HEALTHSOUTH CORPORATION

 

                           2005 EQUITY INCENTIVE PLAN

 

         1. PURPOSE OF THE PLAN. The purpose of the 2005 Equity Incentive Plan

(the "Plan") of HealthSouth Corporation, a Delaware corporation (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 (the "Common Stock"), of the

Corporation by its Directors, executives and other key employees, upon whose

judgment, interest and continuing special efforts the Corporation is largely

dependent for the successful conduct of its operations, and to enable the

Corporation to compete effectively with other enterprises for the services of

such new Directors, executives and employees as may be needed for the continued

improvement of the Corporation's business, through the grant of (a) options to

purchase shares of Common Stock (each, an "Option"), (b) shares of Common Stock

that are subject to restrictions set forth in the Plan or any individual award

agreement ("Restricted Stock" or a "Restricted Stock Award"), (c) Stock

Appreciation Rights (as defined below), (d) the right to receive shares of

Common Stock at the end of a specified deferral period ("Deferred Stock" or a

Deferred Stock Award" and (e) Other Stock-Based Awards (as defined below) (such

Stock Options, Restricted Stock, Stock Appreciation Rights and Other

Stock-Based Awards, collectively, the "Awards"). All Options issued under the

Plan shall constitute non-qualified stock options ("NQSOs").

 

         2. PARTICIPANTS. Awards may be granted under the Plan to Directors of

the Corporation and to such executives and key employees of the Corporation and

its Subsidiaries (as defined below) as shall be determined by the Board of

Directors as set forth in Section 5 of the Plan (each, a "Grantee"); provided,

however, that no Awards may be granted to any person if such grant would cause

the Plan to cease to be an "employee benefit plan" as defined in Rule 405 of

Regulation C promulgated under the Securities Act of 1933. For purposes of the

Plan, a Subsidiary shall mean any corporation in an unbroken chain of

corporations beginning with the Corporation if, at the time of granting of an

Award, each of the corporations (other than the last corporation in the

unbroken chain) owns stock possessing 50% or more of the total combined voting

power of all classes of stock in one of the other corporations in the chain.

 

         3. TERM OF THE PLAN. The Plan shall become effective upon approval of

the Board of Directors of the Corporation (the "Effective Date"). The Plan

shall terminate on the earliest of (a) the third anniversary of the Effective

Date or (b) such earlier time as the Board of Directors of the Corporation may

determine. Any Awards outstanding under the Plan at the time of its termination

shall remain in effect in accordance with its terms and conditions and those of

the Plan. No Awards shall be granted under the Plan after the termination date

of the Plan.

 

         4. STOCK SUBJECT TO THE PLAN.

 

                  (a) Subject to the provisions of Section 16, the aggregate

number of shares of Common Stock for which Awards may be granted under the Plan

shall not exceed 22,000,000 shares, and the maximum number of shares of Common

Stock for which any individual may be granted Awards under the Plan during any

calendar year is 1,000,000 shares of Common Stock. If, on or prior to the

termination of the Plan as provided in Section 3, any Option granted under the

Plan shall have expired or terminated for any reason without having been

exercised in full or any shares of Restricted Stock shall have been forfeited,

or any other Awards for which shares of Common Stock are deliverable are so

forfeited, such unpurchased or forfeited shares covered thereby shall again

become available for the grant of Awards under the Plan. In addition, shares

covered by Options surrendered in connection with the exercise of other Options

pursuant to Section 9(e) shall again become available for the grant of Options

or Restricted Stock under the Plan.

 

                  (b) The shares to be delivered pursuant to an Award shall be

made available, at the discretion of the Board of Directors, either from

authorized but previously unissued shares as permitted by the Certificate of

Incorporation of the Corporation or from shares re-acquired by the Corporation,

including shares of Common Stock purchased in the open market, and shares held

in the treasury of the Corporation.

