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EXHIBIT 99.2
PHYCOR, INC.
CAREWISE STOCK OPTION PLAN
(FORMERLY ADOPTED BY CAREWISE, INC. AS THE CAREWISE, INC.
AMENDED AND RESTATED 1989 STOCK OPTION PLAN)
SECTION 1. PURPOSE
This PhyCor, Inc. CareWise Stock Option Plan (the "Plan") was
established by CareWise, Inc. in order to provide a means whereby selected
employees, directors, officers, agents, consultants, advisors and independent
contractors of CareWise, Inc., or of any parent or subsidiary (as defined in
subsection 5.8 and referred to hereinafter as "related corporations") thereof,
could be granted incentive stock options and/or nonqualified stock options to
purchase the Common Stock (as defined in Section 3) of CareWise, Inc., in order
to attract and retain the services or advice of such employees, directors,
officers, agents, consultants, advisors and independent contractors and to
provide added incentive to such persons by encouraging stock ownership in
CareWise, Inc.
Pursuant to a merger transaction that became effective on July 1, 1998,
CareWise, Inc. has become a wholly-owned subsidiary of PhyCor, Inc. (the
"Company") and the Company desires to adopt the Plan in order to provide for the
continuation of the options that were granted under the Plan and were not
exercised or forfeited at or prior to such merger transaction. The Company
intends that the assumption of the options previously granted hereunder be
treated as the assumption of a stock option in a transaction to which section
424(a) of the Internal Revenue Code of 1986, as amended (the "Code"), applies.
SECTION 2. ADMINISTRATION
This Plan shall be administered by the compensation committee of the
board of directors of the Company (the "Board") or any such other committee that
is designated by the Board to administer the Plan. The administrator of this
Plan shall hereinafter be referred to as the "Plan Administrator."
In the event a member of the Plan Administrator may be eligible,
subject to the restrictions set forth in Section 4, to participate in this Plan,
no member of the Plan Administrator shall vote with respect to the granting of
an option hereunder to himself or herself, as the case may be, and, if state
corporate law does not permit a committee to grant options to directors, then
any option granted under this Plan to a director for his or her services as such
shall be approved by the full Board.
The members of any committee serving as Plan Administrator shall be
appointed by the Board for such term as the Board may determine. The Board may
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from time to time remove members from or add members to the committee. Vacancies
on the committee, however caused, shall be filled by the Board.
2.1 PROCEDURES
The Plan Administrator is empowered to adopt administrative rules to
govern the administration of the Plan.
2.2 RESPONSIBILITIES
Except for the terms and conditions explicitly set forth in this Plan,
the Plan Administrator shall have the authority, in its discretion, to determine
all matters relating to the options to be granted under this Plan, including
selection of the individuals to be granted options, the number of shares to be
subject to each option, the exercise price, and all other terms and conditions
of the options. Grants under this Plan need not be identical in any respect,
even when made simultaneously. The interpretation and construction by the Plan
Administrator of any terms or provisions of this Plan or any option issued
hereunder, or of any rule or regulation promulgated in connection herewith,
shall be conclusive and binding on all interested parties, so long as such
interpretation and construction with respect to incentive stock options
correspond to the requirements of Section 422 of the Code, the regulations
thereunder and any amendments thereto.
2.3 RULE 16B-3 COMPLIANCE AND BIFURCATION OF PLAN
It is the intention of the Company that this Plan shall comply in all
respects with Rule 16b-3 under the Exchange Act. If any Plan provision is later
found not to be in compliance with such Section, the provision shall be deemed
null and void, and in all events this Plan shall be construed in favor of its
meeting the requirements of Rule 16b-3. Notwithstanding anything in this Plan to
the contrary, the Board, in its absolute discretion, may bifurcate this Plan so
as to restrict, limit or condition the application of any provision of this Plan
to participants who are subject to Section 16 of the Exchange Act without so
restricting, limiting or conditioning this Plan with respect to other
participants.
