AMERICAN MEDICAL RESPONSE INC, S-8, 1996-12-11

AMERICAN MEDICAL RESPONSE INC
S-8, 1996-12-11
LOCAL & SUBURBAN TRANSIT & INTERURBAN HWY PASSENGER TRANS

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<PAGE>

As filed with the Securities and Exchange Commission on December 11, 1996

REGISTRATION NO. 333-

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------

FORM S-8
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
----------------------

AMERICAN MEDICAL RESPONSE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------------

DELAWARE 04-3147881
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)

2821 SOUTH PARKER ROAD, 10TH FLOOR, AURORA, COLORADO 80014, (303) 614-8500
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

STAT HEALTHCARE, INC.'S
1996 STOCK INCENTIVE PLAN
AND
STOCK OPTION AGREEMENT
(FULL TITLE OF THE PLAN)

WILLIAM GEORGE
VICE PRESIDENT AND GENERAL COUNSEL
2821 SOUTH PARKER ROAD, 10TH FLOOR, AURORA, COLORADO 80014, (303) 614-8500
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
----------------------

CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>

- --------------------------------------------------------------------------------------------------------------
Amount to be Proposed Maximum Aggregate Amount of
Title of Securities to be Registered Registered Offering Price(1) Registration Fee
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock, $.01 par value......... 88,625 Shares $ 1,377,200 $ 475
- --------------------------------------------------------------------------------------------------------------
(1) The offering price has been determined for the purpose of determining the
registration fee pursuant to Rule 457(o) based on the actual exercise prices
under the 1996 Stock Incentive Plan and the Stock Option Agreement.
</TABLE>
<PAGE>

PART II

INFORMATION REQUIRED IN THE REGISTRATION STATEMENT

Item 3. Incorporation of Documents by Reference.
---------------------------------------

The following documents previously filed by American Medical Response,
Inc. (the "Company" or the "Registrant") with the Commission pursuant to the
Securities and Exchange Act of 1934, as amended (the "Exchange Act"), are hereby
incorporated by reference:

(1) The Company's Annual Report on Form 10-K for the year ended
December 31, 1995.

(2) The Company's Current Report on Form 8-K filed on January 16,
1996.

(3) The Company's Current Report on Form 8-K filed on October 11,
1996;

(4) The Company's Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1996; June 30, 1996, as amended by American's
Quarterly Report on Form 10-Q/A for the quarter ended June 30,
1996; and September 30, 1996.

(5) The description of the Common Stock in the Company's Registration
Statement on Form 8-A (No. 1-11196), as amended.

All documents filed by the Company pursuant to Section 13(a), 13(c), 14
and 15(d) of the Exchange Act after the filing of this Registration Statement,
prior to the filing of a post-effective amendment which indicates that all
securities offered have been sold or which deregisters all securities then
remaining unsold, shall be deemed to be incorporated by reference into this
Registration Statement and shall be deemed to be a part hereof from the date of
filing of such documents. Any statement contained herein or in a document
incorporated by reference shall be deemed to be modified or superseded for
purposes of this Registration Statement to the extent that a statement contained
in this Registration Statement or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Registration Statement.

The Company shall provide, upon request, without charge to each person
to whom a copy of this Registration Statement has been delivered, a copy of any
or all of the documents which have been or may be incorporated in this
Registration Statement by reference, other than certain exhibits to such
documents. Requests for such copies should be directed to: American Medical
Response, Inc., 2821 South Parker Road, 10th Floor, Aurora, Colorado 80014
(telephone: (303) 614-8500), Attention: General Counsel.

Item 4. Description of Securities.
-------------------------

Not applicable.

Item 5. Interests of Named Experts and Counsel.
--------------------------------------

Not applicable.

Item 6. Indemnification of Directors and Officers.
-----------------------------------------

Section 145 of the Delaware General Corporation Law, as amended,
provides that a corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal or investigative (other than an
action by or in the right of the corporation) by reason of the fact that he is
or was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. Section 145 further
provides that a corporation similarly may indemnify any such person serving in
any such capacity who was or is a party or is threatened to be made a party to
any threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor, against expenses actually and

-2-
<PAGE>

reasonably incurred in connection with the defense or settlement of such action
or suit if he acted in good faith and in a manner he reasonably believed to be
in or not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Delaware Court of Chancery or such other
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper.

Section 102(b)(7) of the Delaware General Corporation Law, as amended,
permits a corporation to include in its certificate of incorporation a provision
eliminating or limiting the personal liability of a director to the corporation
or its stockholders for monetary damages for breach of fiduciary duty as a
director, provided that such provision shall not eliminate or limit the
liability of a director (i) for any breach of the director's duty of loyalty to
the corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the Delaware General Corporation Law (relating to
unlawful payment of dividends and unlawful stock purchase and redemption) or
(iv) for any transaction from which the director derived an improper personal
benefit.

The Registrant's Certificate of Incorporation provides that the
Registrant's Directors shall not be liable to the Registrant or its stockholders
for monetary damages for breach of fiduciary duty as a director, except to the
extent that exculpation from liabilities is not permitted under the Delaware
General Corporation Law as in effect at the time such liability is determined.
The Certificate of Incorporation further provides that the Registrant shall
indemnify its directors and officers to the full extent permitted by the law of
the State of Delaware.

The Registrant has obtained an insurance policy that insures its
directors and officers against certain liabilities.

Item 7. Exemption From Registration Claimed.
-----------------------------------

Not applicable.

Item 8. Exhibits.
--------

Exhibit Description
- ------- -----------

4.1 1996 Stock Incentive Plan of STAT Healthcare, Inc.

4.2 Non-statutory Stock Option Agreement dated June 29, 1995 between STAT
Healthcare, Inc. and Russell D. Schneider.

5.1 Opinion of Ropes & Gray.

23.1 Consent of KPMG Peat Marwick.

23.2 Consent of Ropes & Gray (contained in the opinion filed as Exhibit 5.1
to this registration statement).

24 Powers of Attorney (included on page 5 of this registration statement
under the caption "Power of Attorney").

Item 9. Undertakings.
------------

(a) The undersigned Registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:

(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;

-3-
<PAGE>

(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;

provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) shall not
-------- -------
apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed with
or furnished to the Commission by the registrant pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in the registration statement.

(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered herein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof;

(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.

(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.

(c) The undersigned Registrant hereby undertakes to deliver or cause to
be delivered with the prospectus, to each person to whom the prospectus is sent
or given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X is not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.

(d) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.

-4-
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Aurora, State of Colorado, on December 11, 1996.

AMERICAN MEDICAL RESPONSE, INC.

By /s/ Paul T. Shirley
_____________________________________
Paul T. Shirley
President and Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated. Each person whose signature appears below
hereby authorizes Paul T. Shirley, David C. Colby and William George and each
with full power of substitution, to execute in the name and on behalf of such
person any amendment or any post-effective amendment to this Registration
Statement and to file the same, with exhibits thereto, and other documents in
connection therewith, making such changes in this Registration Statement as the
Registrant deems appropriate, and appoints each of Paul T. Shirley, David C.
Colby and William George, each with full power of substitution, attorney-in-fact
to sign any amendment and any post-effective amendment to this Registration
Statement and to file the same, with exhibits thereto, and other documents in
connection therewith.

Signature Capacity Date
--------- -------- ----
<S> <C> <C>

/s/ Paul T. Shirley President, Chief Executive December 10, 1996
____________________ Officer (principal executive
Paul T. Shirley officer) and Director

/s/ David C. Colby Executive Vice President, Chief December 10, 1996
____________________ Financial Officer and Director
David C. Colby (principal financial and
accounting officer)

/s/ George B. DeHuff Executive Vice President, Chief December 10, 1996
____________________ Operating Officer and Director
George B. DeHuff

____________________ Director _________________
Charles D. Baker

____________________ Director _________________
Michael A. Baker

____________________ Director _________________
David B. Hammond

/s/ James E. McGrath Director December 10, 1996
____________________
James E. McGrath

</TABLE>

-5-
<PAGE>

______________________ Director _________________
Joseph R. Paolella

/s/ Dominic J. Puopolo Director December 11, 1996
______________________
Dominic J. Puopolo

/s/ Russell D. Schneider Director December 10, 1996
______________________
Russell D. Schneider

______________________ Director _________________
John Larkin Thompson

/s/ Paul M. Verrochi Director December 11, 1996
______________________
Paul M. Verrochi

-6-
<PAGE>
EXHIBIT INDEX

Number Title of Exhibit Page
------ ---------------- ----

4.1 1996 Stock Incentive Plan of STAT Healthcare, Inc.

4.2 Non-statutory Stock Option Agreement dated June 29,
1995 between STAT Healthcare, Inc. and Russell D.
Schneider.

5.1 Opinion of Ropes & Gray.

23.1 Consent of KPMG Peat Marwick.

23.2 Consent of Ropes & Gray (contained in the opinion
filed as Exhibit 5.1 to this registration statement).

24 Powers of Attorney (included on page 5 of this
registration statement under the caption "Power
of Attorney").

-7-

<PAGE>
Exhibit 4.1

STAT HEALTHCARE, INC.
1996 STOCK INCENTIVE PLAN
-------------------------

ARTICLE ONE

GENERAL PROVISIONS
------------------

I. PURPOSE OF THE PLAN

This 1996 Stock Incentive Plan is intended to promote the interests of
STAT Healthcare, Inc., a Delaware corporation, by providing eligible persons
with the opportunity to acquire a proprietary interest, or otherwise increase
their proprietary interest, in the Corporation as an incentive for them to
remain in the service of the Corporation.

