1996 HEALTH CARE PROFESSIONALS STOCK OPTION PLAN
1.1 Name. This Plan shall be known as the "1996 Health Care
Professionals Stock Option Plan." Capitalized terms used herein are defined in
Article VI hereof.
1.2 Purpose. The purpose of the Plan is to promote the growth and
general prosperity of the Company by permitting the Company to grant Options to
purchase Common Stock of the Company to Advisors, thereby providing them with
an additional incentive to contribute to the success of the Company.
1.3 Effective Date. The Plan shall become effective upon the
1.4 Eligibility to Participate. Any Advisor shall be eligible to
participate in the Plan.
1.5 Shares Subject to the Plan. The shares of Common Stock to be
issued pursuant to the Plan shall be either authorized and unissued shares of
Common Stock or shares of Common Stock issued and thereafter acquired by the
1.6 Maximum Number of Plan Shares. Subject to adjustment pursuant
to the provisions of Section 4.2, and subject to any additional restrictions
elsewhere in the Plan, the maximum aggregate number of shares of Common Stock
that may be issued and sold hereunder shall not exceed 275,000 shares.
1.7 Options and Stock Granted Under Plan. Plan Shares with
respect to which an Option shall have been exercised shall not again be
available for grant hereunder. If an Option terminated for any reason without
being wholly exercised, a new Option may be granted hereunder covering the
number of Plan Shares to which such Option termination relates.
1.8 Conditions Precedent. The Company shall not issue any
certificate for Plan Shares pursuant to the Plan prior to fulfillment of all of
the following conditions:
(a) The admission of the Plan Shares to listing on all
stock exchanges on which the Common Stock is then listed, unless the
Board or Committee determines in its sole discretion that such listing
is neither necessary nor advisable;
(b) The completion of any registration or other
qualification of the offer or sale of Plan Shares under any federal or
state law or under the rulings or regulations of the Securities and
Exchange Commission or any other governmental regulatory body that the
Board or Committee shall in its sole discretion deem necessary or
(c) The obtaining of any approval or other clearance from
any federal or state governmental agency that the Board or Committee
shall in its sole discretion determine to be necessary or advisable.
1.9 Reservation of Shares of Common Stock. During the term of the
Plan, the Company shall at all times reserve and keep available such number of
shares of Common Stock as shall be necessary to satisfy the requirements of the
Plan as to the number of Plan Shares. In addition, the Company shall from time
to time, as is necessary to accomplish the purposes of the Plan, seek or obtain
from any regulatory agency having jurisdiction any requisite authority that is
necessary to issue Plan Shares hereunder. The inability of the Company to
obtain from any regulatory agency having jurisdiction the authority deemed by
the Company's counsel to be necessary to the lawful issuance of any Plan Shares
shall relieve the Company of any liability in respect to the non-issuance of
Plan Shares as to which the requisite authority shall not have been obtained.
1.10 Tax Withholding.
(a) Condition Precedent. The issuance of Plan Shares
pursuant to the exercise of any Option under the Plan is subject to
the condition that if at any time the Committee shall determine, in
its discretion, that the satisfaction of withholding tax or other
withholding liabilities under any federal, state or local law is
necessary or desirable as a condition of, or in connection with such
issuances, then the issuances shall not be effective unless the
withholding shall have been effected or obtained in a manner
acceptable to the Committee.
(b) Manner of Satisfying Withholding Obligation. When an
Optionee is required by the Committee to pay to the Company an amount
required to be withheld under applicable income tax laws in connection
with the exercise of an Option, which payment may be made (i) in cash,
(ii) by check, (iii) if permitted by the Committee, by delivery to the
Company of shares of Common Stock already owned by the Optionee having
a Fair market Value on the Tax Date equal to the amount required to be
withheld, (iv) through the withholding by the Company of a portion of
the Plan Shares acquired upon the exercise of the Options having a
Fair Market Value on the Tax Date equal to the amount required to be
withheld or (v) in any other form of valid consideration, as permitted
by the Committee in its discretion.