SECTION 3. SHARES SUBJECT TO THIS PLAN
The shares subject to this Plan shall be the Company's Common Stock, no
par value per share (the "Common Stock"), currently authorized but unissued or
now held or subsequently acquired by the Company as treasury shares. Subject to
adjustment as provided in Section 7, the aggregate amount of Common Stock to be
delivered upon the exercise of all options granted under this Plan shall not
exceed 597,881 shares of Common Stock. If any option granted under this Plan
shall expire or be surrendered, exchanged for another option, canceled or
terminated for any reason without having been exercised in full, the unpurchased
shares subject thereto shall thereupon again be available for purposes of this
Plan, including for
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replacement options which may be granted in exchange for such expired,
surrendered, exchanged, canceled or terminated options.
SECTION 4. ELIGIBILITY
An incentive stock option may be granted only to an individual who, at
the time the option is granted, is an employee of the Company or a related
corporation. A nonqualified stock option may be granted to any employee,
director, officer, agent, consultant, advisor or independent contractor of the
Company or any related corporation, whether an individual or an entity. Any
party to whom an option is granted under this Plan shall be referred to
hereinafter as an "Optionee."
SECTION 5. TERMS AND CONDITIONS OF OPTIONS
Options granted under this Plan shall be evidenced by written
agreements which shall contain such terms, conditions, limitations and
restrictions as the Plan Administrator shall deem advisable and which are not
inconsistent with this Plan. Notwithstanding the foregoing, options shall
include or incorporate by reference the following terms and conditions:
5.1 NUMBER OF SHARES AND PRICE
The maximum number of shares that may be purchased pursuant to the
exercise of each option and the price per share at which such option is
exercisable (the "exercise price") shall be as established by the Plan
Administrator; provided, however, that the maximum number of shares with respect
to which an option or options may be granted to any Optionee in any one fiscal
year of the Company shall not exceed 300,000 shares (the "Maximum Annual
Optionee Grant"), and provided further that the Plan Administrator shall act in
good faith to establish an exercise price which shall be not less than the fair
market value per share of the Common Stock at the time the option is granted
with respect to incentive stock options and not less than 85% of the fair market
value of the Common Stock at the time the option is granted with respect to
nonqualified stock options, and that, with respect to incentive stock options
granted to greater than 10% stockholders, the exercise price shall be as
required by subsection 6.1.
5.2 TERM AND MATURITY
Subject to the restrictions contained in Section 6 with respect to
granting incentive stock options to greater than 10% stockholders, the term of
each incentive stock option shall be as established by the Plan Administrator
and, if not so established, shall be 10 years from the date it is granted but in
no event shall it exceed 10 years. The term of each nonqualified stock option
shall be as established by the Plan Administrator and, if not so established,
shall be 10 years. All options which were granted by CareWise, Inc. and which
are assumed hereunder by the Company shall be immediately exercisable. All terms
of maturity and expiration
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described herein with respect to options shall be calculated by reference to the
original grant date of the respective options by CareWise, Inc. prior to the
assumption of this Plan by the Company.
5.3 EXERCISE.
Each option may be exercised in whole or in part at any time and from
time to time; provided, however, that no fewer than 100 shares (or the remaining
shares then purchasable under the option, if less than 100 shares) may be
purchased upon any exercise of option hereunder and that only whole shares will
be issued pursuant to the exercise of any option. An Option shall be exercised
by delivery to the Company of notice of the number of shares with respect to
which the option is exercised, together with payment of the exercise price.
5.4 PAYMENT OF EXERCISE PRICE
Payment of the option exercise price shall be made in full at the time
the notice of exercise of the option is delivered to the Company and shall be in
cash, bank certified or cashier's check, or personal check (unless at the time
of exercise the Plan Administrator in a particular case determines not to accept
a personal check) for the shares being purchased.
The Plan Administrator can determine at any time before exercise that
additional forms of payment will be permitted. To the extent permitted by the
Plan Administrator and applicable laws and regulations (including, but not
limited to, federal tax and securities laws and regulations and state corporate
law), an option may be exercised by:
(a) delivery of shares of Common Stock of the Company held by
an Optionee having a fair market value equal to the exercise price,
such fair market value to be determined in good faith by the Plan
Administrator; provided, however, that payment in stock held by an
Optionee shall not be made unless the stock shall have been owned by
the Optionee for a period of at least six months; or
(b) delivery of a properly executed exercise notice, together
with irrevocable instructions to a broker, all in accordance with the
regulations of the Federal Reserve Board, to promptly deliver to the
Company the amount of sale or loan proceeds to pay the exercise price
and any federal, state or local withholding tax obligations that may
arise in connection with the exercise.