Capitalized terms shall have the meanings assigned to such terms in the
attached Appendix.

II. STRUCTURE OF THE PLAN

A. The Plan shall be divided into four separate equity programs:

(i) the Discretionary Option Grant Program under which eligible
persons may, at the discretion of the Plan Administrator, be granted options to
purchase shares of Common Stock,

(ii) the Salary Investment Option Grant Program under which
eligible employees may elect to have a portion of their base salary invested
each year in options to purchase shares of Common Stock,

(iii) the Stock Issuance Program under which eligible persons may,
at the discretion of the Plan Administrator, be issued shares of Common Stock
directly, either through the immediate purchase of such shares or as a bonus for
services rendered the Corporation (or any Parent or Subsidiary), and

(iv) the Automatic Option Grant Program under which eligible non-
employee Board members shall automatically receive option grants at periodic
intervals to purchase shares of Common Stock.

<PAGE>

B. The provisions of Articles One and Six shall apply to all equity
programs under the Plan and shall accordingly govern the interests of all
persons under the Plan.

III. ADMINISTRATION OF THE PLAN

A. Until such time as a Primary Committee is appointed, the
Discretionary Option Grant, Salary Investment Option Grant and Stock Issuance
Programs with respect to Section 16 Insiders shall be administered by the Board.
Once a Primary Committee is appointed, the Primary Committee shall have sole and
exclusive authority to administer the Discretionary Option Grant, Salary
Investment Option Grant and Stock Issuance Programs with respect to Section 16
Insiders. No non-employee Board member shall be eligible to serve on the Primary
Committee if such individual has, during the twelve (12)-month period
immediately preceding the date of his or her appointment to the Committee or (if
shorter) the period commencing with the Section 12(g) Registration Date and
ending with the date of his or her appointment to the Primary Committee,
received an option grant or direct stock issuance under the Plan or any stock
option, stock appreciation, stock bonus or other stock plan of the Corporation
(or any Parent or Subsidiary), other than pursuant to the Automatic Option Grant
Program.

B. Administration of the Discretionary Option Grant, Salary Investment
Option Grant and Stock Issuance Programs with respect to all other persons
eligible to participate in those programs may, at the Board's discretion, be
vested in the Primary Committee (once such Committee is appointed) or a
Secondary Committee, or the Board may retain the power to administer those
programs with respect to such persons. The members of the Secondary Committee
may be individuals who are Employees eligible to receive discretionary option
grants or direct stock issuances under the Plan or any stock option, stock
appreciation, stock bonus or other stock plan of the Corporation (or any Parent
or Subsidiary).

C. Members of the Primary Committee or any Secondary Committee shall
serve for such period of time as the Board may determine and may be removed by
the Board at any time. The Board may also at any time terminate the functions of
any Secondary Committee and reassume all powers and authority previously
delegated to such committee.

D. Each Plan Administrator shall, within the scope of its administrative
functions under the Plan, have full power and authority (subject to the
provisions of the Plan) to establish such rules and regulations as it may deem
appropriate for proper administration of the Discretionary Option Grant, Salary
Investment Option Grant and Stock Issuance Programs and to make such
determinations under, and issue such interpretations of, the provisions of such
programs and any outstanding options or stock issuances thereunder as it may
deem necessary or advisable. Decisions of the Plan Administrator within the
scope of its administrative functions under the Plan shall be final and binding
on all parties who have an interest in the Discretionary Option Grant, Salary
Investment Option Grant or Stock Issuance Program under its jurisdiction or any
option or stock issuance thereunder.

2.
<PAGE>

E. Service on the Primary Committee or the Secondary Committee shall
constitute service as a Board member, and members of each such committee shall
accordingly be entitled to full indemnification and reimbursement as Board
members for their service on such committee. No member of the Primary Committee
or the Secondary Committee shall be liable for any act or omission made in good
faith with respect to the Plan or any option grants or stock issuances under the
Plan.

F. Administration of the Automatic Option Grant Program shall be
self-executing in accordance with the terms of that program, and no Plan
Administrator shall exercise any discretionary functions with respect to option
grants made thereunder.

IV. ELIGIBILITY

A. The persons eligible to participate in the Discretionary Option
Grant and Stock Issuance Programs are as follows:

(i) Employees,

(ii) non-employee members of the Board (other than those serving
as members of the Primary Committee) or the board of directors of any Parent or
Subsidiary, and

(iii) consultants and other independent advisors who provide
services to the Corporation (or any Parent or Subsidiary).

B. Only Section 16 Insiders and other highly-compensated Employees
shall be eligible to participate in the Salary Investment Option Grant Program.

C. Each Plan Administrator shall, within the scope of its
administrative jurisdiction under the Plan, have full authority to determine,
(i) with respect to the option grants under the Discretionary Option Grant and
Salary Investment Option Grant Programs, which eligible persons are to receive
option grants, the time or times when such option grants are to be made, the
number of shares to be covered by each such grant, the status of the granted
option as either an Incentive Option or a Non-Statutory Option, the time or
times at which each option is to become exercisable, the vesting schedule (if
any) applicable to the option shares and the maximum term for which the option
is to remain outstanding and (ii) with respect to stock issuances under the
Stock Issuance Program, which eligible persons are to receive stock issuances,
the time or times when such issuances are to be made, the number of shares to be
issued to each Participant, the vesting schedule (if any) applicable to the
issued shares and the consideration to be paid by the Participant for such
shares.

D. The Plan Administrator shall have the absolute discretion either to
grant options in accordance with the Discretionary Option Grant and/or Salary
Investment Option Grant Program or to effect stock issuances in accordance with
the Stock Issuance Program.

3.
<PAGE>

E. The individuals eligible to participate in the Automatic Option
Grant Program shall be those individuals who first become non-employee Board
members after the Plan Effective Date, whether through appointment by the Board
or election by the Corporation's stockholders, and those individuals who
continue to serve as non-employee Board members after one or more Annual
Stockholders Meetings held after the Plan Effective Date. A non-employee Board
member who has previously been in the employ of the Corporation (or any Parent
or Subsidiary) shall not be eligible to receive an option grant under the
Automatic Option Grant Program at the time he or she first becomes a non-
employee Board member, but such individual shall be eligible to receive periodic
option grants under the Automatic Option Grant Program upon his or her continued
service as a non-employee Board member after one or more Annual Stockholders
Meetings.

V. STOCK SUBJECT TO THE PLAN

A. The stock issuable under the Plan shall be shares of authorized but
unissued or reacquired Common Stock, including shares repurchased by the
Corporation on the open market. The maximum number of shares of Common Stock
which may be issued over the term of the Plan shall initially not exceed
1,500,000 shares. Such authorized share reserve is comprised of (i) the number
of shares which remained available for issuance, as of the Plan Effective Date,
under the Predecessor Plan, including the shares subject to the outstanding
options incorporated into the Plan and any other shares which would have been
available for future option grants under the Predecessor Plan, plus (ii) an
additional 1,200,000 shares authorized by the Board, subject to stockholder
approval.

B. The number of shares of Common Stock available for issuance under
the Plan shall automatically increase on the first trading day of each calendar
year during the term of the Plan, beginning with the 1997 calendar year, by an
amount equal to one and one-half percent (1.5%) of the shares of Common Stock
outstanding on December 31 of the immediately preceding calendar year. No
Incentive Options may be granted on the basis of the additional shares of Common
Stock resulting from such annual increases.

C. No one person participating in the Plan may receive options,
separately exercisable stock appreciation rights and direct stock issuances for
more than 300,000 shares of Common Stock in the aggregate over the term of the
Plan.

D. Shares of Common Stock subject to outstanding options (including
any options incorporated from the Predecessor Plan) shall be available for
subsequent issuance under the Plan to the extent (i) the options expire or
terminate for any reason prior to exercise in full or (ii) the options are
cancelled in accordance with the cancellation-regrant provisions of Article
Two. All shares issued under the Plan (including shares issued upon exercise
of options incorporated from the Predecessor Plan), whether or not those shares
are subsequently repurchased by the Corporation pursuant to its
repurchase/cancellation rights under the Plan, shall reduce on a share-for-share
basis the number of shares of Common Stock available for subsequent issuance
under the Plan. In addition, should the exercise price of an option under

4.
<PAGE>

the Plan (including any option incorporated from the Predecessor Plan) be paid
with shares of Common Stock or should shares of Common Stock otherwise issuable
under the Plan be withheld by the Corporation in satisfaction of the withholding
taxes incurred in connection with the exercise of an option or the vesting of a
stock issuance under the Plan, then the number of shares of Common Stock
available for issuance under the Plan shall be reduced by the gross number of
shares for which the option is exercised or which vest under the stock issuance,
and not by the net number of shares of Common Stock issued to the holder of such
option or stock issuance.

