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Exhibit 99.1
PHYCOR, INC.
NONQUALIFIED STOCK OPTION PLAN
1. Name of the Plan. This stock option plan has been established by
action of the board of directors of PhyCor, Inc. (the "Board") on July 2, 1998,
as the PhyCor, Inc. NonQualified Stock Option Plan.
2. The Purpose of the Plan. The Plan is intended to provide an
opportunity for employees of PhyCor, Inc., a Tennessee corporation (the
"Corporation"), including officers, directors and key employees of the
Corporation and its subsidiaries ("Subsidiaries"), as subsidiaries are defined
in Section 424(f) of the Internal Revenue Code of 1986 (the "Code"), to acquire
shares of the Corporation's common stock, no par value per share ("Common
Stock"). The Plan provides for the grant of stock options ("Options"), which
Options provide an equity interest in the Corporation's business as an incentive
for service or continued service with the Corporation and to aid the Corporation
in retaining and obtaining key personnel of outstanding ability.
3. Stock Subject to the Plan. The maximum numbers of shares of Common
Stock which may be issued under Options granted under the Plan is 1,500,000
(subject to adjustments pursuant to Section 7), which may be either authorized
and unissued shares or shares that are held in the treasury of the Corporation,
as shall be determined by the Board. If an Option expires or terminates for any
reason without being exercised in full, the shares of Common Stock represented
by such Option shall again be available for purposes of the Plan.
4. Administration of the Plan. This Plan shall be administered by a
committee composed of at least two individuals (or such number that satisfies
section 162(m)(4)(C) of the Code and Rule 16b-3 of the Securities Exchange Act
of 1934) who are members of the Board and are not employees of the Corporation
or an Affiliate, and who are designated by the Board as the "compensation
committee" or are otherwise designated to administer the Plan (the "Committee").
The Committee shall have full authority in its discretion to determine the
eligible persons to whom Options shall be granted and the terms and provisions
thereof. In making such determinations, the Committee may take into account the
nature of the services rendered and to be rendered by such persons, their
present and potential contributions to the Corporation and any other factors
which the Committee deems relevant. Subject to the provisions of the Plan, the
Committee shall have full and conclusive authority to interpret the Plan; to
prescribe, amend and rescind rules and regulations relating to the Plan; to
determine the terms and provisions of the respective agreements which represent
each Option (hereinafter, an "Agreement"), which need not be identical; to
determine the restrictions on transferability of Common Stock acquired upon
exercise of Options; and to make all other determinations necessary or advisable
for the proper administration of the Plan.
The Committee may delegate authority to the president or chief
executive officer of the Corporation to amend any Agreement in the manner
specified in a written delegation to modify the exercisability or vesting of the
Option or in any other manner that is specified in a written delegation by the
Committee.
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5. Eligibility and Limits. Options may be granted to employees and
directors as are selected by the Committee. No employee of the Corporation or a
Subsidiary may receive Options with respect to more than 750,000 shares of
Common Stock during any calendar year (which number of shares shall be subject
to adjustments pursuant to Section 7 herein).
6. Terms and Conditions of Options. Subject to the following
provisions, all Options shall be in such form and upon such terms and conditions
as the Committee, in its discretion, may from time to time determine.
(a) Option Price.
(i) NonQualified Options. The Option price per share shall not
be less than 50% of the fair market value per share of the Common
Stock on the date the Option is granted.
(ii) Fair Market Value. For purposes of this Plan, and as used
herein, the "fair market value" of a share of Common Stock is the
closing sales price on the date in question (or, if there was no
reported sale on such date, on the last preceding day on which any
reported sale occurred) of the Common Stock as reported on the
Nasdaq National Market System (or such other exchange that is at the
time, the primary exchange on which the Common Stock is traded).
(b) Date of Grant. The date the Option is granted shall be the
date on which the Committee has determined the recipient of the Option, the
number of shares covered by the Option and has taken all such other action as is
necessary to complete the grant of the Option. Accordingly, the date an Option
is granted may be deemed to be prior to the approval of this Plan or an
amendment by the shareholders of the Corporation and prior to the time that an
Agreement is executed by a Participant and the Corporation.
(c) Option Term. No Option shall be exercisable after the expiration
of ten years from the date the Option is granted, unless provided otherwise in
an Agreement that covers the Option.
(d) Payment. Unless otherwise provided by the Agreement, payment of
the exercise price of an Option shall be made in cash, Common Stock that was
acquired at least six months prior to the exercise of the Option, other
consideration acceptable to the Committee, or a combination thereof. Such
payment shall be made at the time that the Option or any part thereof is
exercised, and no shares shall be issued until full payment therefor has been
made.