5.5 WITHHOLDING TAX REQUIREMENT
The Company or any related corporation shall have the right to retain
and withhold from any payment of cash or shares of Common Stock under this Plan
the
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amount of taxes required by any government to be withheld or otherwise deducted
and paid with respect to such payment. At its discretion, the Company may
require an Optionee receiving shares of Common Stock to reimburse the Company
for any such taxes required to be withheld by the Company and withhold any
distribution in whole or in part until the Company is so reimbursed. In lieu
thereof, the Company shall have the right to withhold from any other cash
amounts due or to become due from the Company to the Optionee an amount equal to
such taxes. The Company may also retain and withhold or the Optionee may elect,
subject to approval by the Company at its sole discretion, to have the Company
retain and withhold a number of shares having a market value not less than the
amount of such taxes required to be withheld by the Company to reimburse the
Company for any such taxes and cancel (in whole or in part) any such shares so
withheld. Any such election must satisfy all applicable requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
5.6 HOLDING PERIODS
The Plan Administrator may require an Optionee to give the Company
prompt notice of any disposition of shares acquired by the exercise of an
incentive stock option prior to one year after the option is exercised and two
years after the option is granted.
5.7 TRANSFERABILITY OF OPTIONS
Options granted under this Plan and the rights and privileges conferred
hereby may not be transferred, assigned, pledged or hypothecated in any manner
(whether by operation of law or otherwise) other than by will or by the
applicable laws of descent and distribution and shall not be subject to
execution, attachment or similar process. During an Optionee's lifetime, any
options granted under this Plan are personal to him or her and are exercisable
solely by such Optionee. Any attempt to transfer, assign, pledge, hypothecate or
otherwise dispose of any option under this Plan or of any right or privilege
conferred hereby, contrary to the Code or to the provisions of this Plan, or the
sale or levy or any attachment or similar process upon the rights and privileges
conferred hereby shall be null and void. Notwithstanding the foregoing, to the
extent permitted by Rule 16b-3 under the Exchange Act and other applicable law
and regulation, the Plan Administrator may permit an Optionee to (i) during the
Optionee's lifetime, designate a person who may exercise the option after the
Optionee's death by giving written notice of such designation to the Company
(such designation may be changed from time to time by the Optionee by giving
written notice to the Company revoking any earlier designation and making a new
designation) or (ii) with respect to nonqualified stock options, transfer the
option and the rights and privileges conferred hereby.
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5.8 TERMINATION OF RELATIONSHIP
If the Optionee's relationship with the Company or any related
corporation ceases for any reason other than termination for cause, death or
total disability, and unless by its terms the option sooner terminates or
expires, then the Optionee may exercise, for a three-month period that portion
of the Optionee's option which is exercisable at the time of such cessation, but
the Optionee's option shall terminate at the end of such period following such
cessation as to all shares for which it has not theretofore been exercised,
unless such provision is waived in the agreement evidencing the option. If, in
the case of an incentive stock option, an Optionee's relationship with the
Company or any related corporation changes (i.e., from employee to nonemployee,
such as a consultant), such change shall constitute a termination of an
Optionee's employment with the Company or any related corporation and the
Optionee's incentive stock option shall terminate in accordance with this
subsection 5.8. Upon the expiration of the three-month period following
cessation of employment in the case of an incentive stock option, or at any time
prior to the expiration of the option in the case of a nonqualified stock
option, the Plan Administrator shall have sole discretion in a particular
circumstance to extend the exercise period following such cessation to any date
up to the termination or expiration of the option. If, however, in the case of
an incentive stock option, the Optionee does not exercise the Optionee's option
within three months after cessation of employment the option will no longer
qualify as an incentive stock option under the Code.