E. Should any change be made to the Common Stock by reason of any stock
split, stock dividend, recapitalization, combination of shares, exchange of
shares or other change affecting the outstanding Common Stock as a class without
the Corporation's receipt of consideration, appropriate adjustments shall be
made to (i) the maximum number and/or class of securities issuable under the
Plan, (ii) the number and/or class of securities for which any one person may be
granted options, separately exercisable stock appreciation rights and direct
stock issuances per calendar year, (iii) the number and/or class of securities
for which automatic option grants are to be subsequently made per Eligible
Director under the Automatic Option Grant Program and (iv) the number and/or
class of securities and the exercise price per share in effect under each
outstanding option (including any option incorporated from the Predecessor Plan)
in order to prevent the dilution or enlargement of benefits thereunder. The
adjustments determined by the Plan Administrator shall be final, binding and
conclusive.

5.
<PAGE>

ARTICLE TWO

DISCRETIONARY OPTION GRANT PROGRAM
----------------------------------

I. OPTION TERMS

Each option shall be evidenced by one or more documents in the form
approved by the Plan Administrator; provided, however, that each such document
--------
shall comply with the terms specified below. Each document evidencing an
Incentive Option shall, in addition, be subject to the provisions of the Plan
applicable to such options.

A. EXERCISE PRICE.
--------------

1. The exercise price per share shall be fixed by the Plan
Administrator but shall not be less than eighty-five percent (85%) of the Fair
Market Value per share of Common Stock on the option grant date.

2. The exercise price shall become immediately due upon exercise
of the option and shall, subject to the provisions of Section I of Article Six
and the documents evidencing the option, be payable in one or more of the forms
specified below:

(i) cash or check made payable to the Corporation,

(ii) shares of Common Stock held for the requisite period
necessary to avoid a charge to the Corporation's earnings for financial
reporting purposes and valued at Fair Market Value on the Exercise Date,
or

(iii) to the extent the option is exercised for vested shares,
through a special sale and remittance procedure pursuant to which the
Optionee shall concurrently provide irrevocable written instructions to (a)
a Corporation-designated brokerage firm to effect the immediate sale of the
purchased shares and remit to the Corporation, out of the sale proceeds
available on the settlement date, sufficient funds to cover the aggregate
exercise price payable for the purchased shares plus all applicable
Federal, state and local income and employment taxes required to be
withheld by the Corporation by reason of such exercise and (b) the
Corporation to deliver the certificates for the purchased shares directly
to such brokerage firm in order to complete the sale transaction.

Except to the extent such sale and remittance procedure is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.

6.
<PAGE>

B. EXERCISE AND TERM OF OPTIONS. Each option shall be exercisable at such
----------------------------
time or times, during such period and for such number of shares as shall be
determined by the Plan Administrator and set forth in the documents evidencing
the option. However, no option shall have a term in excess of ten (10) years
measured from the option grant date.

C. EFFECT OF TERMINATION OF SERVICE.
--------------------------------

1. The following provisions shall govern the exercise of any options
held by the Optionee at the time of cessation of Service or death:

(i) Any option outstanding at the time of the Optionee's
cessation of Service for any reason shall remain exercisable for such
period of time thereafter as shall be determined by the Plan Administrator
and set forth in the documents evidencing the option, but no such option
shall be exercisable after the expiration of the option term.

(ii) Any option exercisable in whole or in part by the Optionee
at the time of death may be subsequently exercised by the personal
representative of the Optionee's estate or by the person or persons to whom
the option is transferred pursuant to the Optionee's will or in accordance
with the laws of descent and distribution.

(iii) During the applicable post-Service exercise period, the
option may not be exercised in the aggregate for more than the number of
vested shares for which the option is exercisable on the date of the
Optionee's cessation of Service. Upon the expiration of the applicable
exercise period or (if earlier) upon the expiration of the option term, the
option shall terminate and cease to be outstanding for any vested shares
for which the option has not been exercised. However, the option shall,
immediately upon the Optionee's cessation of Service, terminate and cease
to be outstanding to the extent it is not otherwise at that time
exercisable for vested shares.

(iv) Should the Optionee's Service be terminated for Misconduct,
then all outstanding options held by the Optionee shall terminate
immediately and cease to be outstanding.

(v) In the event of an Involuntary Termination following a
Corporate Transaction,the provisions of Section III of this Article Two
shall govern the period for which the outstanding options are to remain
exercisable following the Optionee's cessation of Service and shall
supersede any provisions to the contrary in this Section.

2. The Plan Administrator shall have the discretion, exercisable
either at the time an option is granted or at any time while the option remains
outstanding, to:

7.
<PAGE>

(i) extend the period of time for which the option is to remain
exercisable following the Optionee's cessation of Service from the period
otherwise in effect for that option to such greater period of time as the
Plan Administrator shall deem appropriate, but in no event beyond the
expiration of the option term, and/or

(ii) permit the option to be exercised, during the applicable
post-Service exercise period, not only with respect to the number of vested
shares of Common Stock for which such option is exercisable at the time of
the Optionee's cessation of Service but also with respect to one or more
additional installments in which the Optionee would have vested under the
option had the Optionee continued in Service.

D. STOCKHOLDER RIGHTS. The holder of an option shall have no
------------------
stockholder rights with respect to the shares subject to the option until such
person shall have exercised the option, paid the exercise price and become a
holder of record of the purchased shares.

E. REPURCHASE RIGHTS. The Plan Administrator shall have the
-----------------
discretion to grant options which are exercisable for unvested shares of Common
Stock. Should the Optionee cease Service while holding such unvested shares, the
Corporation shall have the right to repurchase, at the exercise price paid per
share, any or all of those unvested shares. The terms upon which such repurchase
right shall be exercisable (including the period and procedure for exercise and
the appropriate vesting schedule for the purchased shares) shall be established
by the Plan Administrator and set forth in the document evidencing such
repurchase right.

F. LIMITED TRANSFERABILITY OF OPTIONS. During the lifetime of the
----------------------------------
Optionee, the option shall be exercisable only by the Optionee and shall not be
assignable or transferable other than by will or by the laws of descent and
distribution following the Optionee's death. However, a Non-Statutory Option
may be assigned in accordance with the terms of a Qualified Domestic Relations
Order. The assigned portion may only be exercised by the person or persons who
acquire a proprietary interest in the option pursuant to such Qualified Domestic
Relations Order. The terms applicable to the assigned portion shall be the same
as those in effect for the option immediately prior to such assignment and shall
be set forth in such documents issued to the assignee as the Plan Administrator
may deem appropriate.

II. INCENTIVE OPTIONS

The terms specified below shall be applicable to all Incentive Options.
Except as modified by the provisions of this Section II, all the provisions of
Articles One, Two and Six shall be applicable to Incentive Options. Options
which are specifically designated as Non-Statutory Options when issued under the
Plan shall not be subject to the terms of this Section II.
---

A. ELIGIBILITY. Incentive Options may only be granted to Employees.
-----------

8.
<PAGE>

B. EXERCISE PRICE. The exercise price per share shall not be less than
--------------
one hundred percent (100%) of the Fair Market Value per share of Common Stock on
the option grant date.

C. DOLLAR LIMITATION. The aggregate Fair Market Value (determined as
-----------------
of the respective date or dates of grant) of the shares of Common Stock for
which one or more options granted to any Employee under the Plan (or any other
option plan of the Corporation or any Parent or Subsidiary) may for the first
time become exercisable as Incentive Options during any one (1) calendar year
shall not exceed the sum of One Hundred Thousand Dollars ($100,000). To the
extent the Employee holds two (2) or more such options which become exercisable
for the first time in the same calendar year, the foregoing limitation on the
exercisability of such options as Incentive Options shall be applied on the
basis of the order in which such options are granted.

D. 10% STOCKHOLDER. If any Employee to whom an Incentive Option is
---------------
granted is a 10% Stockholder, then the exercise price per share shall not be
less than one hundred ten percent (110%) of the Fair Market Value per share of
Common Stock on the option grant date, and the option term shall not exceed five
(5) years measured from the option grant date.

III. CORPORATE TRANSACTION/CHANGE IN CONTROL

A. In the event of any Corporate Transaction, each outstanding option
shall automatically accelerate so that each such option shall, immediately prior
to the effective date of the Corporate Transaction, become fully exercisable for
all of the shares of Common Stock at the time subject to such option and may be
exercised for any or all of those shares as fully-vested shares of Common Stock.
However, an outstanding option shall not so accelerate if and to the extent: (i)
such option is, in connection with the Corporate Transaction, either to be
assumed by the successor corporation (or parent thereof) or to be replaced with
a comparable option to purchase shares of the capital stock of the successor
corporation (or parent thereof), (ii) such option is to be replaced with a cash
incentive program of the successor corporation which preserves the spread
existing on the unvested option shares at the time of the Corporate Transaction
and provides for subsequent payout in accordance with the same vesting schedule
applicable to such option or (iii) the acceleration of such option is subject to
other limitations imposed by the Plan Administrator at the time of the option
grant. The determination of option comparability under clause (i) above shall be
made by the Plan Administrator, and its determination shall be final, binding
and conclusive.