1.11 Exercise of Options.
(a) Method of Exercise. Each Option shall be exercisable
in accordance with the terms of the Option Agreement pursuant to which
the Option was granted. No Option may be exercised for a fraction of
a Plan Share.
(b) Payment of Purchase Price. The purchase price of any
Plan Shares purchased shall be paid at the time of exercise of the
Options either (i) in cash, (ii) by
certified or cashier's check, (iii) if permitted by the Committee, by
shares of Common Stock, (iv) if permitted by the Committee, by cash or
certified or cashier's check for the par value of the Plan Shares plus
a promissory note for the balance of the purchase price, which note
shall provide for full personal liability of the maker and shall
contain such other terms and provisions as the Committee may
determine, including without limitation the right to repay the note
partially or wholly with Common Stock, (v) by delivery of a copy of
irrevocable instructions from the Optionee to a broker or dealer,
reasonably acceptable to the Company, to sell certain of the Plan
Shares purchased upon exercise of the Options or to pledge them as
collateral for a loan and promptly deliver to the Company the amount
of sale or loan proceeds necessary to pay such purchase price or (vi)
in any other form of valid consideration, as permitted by the
Committee in its discretion. If any portion of the purchase price or
a note given at the time of exercise is paid in shares of Common
Stock, those shares shall be valued at the then Fair Market Value.
1.12 Acceleration in Certain Events. The Committee may accelerate
the exercisability of any Option in whole or in part at any time.
Notwithstanding the provisions of any Option Agreement, the following
provisions shall apply:
(a) Mergers and Reorganizations. If the Company or its
stockholders enter into an agreement to dispose of all or
substantially all of the assets of the Company by means of a sale,
merger, or other reorganization, liquidation or otherwise, all Options
shall become immediately exercisable with respect to the full number
of shares subject to such Options during the period commencing as of
the date of the agreement to dispose of all or substantially all of
the assets or stock of the Company and ending when the disposition of
assets or stock contemplated by that agreement is consummated or the
Options are otherwise terminated in accordance with its provisions or
the provisions of this Plan, whichever occurs first; provided that no
Option will be immediately exercisable under this Section on account
of any agreement of merger or other reorganization when the
stockholders of the Company immediately before the consummation of the
transaction will own at least 50% of the total combined voting power
of all the classes of the stock entitled to vote of the surviving
entity immediately after the consummation of the transaction. An
Option shall not become immediately exercisable, however, if the
transaction contemplated in the agreement is a merger or
reorganization in which the Company shall survive.
(b) Change in Control. In the event of a change in
control or threatened change in control of the Company, all Options
granted prior to the change in control or threatened change in control
shall become immediately exercisable. A "change in control" will be
deemed to have occurred for purposes hereof (i) upon the occurrence of
a change of stock ownership of the Company of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A
promulgated under the Securities Act, and any successor Item of a
similar nature; or (ii) upon the acquisition of beneficial ownership,
directly or indirectly, by any person (as such term is used in
and 14(d)(2) of the Exchange Act) of securities of the Company
representing 33% or more of the combined voting power of the Company's
then outstanding securities; or (iii) a change during any period of
two consecutive years of a majority of the members of the Board for
any reason, unless the election, or the nomination for election by the
Company's stockholders, of each director was approved by a vote of a
majority of the directors then still in office who were directors at
the beginning of the period; provided that a change in control will
not be deemed to have occurred for purposes hereof with respect to any
person meeting the requirements of clauses (i) and (ii) of Rule
13d-1(b)(1) promulgated under the Securities Act.
