Exhibit C
CYCARE SYSTEMS, INC.
DIRECTOR STOCK PLAN
ARTICLE 1. ESTABLISHMENT, PURPOSE, AND DURATION
1.1 Establishment of the Plan. CyCare Systems, Inc., a Delaware
corporation, hereby establishes the CyCare Systems, Inc. Director Stock Plan
(the "Plan") for the benefit of its Non-employee Directors. The Plan sets forth
the terms of an initial, one-time grant of Non-Qualified Stock Options and
subsequent annual grants of Restricted Stock to Non-employee Directors. All such
grants are subject to the terms and provisions set forth in this Plan.
1.2 Purpose of the Plan. The purpose of the Plan is to encourage
ownership in the Company by Non-employee Directors, to strengthen the ability of
the Company to attract and retain the services of experienced and knowledgeable
individuals as Non-employee Directors of the Company, and to provide
Non-employee Directors with a further incentive to work for the best interests
of the Company and its stockholders.
1.3 Effective Date. The Plan is effective as of October 18, 1994 (the
"Effective Date"). Within one year after the Effective Date, the Plan shall be
submitted to the stockholders of the Company for their approval. The Plan will
be deemed to be approved by the stockholders if it receives the affirmative vote
of the holders of a majority of the shares of stock of the Company present, or
represented, and entitled to vote at a meeting duly held in accordance with the
applicable provisions of the Delaware Law and the Company's Bylaws and Restated
Certificate of Incorporation. Any Awards granted under the Plan prior to
stockholder approval are effective when made, but no Award may be exercised or
settled and no restrictions relating to any Award may lapse before stockholder
approval. If the stockholders fail to approve the Plan, any Award previously
made shall be automatically canceled without any further act.
1.4 Duration of the Plan. The Plan shall remain in effect until such
time as the Plan is terminated by the Board of Directors pursuant to Article 9
or Section 10.4.
ARTICLE 2. DEFINITIONS AND CONSTRUCTION
2.1. Definitions. For purposes of the Plan, the following terms will
have the meanings set forth below:
(a) "Award" means a grant of Non-Qualified Stock Options or
Restricted Stock under the Plan.
(b) "Board" or "Board of Directors" means the Board of
Directors of the Company, and includes any committee of the Board of
Directors designated by the Board to administer this Plan.
(c) "Change in Control" of the Company means and includes each
of the following:
(1) a change of control of the Company of a nature
that would be required to be reported in response to Item 6(e)
of Schedule 14A of the Exchange Act regardless of whether the
Company is subject to such reporting requirements;
(2) a change of control of the Company through a
transaction or series of transactions, such that any person
(as that term is used in Section 13 and 14(d)(2) of the
Exchange Act), excluding affiliates of the Company as of the
Effective Date, is or becomes the beneficial owner (as that
term is used in Section 13(d) of the Exchange Act), directly
or indirectly, of securities of the Company representing 35%
or more of the combined voting power of the Company's then
outstanding securities;
(3) any consolidation or liquidation of the Company
in which the Company is not the continuing or surviving
corporation or pursuant to which Shares would be con- verted
into cash, securities, or other property, other than a merger
of the Company in which the holders of the Shares immediately
before the merger have the same proportionate ownership of
Common Stock of the surviving corporation immediately after
the merger;
(4) the stockholders of the Company approve any plan
or proposal for the liquidation or dissolution of the Company;
or
(5) substantially all of the assets of the Company
are sold or otherwise transferred to parties that are not
within a "controlled group of corporations" (as defined in
Section 1563 of the Code) in which the Company is a member.
The foregoing events shall not be deemed to be a Change in
Control if the transaction or transactions causing such change
shall have been approved by the affirmative vote of at least a
majority of the members of the Board in office as of the
Effective Date ("Incumbents"), those serving on the Board
pursuant to nomination or appointment thereto by a majority of
Incumbents ("Successors"), and those serving on the Board
pursuant to nomination or appointment thereto by a majority of
a Board composed of Incumbents and/or Successors.
(d) "Code" means the Internal Revenue Code of 1986, as amended
from time to time.
(e) "Committee" means the committee appointed by the Board to
administer the Plan.
(f) "Company" means CyCare Systems, Inc., a Delaware
corporation, or any successor as provided in Section 10.3.