B. All outstanding repurchase rights shall also terminate
automatically, and the shares of Common Stock subject to those terminated rights
shall immediately vest in full, in the event of any Corporate Transaction,
except to the extent: (i) those repurchase rights are to be assigned to the
successor corporation (or parent thereof) in connection with such Corporate
Transaction or (ii) such accelerated vesting is precluded by other limitations
imposed by the Plan Administrator at the time the repurchase right is issued.

9.
<PAGE>

C. Immediately following the consummation of the Corporate Transaction,
all outstanding options shall terminate and cease to be outstanding, except to
the extent assumed by the successor corporation (or parent thereof).

D. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction had
the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments to reflect such Corporate Transaction shall also be made
to (i) the number and class of securities available for issuance under the Plan
following the consummation of such Corporate Transaction, (ii) the exercise
price payable per share under each outstanding option, provided the aggregate
--------
exercise price payable for such securities shall remain the same and (iii) the
maximum number and/or class of securities for which any one person may be
granted options, separately exercisable stock appreciation rights and direct
stock issuances under the Plan.

E. The Plan Administrator shall have full power and authority to grant
options under the Discretionary Option Grant Program which will automatically
accelerate in the event the Optionee's Service subsequently terminates by reason
of an Involuntary Termination within a designated period (not to exceed eighteen
(18) months) following the effective date of any Corporate Transaction in which
those options are assumed or replaced and do not otherwise accelerate. Any
options so accelerated shall remain exercisable for fully-vested shares until
the earlier of (i) the expiration of the option term or (ii) the expiration of
-------
the one (1)-year period measured from the effective date of the Involuntary
Termination. In addition, the Plan Administrator may provide that one or more
of the Corporation's outstanding repurchase rights with respect to shares held
by the Optionee at the time of such Involuntary Termination shall immediately
terminate, and the shares subject to those terminated repurchase rights shall
accordingly vest in full.

F. The Plan Administrator shall have full power and authority to grant
options under the Discretionary Option Grant Program which will automatically
accelerate in the event the Optionee's Service subsequently terminates by reason
of an Involuntary Termination within a designated period (not to exceed eighteen
(18) months) following the effective date of any Change in Control. Each option
so accelerated shall remain exercisable for fully-vested shares until the
earlier of (i) the expiration of the option term or (ii) the expiration of the
- -------
one (1)-year period measured from the effective date of the Involuntary
Termination. In addition, the Plan Administrator may provide that one or more
of the Corporation's outstanding repurchase rights with respect to shares held
by the Optionee at the time of such Involuntary Termination shall immediately
terminate, and the shares subject to those terminated repurchase rights shall
accordingly vest in full.

G. The portion of any Incentive Option accelerated in connection with a
Corporate Transaction or Change in Control shall remain exercisable as an
Incentive Option only to the extent the applicable One Hundred Thousand Dollar
limitation is not exceeded. To the

10.
<PAGE>

extent such dollar limitation is exceeded, the accelerated portion of such
option shall be exercisable as a Non-Statutory Option under the Federal tax
laws.

H. The grant of options under the Discretionary Option Grant Program
shall in no way affect the right of the Corporation to adjust, reclassify,
reorganize or otherwise change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets.

IV. CANCELLATION AND REGRANT OF OPTIONS

The Plan Administrator shall have the authority to effect, at any time
and from time to time, with the consent of the affected option holders, the
cancellation of any or all outstanding options under the Discretionary Option
Grant Program (including outstanding options incorporated from the Predecessor
Plan) and to grant in substitution new options covering the same or different
number of shares of Common Stock but with an exercise price per share based on
the Fair Market Value per share of Common Stock on the new option grant date.

V. STOCK APPRECIATION RIGHTS

A. The Plan Administrator shall have full power and authority to grant
to selected Optionees tandem stock appreciation rights and/or limited stock
appreciation rights.

B. The following terms shall govern the grant and exercise of tandem
stock appreciation rights:

(i) One or more Optionees may be granted the right, exercisable
upon such terms as the Plan Administrator may establish, to elect between
the exercise of the underlying option for shares of Common Stock and the
surrender of that option in exchange for a distribution from the
Corporation in an amount equal to the excess of (a) the Fair Market Value
(on the option surrender date) of the number of shares in which the
Optionee is at the time vested under the surrendered option (or surrendered
portion thereof) over (b) the aggregate exercise price payable for such
shares.

(ii) No such option surrender shall be effective unless it is
approved by the Plan Administrator. If the surrender is so approved, then the
distribution to which the Optionee shall be entitled may be made in shares of
Common Stock valued at Fair Market Value on the option surrender date, in cash,
or partly in shares and partly in cash, as the Plan Administrator shall in its
sole discretion deem appropriate.

(iii) If the surrender of an option is rejected by the Plan
Administrator, then the Optionee shall retain whatever rights the Optionee had
under the surrendered option (or surrendered portion thereof) on the option

11.
<PAGE>

surrender date and may exercise such rights at any time prior to the later
-----
of (a) five (5) business days after the receipt of the rejection notice or
(b) the last day on which the option is otherwise exercisable in accordance
with the terms of the documents evidencing such option, but in no event may
such rights be exercised more than ten (10) years after the option grant
date.

C. The following terms shall govern the grant and exercise of limited
stock appreciation rights:

(i) One or more Section 16 Insiders may be granted limited
stock appreciation rights with respect to their outstanding options.

(ii) Upon the occurrence of a Hostile Take-Over, each such
individual holding one or more options with such a limited stock
appreciation right in effect for at least six (6) months shall have the
unconditional right (exercisable for a thirty (30)-day period following
such Hostile Take-Over) to surrender each such option to the Corporation,
to the extent the option is at the time exercisable for vested shares of
Common Stock. In return for the surrendered option, the Optionee shall
receive a cash distribution from the Corporation in an amount equal to the
excess of (a) the Take-Over Price of the shares of Common Stock which are
at the time vested under each surrendered option (or surrendered portion
thereof) over (b) the aggregate exercise price payable for such shares.
Such cash distribution shall be paid within five (5) days following the
option surrender date.

(iii) Neither the approval of the Plan Administrator nor the
consent of the Board shall be required in connection with such option
surrender and cash distribution.

(iv) The balance of the option (if any) shall continue in full
force and effect in accordance with the documents evidencing such option.

12.
<PAGE>

ARTICLE THREE

SALARY INVESTMENT OPTION GRANT PROGRAM
--------------------------------------

I. OPTION GRANTS

The Primary Committee shall have the sole and exclusive authority to
determine the calendar year or years (if any) for which the Salary Investment
Option Program is to be in effect and to select the Employees eligible to
participate in the Salary Investment Option Grant Program for those calendar
year or years. Each selected Employee who elects to participate in the Salary
Investment Option Grant Program must, prior to the start of each calendar year
of participation, file with the Plan Administrator (or its designate) an
irrevocable authorization directing the Corporation to reduce his or her base
salary for that calendar year by a designated dollar amount (in multiples of One
Thousand Dollars ($1,000.00)). However, the amount of such salary reduction
must be not less than Ten Thousand Dollars ($10,000.00) and must not be more
than Fifty Thousand Dollars ($50,000.00). Each individual who files a proper
salary reduction authorization shall automatically be granted an option under
this Salary Investment Option Grant Program on the first trading day in January
of the calendar year for which that salary reduction is to be in effect.

II. OPTION TERMS

Each option shall be a Non-Statutory Option evidenced by one or more
documents in the form approved by the Plan Administrator; provided, however,
--------
that each such document shall comply with the terms specified below.

A. EXERCISE PRICE.
--------------

1. The exercise price per share shall be thirty-three and one-
third percent (33-1/3%) of the Fair Market Value per share of Common Stock on
the option grant date.

2. The exercise price shall become immediately due upon exercise
of the option and shall be payable in one or more of the alternative forms
authorized under the Discretionary Option Grant Program. Except to the extent
the sale and remittance procedure specified thereunder is utilized, payment of
the exercise price for the purchased shares must be made on the Exercise Date.

B. NUMBER OF OPTION SHARES. The number of shares of Common Stock
-----------------------
subject to the option shall be determined pursuant to the following formula
(rounded down to the nearest whole number):

13.
<PAGE>

X = A / (B x 66-2/3%), where

X is the number of option shares,

A is the dollar amount of the Optionee's base salary
reduction for the calendar year, and

B is the Fair Market Value per share of Common Stock on
the option grant date.

C. EXERCISE AND TERM OF OPTIONS. The option shall become exercisable
----------------------------
in a series of twelve (12) successive equal monthly installments upon the
Optionee's completion of each calendar month of Service in the calendar year for
which the salary reduction is in effect. Each option shall have a maximum term
of ten (10) years measured from the option grant date.

D. EFFECT OF TERMINATION OF SERVICE. Should the Optionee cease
--------------------------------
Service for any reason while holding one or more options under this Article
Three, then each such option shall remain exercisable, for any or all of the
shares for which the option is exercisable at the time of such cessation of
Service, until the earlier of (i) the expiration of the ten (10)-year option
-------
term or (ii) the expiration of the two (2)-year period measured from the date of
such cessation of Service. Should the Optionee die while holding one or more
options under this Article Three, then each such option may be exercised, for
any or all of the shares for which the option is exercisable at the time of the
Optionee's cessation of Service (less any shares subsequently purchased by the
Optionee prior to death), by the personal representative of the Optionee's
estate or by the person or persons to whom the option is transferred pursuant to
the Optionee's will or in accordance with the laws of descent and distribution.
Such right of exercise shall lapse, and the option shall terminate, upon the
earlier of (i) the expiration of the ten (10)-year option term or (ii) the two
- -------
(2)-year period measured from the date of the Optionee's cessation of Service.
However, the option shall, immediately upon the Optionee's cessation of Service
for any reason, terminate and cease to remain outstanding with respect to any
and all shares of Common Stock for which the option is not otherwise at that
time exercisable.