1.13 Written Notice Required. Any Option shall be deemed to be
exercised for purposes of the Plan when written notice of exercise has been
received by the Company at its principal office from the person entitled to
exercise the Option and payment of the Plan Shares with respect to which the
Option is exercised has been received by the Company in accordance with Section
1.14 Compliance with Securities Laws. Plan Shares shall not be
issued with respect to any Option unless the issuance and delivery of the Plan
Shares (and the exercise of an Option, if applicable) shall comply with all
relevant provisions of state and federal law (including without limitation (i)
the Securities Act, the rules and regulations promulgated thereunder, and (ii)
the requirements of any stock exchange upon which the Plan Shares may than be
listed) and shall be further subject to the approval of counsel for the Company
with respect to such compliance. The Committee may also require an Optionee to
furnish evidence satisfactory to the Company, including without limitation a
written and signed representation letter and consent to be bound by any
transfer restrictions imposed by law, legend, condition, or otherwise, that the
Plan Shares are being acquired only for investment and without any present
intention to sell or distribute the shares in violation of any state or federal
law, rule, or regulation. Further, each Optionee shall consent to the
imposition of a legend on the certificate representing the Plan Shares issued
pursuant to the exercise of an Option restricting their transfer as required by
law of this Section.
1.15 Service of Optionee. Nothing in the Plan or in any Option
granted hereunder shall confer upon any Optionee any right to continued service
as an Advisor of the Company or any of its Subsidiaries or limit in any right
of the Company or any Subsidiary at any time to terminate or alter the terms of
1.16 Rights of Optionees Upon Termination of Service. The
Committee shall provide in each Option Agreement for the circumstances under
which Options granted hereunder terminate; provided, however, that in the event
an Optionee ceases to serve as an Advisor for Cause of voluntarily leaves the
employment of a Clinic in breach of his employment agreement with such Clinic;
the Optionee's Options shall automatically expire. The Committee also shall
address in each Option Agreement the exercisability of Options following the
death, Permanent Disability or Retirement of an Optionee.
1.17 Transferability of Options. The Committee may, in its
discretion, provide that Options granted hereunder may be transferred by the
Optionee to members of his immediate family, trusts for the benefit of such
immediate family members and partnerships in which such immediate family
members are the only partners, provided that there cannot be any consideration
for the transfer.
1.18 Information to Optionees. The Company shall furnish to each
Optionee a copy of the annual report, proxy statements and all other reports
sent to the Company's stockholders. Upon written request, the Company shall
furnish to each Optionee a copy of its most recent Form 10-K Annual Report and
each quarterly report to stockholders issued since the end of the Company's
most recent fiscal year.
2.1 Committee. Subject to Section 2.2, the Plan shall be
administered by a Committee consisting of not fewer than two members of the
Board from time to time. Except as otherwise provided by the terms of this
Plan or by the Board, the Committee shall have all the power and authority of
the Board hereunder. The Committee shall have the full and final authority in
its discretion, but subject to the provisions of the Plan, to determine from
time to time the Advisors to whom Options shall be granted and the number of
Plan Shares subject to each Option; to interpret the Plan, to prescribe, amend
and rescind any rules and regulations necessary or appropriate for the
administration of the Plan, to determine and interpret the details and
provisions of each Option Agreement, to modify or amend any Option Agreement or
waive any conditions or restrictions applicable to any Options (or the exercise
thereof), and to make all other determinations necessary or advisable for the
administration of the Plan.
2.2 Grants Prior to Initial Public Offering. Notwithstanding the
provisions of Section 2.1, prior to the date of the Company's initial public
offering of Common Stock, the Plan shall be administered by the full Board, and
the Board shall have all of the powers of the Committee hereunder.
2.3 Appointment of Committee. The Committee shall be appointed by
the Board; provided that the Board may remove any Committee member, with or
2.4 Majority Rule; Unanimous Written Consent. A majority of the
members of the Committee shall constitute a quorum, and any action taken by a
majority present at a meeting at which a quorum is present or any action taken
without a meeting evidenced by a writing executed by all members of the
Committee shall constitute the action of the Committee. Meetings of the
Committee may take place by telephone conference call.
