may be granted under the Plan shall not exceed 2,000,000. If Restricted Stock is cancelled or repurchased by the Corporation, the cancelled or repurchased shares shall again be available under the Plan. 
  
 The shares to be delivered under the Plan shall be made available, at the
discretion of the Board, either from authorized but previously unissued shares as permitted by the Certificate of Incorporation of the Corporation or, from shares re-acquired by the Corporation, including shares of Common Stock purchased in the open
market, or from shares held in the treasury of the Corporation. 
  
 5. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the Board. The acts of a majority of the Board, at any meeting thereof at which a quorum is present, 
  

	1	For purposes of the Plan, the interim Chief Executive Officer and interim Chairman of the Board of Directors of the Board serving as of the effective date of the
Plan are not considered employees of the Corporation and are considered Outside Directors under the Plan. 

 or acts reduced to or approved in writing by a majority of the members of the Board, shall be the valid acts of the
Board. The expenses of administering the Plan shall be borne by the Corporation. 
  
 The interpretation and construction of any provision of the Plan or of any Restricted Stock granted under it by the Board shall be final, conclusive and binding upon all parties, including the Corporation, its
stockholders and directors, and the executives and employees of the Corporation and its subsidiaries. No member of the Board shall be liable to the Corporation, any stockholder, any optionholder or Restricted Stock holder or any employee of the
Corporation or its subsidiaries for any action or determination made in good faith with respect to the Plan or any Restricted Stock granted under it. 
  
 6. ANNUAL AWARDS. Each Outside Director shall be granted during the term of the Plan, on January 20, 2004 and on January 1, 2005, shares of
Restricted Stock having a value on the date of grant equal to $50,000, determined using the fair market value of the Common Stock pursuant to the provisions of Section 8 and rounding up to the nearest number of full shares. 
  
 In addition, each Outside Director first elected or appointed to the Board
following the effective date of the Plan shall be granted, as of the date of such Outside Director’s first election or appointment to the Board, shares of Restricted Stock having a value on the date of grant as set forth below, determined using
the fair market value of the Common Stock pursuant to the provisions of Section 8 and rounding up to the nearest number of full shares: 
  

				
	 Date of Election

	  	Value of Restricted
Stock Grant

	 January 1 through March 31
	  	$	50,000
	 April 1 through June 30
	  	 	37,500
	 July 1 through September 30
	  	 	25,000
	 After October 1
	  	 	0

  
 7. RESTRICTED STOCK
AGREEMENT. Restricted Stock granted under the Plan shall be granted pursuant to and subject to the terms and conditions of a Restricted Stock Agreement to be entered into between the Corporation and the director at the time of such grant. Each
such agreement shall be in a form from time-to-time adopted for use under the Plan by the Board (such form being hereinafter called an “Agreement”). Any such Agreement shall incorporate by reference all of the terms and provisions of the
Plan as in effect at the time of grant and may contain such other terms and provisions as shall be approved and adopted by the Board. 
  
 8. VALUE OF RESTRICTED STOCK. If the Common Stock is not listed upon a national securities exchange or exchanges, the fair market value shall be as
determined by the 

  

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Board (which determination shall be conclusive and binding for all purposes) or, if applicable, shall be deemed to be the last reported sale price for the
Common Stock as quoted by brokers and dealers trading in the Common Stock in the over-the-counter market (or if the Common Stock shall be quoted by the National Association of Securities Dealers Automated Quotation system, then such NASDAQ quote) on
the date on which the Restricted Stock is granted. If the Common Stock is listed upon a national securities exchange or exchanges, such fair market value shall be deemed to be the last reported sale price at which the shares of Common Stock were
traded on such securities exchange or exchanges on the date on which the Restricted Stock is granted, or if no sale of the Common Stock was made on any national securities exchange on such date, then the closing price per share of the Common Stock
on such securities exchange or exchanges on the next preceding day on which there was a sale of the Common Stock. 
  
 9. TERMS OF RESTRICTED STOCK. 
  
 (i) STOCKHOLDER RIGHTS. Holders of Restricted Stock shall have any rights to dividends, voting and/or other rights of a stockholder subject to the
restrictions and terms of the Plan and the Agreement. 
  
 (ii)
CERTIFICATES. The Corporation shall, upon the date of the Restricted Stock grant, issue the shares of Common Stock by registering such shares in book entry form with the Corporation’s transfer agent in the name of the recipient. No
certificate(s) representing all or a part of such shares shall be issued until the conclusion of the Restricted Period (as defined in subparagraph (vi)(1) below. 
  