III. CORPORATE TRANSACTION/CHANGE IN CONTROL

A. In the event of any Corporate Transaction while the Optionee remains
in Service, each outstanding option held by such Optionee under this Salary
Investment Option Grant Program shall automatically accelerate so that each such
option shall, immediately prior to the effective date of the Corporate
Transaction, become fully exercisable for all of the shares of Common Stock at
the time subject to such option and may be exercised for any or all of those
shares as fully-vested shares of Common Stock. Each such outstanding option
shall be assumed by the successor corporation (or parent thereof) in the
Corporate Transaction and shall remain exercisable for the fully-vested shares
until the earlier of (i) the expiration of the option term or

14.
<PAGE>

(ii) the expiration of the two (2)-year period measured from the date of
Optionee's cessation of Service.

B. In the event of a Change in Control while the Optionee remains in
Service, each outstanding option held by such Optionee under this Salary
Investment Option Grant Program shall automatically accelerate so that each such
option shall immediately become fully exercisable for all of the shares of
Common Stock at the time subject to such option and may be exercised for any or
all of such shares as fully-vested shares of Common Stock. The option shall
remain so exercisable until the earlier of (i) the expiration of the option term
or (ii) the expiration of the two (2)-year period measured from the date of
Optionee's cessation of Service.

C. The grant of options under the Salary Investment Option Grant Program
shall in no way affect the right of the Corporation to adjust, reclassify,
reorganize or otherwise change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets.

III. REMAINING TERMS

The remaining terms of each option granted under the Salary Investment
Option Grant Program shall be the same as the terms in effect for option grants
made under the Discretionary Option Grant Program.

15.
<PAGE>

ARTICLE FOUR

STOCK ISSUANCE PROGRAM
----------------------

I. STOCK ISSUANCE TERMS

Shares of Common Stock may be issued under the Stock Issuance Program
through direct and immediate issuances without any intervening option grants.
Each such stock issuance shall be evidenced by a Stock Issuance Agreement which
complies with the terms specified below.

A. Purchase Price.
--------------

1. The purchase price per share shall be fixed by the Plan
Administrator, but shall not be less than eighty-five percent (85%) of the Fair
Market Value per share of Common Stock on the stock issuance date.

2. Subject to the provisions of Section I of Article Six shares of
Common Stock may be issued under the Stock Issuance Program for any of the
following items of consideration which the Plan Administrator may deem
appropriate in each individual instance:

(i) cash or check made payable to the Corporation, or

(ii) past services rendered to the Corporation (or any Parent or
Subsidiary).

B. VESTING PROVISIONS.
------------------

1. Shares of Common Stock issued under the Stock Issuance Program may,
in the discretion of the Plan Administrator, be fully and immediately vested
upon issuance or may vest in one or more installments over the Participant's
period of Service or upon attainment of specified performance objectives. The
elements of the vesting schedule applicable to any unvested shares of Common
Stock issued under the Stock Issuance Program, namely:

(i) the Service period to be completed by the Participant or the
performance objectives to be attained,

(ii) the number of installments in which the shares are to vest,

(iii) the interval or intervals (if any) which are to lapse between
installments, and

16.
<PAGE>

(iv) the effect which death, Permanent Disability or other event
designated by the Plan Administrator is to have upon the vesting schedule,
shall be determined by the Plan Administrator and incorporated into the
Stock Issuance Agreement.

2. Any new, substituted or additional securities or other property
(including money paid other than as a regular cash dividend) which the
Participant may have the right to receive with respect to the Participant's
unvested shares of Common Stock by reason of any stock dividend, stock split,
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation's
receipt of consideration shall be issued subject to (i) the same vesting
requirements applicable to the Participant's unvested shares of Common Stock and
(ii) such escrow arrangements as the Plan Administrator shall deem appropriate.

3. The Participant shall have full stockholder rights with respect to
any shares of Common Stock issued to the Participant under the Stock Issuance
Program, whether or not the Participant's interest in those shares is vested.
Accordingly, the Participant shall have the right to vote such shares and to
receive any regular cash dividends paid on such shares.

4. Should the Participant cease to remain in Service while holding one
or more unvested shares of Common Stock issued under the Stock Issuance Program
or should the performance objectives not be attained with respect to one or more
such unvested shares of Common Stock, then those shares shall be immediately
surrendered to the Corporation for cancellation, and the Participant shall have
no further stockholder rights with respect to those shares. To the extent the
surrendered shares were previously issued to the Participant for consideration
paid in cash or cash equivalent (including the Participant's purchase-money
indebtedness), the Corporation shall repay to the Participant the cash
consideration paid for the surrendered shares and shall cancel the unpaid
principal balance of any outstanding purchase-money note of the Participant
attributable to such surrendered shares.

5. The Plan Administrator may in its discretion waive the surrender
and cancellation of one or more unvested shares of Common Stock (or other assets
attributable thereto) which would otherwise occur upon the cessation of the
Participant's Service or the non-completion of the vesting schedule applicable
to such shares. Such waiver shall result in the immediate vesting of the
Participant's interest in the shares of Common Stock as to which the waiver
applies. Such waiver may be effected at any time, whether before or after the
Participant's cessation of Service or the attainment or non-attainment of the
applicable performance objectives.

II. CORPORATE TRANSACTION/CHANGE IN CONTROL

A. All of the outstanding cancellation rights under the Stock Issuance
Program shall terminate automatically, and all the shares of Common Stock
subject to those terminated

17.
<PAGE>

rights shall immediately vest in full, in the event of any Corporate
Transaction, except to the extent (i) those cancellation rights are assigned to
the successor corporation (or parent thereof) in connection with such Corporate
Transaction or (ii) such accelerated vesting is precluded by other limitations
imposed in the Stock Issuance Agreement.

B. The Plan Administrator shall have the discretionary authority,
exercisable either at the time the unvested shares are issued or any time while
the Corporation's cancellation rights remain outstanding under the Stock
Issuance Program, to provide that those rights shall automatically terminate in
whole or in part, and the shares of Common Stock subject to those terminated
rights shall immediately vest, in the event the Participant's Service should
subsequently terminate by reason of an Involuntary Termination within a
designated period (not to exceed eighteen (18) months) following the effective
date of any Corporate Transaction in which those cancellation rights are
assigned to the successor corporation (or parent thereof).

C. The Plan Administrator shall have the discretionary authority,
exercisable either at the time the unvested shares are issued or any time while
the Corporation's cancellation rights remain outstanding under the Stock
Issuance Program, to provide that those rights shall automatically terminate in
whole or in part, and the shares of Common Stock subject to those terminated
rights shall immediately vest, in the event the Participant's Service should
subsequently terminate by reason of an Involuntary Termination within a
designated period (not to exceed eighteen (18) months) following the effective
date of any Change in Control.

III. SHARE ESCROW/LEGENDS

Unvested shares may, in the Plan Administrator's discretion, be held in
escrow by the Corporation until the Participant's interest in such shares vests
or may be issued directly to the Participant with restrictive legends on the
certificates evidencing those unvested shares.

18.
<PAGE>

ARTICLE FIVE

AUTOMATIC OPTION GRANT PROGRAM
------------------------------

I. OPTION TERMS

A. GRANT DATES. Option grants shall be made on the dates specified
-----------
below:

1. Each Eligible Director who is first elected or appointed as a
non-employee Board member after the Plan Effective Date shall automatically be
granted, on the date of such initial election or appointment, a Non-Statutory
Option to purchase 20,000 shares of Common Stock, provided such individual has
not previously been in the employ of the Corporation (or any Parent or
Subsidiary).

2. On the date of each Annual Stockholders Meeting beginning with
the 1997 Annual Meeting, each individual who is to continue to serve as an
Eligible Director shall automatically be granted a Non-Statutory Option to
purchase an additional 20,000 shares of Common Stock, provided such individual
has served as a non-employee Board member for at least six (6) months. There
shall be no limit on the number of such 20,000-share option grants any one
Eligible Director may receive over his or her period of Board service.

B. EXERCISE PRICE.
--------------

1. The exercise price per share shall be equal to one hundred
percent (100%) of the Fair Market Value per share of Common Stock on the option
grant date.

2. The exercise price shall be payable in one or more of the
alternative forms authorized under the Discretionary Option Grant Program.
Except to the extent the sale and remittance procedure specified thereunder is
utilized, payment of the exercise price for the purchased shares must be made on
the Exercise Date.