2.5 Company Assistance. The Company shall supply full and timely
information to the Committee on all matters relating to Advisors, their
service, death, Retirement, Permanent Disability, or other termination of
service, and such other pertinent facts as the Committee may require. The
Company shall furnish the Committee with such clerical and other assistance as
is necessary in the performance of its duties.
NONQUALIFIED STOCK OPTIONS
3.1 Options Terms and Conditions. The terms and conditions of
Options granted pursuant to this Plan may differ from one another as the
Committee shall, in its discretion, determine as long as all Options granted
pursuant to this Plan satisfy the requirements of this Article.
3.2 Duration of Options. Each Option granted pursuant to this
Plan and all rights thereunder shall expire on the date determined by the
Committee, but in no event shall any Option granted pursuant to this Plan
expire later than 10 years after the date on which the Option is granted. In
addition, each Option shall be subject to early termination as provided
elsewhere in the Plan or Option Agreement.
3.3 Purchase Price. The purchase price for the Plan Shares
acquired pursuant to the exercise, in whole or in part, of any Option granted
pursuant to this Plan shall not be less than the Fair Market Value of the Plan
Shares at the time of the grant of the Option.
3.4 Individual Option Agreements. Each Optionee receiving Options
pursuant to this Plan shall be required to enter into a written Option
Agreement with the Company. In such Option Agreement, the Optionee shall agree
to be bound by the terms and conditions of the Plan, the Options made pursuant
hereto, and such other matters as the Committee deems appropriate.
TERMINATION, AMENDMENT, AND ADJUSTMENT
4.1 Termination and Amendment. The Plan shall terminate on
November __, 2006. The Plan may be amended, altered or discontinued by the
Board, or, if the Board has delegated this authority to the Committee, by the
Committee, without approval of the stockholders. In the event any law, or any
rule or regulation issued or promulgated by the Internal Revenue Service,
Securities and Exchange Commission, National Association of Securities Dealers,
Inc., and stock exchange upon which the Common Stock is listed for trading or
other governmental or quasi-governmental agency having jurisdiction over the
Company, its Common Stock or the Plan, requires the Plan to be amended, the
Plan will be amended at that time and all Options then
outstanding will be subject to such amendment. No amendment, alteration or
discontinuation of the Plan shall, without the consent of the individual who
has received an Option hereunder, alter or impair any of that individual's
rights or obligations under any Option granted under the Plan prior to that
amendment, alteration or discontinuation.
4.2 Adjustments. If the outstanding Common Stock is increased,
decreased, changed into, or exchanged for a different number or kind of shares
or securities through merger, consolidation, combination, exchange of shares,
other reorganization, recapitalization, reclassification, stock dividend, stock
split, or reverse stock split, an appropriate and proportionate adjustment
shall be made in the maximum number and kind of Plan Shares as to which Options
may be granted under the Plan. A corresponding adjustment changing the number
or kind of shares allocated to unexercised Options or portions thereof, which
shall have been granted prior to any such change, shall likewise be made. Any
such adjustment in outstanding Options shall be made without change in the
aggregate purchase price applicable to the unexercised portion of the Option,
but with a corresponding adjustment in the price for each share covered by the
Option. The foregoing adjustments and the manner of application of the
foregoing provisions shall be determined by the Board or Committee, and any
such adjustment may provide for the elimination or fractional share interests.
5.1 Other Compensation Plans. The adoption of the Plan shall not
affect any other stock option or incentive or other compensation plans in
effect for the Company or any Subsidiary or affiliate of the Company, nor shall
the Plan preclude the Company or any Subsidiary or affiliate thereof from
establishing any other forms of incentive or other compensation plans.
5.2 Plan Binding on Successors. The Plan shall be binding upon
the successors and assigns of the Company and any Subsidiary or affiliate of
the Company that adopts the Plan.