 (iii) PRICE. Except as otherwise determined by the Board of Directors, all Restricted Stock issued hereunder shall be
issued without the payment of any cash purchase price by the recipients (in which case the “price per share originally paid” for purposes of clause (2) of paragraph (vi) below shall be zero). 
  
 (iv) VESTING. Except as otherwise provided in the Plan, the forfeiture
provisions of each grant of Restricted Stock shall lapse on December 31 of each year following the date of grant (beginning on December 31 of the year in which the grant is made) with regard to one-third of the number of shares granted until all
such restrictions have lapsed and such shares of Restricted Stock shall become fully vested in the recipient thereof. Notwithstanding the foregoing, the forfeiture provisions of the Restricted Stock granted under this Plan shall immediately lapse in
the event (A) a Change in Control (as defined in Section 17) of the Corporation occurs, or (B) the recipient ceases to serve as a director of the Corporation due to his or her death, Director Disability or Director Retirement (both as defined in
Section 18), provided that the recipient has held such Restricted Stock for a period of at least twelve months. Notwithstanding the foregoing, if any Outside Director ceases to serve as a director of the Corporation by reason of Director Misconduct
(as defined in Section 18) during the course of such Outside Director’s term, the Outside Director’s rights to any shares of Restricted Stock for which the holding period set forth in subparagraph (v) below has not expired shall be
forfeited as of the date of the occurrence of such Director Misconduct. 
  
 (v) HOLDING PERIOD. Except as set forth below, the restrictions on transfer of the Restricted Stock shall apply during the course of the Outside Director’s term and 

  

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for a period of twelve months thereafter. Notwithstanding the foregoing, the restrictions on transfer of the Restricted Stock granted under this Plan shall
immediately lapse in the event (A) a Change in Control of the Corporation occurs, or (B) the recipient ceases to serve as a director of the Corporation due to his or her death, Director Disability or Director Retirement. 
  
 (vi) RESTRICTIONS ON TRANSFER / FORFEITURE PROVISIONS. In addition to
such other terms, conditions and restrictions on Restricted Stock contained in the Plan or the applicable Restricted Stock Agreement, all Restricted Stock shall be subject to the following restrictions: 
  
 (1) No shares of Restricted Stock shall be sold, assigned,
transferred, pledged, hypothecated or otherwise disposed of until they become vested pursuant to paragraph (iv) above and the holding period set forth in subparagraph (v) above has expired. The period during which such restrictions are applicable is
referred to as the “Restricted Period.” 
  
 (2) Except as set forth in the last two sentences of subparagraph (iv) above, if a recipient ceases to be a director of the Corporation within the Restricted Period for any reason, the shares of Restricted Stock that have not become fully
vested shall be forfeited by the holder and cancelled by the Corporation. 
  
 (3) Notwithstanding subparagraphs (1) and (2) above, the Board may, in its discretion, either at the time that shares of Restricted Stock are awarded or at any time thereafter, waive the restrictions on transfer and
forfeiture provisions of any Restricted Stock upon the occurrence of any of the events described in this paragraph (vi) or remove or modify any part or all of the restrictions. In addition, the Board may, in its discretion, impose upon the recipient
of Restricted Stock at the time that such shares of Restricted Stock are granted such other restrictions on any Restricted Stock as the Board may deem advisable. 
  
 (vi) ADDITIONAL SHARES. Any shares received by a recipient of Restricted Stock as a stock dividend, or as a result of
stock splits, combinations, exchanges of shares, reorganizations, mergers, consolidations or otherwise with respect to such Restricted Stock shall have the same status and shall bear the same restrictions, all on a proportionate basis, as the shares
or Restricted Stock initially subject to such restrictions. 
  
 (vii) TRANSFERS IN BREACH OF RESTRICTED STOCK. If any transfer of Restricted Stock is made or attempted contrary to the terms of the Plan and of such Restricted Stock, the Board shall have the right to purchase for the account of the
Corporation those shares from the owner thereof or his or her transferee at any time before or after the transfer at the price paid for such shares by the person to whom they were awarded under the Plan. In addition to any other legal or equitable
remedies that it may have, the Corporation may enforce its rights by specific performance to the extent permitted by law. The Corporation may refuse for any purpose to recognize as a shareholder of the Corporation any transferee who receives any
shares contrary to the provisions of the Plan and the applicable Restricted Stock or any recipient of Restricted Stock who breaches his or her obligation to resell shares as required 

  

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by the provisions of the Plan and the applicable Restricted Stock, and the Corporation may retain and/or recover all dividends on such shares which were paid
or payable subsequent to the date on which the prohibited transfer or breach was made or attempted. 
  