 

         5. ADMINISTRATION OF THE PLAN.

 

                  (a) With respect to the participation of executives and key

employees of the Corporation and its Subsidiaries who are not also Directors of

the Corporation, the Plan shall be administered by the Board of Directors,

except to the extent that such authority is delegated by the Board of Directors

to the Compensation Committee of the Board of Directors of the Corporation

(hereinafter called the "Committee"). To the extent so delegated, the acts of a

majority of the Committee, at any meeting thereof at which a quorum is present,

or acts reduced to or approved in writing by a majority of the members of the

Committee, shall be the valid acts of the Committee. Except to the extent so

delegated to the Committee, the Board of Directors shall determine the Grantees

who shall be granted Awards and the number of shares of Common Stock to be

subject to each such Award and all other applicable terms of each such Award.

Such applicable terms and conditions shall be evidenced in an award agreement

entered into by and between the Grantee and the Corporation (an "Award

Agreement").

 

                  (b) The interpretation and construction of any provision of

the Plan or of any Award granted under it by the Committee shall be final,

conclusive and binding upon all parties, including the Corporation, its

stockholders and Directors, and the executives and employees of the Corporation

and its Subsidiaries. No member of the Board of Directors or the Committee

shall be liable to the Corporation, any stockholder, any Grantee 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 Award granted under it. No

member of the Board of Directors may vote on any Award to be granted to him or

her.

 

                  (c) The expenses of administering the Plan shall be borne by

the Corporation.

 

         6. GRANT OF OPTIONS.

 

                  (a) Options may be granted under the Plan by the Board of

Directors in accordance with the provisions of Section 5 at any time prior to

the termination of the Plan. In making any determination as to the Grantee to

whom Options shall be granted and as to the number of shares to be covered by

such Options, the Board of Directors shall take into account the duties of the

respective Grantees, their present and potential contribution to the success of

the Corporation, and such other factors as the Board of Directors shall deem

relevant in connection with the accomplishment of the purposes of the Plan.

Notwithstanding the foregoing, it is the intention of the Corporation that all

Options granted hereunder shall be intended to comply with the provisions and

requirement of Section 409A of the Internal Revenue Code of 1986, as amended

(the "Code").

 

                  (b) Each Option granted under the Plan shall be granted

pursuant to and subject to the terms and conditions of a stock option agreement

to be entered into between the Corporation and the Grantee at the time of such

grant. Each such stock option agreement shall be in a form from time-to-time

adopted for use under the Plan by the Committee (such form being hereinafter

called a "Stock Option Agreement"). Any such Stock Option Agreement shall

incorporate by reference all of the terms and provisions of the Plan as in

effect at the time of grant and may contain such other terms and provisions as

shall be approved and adopted by the Board of Directors.

 

         7. OPTION PRICE.

 

                  (a) The purchase price of the shares of Common Stock covered

by each Option granted under the Plan shall be at least 100% of the fair market

value (but in no event less than the par value) of such shares at the time the

Option is granted, or such higher purchase price as shall be determined by the

Committee.

 

                  (b) If the Common Stock is not listed upon a national

securities exchange or exchanges, such fair market value shall be as determined

by the Board of Directors of the Corporation (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) immediately prior to the

commencement of the meeting of the Committee at which the Option 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 immediately prior to the commencement of the meeting of the Committee

at which the Option 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. Notwithstanding

the foregoing, the determination of fair market value in all cases shall be in

accordance with the requirements set forth under Section 409A of the Code. The

determination of fair market value pursuant to this subsection (b) is referred

to herein as the Fair Market Value.

 

                  (c) The exercise price of any outstanding Options shall not

be reduced during the term of such Options except by reason of an adjustment

pursuant to Section 16 hereof (and any such reduction shall be in accordance

with Section 409A of the Code), nor shall the Committee or the Board of

Directors cancel outstanding Options and reissue new Options at a lower

exercise price in substitution for the canceled Options.

 

         8. TERM OF OPTIONS. The expiration date of an Option granted under the

Plan shall be as determined by the Board of Directors at the time of grant,

provided that each such Option shall expire not more than ten years after the

date such Option was granted.