(g) "Director" means any individual who is a member of the
Board of Directors of the Company.
(h) "Disability" means a permanent and total disability,
within the meaning of Section 22(e)(3) of the Code. To the extent
permitted pursuant to Section 16 of the Exchange Act, Disability shall
be determined by the Board in good faith, upon receipt of sufficient
competent medical advice from one or more individuals, selected by the
Board, who are qualified to give professional medical advice.
(i) "Exchange Act" means the Securities Exchange Act of 1934,
as amended from time to time, or any successor provision.
(j) "Fair Market Value" means the average of the highest and
lowest quoted selling prices for Shares on the relevant date, or (if
there were no sales on such date) the average of the highest and lowest
quoted selling prices on the immediately preceding date on which such
sales occurred, as reported in The Wall Street Journal or a similar
publication selected by the Committee.
(k) "Grant Date" means July 1, 1995 and each anniversary of
that date.
(l) "Non-employee Director" means any individual who is a
member of the Board of Directors of the Company, but who is not
otherwise an employee of the Company.
(m) "Non-Qualified Stock Option" or "NQSO" means an option to
purchase Shares, granted under Article 6, that is not intended to be an
incentive stock option qualifying under Section 422 of the Code.
(n) "Option" means a Non-Qualified Stock Option granted under
the Plan.
(o) "Participant" means a Non-employee Director of the Company
who has been granted an Award under the Plan.
(p) "Period of Restriction" means the period during which the
transfer of Shares of Restricted Stock is limited in some way, and the
Shares are subject to a substantial risk of forfeiture, as provided in
Article 7.
(q) "Person" shall have the meaning given in Section 3(a)(9)
of the Exchange Act and used in Sections 13(d) and 14(d) thereof, and
shall include a "group," as that term is defined in Section 13(d).
(r) "Restricted Stock" means an Award granted to a
Non-employee Director pursuant to Article 7 that is subject to a Period
of Restriction.
(s) "Shares" means the shares of the Company's Common Stock,
$.01 par value.
2.2 Gender and Number. Except as indicated by the context, any
masculine term also shall include the feminine, the plural shall include the
singular, and the singular shall include the plural.
2.3. Severability of Provisions. With respect to persons subject to
Section 16 of the Exchange Act, transactions under this plan are intended to
comply with all applicable conditions of Rule 16b-3 or its successors under the
Exchange Act. To the extent any provision of the Plan or action by the plan
administrators fails to so comply, it shall be deemed null and void, to the
extent permitted by law and deemed advisable by the plan administrators, and the
remaining provisions of the Plan or actions by plan administrators shall be
construed and enforced as if the invalid provision or action had not been
included or undertaken.
2.4. Incorporation by Reference. In the event this Plan does not
include a provision required by Rule 16b-3 to be stated herein, such provision
(other than one relating to eligibility requirements or the price and amount of
Awards) shall be deemed automatically to be incorporated by reference herein,
insofar as Participants subject to Section 16 of the Exchange Act are concerned.
ARTICLE 3. ADMINISTRATION
3.1 The Committee. The Plan will be administered by the Committee,
subject to the restrictions set forth in the Plan.
3.2 Administration by the Committee. The Committee has the full power,
discretion, and authority to interpret and administer the Plan in a manner that
is consistent with the Plan's provisions. However, the Committee does not have
the power to (i) determine Plan eligibility, or to determine the number, the
price, the vesting period, or the timing of Awards to be made under the Plan to
any Participant or (ii) take any action that would result in the Awards not
being treated as "formula awards" within the meaning of Rule 16b-3(c)(ii) or any
successor provision, promulgated pursuant to the Exchange Act.
3.3 Decisions Binding. The Committee's determinations and decisions
under the Plan, and all related orders or resolutions of the Board shall be
final, conclusive, and binding on all persons, including the Company, its
stockholders, employees, Participants, and their estates and beneficiaries.
ARTICLE 4. SHARES SUBJECT TO THE PLAN
4.1 Number of Shares. The total number of Shares available for grant
under the Plan may not exceed 50,000, subject to adjustment as provided in
Section 4.3. The Shares issued pursuant to the exercise of Options granted under
the Plan and the Shares issued as Restricted Stock may be authorized and
unissued Shares or Shares reacquired by the Company, as determined by the
Committee.