 11. ADJUSTMENT OF AND CHANGES IN CAPITALIZATION. In the event that the outstanding shares of Common Stock shall be changed in number or class by
reason of split-ups, combinations, mergers, consolidations or recapitalizations, or by reason of stock dividends, the number of shares of Restricted Stock available for grant and granted under the Plan, both in the aggregate and as to any
individual, shall be adjusted so as to reflect such change, all as determined by the Board. In the event there shall be any other change in the number or kind of the outstanding shares of Common Stock, or of any stock or other securities into which
such Common Stock shall have been changed, or for which it shall have been exchanged, then if the Board, in its sole discretion, determine that such change equitably requires an adjustment to Restricted Stock theretofore granted or which may be
granted under the Plan, such adjustment shall be made in accordance with such determination. 
  
 Notice of any adjustment shall be given by the Corporation to each holder of Restricted Stock which shall have been so adjusted and such adjustment (whether or not such notice is given) shall be effective and binding
for all purposes of the Plan. Fractional shares resulting from any adjustment in Restricted Stock pursuant to this Section 11 may be settled in cash or otherwise as the Board may determine. 
  
 12. SECURITIES ACTS REQUIREMENTS. The Corporation shall not be
obligated to issue Restricted Stock if such issuance would, in the opinion of counsel for the Corporation, violate the Securities Act of 1933 or other Federal or state statutes having similar requirements, as they may be in effect at that time. Each
grant of Restricted Stock shall be subject to the further requirement that, at any time that the Board shall determine, in its discretion, that the listing, registration or qualification of the shares of Common Stock subject to such Restricted Stock
under any securities exchange requirements or under any applicable law, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of, or in connection with, the issuance of Restricted Stock, such
Restricted Stock shall not be issued in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Board. 
  
 As a condition to the issuance of any Restricted Stock under the Plan, the
Board may require the holder to furnish a written representation that he is acquiring the shares for investment and not with a view to distribution of the shares to the public and a written agreement restricting the transferability of the shares
solely to the Corporation, and may affix a restrictive legend or legends on the face of the certificate representing such shares. Such representation, agreement and/or legend shall be required only in cases where in the opinion of the Board and
counsel for the Corporation, it is necessary to enable the Corporation to comply with the provisions of the Securities Act of 1933 or other Federal or state statutes having similar requirements, and any stockholder who gives such representation and
agreement shall be released from it and the legend removed at such time as the shares to which they applied are registered or qualified pursuant to the Securities Act of 1933 or other Federal or state statutes having similar requirements, or at such
other time as, in the opinion of the Board and counsel for the Corporation, the representation and agreement and legend cease to be necessary to enable the Corporation to comply with the provisions of the Securities Act of 1933 or other Federal or
state statutes having similar requirements. 
  

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 13. AMENDMENT OF THE PLAN. The Plan may, at any time or from time to time, be terminated, modified
or amended by the Board; provided, however, that no such amendment (i) may allow for the grant of Restricted Stock hereunder to any person who is not an Outside Director of the Corporation at the time of the grant, unless such amendment and the Plan
shall have been approved by the stockholders of the Corporation and (ii) shall be applicable to Restricted Stock previously granted. 
  
 14. CHANGES IN LAW. Subject to the provisions of Section 13, the Board shall have the power to amend the Plan and any outstanding Restricted Stock
granted thereunder in such respects as the Board shall, in its sole discretion, deem advisable in order to incorporate in the Plan or any such Restricted Stock any new provision or change designed to comply with or take advantage of requirements or
provisions of the Internal Revenue Code or any other statute, or Rules or Regulations of the Internal Revenue Service or any other Federal or state governmental agency enacted or promulgated after the adoption of the Plan. 
  
 15. APPLICABLE LAW. This Plan and all determinations made and actions
taken pursuant hereto shall be governed by the law of Delaware, applied without giving effect to any conflicts-of-law principles, and construed accordingly. 
  