 

         9. EXERCISE OF OPTIONS

 

                  (a) Each Option shall become exercisable in whole or in part

or in installments at such time or times as the Committee may prescribe at the

time the Option is granted and specify in the Stock Option Agreement. No Option

shall be exercisable after the expiration of ten years from the date on which

it was granted and no Option may be exercised, regardless of vesting, unless

and until the Corporation has an effective Registration Statement on Form S-8

(or such other applicable form) on file with the Securities and Exchange

Commission (the "SEC") to register the sale of its common stock for issuance of

shares upon the exercise of the Option.

 

                  (b) Notwithstanding any contrary provision contained herein,

unless otherwise expressly provided in the Stock Option Agreement, any Option

granted hereunder shall become immediately vested in full upon the occurrence

of a Change in Control of the Corporation. For purposes of this Plan, "Change

in Control" shall mean

 

                  (i) the acquisition (other than from the Corporation) by any

         person, entity or "group" (within the meaning of Sections 13(d)(3) or

         14(d)(2) of the Securities Exchange Act of 1934, but excluding, for

         this purpose, the Corporation or its Subsidiaries, or any employee

         benefit plan of the Corporation or its Subsidiaries which acquires

         beneficial ownership of voting securities of the Corporation) of

         beneficial ownership (within the meaning of Rule 13d-3 promulgated

         under the Securities Exchange Act of 1934) of 25% or more of either

         the then-outstanding shares of Common Stock or the combined voting

         power of the Corporation's then-outstanding voting securities entitled

         to vote generally in the election of Directors; or

 

                  (ii) individuals who, as of November 17, 2005, constitute the

         Board of Directors of the Corporation (as of such date, the "Incumbent

         Board") cease for any reason to constitute at least a majority of the

         Board of Directors; provided, however, that any person becoming a

         Director subsequent to such date whose election, or nomination for

         election, was approved by a vote of at least a majority of the

         Directors then constituting the Incumbent Board (other than an

         election or nomination of an individual whose initial assumption of

         office is in connection with an actual or threatened election contest

         relating to the election of Directors of the Corporation) shall be,

         for purposes of this Section 9(b)(ii), considered as though such

         person were a member of the Incumbent Board; or

 

                  (iii) 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 50% of the combined voting power

         entitled to vote generally in the election of directors of the

         reorganized, merged, consolidated or other surviving entity's

         then-outstanding voting securities, or a liquidation or dissolution of

         the Corporation or the sale of all or substantially all of the assets

         of the Corporation.

 

                  (c) Subject to Sections 9(a) and 17(a), Options may be

exercised by giving written notice to the Corporation of intention to exercise,

specifying the number of shares to be purchased pursuant to such exercise in

accordance with the procedures set forth in the Stock Option Agreement. All

shares purchased upon exercise of any Option shall be paid for in full at the

time of purchase in accordance with the procedures set forth in the Stock

Option Agreement. Except as provided in Sections 9(d) and 9(e) hereof, such

payment shall be made in cash or through delivery of shares of Common Stock or

a combination of cash and Common Stock as provided in the Stock Option

Agreement. Any shares so delivered shall be valued at their fair market value

determined as of the date of exercise of the Option under the method set forth

in Section 7(b) hereof.

 

                  (d) Payment for shares purchased upon exercise of any such

Option may be made by delivery to the Corporation of a properly executed

exercise notice together with irrevocable instructions to a broker to promptly

deliver to the Corporation an amount of sale sufficient to pay the exercise

price. Additionally, the Corporation will accept, in payment for shares

purchased upon exercise of any such Option, proceeds of a margin loan obtained

by the exercising Grantee from a broker, provided that the exercising Grantee

has, at the same time as delivery to the Corporation of a properly executed

exercise notice, delivered to the Corporation irrevocable instructions to the

Corporation to deliver share certificates directly to such broker upon payment

for such shares.

 

                  (e) Subject to approval of the Board of Directors, payment

for shares purchased upon exercise of any Option granted hereunder may be made

by surrender of outstanding Options issued under this Plan or any other stock

option plan of the Corporation having a Spread (as defined below) equal to the

exercise price of the Options sought to be exercised. For purposes of this

Section 9(e), the "Spread" with respect to any unexercised Option shall be

equal to (i) the average price per share of Common Stock on the date of

exercise, as determined in accordance with the method set forth in Section 7(b)

hereof, less (ii) the exercise price of the surrender of the Option. All

Options so surrendered shall again become available for the grant of Options or

Restricted Stock under the Plan. Such surrender shall be evidenced in a form

satisfactory to the Secretary of the Corporation.