C. OPTION TERM. Each option shall have a term of ten (10) years
-----------
measured from the option grant date.

D. EXERCISE AND VESTING OF OPTIONS. Each option shall be immediately
-------------------------------
exercisable for any or all of the option shares. However, any shares purchased
under the option shall be subject to repurchase by the Corporation, at the
exercise price paid per share, upon the Optionee's cessation of Board service
prior to vesting in those shares. Each initial grant shall vest, and the
Corporation's repurchase right shall lapse, in a series of four (4) equal and
successive annual installments over the Optionee's period of continued service
as a Board member, with the first such installment to vest upon the Optionee's
completion of one (1) year of Board service measured from the option grant date.
Each annual grant shall vest, and the

19.
<PAGE>

Corporation's repurchase right shall lapse, upon the Optionee's completion of
one (1) year of Board service measured from the option grant date.

E. EFFECT OF TERMINATION OF BOARD SERVICE. The following provisions shall
--------------------------------------
govern the exercise of any options held by the Optionee at the time the Optionee
ceases to serve as a Board member:

(i) Should the Optionee cease to serve as a Board member for any
reason (other than death or Permanent Disability), then the Optionee shall
have a six (6)-month period following the date of such cessation of Board
service in which to exercise each such option.

(ii) Should the Optionee die while the option is outstanding, then the
personal representative of the Optionee's estate or the person or persons
to whom the option is transferred pursuant to the Optionee's will or in
accordance with the laws of descent and distribution shall have a twelve
(12)-month period following the date of the Optionee's cessation of Board
service in which to exercise each such option.

(iii) During the limited post-service exercise period, the option may
not be exercised in the aggregate for more than the number of vested shares
for which the option is exercisable at the time of the Optionee's cessation
of Board service.

(iv) Should the Optionee cease to serve as a Board member by reason of
death or Permanent Disability, then all shares at the time subject to the
option shall immediately vest so that such option may, during the twelve
(12)-month exercise period following the Optionee's death or Permanent
Disability, be exercised for all or any portion of such shares as fully-
vested shares of Common Stock.

(v) In no event shall the option remain exercisable after the
expiration of the option term. Upon the expiration of the limited post-
service exercise period or (if earlier) upon the expiration of the option
term, the option shall terminate and cease to be outstanding for any vested
shares for which the option has not been exercised. However, the option
shall, immediately upon the Optionee's cessation of Board service,
terminate and cease to be outstanding to the extent it is not otherwise at
that time exercisable for vested shares.

II. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER

A. In the event of any Corporate Transaction, the shares of Common Stock
at the time subject to each outstanding option but not otherwise vested shall
automatically vest
20.
<PAGE>

in full so that each such option shall, immediately prior to the effective date
of the Corporate Transaction, become fully exercisable for all of the shares of
Common Stock at the time subject to such option and may be exercised for all or
any portion of such shares as fully-vested shares of Common Stock. Immediately
following the consummation of the Corporate Transaction, each automatic option
grant shall terminate and cease to be outstanding, except to the extent assumed
by the successor corporation (or parent thereof).

B. In connection with any Change in Control, the shares of Common Stock at
the time subject to each outstanding option but not otherwise vested shall
automatically vest in full so that each such option shall, immediately prior to
the effective date of the Change in Control, become fully exercisable for all of
the shares of Common Stock at the time subject to such option and may be
exercised for all or any portion of such shares as fully-vested shares of Common
Stock. Each such option shall remain exercisable for such fully-vested option
shares until the expiration or sooner termination of the option term or the
surrender of the option in connection with a Hostile Take-Over.

C. Upon the occurrence of a Hostile Take-Over, the Optionee shall have a
thirty (30)-day period in which to surrender to the Corporation each automatic
option held by him or her for a period of at least six (6) months. The Optionee
shall in return be entitled to a cash distribution from the Corporation in an
amount equal to the excess of (i) the Take-Over Price of the shares of Common
Stock at the time subject to the surrendered option (whether or not the Optionee
is otherwise at the time vested in those shares) over (ii) the aggregate
exercise price payable for such shares. Such cash distribution shall be paid
within five (5) days following the surrender of the option to the Corporation.
No approval or consent of the Board shall be required in connection with such
option surrender and cash distribution.

E. The grant of options under the Automatic Option Grant Program shall in
no way affect the right of the Corporation to adjust, reclassify, reorganize or
otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.

21.
<PAGE>

III. AMENDMENT OF THE AUTOMATIC OPTION GRANT PROGRAM

The provisions of this Automatic Option Grant Program, together with the
option grants outstanding thereunder, may not be amended at intervals more
frequently than once every six (6) months, other than to the extent necessary to
comply with applicable Federal income tax laws and regulations.

IV. REMAINING TERMS

The remaining terms of each option granted under the Automatic Option Grant
Program shall be the same as the terms in effect for option grants made under
the Discretionary Option Grant Program.

22.
<PAGE>

ARTICLE SIX

MISCELLANEOUS
-------------

I. FINANCING

A. The Plan Administrator may permit any Optionee or Participant to pay
the option exercise price under the Discretionary Option Grant Program or the
purchase price for shares issued under the Stock Issuance Program by delivering
a promissory note payable in one or more installments. The terms of any such
promissory note (including the interest rate and the terms of repayment) shall
be established by the Plan Administrator in its sole discretion. Promissory
notes may be authorized with or without security or collateral. In no event may
the maximum credit available to the Optionee or Participant exceed the sum of
(i) the aggregate option exercise price or purchase price payable for the
purchased shares plus (ii) any Federal, state and local income and employment
tax liability incurred by the Optionee or the Participant in connection with the
option exercise or share purchase.

B. The Plan Administrator may, in its discretion, determine that one or
more such promissory notes shall be subject to forgiveness by the Corporation in
whole or in part upon such terms as the Plan Administrator may deem appropriate.

II. TAX WITHHOLDING

A. The Corporation's obligation to deliver shares of Common Stock upon the
exercise of options or stock appreciation rights or upon the issuance or vesting
of such shares under the Plan shall be subject to the satisfaction of all
applicable Federal, state and local income and employment tax withholding
requirements.

B. The Plan Administrator may, in its discretion, provide any or all
holders of Non-Statutory Options or unvested shares of Common Stock under the
Plan (other than the options granted or the shares issued under the Automatic
Option Grant Program) with the right to use shares of Common Stock in
satisfaction of all or part of the Taxes incurred by such holders in connection
with the exercise of their options or the vesting of their shares. Such right
may be provided to any such holder in either or both of the following formats:

(i) Stock Withholding: The election to have the Corporation withhold,
-----------------
from the shares of Common Stock otherwise issuable upon the exercise of
such Non-Statutory Option or the vesting of such shares, a portion of those
shares with an aggregate Fair Market Value equal to the percentage of the
Taxes (not to exceed one hundred percent (100%)) designated by the holder.

(ii) Stock Delivery: The election to deliver to the Corporation, at the
--------------
time the Non-Statutory Option is exercised or the shares vest,

23.
<PAGE>

one or more shares of Common Stock previously acquired by such holder
(other than in connection with the option exercise or share vesting
triggering the Taxes) with an aggregate Fair Market Value equal to the
percentage of the Taxes (not to exceed one hundred percent (100%))
designated by the holder.

III. EFFECTIVE DATE AND TERM OF PLAN

A. The Plan was adopted by the Board on March 15, 1996, subject to
approval of the shareholders and partners of the entities that are parties to
the Exchange. The Plan shall become effective immediately on the Plan Effective
Date, and options may be granted under the Discretionary Option Grant Program
from and after the Plan Effective Date. The Salary Investment Option Grant
Program shall be implemented at such time as the Primary Committee may deem
appropriate.

B. The Plan shall serve as the successor to the Predecessor Plan, and no
further option grants shall be made under the Predecessor Plan after the Plan
Effective Date. All options outstanding under the Predecessor Plan on such date
shall be incorporated into the Plan and treated as outstanding options under the
Plan. However, each outstanding option so incorporated shall continue to be
governed solely by the terms of the documents evidencing such option, and no
provision of the Plan shall be deemed to affect or otherwise modify the rights
or obligations of the holders of such incorporated options with respect to their
acquisition of shares of Common Stock.

C. One or more provisions of the Plan, including (without limitation) the
option/vesting acceleration provisions of Article Two applicable to Corporate
Transactions and Changes in Control, may, in the Plan Administrator's
discretion, be extended to one or more options incorporated from the Predecessor
Plan which do not otherwise contain such provisions.

D. The Plan shall terminate upon the earliest of (i) June 23, 2006, (ii)
--------
the date on which all shares available for issuance under the Plan shall have
been issued pursuant to the exercise of the options or the issuance of shares
(whether vested or unvested) under the Plan or (iii) the termination of all
outstanding options in connection with a Corporate Transaction. Upon a clause
(i) termination, all options and unvested stock issuances outstanding on such
date shall thereafter continue to have force and effect in accordance with the
provisions of the documents evidencing such options or issuances.