If an Optionee is terminated for cause, each option granted hereunder
shall automatically terminate as of the first discovery by the Company of any
reason for termination for cause, and such Optionee shall thereupon have no
right to purchase any shares pursuant to such option. "Termination for cause"
shall mean dismissal for dishonesty, conviction or confession of a crime (except
minor violations), fraud, misconduct or disclosure of confidential information.
If an Optionee's relationship with the Company or any related corporation is
suspended pending an investigation of whether or not the Optionee shall be
terminated for cause, the Optionee's rights under each option granted hereunder
likewise shall be suspended during the period of investigation.
If an Optionee's relationship with the Company or any related
corporation ceases because of a disability (as defined in section 22(e)(3) of
the Code), the Optionee's option shall not terminate until the end of the
12-month period following such cessation (unless by its terms it sooner
terminates or expires). In the case of incentive stock options, cessation of an
Optionee's relationship shall occur upon termination of employment with the
Company and related corporations.
Options granted under the Plan shall not be affected by any change of
relationship with the Company so long as the Optionee continues to be an
employee, director, officer, agent, consultant, advisor or independent
contractor of
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the Company or of a related corporation; however, a change in an Optionee's
status from an employee to a nonemployee (e.g., consultant or independent
contractor) shall result in the termination of an outstanding incentive stock
option held by such Optionee. The Plan Administrator, in its absolute
discretion, may determine all questions of whether particular leaves of absence
constitute a termination of services; provided, however, that with respect to
incentive stock options, such determination shall be subject to any requirements
contained in the Code. The foregoing notwithstanding, with respect to incentive
stock options, employment shall not be deemed to continue beyond the first 90
days of such leave, unless the Optionee's reemployment rights are guaranteed by
statute or by contract.
As used herein, the term "related corporation," when referring to a
subsidiary corporation shall mean any corporation (other than the Company) in,
at the time of the granting of the option, an unbroken chain of corporations
ending with the Company, if stock possessing 50% or more of the total combined
voting power of all classes of stock of each of the corporations other than the
Company is owned by one of the other corporations in such chain. When referring
to a parent corporation, the term "related corporation" shall mean any
corporation in an unbroken chain of corporations ending with the Company if, at
the time of the granting of the option, each of the corporations other than the
Company owns stock possessing 50% or more of the total combined voting power of
all classes of stock in one of the other corporations in such chain.
5.9 DEATH OF OPTIONEE
If an Optionee dies while he or she has a relationship with the Company
or any related corporation or within the three-month period (or 12-month period
in the case of totally disabled Optionees) following cessation of such
relationship, any option held by such Optionee to the extent that the Optionee
would have been entitled to exercise such option, may be exercised within one
year after his or her death by the personal representative of his or her estate
or by the person or persons to whom the Optionee's rights under the option shall
pass (i) by will or by the applicable laws of descent and distribution or (ii)
by a designation or transfer pursuant to Section 5.7.
5.10 NO STATUS AS STOCKHOLDER
Neither the Optionee nor any party to which the Optionee's rights and
privileges under the option may pass shall be, or have any of the rights or
privileges of, a stockholder of the Company with respect to any of the shares
issuable upon the exercise of any option granted under this Plan unless and
until such option has been exercised.
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5.11 CONTINUATION OF RELATIONSHIP
Nothing in this Plan or in any option shall confer upon any Optionee
any right to continue in the employ or other relationship of the Company or of a
related corporation, or to interfere in any way with the right of the Company or
of any such related corporation to terminate his or her employment or other
relationship with the Company at any time.
5.12 MODIFICATION AND AMENDMENT OF OPTION
Subject to the requirements of Code Section 422 with respect to
incentive stock options and to the terms and conditions and within the
limitations of this Plan, the Plan Administrator may modify or amend any
outstanding option granted under this Plan. The modification or amendment of an
outstanding option shall not, without the consent of the Optionee, impair or
diminish any of his or her rights or any of the obligations of the Company under
such option. Except as otherwise provided in this Plan, no outstanding option
shall be terminated without the consent of the Optionee.