 

         10. NONTRANSFERABILITY OF OPTIONS. Options granted under the Plan

shall be assignable or transferable only by will or pursuant to the laws of

descent and distribution and shall be exercisable during the Grantee's lifetime

only by such Grantee.

 

         11. STOCKHOLDER RIGHTS OF OPTIONHOLDER. No holder of any Option shall

have any rights to dividends or other rights of a stockholder with respect to

shares subject to an Option prior to the purchase of such shares upon exercise

of the Option.

 

         12. TERMINATION OF OPTION.

 

                  (a) Except as set forth in an individual agreement with any

Grantee, upon termination of employment or service with the Corporation, all

unvested Options held by such Grantee shall immediately terminate and all

vested options shall remain exercisable until the earlier of (i) three months

after the date of termination of employment or service or (ii) the expiration

of the original term of the Option, except as follows.

 

                  (i) Death. If a Grantee's employment or service with the

         Corporation is terminated by reason of death or if the Grantee dies

         during the three-month post-termination exercise period described in

         the preceding sentence, then all Options held by the Grantee shall

         remain exercisable until the earlier of one year after the date of

         death or the expiration of the original term of the Option.

 

                  (ii) Cause. If a Grantee's employment or service with the

         Corporation is terminated for cause (as determined by the Committee in

         its sole discretion), then all Options held by such Grantee, whether

         vested or unvested, shall immediately terminate.

 

                  (iii) Retirement. If a Grantee retires from employment with

         the Company and at the time of such retirement has attained the age of

         59 1/2 and completed at least five consecutive years of service with

         the Corporation, then all Options held by such Grantee, whether vested

         or unvested, shall become immediately vested and exercisable and shall

         remain exercisable until the earlier of the third anniversary of such

         Grantee's date of termination of employment or the expiration of the

         term of the Option.

 

                  (b) Notwithstanding the foregoing, the Board of Directors

may, at any time prior to any termination of such employment or service,

determine in its sole discretion that the exercise of any Option after

termination of such employment or other relationship with the Corporation shall

be subject to satisfaction of the conditions precedent that the Grantee refrain

from engaging, directly or indirectly, in any activity which is competitive

with any activity of the Corporation or any subsidiary thereof and from

otherwise acting, either prior to or after termination of such employment or

other relationship, in any manner inimical or in any way contrary to the best

interests of the Corporation and that the Grantee furnish to the Corporation

such information with respect to the satisfaction of the foregoing condition

precedent as the Board of Directors shall reasonably request.

 

                  (c) Nothing in the Plan or in the Stock Option Agreement

shall confer upon any Grantee the right to continue in the employ of the

Corporation or any of its Subsidiaries or in any other relationship thereto or

interfere in any way with the right of the Corporation to terminate such

employment or other relationship at any time.

 

                  (d) A holder of an Option under the Plan may make written

designation of a beneficiary on forms prescribed by and filed with the

Secretary of the Corporation. Such beneficiary, or if no such designation of

any beneficiary has been made, the legal representative of such Grantee or such

other person entitled thereto as determined by a court of competent

jurisdiction, may exercise, in accordance with and subject to the provisions of

this Section 12, any unterminated and unexpired Option granted to such Grantee

to the same extent that the Grantee himself or herself could have exercised

such Option were he alive or able; provided, however, that no Option granted

under the Plan shall be exercisable for more shares than the Grantee could have

purchased thereunder on the date his or her employment by, or other

relationship with, the Corporation and its Subsidiaries was terminated.