IV. AMENDMENT OF THE PLAN

A. The Board shall have complete and exclusive power and authority to
amend or modify the Plan in any or all respects. However, (i) no such amendment
or modification shall adversely affect the rights and obligations with respect
to options, stock appreciation rights or unvested stock issuances at the time
outstanding under the Plan unless the Optionee or the Participant consents to
such amendment or modification, and (ii) any amendment made to the Automatic
Option Grant Program (or any options outstanding thereunder) shall be in
compliance

24.
<PAGE>

with the limitations of that program. In addition, the Board shall not, without
the approval of the Corporation's stockholders, (i) materially increase the
maximum number of shares issuable under the Plan, the number of shares for which
options may be granted under the Automatic Option Grant Program or the maximum
number of shares for which any one person may be granted options, separately
exercisable stock appreciation rights and direct stock issuances over the term
of the Plan, except for permissible adjustments in the event of certain changes
in the Corporation's capitalization, (ii) materially modify the eligibility
requirements for Plan participation or (iii) materially increase the benefits
accruing to Plan participants.

B. Options to purchase shares of Common Stock may be granted under the
Discretionary Option Grant and Salary Investment Option Grant Programs and
shares of Common Stock may be issued under the Stock Issuance Program that are
in each instance in excess of the number of shares then available for issuance
under the Plan, provided any excess shares actually issued under those programs
are held in escrow until there is obtained stockholder approval of an amendment
sufficiently increasing the number of shares of Common Stock available for
issuance under the Plan. If such stockholder approval is not obtained within
twelve (12) months after the date the first such excess issuances are made, then
(i) any unexercised options granted on the basis of such excess shares shall
terminate and cease to be outstanding and (ii) the Corporation shall promptly
refund to the Optionees and the Participants the exercise or purchase price paid
for any excess shares issued under the Plan and held in escrow, together with
interest (at the applicable Short Term Federal Rate) for the period the shares
were held in escrow, and such shares shall thereupon be automatically cancelled
and cease to be outstanding.

V. USE OF PROCEEDS

Any cash proceeds received by the Corporation from the sale of shares of
Common Stock under the Plan shall be used for general corporate purposes.

VI. REGULATORY APPROVALS

A. The implementation of the Plan, the granting of any option or stock
appreciation right under the Plan and the issuance of any shares of Common Stock
(i) upon the exercise of any option or stock appreciation right or (ii) under
the Stock Issuance Program shall be subject to the Corporation's procurement of
all approvals and permits required by regulatory authorities having jurisdiction
over the Plan, the options and stock appreciation rights granted under it and
the shares of Common Stock issued pursuant to it.

B. No shares of Common Stock or other assets shall be issued or delivered
under the Plan unless and until there shall have been compliance with all
applicable requirements of Federal and state securities laws, including the
filing and effectiveness of the Form S-8 registration statement for the shares
of Common Stock issuable under the Plan, and all applicable listing requirements
of any stock exchange (or the Nasdaq National Market, if applicable) on which
Common Stock is then listed for trading.

25.
<PAGE>

VII. NO EMPLOYMENT/SERVICE RIGHTS

Nothing in the Plan shall confer upon the Optionee or the Participant any
right to continue in Service for any period of specific duration or interfere
with or otherwise restrict in any way the rights of the Corporation (or any
Parent or Subsidiary employing or retaining such person) or of the Optionee or
the Participant, which rights are hereby expressly reserved by each, to
terminate such person's Service at any time for any reason, with or without
cause.

26.
<PAGE>

APPENDIX
--------

The following definitions shall be in effect under the Plan:

A. AUTOMATIC OPTION GRANT PROGRAM shall mean the automatic option grant
------------------------------
program in effect under the Plan.

B. BOARD shall mean the Corporation's Board of Directors.
-----

C. CHANGE IN CONTROL shall mean a change in ownership or control of the
-----------------
Corporation effected through either of the following transactions:

(i) the acquisition, directly or indirectly, by any person or related
group of persons (other than the Corporation or a person that directly or
indirectly controls, is controlled by, or is under common control with, the
Corporation), of beneficial ownership (within the meaning of Rule 13d-3 of
the 1934 Act) of securities possessing more than fifty percent (50%) of the
total combined voting power of the Corporation's outstanding securities
pursuant to a tender or exchange offer made directly to the Corporation's
stockholders which the Board does not recommend such stockholders to
accept, or

(ii) a change in the composition of the Board over a period of thirty-
six (36) consecutive months or less such that a majority of the Board
members ceases, by reason of one or more contested elections for Board
membership, to be comprised of individuals who either (A) have been Board
members continuously since the beginning of such period or (B) have been
elected or nominated for election as Board members during such period by at
least a majority of the Board members described in clause (A) who were
still in office at the time the Board approved such election or nomination.

D. CODE shall mean the Internal Revenue Code of 1986, as amended.
----

E. COMMON STOCK shall mean the Corporation's common stock.
------------

F. CORPORATE TRANSACTION shall mean either of the following stockholder-
---------------------
approved transactions to which the Corporation is a party:

(i) a merger or consolidation in which securities possessing more than
fifty percent (50%) of the total combined voting power of the Corporation's
outstanding securities are transferred to a person or persons different
from the persons holding those immediately prior to such transaction; or

A-1.
<PAGE>

(ii) the sale, transfer or other disposition of all or substantially
all of the Corporation's assets in complete liquidation or dissolution of
the Corporation.

G. CORPORATION shall mean STAT Healthcare, Inc., a Delaware corporation.
-----------

H. DISCRETIONARY OPTION GRANT PROGRAM shall mean the discretionary option
----------------------------------
grant program in effect under the Plan.

I. DOMESTIC RELATIONS ORDER shall mean any judgment, decree or order
------------------------
(including approval of a property settlement agreement) which provides or
otherwise conveys, pursuant to applicable State domestic relations laws
(including community property laws), marital property rights to any spouse or
former spouse of the Optionee.

J. ELIGIBLE DIRECTOR shall mean a non-employee Board member eligible to
-----------------
participate in the Automatic Option Grant Program in accordance with the
eligibility provisions of Article One.

K. EMPLOYEE shall mean an individual who is in the employ of the
--------
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.

L. EXCHANGE shall mean the series of transactions in accordance with the
--------
Amended and Restated Agreement and Plan of Reorganization dated as of March 15,
1996, pursuant to which certain corporations will be merged with the Corporation
and/or its subsidiary and partners of certain partnerships will be offered
shares of Common Stock in exchange for their partnership interests.

M. EXERCISE DATE shall mean the date on which the Corporation shall have
-------------
received written notice of the option exercise.

N. FAIR MARKET VALUE per share of Common Stock on any relevant date shall
-----------------
be determined in accordance with the following provisions:

(i) If the Common Stock is at the time traded on the Nasdaq National
Market, then the Fair Market Value shall be the closing selling price per
share of Common Stock on the date in question, as such price is reported by
the National Association of Securities Dealers on the Nasdaq National
Market or any successor system. If there is no closing selling price for
the Common Stock on the date in question, then the Fair Market Value shall
be the closing selling price on the last preceding date for which such
quotation exists.

(ii) If the Common Stock is at the time listed on any Stock Exchange,
then the Fair Market Value shall be the closing selling price per share

A-2.
<PAGE>

of Common Stock on the date in question on the Stock Exchange determined by
the Plan Administrator to be the primary market for the Common Stock, as
such price is officially quoted in the composite tape of transactions on
such exchange. If there is no closing selling price for the Common Stock on
the date in question, then the Fair Market Value shall be the closing
selling price on the last preceding date for which such quotation exists.

O. HOSTILE TAKE-OVER shall mean a change in ownership of the Corporation
-----------------
effected through the following transaction:

(i) the acquisition, directly or indirectly, by any person or related
group of persons (other than the Corporation or a person that directly or
indirectly controls, is controlled by, or is under common control with, the
Corporation) of beneficial ownership (within the meaning of Rule 13d-3 of
the 1934 Act) of securities possessing more than fifty percent (50%) of the
total combined voting power of the Corporation's outstanding securities
pursuant to a tender or exchange offer made directly to the Corporation's
stockholders which the Board does not recommend such stockholders to
accept, and
---

(ii) more than fifty percent (50%) of the securities so acquired are
accepted from persons other than Section 16 Insiders.

P. INCENTIVE OPTION shall mean an option which satisfies the requirements
----------------
of Code Section 422.

Q. INVOLUNTARY TERMINATION shall mean the termination of the Service of
-----------------------
any individual which occurs by reason of:

(i) such individual's involuntary dismissal or discharge by the
Corporation for reasons other than Misconduct, or

(ii) such individual's voluntary resignation following (A) a change in
his or her position with the Corporation which materially reduces his or
her level of responsibility, (B) a reduction in his or her level of
compensation (including base salary, fringe benefits and any non-
discretionary and objective-standard incentive payment or bonus award) by
more than fifteen percent (15%) or (C) a relocation of such individual's
place of employment by more than fifty (50) miles, provided and only if
such change, reduction or relocation is effected by the Corporation without
the individual's consent.

R. MISCONDUCT shall mean the commission of any act of fraud, embezzlement
----------
or dishonesty by the Optionee or Participant, any unauthorized use or disclosure
by such person of confidential information or trade secrets of the Corporation
(or any Parent or Subsidiary), or any other intentional misconduct by such
person adversely affecting the business or affairs of

A-3.
<PAGE>

the Corporation (or any Parent or Subsidiary) in a material manner. The
foregoing definition shall not be deemed to be inclusive of all the acts or
omissions which the Corporation (or any Parent or Subsidiary) may consider as
grounds for the dismissal or discharge of any Optionee, Participant or other
person in the Service of the Corporation (or any Parent or Subsidiary).