4.2 Lapsed Awards. If any Option or Share of Restricted Stock granted
under the Plan terminates, expires, or lapses for any reason, any Shares subject
to purchase pursuant to such Option and any such Shares of Restricted Stock
again will be available for grant under the Plan.
4.3 Adjustments in Authorized Shares. In the event of any merger,
reorganization, consolidation, recapitalization, separation, liquidation, stock
dividend, split-up, Share combination, or other change in the corporate
structure of the Company affecting the Shares, the number and/or type of Shares
subject to any outstanding Award, and the Option exercise price per Share under
any outstanding Option will be automatically adjusted so that the proportionate
interests of the Participants will be maintained as before the occurrence of
such event.
ARTICLE 5. ELIGIBILITY AND PARTICIPATION
5.1. Eligibility. Eligibility to participate in the Plan is limited to
Non-employee Directors.
5.2 Actual Participation. All eligible Non-employee Directors will
receive a grant of Options pursuant to Article 6 and annual grants of Restricted
Stock pursuant to Article 7.
ARTICLE 6. ONE-TIME GRANT OF OPTIONS
6.1. One-Time Grant of Options. Each individual who is a Non-employee
Director on October 18, 1994 will be granted Options on that date, the exercise
of which will entitle the Non-employee Director to purchase 2,500 Shares. The
specific terms of the Options are subject to the provisions of this Article 6
and the Option Agreement executed pursuant to Section 6.2.
6.2. Option Agreement. The grant of Options will be evidenced by an
Option Agreement that will not include any terms or conditions that are
inconsistent with the terms and conditions of this Plan.
6.3 Option Exercise Price Per Share. The Option exercise price per
Share under any outstanding Option granted pursuant to this Article 6 shall be
$12.375 (the "Exercise Price").
6.4. Duration of Options. Each Option granted to a Participant under
this Article 6 shall expire on October 18, 1999, the fifth (5th) anniversary
date of its grant, unless the Option is earlier terminated, forfeited, or
surrendered pursuant to a provision of this Plan.
6.5. Vesting of Options Subject to Exercise. Subject to Section 1.3,
the Options granted to the Participants under this Article 6 shall vest and
become subject to exercise during the four-year period (the "Exercise Period")
beginning on the Effective Date and ending on October 18, 1998; provided,
however, that only one-quarter of the total number of Options granted to a
Participant pursuant to this Article 6 shall vest during each of the four
one-year periods during the Exercise Period that begin on the Effective Date and
each subsequent October 18 thereafter until October 18, 1998.
6.6. Exercise or Disposition of Options. Participants shall be entitled
to exercise any Option that has vested at any time within the period beginning
with the Effective Date and ending five (5) years after the Effective Date;
provided, however, that the disposition by a Participant of any Shares acquired
pursuant to the exercise of an Option shall occur only after the end of the six
(6) month period beginning on the date that Company's stockholders approve the
Plan.
6.7. Payment. Options are exercised by delivering a written notice of
exercise to the Secretary of the Company, setting forth the number of Options to
be exercised and accompanied by a payment equivalent to the product of the
number of Options exercised multiplied by the Exercise Price (the "Total
Exercise Price"). The Total Exercise Price is payable:
(a) in cash or its equivalent;
(b) by tendering previously acquired Shares having a Fair
Market Value at the time of exercise equal to the Total Exercise Price;
(c) by directing the Company to withhold from the shares of
Stock that would otherwise be issued upon exercise of the Options that
number of Shares having a Fair Market Value on the exercise date equal
to the Total Exercise Price; or
(d) by a combination of (a), (b), and (c).
A Participant may elect to use the payment method described in clause
(c) of this Section 6.7 only with the consent of, and at the time and
in the manner prescribed by, the Committee. As soon as practicable
after receipt of a written notification of exercise and full payment,
the Company shall deliver to the Participant, in the Participant's
name, Share certificates in an appropriate amount based upon the number
of Shares purchased pursuant to the exercise of the Options.
6.8. Restrictions on Share Transferability. To the extent necessary to
ensure that Options granted under this Article 6 comply with applicable law, the
Board shall impose restrictions on the transferability of any Shares acquired
pursuant to the exercise of an Option under this Article 6, including, without
limitation, restrictions under applicable Federal securities laws, under the
requirements of any Stock exchange or market upon which such Shares are then
listed and/or traded, and under any blue sky or state securities laws applicable
to such Shares.