(e) Status of Option Holder. The holder of an Option shall, as such,
have none of the rights of a stockholder.
(f) Nontransferability of Options. In general, Options shall not be
transferable or assignable except by will or by the laws of descent and
distribution and shall be exercisable, during the holder's lifetime, only by
him. Provided, however, that a Participant may transfer an Option to the extent
permitted by the Committee and set forth in the Agreement evidencing the Option.
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(g) Termination of Employment; Disability; Retirement or Death.
Except as provided below, an Option may not be exercised by a holder unless he
has been an employee continually from the date of the grant until the date
ending three months before the date of exercise. If the holder of an Option
dies, such Option may be exercised by a legatee or legatees of the holder under
his last will, or by his personal representative or distributee, at any time
during the twelve-month period following his death. If a holder is discharged as
an employee, or removed as a director, for cause, as determined by the
Committee, Options held by him shall not be exercisable after such discharge or
removal, unless otherwise provided herein. If a holder ceases to be an employee
by reason of permanent disability, within the meaning of section 22(e)(3) of the
Code ("Disability"), all Options held by the holder may be exercised at any time
during the twelve-month period following the Disability. Upon a holder's
Retirement (as defined below), Disability or Death, all Options held by the
holder shall become fully exercisable as to the full number of shares covered
thereby notwithstanding any vesting schedule contemplated in the Option. As used
herein, "Retirement" shall mean (i) the holder is at least 60 years old and has
continuously been employed by the Corporation or a Subsidiary for a period of at
least five years, or is at least 55 years old and has continuously been employed
by the Corporation or a Subsidiary for a period of at least twenty years, and
(ii) the holder has given written notice in a form satisfactory to the Committee
of his permanent retirement. For purposes of this subparagraph (g), a holder
shall be deemed to be an employee or director so long as the holder is an
employee or director of a parent or Subsidiary of the Corporation or by another
corporation (or a parent or subsidiary corporation of such other corporation)
which has assumed the Option of the holder in a transaction to which section
424(a) of the Code is applicable. The provisions of this Section 6(g) shall be
deemed to apply to any outstanding Option without regard to when such Option was
granted by the Committee.
(h) Limited Rights of Exercise. Notwithstanding any vesting schedule
contained in an Agreement, an Option may be exercised during the Option term as
to the full number of shares covered by the Option if: (1) a tender offer or
exchange offer has been made for shares of Common Stock, provided that the
corporation, person or other entity making such offer purchases or otherwise
acquires shares of Common Stock pursuant to such offer; (2) the stockholders of
the Corporation have approved a definitive agreement (a "Merger Agreement") to
merge or consolidate with or into another corporation pursuant to which the
Corporation will not survive or will survive only as a subsidiary of another
corporation (the "Transaction"), or to sell or otherwise dispose of all or
substantially all of its assets, (3) any person or group (as such terms are
defined in section 13(d) of the Securities Exchange Act of 1934, as amended (the
"Act")), becomes the beneficial owner (as such term is defined in Rule 13(d)
pursuant to the Act) of 50% or more of the outstanding shares of Common Stock,
or (4) the individuals who, as of the date of this Plan, are members of the
Board (the "Incumbent Board"), cease for any reason to constitute at least a
majority of the members of the Board; provided, however, that if the election,
or nomination for election by the Corporation's stockholders, of any new
director was approved by a vote of at least a majority of the Incumbent Board,
such new director shall, for purposes of this Plan, be considered as a member of
the Incumbent Board; provided, further, however, that no individual shall be
considered a member of the Incumbent Board if such individual initially assumed
office as a result of either an actual or threatened "Election Contest" (as
described in Rule 14a-11 promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person other
than the Board (a "Proxy Contest") including by reason of any agreement intended
to avoid or settle any Election Contest or Proxy
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Contest. If any of the events specified in this subparagraph (h) (a "Change in
Control") have occurred, the Option shall be fully exercisable: (x) in the event
of a tender offer or exchange offer as described in clause (1) above, during the
term of the tender or exchange offer and for a period of 30 days thereafter; (y)
in the event of execution of a Merger Agreement as defined in clause (2) above,
within a 30-day period commencing on the date of execution of a Merger
Agreement, and the Option holder may condition such exercise upon the
consummation of the Transaction; (z) in the event of an event described in
clause (3) above, within a 30-day period commencing on the date upon which the
Corporation is provided a copy of Schedule 13D or 13G (filed pursuant to section
13(d) or 13(g) of the Act and the rules and regulations promulgated thereunder)
indicating that any person or group has become the beneficial owner of 50% or
more of the outstanding shares of Common Stock or, if the Corporation is not
subject to section 13(d) of the Act, within a 30-day period commencing on the
date upon which the Corporation receives written notice that any person or group
has become the beneficial owner of 50% or more of the outstanding shares of
Common Stock or (a) if a change in the Incumbent Board occurs pursuant to clause
(4) above, within a 30 day period commencing upon the date the Option holder was
given notice of the change in the Board composition. The provisions of this
Section 6(h) shall be deemed to apply to any outstanding Option without regard
to when such Option was granted by the Committee. Moreover, unless the Option
holder specifically elects otherwise, if the Option holder exercises less than
all the Options as to which vesting is accelerated pursuant to this Section
6(h), the Options exercised shall be deemed to be those which had the latest
vesting date.