 

         13. GRANT OF RESTRICTED STOCK OR DEFERRED STOCK.

 

                  (a) The Board of Directors may grant Restricted Stock Awards

and Deferred Stock Awards, subject to such restrictions, terms and conditions,

as the Committee shall determine in its sole discretion and as shall be

evidenced by the applicable award agreement (a "Restricted Stock Agreement" or

"Deferred Stock Agreement"). The vesting of a Restricted Stock Award or a

deferred Stock Award granted under the Plan may be conditioned upon the

completion of a specified period of employment or service with the Corporation

or any of its Subsidiaries, upon the attainment of specified performance goals

as determined by the Committee in its sole discretion, or a combination

thereof, and shall be set forth in the applicable Restricted Stock Agreement or

Deferred Stock Agreement.

 

                  (b) The Board of Directors may, upon such terms and

conditions as the Board of Directors determines, provide that a certificate or

certificates representing the shares underlying a Restricted Stock Award shall

be registered in the Grantee's name and bear an appropriate legend specifying

that such shares are not transferable and are subject to the provisions of the

Plan and the restrictions, terms and conditions set forth in the applicable

Restricted Stock Agreement, or that such certificate or certificates shall be

held in escrow by the Corporation on behalf of the Grantee until such shares

become vested or are forfeited. Except as provided in the applicable Restricted

Stock Agreement or Deferred Stock Agreement, no shares of Stock underlying a

Restricted Stock Award or a Deferred Stock Award may be assigned, transferred,

or otherwise encumbered or disposed of by the Grantee until such shares of

Restricted Stock or Deferred Stock become vested.

 

                  (c) If and to the extent that the applicable Restricted Stock

Agreement may so provide, a Grantee shall have the right to vote and receive

dividends on Restricted Stock granted under the Plan. Unless otherwise provided

in the applicable Restricted Stock Agreement, any Common Stock received as a

dividend on or in connection with a stock split of the shares of Common Stock

underlying a Restricted Stock Award shall be subject to the same restrictions

as the shares of Common Stock underlying such Restricted Stock Award.

 

                  (d) With respect to a Deferred Stock Award, the Board of

Directors shall determine the rights, if any, that a Grantee shall hold with

respect to Deferred Stock. Upon vesting of any Deferred Stock Award, stock

certificates in respect of such shares of Deferred Stock shall be delivered to

the Grantee, or his or her legal representative, in a number equal to the

number of shares of Common Stock covered by the Deferred Stock Award.

 

                  (e) Upon termination of employment with or service to the

Corporation or any of its Subsidiaries (including by reason of such subsidiary

ceasing to be a subsidiary of the Corporation), during the applicable

restriction period, Restricted Stock and Deferred Stock shall be forfeited;

provided, that the Board of Directors may provide, by rule or regulation or in

any Restricted Stock Agreement or Deferred Stock Agreement, or may determine in

any individual case, that restrictions or forfeiture conditions relating to

Restricted Stock or Deferred Stock will be waived in whole or in part in the

event of terminations resulting from specified causes, and the Board or the

Board of Directors may in other cases waive in whole or in part the forfeiture

of Restricted Stock or Deferred Stock.

 

                  (f) Unless otherwise determined by the Board of Directors or

set forth in an applicable Restricted Stock Agreement or Deferred Stock

Agreement, upon a Change in Control of the Corporation, all Restricted Stock

Awards and Deferred Stock Awards shall become immediately vested and all

restrictions with respect thereto shall lapse, other than restrictions on

transfer imposed under the federal securities laws.

 

         14. STOCK APPRECIATION RIGHTS.

 

                  (a) A stock appreciation right means the right pursuant to an

Award granted under this Section 14 to receive an amount equal to the excess,

if any, of (i) the aggregate Fair Market Value, as of the date of such Stock

Appreciation Right or portion thereof is surrendered, of the shares of Common

Stock covered by such right or such portion thereof, over (ii) the aggregate

exercise price of such right or portion thereof (a "Stock Appreciation Right").