5.13 LIMITATION ON VALUE FOR INCENTIVE STOCK OPTIONS
As to all incentive stock options granted under the terms of this Plan,
to the extent that the aggregate fair market value of the shares (determined at
the time the incentive stock option is granted) with respect to which incentive
stock options are exercisable for the first time by the Optionee during any
calendar year (under this Plan and all other incentive stock option plans of the
Company, a related corporation or a predecessor corporation) exceeds $100,000,
such options shall be treated as nonqualified stock options. The previous
sentence shall not apply if the Internal Revenue Service issues a public rule,
issues a private ruling to the Company, any Optionee or any legatee, personal
representative or distributee of an Optionee or issues regulations changing or
eliminating such annual limit.
SECTION 6. GREATER THAN 10% STOCKHOLDERS
6.1 EXERCISE PRICE AND TERM OF INCENTIVE STOCK OPTIONS
If an incentive stock option is granted under this Plan to any employee
who owns more than 10% of the total combined voting power of all classes of
stock of the Company or any related corporation, the term of such incentive
stock options shall not exceed five years and the exercise price shall be not
less than 110% of the fair market value of the shares at the time the incentive
stock option is granted. This provision shall control notwithstanding any
contrary teens contained in an option agreement or any other document.
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6.2 ATTRIBUTION RULE
For purposes of subsection 6.1, in determining stock ownership, an
employee shall be deemed to own the shares owned, directly or indirectly, by or
for his or her brothers, sisters, spouse, ancestors and lineal descendants.
Shares owned, directly or indirectly, by or for a corporation, partnership,
estate or trust shall be deemed to be owned proportionately by or for its
stockholders, partners or beneficiaries. If an employee or a person related to
the employee owns an unexercised option or warrant to purchase shares of the
Company, the shares subject to that portion of the option or warrant which is
unexercised shall not be counted in determining stock ownership. For purposes of
this Section 6, shares owned by an employee shall include all shares actually
issued and outstanding immediately before the grant of the incentive stock
option to the employee.
SECTION 7. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
The aggregate number and class of shares for which options may be
granted under this Plan, the Maximum Annual Optionee Grant set forth in Section
5.1, the number and class of shares covered by each outstanding option and the
exercise price per share thereof (but not the total price), and each such
option, shall all be proportionately adjusted for any increase or decrease in
the number of issued shares of Common Stock of the Company resulting from a
split-up or consolidation of shares or any like capital adjustment, or the
payment of any stock dividend.
7.1 EFFECT OF LIQUIDATION OR REORGANIZATION
7.1.1 CASH, STOCK OR OTHER PROPERTY FOR STOCK
Except as provided in subsection 7.1.2, upon a merger
(other than a merger of the Company in which the holders of
shares of Common Stock immediately prior to the merger have
the same proportionate ownership of shares of Common Stock in
the surviving corporation immediately after the merger),
consolidation, acquisition of property or stock, separation,
reorganization (other than a mere reincorporation or the
creation of a holding company) or liquidation of the Company,
as a result of which the stockholders of the Company receive
cash, stock or other property in exchange for or in connection
with their shares of Common Stock, any option granted
hereunder shall terminate, but the Optionee shall have the
right immediately prior to any such merger, consolidation'
acquisition of property or stock, separation, reorganization
or liquidation to exercise such Optionee's option in whole or
in part whether or not the vesting requirements set forth in
the option agreement have been satisfied.
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7.1.2 CONVERSION OF OPTIONS ON STOCK FOR STOCK EXCHANGE
If the stockholders of the Company receive capital
stock of another corporation ("Exchange Stock") in exchange
for their shares of Common Stock in any transaction involving
a merger (other than a merger of the Company in which the
holders of Common Stock immediately prior to the merger have
the same proportionate ownership of Common Stock in the
surviving corporation immediately after the merger),
consolidation, acquisition of property or stock, separation or
reorganization (other than a mere reincorporation or the
creation of a holding company), all options granted hereunder
shall be converted into options to purchase shares of Exchange
Stock unless the Company and the corporation issuing the
Exchange Stock, in their sole discretion, determine that any
or all such options granted hereunder shall not be converted
into options to purchase shares of Exchange Stock but instead
shall terminate in accordance with the provisions of
subsection 7.1.1. The amount and price of converted options
shall be determined by adjusting the amount and price of the
options granted hereunder in the same proportion as used for
determining the number of shares of Exchange Stock the holders
of the shares of Common Stock receive in such merger,
consolidation, acquisition of property or stock, separation or
reorganization. The converted options shall be fully vested
whether or not the vesting requirements set forth in the
option agreement have been satisfied.