6.9. Termination of Service on Board of Directors Due to Death or
Disability. If a Participant's service on the Board is terminated by reason of
death or Disability, any outstanding Options held by the Participant that are
not fully vested are immediately forfeited and returned to the Company. Any
outstanding options held by the Participant that are fully vested will remain
fully vested and subject to exercise.
To the extent an Option is fully vested and exercisable as of the date
of death or Disability, it will remain exercisable for sixty (60) days after the
date of death or Disability by the Participant or such person or persons as
shall have been named as the Participant's legal representative or beneficiary,
or by such persons as shall have acquired the Participant's Options by will or
by the laws of descent and distribution. Any Option that is fully vested but not
exercised during this sixty (60) day period after death or Disability will be
immediately forfeited to the Company.
6.10. Termination of Service on Board of Directors for Other Reasons.
If the Participant's service on the Board is terminated for any reason other
than for death or Disability, any outstanding Options held by the Participant
that are not fully vested as of the date of termination are immediately
forfeited to the Company. To the extent an Option is fully vested and
exercisable as of such date, it will remain exercisable for sixty (60) days
after the date the Participant's service on the Board terminates. Any Option
that is fully vested but not exercised during this sixty (60) day period after
termination of service will be immediately forfeited to the Company.
6.11. Limitations on the Transferability of Options. No Option granted
under this Article 6 may be sold, transferred, pledged, assigned, or otherwise
alienated, other than by will, the laws of descent and distribution, or under
any other circumstances allowed by the Committee that would not violate the
transferability restrictions contained in Rule 16b-3(a)(2) or any successor
provision.
ARTICLE 7. ANNUAL RESTRICTED STOCK GRANTS
7.1. Initial Grant of Restricted Stock. Each individual who is a
Non-employee Director on July 1, 1995 will be granted One Thousand (1,000)
Shares of Restricted Stock on that date. The specific terms of the Restricted
Stock grant are subject to the provisions of this Article 7 and the Restricted
Stock Agreement executed pursuant to Section 7.3.
7.2. Annual Grant of Restricted Stock. Each individual who is a
Non-employee Director on the relevant Grant Date after July 1, 1995 will be
granted One Thousand (1,000) Shares of Restricted Stock on such Grant Date,
subject to the limitation on the number of Shares that may be awarded under the
Plan.
7.3. Restricted Stock Agreement. Each Restricted Stock grant shall be
evidenced by a Restricted Stock Agreement that will not include any terms or
conditions that are inconsistent with the terms and conditions of the Plan.
7.4. Nontransferability of Restricted Stock. The Shares of Restricted
Stock granted may not be sold, transferred, pledged, assigned, or otherwise
alienated until the end of the applicable Period of Restriction.
7.5. Period of Restriction. The Period of Restriction for each grant of
Shares of Restricted Stock awarded pursuant to this Article 7 shall expire at
the end of the one (1) year period following the applicable Grant Date.
7.6. Certificate Legend. Any certificate representing Shares of
Restricted Stock granted pursuant to the Plan shall bear the following legend:
"The sale or other transfer of the Shares of stock represented
by this certificate, whether voluntary, involuntary, or by
operation of law, is subject to certain restrictions on
transfer as set forth in the CyCare Systems, Inc. Director
Stock Plan, and the corresponding Restricted Stock Agreement.
A copy of the Plan and the Restricted Stock Agreement may be
obtained from the Secretary of CyCare Systems, Inc."
7.7. Removal of Restrictions. Except as otherwise provided in the Plan,
Shares of Restricted Stock covered by each Restricted Stock grant made under the
Plan shall become freely transferable by the Non-employee Director after the
last day of the Period of Restriction. Once the Shares are released from the
restrictions, the Non-employee Director shall be entitled to have the legend
required by Section 7.6 removed from his or her Share certificates. All rights
with respect to the Restricted Stock granted to a Non-employee Director under
the Plan shall be available during his or her lifetime only to such Non-employee
Director.
7.8. Voting Rights. During the Period of Restriction, Non-employee
Directors holding Shares of Restricted Stock granted hereunder will have voting
rights with respect to those Shares.