Stock Appreciation Rights may be granted either alone ("Free Standing Stock

Appreciation Rights") or in conjunction with all or part of any Option granted

under the Plan ("Related Stock Appreciations Rights"). Related Stock

Appreciation Rights may be granted either at or after the time of the grant of

such Option. The Board of Directors shall determine the Grantee to whom, and

the time or times at which, grants of Stock Appreciation Rights shall be made;

the number of shares of Common Stock to be awarded, the price per share, and

all other conditions of Stock Appreciation Rights. Notwithstanding the

foregoing, no Related Stock Appreciation Right may be granted for more shares

than are subject to the Option to which it relates and any Stock Appreciation

Right must be granted with an exercise price not less than the Fair Market

Value of Common Stock on the date of grant. The provisions of Stock

Appreciation Rights need not be the same with respect to each Grantee. Stock

Appreciation Rights granted under the Plan shall be subject to the following

terms and conditions set forth in this Section 14 and shall contain such

additional terms and conditions, not inconsistent with the terms of the Plan,

as the Board of Directors shall deem desirable, as set forth in the applicable

Award Agreement.

 

                  (b) The Grantee of a Stock Appreciation Right shall not have

any rights with respect to such Award, unless and until such recipient has

executed an Award Agreement and delivered a fully executed copy thereof to the

Corporation, within a period of sixty days (or such other period as the Board

of Directors may specify) after the award date. Grantees who are granted Stock

Appreciation Rights shall have no rights as stockholders of the Corporation

with respect to the grant or exercise of such rights.

 

                  (c) Free Standing Stock Appreciation Rights shall be

exercisable at such time or times and subject to such terms and conditions as

shall be determined by the Board of Directors at or after grant; provided,

however, that no Free Standing Stock Appreciation Right shall be exercisable

during the first six months of its term, except that this additional limitation

shall not apply in the event of a Participant's death or disability (as defined

in Section 409A(a)(2)(C) of the Code) prior to the expiration of such six-month

period.

 

                  (d) Related Stock Appreciation Rights shall be exercisable

only at such time or times and to the extent that the Options to which they

relate shall be exercisable in accordance with the provisions of Section 7

above and this Section 14 of the Plan.

 

                  (e) Upon the exercise of a Free Standing Stock Appreciation

Right, the Grantee shall be entitled to receive up to, but not more than, that

number of shares of Common Stock equal in value to the excess of the Fair

Market Value as of the date of exercise over the price per share specified in

the Free Standing Stock Appreciation Right (which price shall be no less than

100% of the Fair Market Value on the date of grant) multiplied by the number of

shares of Common Stock in respect of which the Free Standing Stock Appreciation

Right is being exercised, with the Committee having the right to determine the

form of payment.

 

                  (f) A Related Stock Appreciation Right may be exercised by a

Grantee by surrendering the applicable portion of the related Option. Upon such

exercise and surrender, the Grantee shall be entitled to receive up to, but not

more than, that number of shares of Common Stock equal in value to the excess

of the Fair Market Value as of the date of exercise over the Exercise Price

specified in the related Option (which price shall be no less than 100% of the

Fair Market Value on the date of grant) multiplied by the number of shares of

Common Stock in respect of which the Related Stock Appreciation Right is being

exercised, with the Committee having the right to determine the form of

payment. Options which have been so surrendered, in whole or in part, shall no

longer be exercisable to the extent the Related Stock Appreciation Rights have

been so exercised.

 

                  (g) Notwithstanding the foregoing, the Board of Directors may

determine to settle the exercise of a Stock Appreciation Right in cash (or in

any combination of shares Common Stock and cash) to the extent that such

settlement does not violate Section 409A of the Code.

 

                  (h) Unless otherwise determined by the Board of Directors or

set forth in an applicable Award Agreement, upon a Change in Control of the

Corporation, all Stock Appreciation Rights shall become immediately vested and

exercisable.

 

                  (i) Stock Appreciation Rights shall be transferable only when

and to the extent that an Option would be transferable under Section 10 of the

Plan.

 

                  (j) Except as otherwise set forth in an Award Agreement with

a Grantee, upon termination of employment or service, any outstanding Stock

Appreciation Rights shall be governed by the same principles relating to

Options as set forth in Section 12 hereof.