(i) Upon exercise of an Option by a Participant who is an
employee of the Corporation or a Subsidiary, the Participant shall, upon
notification of the amount due and prior to or concurrently with the delivery of
the certificates representing the shares, pay to the Corporation amounts
necessary to satisfy applicable federal, state and local withholding tax
requirements or shall otherwise make arrangements satisfactory to the
Corporation for such requirements.
7. Changes in Capitalization, Merger or Liquidation.
(a) The number of shares of Common Stock as to which Options may be
granted, the number of shares covered by each outstanding Option, and the price
per share in each outstanding Option, shall be proportionately adjusted for (i)
any increase or decrease in the number of issued shares of Common Stock
resulting from a subdivision or combination of shares, (ii) the payment of a
stock dividend in shares of Common Stock to holders of outstanding shares of
Common Stock or (iii) any other increase or decrease in the number of such
shares effected without receipt of consideration by the Corporation.
(b) If the Corporation shall be the surviving corporation in any
merger, share exchange or consolidation, recapitalization, reclassification of
shares or similar reorganization, the holder of each outstanding Option shall be
entitled to receive or purchase, as applicable, at the same times and upon the
same terms and conditions as are then provided in the relevant Agreement, the
number and class of shares of Common Stock or other securities to which a holder
of the number of options or shares of Common Stock at the time of such
transaction would have been entitled to receive as a result of such transaction.
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(c) In the event of any such changes in capitalization of the
Corporation, the Committee may make such additional adjustments in the number
and class of shares of Common Stock or other securities with respect to which
outstanding Options are exercisable as the Committee in its sole discretion
shall deem equitable or appropriate, subject to the provisions of this
Section 7.
(d) A dissolution or liquidation of the Corporation shall cause each
outstanding Option to terminate.
(e) Upon a merger, share exchange, consolidation or other business
combination in which the Corporation is not the surviving corporation, the
surviving corporation shall substitute another award of stock options with
equivalent value as to an outstanding Option in a transaction described in
section 424(a) of the Code. In the event of a change of the Corporation's shares
of Common Stock with par value in or the same number of shares with a different
par value or without par value, the shares resulting from any such change shall
be deemed to be the Common Stock within the meaning of the Plan. Except as
expressly provided in this Section 7, the holder of a Option shall have no
rights by reason of any subdivision or combination of shares of Common Stock of
any class or the payment of any stock dividend or any other increase or decrease
in the number of shares of Common Stock of any class or by reason of any
dissolution, liquidation, merger, share exchange or consolidation or
distribution to the Corporation's stockholders of assets of stock of another
corporation, and any issue by the Corporation of shares of Common Stock of any
class, or securities convertible into shares of Common Stock of any class, shall
not affect, and no adjustment by reasons thereof shall be made with respect to,
the number or price of shares of Common Stock subject to the Option. The
existence of the Plan and the Options granted pursuant to the Plan shall not
affect in any way the right or power of the Corporation to make or authorize any
adjustment, reclassification, reorganization or other change in its capital or
business structure, any merger, share exchange or consolidation of the
Corporation, any issue of debt or equity securities having preferences or
priorities as to the Common Stock or the rights thereof, the dissolution or
liquidation of the Corporation, any sale or transfer of all or any part of its
business or assets, or any other corporate act or proceeding.
8. Termination and Amendment of the Plan. The Plan shall remain in
effect until terminated by the Board. Upon termination of the Plan, no Options
shall be granted under the Plan after that date, but any Options granted before
termination of the Plan shall remain exercisable thereafter until they expire or
lapse according to their terms. The Board may amend or terminate this Plan at
any time; provided, however, an amendment that would have a material adverse
effect on the rights of a Participant under an outstanding Option is not valid
with respect to such Option without the Participant's consent.
9. Effective Date of Plan. This Plan is effective upon its adoption by
the Board.
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IN WITNESS WHEREOF, the undersigned officer of the Corporation has
executed this instrument on this the ___ day of ___________, 1998, but to be
effective on the date first written above.
PHYCOR, INC.
By: _________________________________
Its: _________________________________
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