7.2 FRACTIONAL SHARES
In the event of any adjustment in the number of shares covered by any
option, any fractional shares resulting from such adjustment shall be
disregarded and each such option shall cover only the number of full shares
resulting from such adjustment.
7.3 DETERMINATION OF BOARD TO BE FINAL
All Section 7 adjustments shall be made by the Plan Administrator, and
its determination as to what adjustments shall be made, and the extent thereof,
shall be final, binding and conclusive. Unless an Optionee agrees otherwise, any
change or adjustment to an incentive stock option shall be made in such a manner
so as not to constitute a "modification" as defined in Code Section 424(h) and
so as not to cause his or her incentive stock option issued hereunder to fail to
continue to qualify as an incentive stock option as defined in Code Section
422(b).
SECTION 8. SECURITIES REGULATION
Shares shall not be issued with respect to an option granted under this
Plan unless the exercise of such option and the issuance and delivery of such
shares pursuant thereto shall comply with all relevant provisions of law,
including, without limitation, any applicable state securities laws, the
Securities Act of 1933,
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as amended, the Exchange Act, the rules and regulations promulgated thereunder,
and the requirements of any stock exchange upon which the shares may then be
listed, and shall be further subject to the approval of counsel for the Company
with respect to such compliance, including the availability, if applicable, of
an exemption from registration for the issuance and sale of any shares
hereunder. Inability of the Company to obtain, from any regulatory body having
jurisdiction, the authority deemed by the Company's counsel to be necessary for
the lawful issuance and sale of any shares hereunder or the unavailability of an
exemption from registration for the issuance and sale of any shares hereunder
shall relieve the Company of any liability in respect of the nonissuance or sale
of such shares as to which such requisite authority shall not have been
obtained.
As a condition to the exercise of an option, the Company may require
the Optionee to represent and warrant at the time of any such exercise that the
shares are being purchased only for investment and without any present intention
to sell or distribute such shares if, in the opinion of counsel for the Company,
such a representation is required by any relevant provision of the
aforementioned laws. At the option of the Company, a stop-transfer order against
any shares of stock may be placed on the official stock books and records of the
Company, and a legend indicating that the stock may not be pledged, sold or
otherwise transferred, unless an opinion of counsel is provided (concurred in by
counsel for the Company) stating that such transfer is not in violation of any
applicable law or regulation, may be stamped on stock certificates in order to
assure exemption from registration. The Plan Administrator may also require such
other action or agreement by the Optionees as may from time to time be necessary
to comply with the federal and state securities laws.
SECTION 9. AMENDMENT AND TERMINATION
9.1 BOARD ACTION
The Board may at any time suspend, amend or terminate this Plan,
provided that, the Company's shareholders must approve any amendment which will
increase the number of shares that may be issued under this Plan.
Such shareholder approval must be obtained within 12 months of the
adoption by the Board of such amendment.
Any amendment made to this Plan which would constitute a "modification"
to incentive stock options outstanding on the date of such amendment, shall not
be applicable to such outstanding incentive stock options, but shall have
prospective effect only, unless the Optionee agrees otherwise.
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9.2 AUTOMATIC TERMINATION
Except for options that are assumed by the Company that were previously
granted by CareWise, Inc., no new options shall be granted under this Plan after
it is adopted by the Board. Otherwise, this Plan shall continue to govern all
options that were granted hereunder until such options are terminated, exercised
or assumed in a subsequent transaction. Any other amendment or termination of
this Plan shall not, without the consent of the option holder, alter or impair
any rights or obligations under any option theretofore granted under this Plan.
SECTION 10. EFFECTIVENESS OF THIS PLAN
This Plan shall become effective upon adoption by the Board.
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