5.3 Headings. Headings of articles and sections hereof are
inserted for convenience of reference and constitute no part of the Plan.
As used herein with initial capital letters, the following terms have
the meanings hereinafter set forth unless the context clearly indicates to the
6.1 "Advisor" means a physician or dentist to whom the Company
chooses to grant Options in accordance with the Plan that is an Employee or
(ii) has entered into a Consulting Agreement; provided that (i) bona fide
services are rendered by such person and such services are not rendered in
connection with the offer or sale of securities in a capital-raising
transaction and (ii) such person is not a Reporting Person.
6.2 "Board" means the Board of Directors of the Company.
6.3 "Cause" has the same meaning as that provided in the
Optionee's employment agreement with a clinic.
6.4 "Clinic" means a professional corporation or association that
is managed by the Company's wholly owned subsidiary, PSC Management Corp.
pursuant to a management services agreement.
6.5 "Committee" means the Committee appointed in accordance with
6.6 "Common Stock" means the Common Stock, par value $.001 per
share, of the Company or, in the event that the outstanding shares of such
Common Stock are hereafter changed into or exchanged for shares of a different
stock or security of the Company or some other corporation, such other stock or
6.7 "Company" means Physicians' Specialty Corp., a Delaware
corporation, or one or more of its Subsidiaries.
6.8 "Consulting Agreement" means an agreement between the Company
and a physician or dentist with respect to which the physician or dentist
provides medical and surgical services to enrollees of managed care contracts
held by the Company or any Subsidiary of the Company.
6.9 "Effective Date" means November 25, 1996.
6.10 "Employee" means an employee of a Clinic.
6.11 "Exchange Act" means the Securities Exchange Act of 1934, as
6.12 "Fair Market Value" means such value as determined by the
Board or Committee on the basis of such factors as it deems appropriate;
provided that if the Common Stock is traded on a national securities exchange
or transactions in the Common Stock are quoted on the Nasdaq National Market
System, such value as shall be determined by the Committee on the basis of the
last reported sales price for the Common Stock on the date for which such
determination is relevant, as reported on the national securities exchange or
the Nasdaq National Market System, as the case may be. If the Common Stock is
not listed and traded upon a recognized securities exchange or on the Nasdaq
National Market System, the Committee shall make a determination
of Fair Market Value on the basis of the mean between the closing bid and asked
quotations for such stock on the date for which such determination is relevant
(as reported by a recognized stock quotation service) or, in the event that
there shall be no bid or asked quotations on the date for which such
determination is relevant, then on the basis of the mean between the closing
bid and asked quotations on the date nearest preceding the date for which such
determination is relevant for which such bid and asked quotations were
6.13 "Option" means a Nonqualified Stock Option granted pursuant to
6.14 "Option Agreement" means an agreement between the Company and
an Optionee with respect to one or more Options.
6.15 "Optionee" means an Advisor to whom an Option has been granted
6.16 "Permanent Disability" has the same meaning as that provided
in Section 22(e)(3) of the Code.
6.17 "Plan" means the 1996 Health Care Professionals Stock Option
Plan, as amended from time to time.
6.18 "Plan Shares" means shares of Common Stock issuable pursuant
to the Plan.
6.19 "Reporting Person" means an individual who is subject to the
reporting requirements of Section 16 of the Exchange Act as a result of his
relationship with the Company.
6.20 "Retirement" occurs when an Optionee terminates his
relationship with a Clinic on or after the date the Optionee (a) turns 65 years
old or (b) turns 55 years old and has completed 10 years of service with the
Clinic or has otherwise been determined by the Board.
6.21 "Securities Act" means the Securities Act of 1933, as amended.
6.22 "Subsidiary" means a subsidiary corporation of the Company, as
defined in Section 424(f) of the Code.
6.23 "Tax Date" means the date the amount of tax to be withheld is