 

         15. OTHER STOCK-BASED AWARDS.

 

                  (a) The Board of Directors is authorized to grant Awards to

Grantee in the form of Other Stock-Based Awards, as deemed by the Committee to

be consistent with the purposes of the Plan and as evidenced by an Award

Agreement. Other Stock-Based Awards shall include a right or other interest

granted to a Grantee under the Plan that may be denominated or payable in,

valued in whole or in part by reference to, or otherwise based on or related

to, shares of Common Stock, including but not limited to restricted stock

units, dividend equivalents or performance units, each of which may be subject

to the attainment of performance goals or a period of continued employment or

other terms or conditions as determined by the Board of Directors. The Board of

Directors shall determine the terms and conditions of such Other Stock-Based

Awards, consistent with the terms of the Plan, at the date of grant or

thereafter, including any performance goals and performance periods. Common

Stock or other securities or property delivered pursuant to an Award in the

nature of a purchase right granted under this Section 15 shall be purchased for

such consideration, paid for at such times, by such methods, and in such forms,

including, without limitation, shares of Common Stock, other Awards, notes or

other property, as the Board of Directors shall determine, subject to any

required corporate action.

 

                  (b) To the extent that the Plan is subject to Section 162(m)

of the Code, no payment shall be made to a "covered employee" (within the

meaning of Section 162(m) of the Code) prior to the certification by the

Committee that all requisite performance goals have been attained. The

Committee may establish such other rules applicable to the Other Stock-Based

Awards, provided, however, that in the event that the Plan is subject to

Section 162(m) of the Code, such rules shall be in compliance with Section

162(m) of the Code.

 

                  (c) Unless otherwise determined by the Board of Directors,

any Other Stock-Based Award shall become immediately vested upon a Change in

Control.

 

         16. ADJUSTMENT OF AND CHANGES IN CAPITALIZATION.

 

                  (a) In the event that the outstanding shares of Common Stock

shall be changed in number or class by reason of split-ups, combinations,

mergers, consolidations or recapitalizations, or by reason of stock dividends,

the number or class of shares which thereafter may be issued pursuant to Awards

granted under the Plan, both in the aggregate and as to any individual, and the

number and class of shares then subject to Awards theretofore granted and the

price per share payable upon exercise of such Option shall be adjusted so as to

reflect such change, all as determined by the Board of Directors. 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 or property into which

such Common Stock shall have been changed, or for which it shall have been

exchanged, then if the Board of Directors shall, in its sole discretion,

determine that such change equitably requires an adjustment in any outstanding

Award theretofore granted or which may be granted under the Plan, such

adjustment shall be made in accordance with such determination.

 

                  (b) Notice of any adjustment shall be given by the

Corporation to each Grantee with an Award 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.

 

                  (c) Fractional shares resulting from any adjustment in

Options or Restricted Stock pursuant to this Section 16 may be settled in cash

or otherwise as the Board of Directors may determine.

 

         17. SECURITIES ACTS REQUIREMENTS.

 

                  (a) THE CORPORATION HAS NOT FILED FINANCIAL STATEMENTS FOR

ANY PERIODS ENDED AFTER DECEMBER 31, 2003. THE CORPORATION DOES NOT EXPECT TO

BECOME CURRENT WITH RESPECT TO ALL OF ITS PREVIOUSLY UNFILED FINANCIAL

STATEMENTS UNTIL AT LEAST THE FIRST QUARTER OF 2006. BECAUSE THE ISSUANCE OF

SHARES OF COMMON STOCK MUST BE REGISTERED UNDER THE SECURITIES ACT OF 1933,

UNLESS AN EXEMPTION IS AVAILABLE, NO OPTION UNDER THE PLAN MAY BE EXERCISED

UNTIL THE CORPORATION COMPLIES WITH ITS REPORTING OBLIGATIONS UNDER THE FEDERAL

SECURITIES LAWS, AND NO SHARES OF COMMON STOCK MAY BE OTHERWISE ISSUABLE

PURSUANT TO OTHER STOCK-BASED AWARDS.