7.9. Dividends and Other Distributions. During the Period of
Restriction, cash and stock dividends on Shares of Restricted Stock may be
either currently paid or withheld by the Company for the Participant's account.
At the discretion of the Committee, interest may be paid on the amount of cash
dividends withheld, including cash dividends on stock dividends, at a rate and
subject to such terms as will be determined by the Committee.
7.10. Termination of Service on Board. If a Participant's service on
the Board terminates for any reason before the end of a Period of Restriction
relating to any grant of Restricted Stock, the Restricted Stock that is subject
to a Period of Restriction shall be forfeited to the Company and will be again
available for grant under the Plan.
ARTICLE 8. CHANGE IN CONTROL
In the event of a Change in Control of the Company, all Awards granted
under the Plan that are still outstanding and not yet vested or are subject to
restrictions, shall become immediately one hundred percent (100%) vested in each
Participant or shall be free of any restrictions, as of the first date that a
Change in Control occurs, and shall be exercisable for the remaining duration of
the Award. All Options that are exercisable as of the effective date of the
Change in Control will remain exercisable for the remaining duration of the
Options.
ARTICLE 9. AMENDMENT, MODIFICATION, AND TERMINATION
9.1 Amendment, Modification, and Termination. Subject to the terms set
forth in this Section 9.1, the Committee may terminate, amend, or modify the
Plan at any time; provided, however, that stockholder approval is required for
any Plan amendment that would materially increase the benefits to Participants
or the number of securities that may be issued, or materially modify the
eligibility requirements in the Plan. Further, Plan provisions relating to the
amount, price, and timing of securities to be awarded under the Plan may not be
amended more than once every six (6) months, other than to comport with changes
in the Code, the Employee Retirement Income Security Act, or the rules
thereunder.
9.2. Awards Previously Granted. Unless required by law, no termination,
amendment, or modification of the Plan shall in any manner adversely affect any
Award previously granted under the Plan, without the written consent of the
Participant holding the Award.
ARTICLE 10. MISCELLANEOUS
10.1. Indemnification. Each individual who is or shall have been a
member of the Board or the Committee shall be indemnified and held harmless by
the Company against and from any loss, cost, liability, or expense that may be
imposed upon or reasonably incurred by him or her in connection with or
resulting from any claim, action, suit, or proceeding to which he or she may be
a party or in which he or she may be involved by reason of any action taken or
failure to act under this Plan and against and from any and all amounts paid by
him or her in settlement thereof, with the Company's approval, or paid by him or
her in satisfaction of any judgment in any such action, suit, or proceeding
against him or her, provided he or she shall give the Company an opportunity, at
its own expense, to assume and defend the same before he or she undertakes to
defend it on his or her own behalf.
The foregoing right of indemnification shall not be exclusive of any
other rights of indemnification to which such individuals may be entitled under
the Company's Restated Certificate of Incorporation or Bylaws, as a matter of
law, or otherwise, or any power that the Company may have to indemnify them or
hold them harmless.
10.2. Beneficiary Designation. Each Participant under the Plan may name
any beneficiary or beneficiaries to whom any benefit under the Plan is to be
paid in the event of his or her death. Each designation will revoke all prior
designations by the same Participant, shall be in a form prescribed by the
Committee, and will be effective only when filed by the Participant in writing
with the Committee during his or her lifetime. In the absence of any such
designation, benefits remaining unpaid at the Participant's death shall be paid
to the Participant's estate.
10.3. Successors. All obligations of the Company under the Plan, with
respect to Awards granted hereunder, shall be binding on any successor to the
Company, whether the existence of such successor is the result of a direct or
indirect purchase, merger, consolidation, or otherwise, of all or substantially
all of the business and/or assets of the Company.
10.4. Requirements of Law. The granting of Awards under the Plan shall
be subject to all applicable laws, rules, and regulations, and to such approvals
by any governmental agencies or national securities exchanges as may be
required. Notwithstanding any other provision of the Plan, the Committee may, in
its sole discretion, terminate, amend, or modify the Plan in any way necessary
to comply with the applicable requirements of Rule 16b-3 promulgated by the
Securities and Exchange Commission as interpreted pursuant to no-action letters
and interpretive releases.
10.5. Governing Law. To the extent not preempted by Federal law, the
Plan, and all agreements hereunder, shall be construed in accordance with and
governed by the laws of the State of Delaware.