 16. WITHHOLDING. 
  
 (a) The Corporation shall have the right to deduct from payments of any kind otherwise due to the recipient of Restricted Stock any federal, state or
local taxes of any kind required by law to be withheld with respect to any shares issued under the Plan or upon the expiration or termination of the Restricted Period relating to the Restricted Stock. Subject to the prior approval of the
Corporation, the recipient of Restricted Stock may elect to satisfy such obligations, in whole or in part, (i) by causing the Corporation to withhold shares of Common Stock otherwise issuable pursuant to the expiration or termination of the
Restricted Period relating to the Restricted Stock or (ii) by delivering to the Corporation shares of Common Stock already owned by the optionee or Restricted Stock recipient. The shares so delivered or withheld shall have a fair market value equal
to such withholding obligation. The fair market value of the shares used to satisfy such withholding obligation shall be determined by the Corporation as of the date that the amount of tax to be withheld shall be determined in accordance with
Section 8. A Restricted Stock recipient who has made an election pursuant to this Section 11(a) may only satisfy his or her withholding obligation with shares of Common Stock which are not subject to any repurchase, forfeiture, unfulfilled vesting
or other similar requirements. 
  
 (b) If the recipient of
Restricted Stock under the Plan elects, in accordance with Section 83(b) of the Code, to recognize ordinary income in the year of acquisition of any shares awarded under the Plan, the Corporation will require at the time of such election an
additional payment for withholding tax purposes based on the difference, if any, between the purchase price of such shares and the fair market value of such shares as of the date immediately preceding the date on which the Restricted Stock is
awarded. 
  

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 17. CHANGE IN CONTROL. A “Change in Control” shall be deemed to have occurred if:

  
 (i) the acquisition (other than from the
Corporation) by any person, entity or “group” (within the meaning of Sections 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, but excluding, for this purpose, the Corporation or its subsidiaries, or any employee benefit plan
of the Corporation or its subsidiaries which acquires beneficial ownership of voting securities of the Corporation) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act of 1934) of 25% or more of
either the then-outstanding shares of Common Stock or the combined voting power of the Corporation’s then-outstanding voting securities entitled to vote generally in the election of directors; or 
  
 (ii) individuals who, as of January 1, 2004, constitute the
Board of Directors (as of such date, the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any person becoming a director subsequent to such date whose election, or nomination
for election, was approved by a vote of at least a majority of the directors then constituting the Incumbent Board (other than an election or nomination of an individual whose initial assumption of office is in connection with an actual or
threatened election contest relating to the election of directors of the Corporation) shall be, for purposes of this Section 17(ii), considered as though such person were a member of the Incumbent Board; or 
  
 (iii) consummation of a reorganization, merger,
consolidation or share exchange, in each case with respect to which persons who were the stockholders of the Corporation immediately prior to such reorganization, merger, consolidation or share exchange do not, immediately thereafter, own more than
75% of the combined voting power entitled to vote generally in the election of directors of the reorganized, merged, consolidated or other surviving entity’s then-outstanding voting securities, or approval by the stockholders of the Corporation
of a liquidation or dissolution of the Corporation or consummation of the sale of all or substantially all of the assets of the Corporation. 
  
 18. CERTAIN DEFINITIONS. The following terms shall have the meanings set forth below: 
  
 (i) “Director Disability” means that the Outside
Director (i) has established to the satisfaction of the Board that the Outside Director is unable to perform his or her duties as a member of the Board by reason of any medically determinable physical or mental impairment which can be expected to
last for a continuous period of not less than twelve (12) months and (ii) has satisfied any requirement imposed by the Committee in regard to evidence of such disability. 
  
 (ii) “Director Misconduct” means the occurrence of any one or more of the following (i) the
willful and continued failure by a Outside Director to substantially perform his or her duties (other than any such failure resulting from Director Disability, death or Director Retirement), after a written demand for substantial performance is

  

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delivered by the Board to the Outside Director that specifically identifies the manner in which the Board believes that the Outside Director has not
substantially performed his or her duties, and the Outside Director has failed to remedy the situation within thirty (30) calendar days of receiving such notice or (ii) a Outside Director’s conviction for committing an act of fraud,
embezzlement, theft or another act constituting a felony or a crime involving moral turpitude or (iii) substantial dependence or addiction to any drug illegally taken or to alcohol that is in either event materially and demonstrably injurious to the
Corporation or (iv) the engaging by a Outside Director in gross misconduct materially and demonstrably injurious to the Corporation. No act or failure to act, on a Outside Director’s part shall be considered “willful” unless done, or
omitted to be done, by the Outside Director not in good faith and without reasonable belief that his action or omission was in the best interest of the Corporation. Director Misconduct shall be determined by the Board in exercise of good faith and
reasonable judgment. 
  
 (iii) “Director
Retirement” means mandatory retirement from service as a member of the Board pursuant to the Corporation’s policies. 
  

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