 

                  (b) In addition to the requirements set forth in Section

17(a), (i) no Option granted pursuant to the Plan shall be exercisable in whole

or in part, and the Corporation shall not be obligated to sell any shares of

Common Stock subject to any such Option, if such exercise and sale or 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; and (ii) each Option shall be subject to

the further requirement that, at any time that the Board of Directors or the

Committee, as the case may be, shall determine, in their respective discretion,

that the listing, registration or qualification of the shares of Common Stock

subject to such Option under any securities exchange requirements or under any

applicable law, or the consent or approval of any governmental regulatory body,

is necessary or desirable as a condition of, or in connection with, the

granting of such Option or the issuance of shares thereunder, such Option may

not be exercised or issued, as the case may be, in whole or in part unless such

listing, registration, qualification, consent or approval shall have been

effected or obtained free of any conditions not acceptable to the Board of

Directors or the Committee, as the case may be.

 

                  (c) As a condition to the issuance of any Restricted Stock,

Stock Appreciation Right that may be settled in shares of Common Stock or Other

Stock-Based Award under the Plan, the Board of Directors or the Committee, as

the case may be, may require the Grantee to furnish a written representation

that he or she is acquiring such Restricted Stock or Common Stock for

investment and not with a view to distribution of the shares of Restricted

Stock or Common Stock to the public and a written agreement restricting the

transferability of the shares of Restricted Stock or Common Stock, and may

affix a restrictive legend or legends on the face of the certificate

representing such shares of Restricted Stock or Common Stock. Such

representation, agreement and/or legend shall be required only in cases where

in the opinion of the Board of Directors or the Committee, as the case may be,

and counsel for the Corporation, it is necessary to enable the Corporation to

comply with the provisions of the Securities Act of 1933 or other Federal or

state statutes having similar requirements, and any stockholder who gives such

representation and agreement shall be released from it and the legend removed

at such time as the shares of Restricted Stock or Common Stock to which they

applied are registered or qualified pursuant to the Securities Act of 1933 or

other Federal or state statutes having similar requirements, or at such other

time as, in the opinion of the Board of Directors or the Committee, as the case

may be, and counsel for the Corporation, the representation and agreement and

legend cease to be necessary to enable the Corporation to comply with the

provisions of the Securities Act of 1933 or other Federal or state statutes

having similar requirements.

 

         18. AMENDMENT OF THE PLAN. The Board of Directors may at any time and

from time to time alter, amend, suspend, or terminate the Plan in whole or in

part. Notwithstanding the foregoing, no amendment to or termination of the Plan

shall affect adversely any of the rights of any Grantee, without such Grantee's

consent, under any Option or Restricted Stock theretofore granted under the

Plan. All changes described in this paragraph are at the sole discretion of the

Board of Directors and/or the Committee, may be made at any time, and may have

a retroactive effective date.

 

         19. CHANGES IN LAW. Subject to the provisions of Section 18, the Board

of Directors shall have the power to amend the Plan and any outstanding Awards

granted thereunder in such respects as the Board of Directors shall, in its

sole discretion, deem advisable in order to incorporate in the Plan or any such

Awards any new provision or change designed to comply with or take advantage of

requirements or provisions of the Code or any other statute, or Rules or

Regulations of the Internal Revenue Service or any other Federal or state

governmental agency enacted or promulgated after the adoption of the Plan.

 

         20. LEGAL MATTERS.

 

                  (a) Every right of action by or on behalf of the Corporation

or by any stockholder against any past, present or future member of the Board

of Directors, officer or employee of the Corporation arising out of or in

connection with this Plan shall, irrespective of the place where such action

may be brought and irrespective of the place of residence of any such Grantee,

cease and be barred by the expiration of three years from whichever is the

later of (a) the date of the act or omission in respect of which such right of

action arises, or (b) the first date upon which there has been made generally

available to stockholders an annual report of the Corporation and a proxy

statement for the Annual Meeting of Stockholders following the issuance of such

annual report, which annual report and proxy statement alone or together set

forth, for the related period, the aggregate number of shares for which Awards

were granted; and any and all right of action by any employee or executive of

the Corporation (past, present or future) against the Corporation arising out

of or in connection with this Plan shall, irrespective of the place where such

action may be brought, cease and be barred by the expiration of three years

from the date of the act or omission in respect of which such right of action

arises.

 

                  (b) 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.

 

</TEXT>

</DOCUMENT>