S. 1934 ACT shall mean the Securities Exchange Act of 1934, as amended.
--------

T. NON-STATUTORY OPTION shall mean an option not intended to satisfy the
--------------------
requirements of Code Section 422.

U. OPTIONEE shall mean any person to whom an option is granted under the
--------
Discretionary Option Grant, Automatic Option Grant or Salary Investment Option
Grant Program.

V. PARENT shall mean any corporation (other than the Corporation) in an
------
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.

W. PARTICIPANT shall mean any person who is issued shares of Common Stock
-----------
under the Stock Issuance Program.

X. PERMANENT DISABILITY OR PERMANENTLY DISABLED shall mean the inability
--------------------------------------------
of the Optionee or the Participant to engage in any substantial gainful activity
by reason of any medically determinable physical or mental impairment expected
to result in death or to be of continuous duration of twelve (12) months or
more. However, solely for the purposes of the Automatic Option Grant Program,
Permanent Disability or Permanently Disabled shall mean the inability of the
non-employee Board member to perform his or her usual duties as a Board member
by reason of any medically determinable physical or mental impairment expected
to result in death or to be of continuous duration of twelve (12) months or
more.

Y. PLAN shall mean the Corporation's 1996 Stock Incentive Plan, as set
----
forth in this document.

Z. PLAN ADMINISTRATOR shall mean the particular entity, whether the
------------------
Primary Committee, the Board or the Secondary Committee, which is authorized to
administer the Discretionary Option Grant, Salary Investment Option Grant and
Stock Issuance Programs with respect to one or more classes of eligible persons,
to the extent such entity is carrying out its administrative functions under
those programs with respect to the persons under its jurisdiction.

AA. PLAN EFFECTIVE DATE shall mean the effective date of the consummation
-------------------
of the Exchange.

A-4.
<PAGE>

AB. PREDECESSOR PLAN shall mean the STAT Healthcare, Inc. 1994 Stock Option
----------------
Plan, which was assumed by the Corporation in connection with the Exchange.

AC. PRIMARY COMMITTEE shall mean the committee of two (2) or more non-
-----------------
employee Board members appointed by the Board to administer the Discretionary
Option Grant, Salary Investment Option Grant and Stock Issuance Programs with
respect to Section 16 Insiders.

AD. QUALIFIED DOMESTIC RELATIONS ORDER shall mean a Domestic Relations
----------------------------------
Order which substantially complies with the requirements of Code Section 414(p).
The Plan Administrator shall have the sole discretion to determine whether a
Domestic Relations Order is a Qualified Domestic Relations Order.

AE. SALARY INVESTMENT OPTION GRANT PROGRAM shall mean the salary investment
--------------------------------------
option grant program in effect under the Plan.

AF. SECONDARY COMMITTEE shall mean a committee of two (2) or more Board
-------------------
members appointed by the Board to administer the Discretionary Option Grant,
Salary Investment Option Grant and Stock Issuance Programs with respect to
eligible persons other than Section 16 Insiders.

AG. SECTION 16 INSIDER shall mean an officer or director of the Corporation
------------------
subject to the short-swing profit liabilities of Section 16 of the 1934 Act.

AH. SECTION 12(G) REGISTRATION DATE shall mean the first date on which the
-------------------------------
Common Stock is registered under Section 12(g) of the 1934 Act.

AI. SERVICE shall mean the provision of services to the Corporation (or any
-------
Parent or Subsidiary) by a person in the capacity of an Employee, a non-employee
member of the board of directors or a consultant or independent advisor, except
to the extent otherwise specifically provided in the documents evidencing the
option grant or stock issuance.

AJ. STOCK EXCHANGE shall mean either the American Stock Exchange or the New
--------------
York Stock Exchange.

AK. STOCK ISSUANCE AGREEMENT shall mean the agreement entered into by the
------------------------
Corporation and the Participant at the time of issuance of shares of Common
Stock under the Stock Issuance Program.

AL. STOCK ISSUANCE PROGRAM shall mean the stock issuance program in effect
----------------------
under the Plan.

AM. SUBSIDIARY shall mean any corporation (other than the Corporation) in
----------
an unbroken chain of corporations beginning with the Corporation, provided each
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the determination, stock

A-5.
<PAGE>

possessing fifty percent (50%) or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain.

AN. TAKE-OVER PRICE shall mean the greater of (i) the Fair Market Value per
--------------- -------
share of Common Stock on the date the option is surrendered to the Corporation
in connection with a Hostile Take-Over or (ii) the highest reported price per
share of Common Stock paid by the tender offeror in effecting such Hostile Take-
Over. However, if the surrendered option is an Incentive Option, the Take-Over
Price shall not exceed the clause (i) price per share.

AO. TAXES shall mean the Federal, state and local income and employment tax
-----
liabilities incurred by the holder of Non-Statutory Options or unvested shares
of Common Stock in connection with the exercise of such holder's options or the
vesting of his or her shares.

AP. 10% STOCKHOLDER shall mean the owner of stock (as determined under Code
---------------
Section 424(d)) possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Corporation (or any Parent or
Subsidiary).

A-6.

<PAGE>
Exhibit 4.2

STAT HEALTHCARE, INC.

NONSTATUTORY STOCK OPTION AGREEMENT

STAT Healthcare, Inc., a Delaware corporation (the "Company"), has granted
to Russell D. Schneider (the "Optionee"), an option to purchase a total of
10,000 shares of Common Stock (the "Shares"), at the price determined as
provided herein, and subject to the terms herein.

1. Nature of the Option. This Option is a nonstatutory option not intended to
--------------------
satisfy the requirements of Section 422 of the Code.

2. Exercise Price. The exercise price is $2.75 for each share of Common
--------------
Stock, which price is not less than the fair market value per share of the
Common Stock on the date of grant.

3. Exercise of Option. This Option shall be exercisable during its term as
------------------
follows:

(i) Right to Exercise
-----------------

(a) Subject to subsections 3(i) (b) and (c) below, this Option shall
vest at the rate of twenty-five percent (25%) per year for four
(4) years.

(b) This Option may not be exercised for a fraction of a share.

(c) In the event of Optionee's death, disability or other termination
of services, the exercisability of the Option is governed by
Sections 6, 7 and 8 below.

(ii) Method of Exercise. This Option shall be exercisable by written
------------------
notice which shall state the election to exercise the Option, the
number of Shares in respect of which the Option is being exercised,
and such other representations and agreements as to the holder's
investment intent with respect to such shares of Common Stock as may
be required by the Company pursuant to the provisions of the Plan.
Such written notice shall be signed by the Optionee and shall be
delivered in person or by certified mail to the Secretary of the
Company. The written notice shall be accompanied by payment of the
exercise price. This Option shall be deemed to be exercised upon
receipt by the Company of such written notice accompanied by the
exercise price.

-1-
<PAGE>

No shares will be issued pursuant to the exercise of an Option unless
such issuance and such exercise shall comply with all relevant
provisions of law and the requirements and any stock exchange upon
which the Shares may then be listed. Assuming such compliance, the
Shares shall be considered transferred to the Optionee on the date on
which the Option is exercised with respect to such Shares.

4. Optionee's Representations. In the event the Shares purchasable pursuant
--------------------------
to the exercise of this Option have not been registered under the
Securities Act of 1933, as amended, at the time this Option is exercised,
Optionee shall, upon the Company's request, concurrently with the exercise
of all or any portion of this Option, deliver to the Company its Investment
Representation Statement in the form attached hereto as Exhibit "A".

5. Method of Payment. Payment of the exercise price shall be by any of the
-----------------
following, or a combination thereof, at the election of the Optionee:

(i) cash; or

(ii) check.

6. Termination of Director Status. If Optionee ceases to serve as a Director,
-------------------------------
Optionee may, but only within thirty (30) days after the date of such
cessation, exercise this Option to the extent that Optionee was entitled to
exercise it at the date of such cessation of service. To the extent that
Optionee was not entitled to exercise this Option at the date of such
cessation of service or if Optionee does not exercise this Option within
the time specified herein, this Option shall terminate.

7. Disability of Optionee. Notwithstanding the provisions in Section 6 above,
-----------------------
if Optionee is unable to continue his service with the Company as a result
of his total and permanent disability (as defined in Section 22(e)(3) of
the Code), Optionee may, but only within six (6) months from the date of
cessation of service, exercise this Option to the extent Optionee was
entitled to exercise it at the date of such termination. To the extent
that Optionee was not entitled to exercise the Option at the date of
termination, or if Optionee does not exercise such Option (which he was
entitled to exercise) within the time specified herein, the Option shall
terminate.

8. Death of Optionee. In the event of the death of Optionee:
------------------

-2-
<PAGE>

(i) during the term of this Option and while a Director of the Company and
having been in Continuous Status as Director since the date of grant
of the Option, the Option may be exercised, at any time within six (6)
months following the date of death, by Optionee's estate or by a
person who acquired the right to exercise the Option by bequest or
inheritance, but only to the extent of the right to exercise that had
accrued at the date of death; or

(ii) within thirty (30) days after the termination of Optionee's Continued
Status as a Director, the Option may be exercised, at any time within
six (6) months following the date of death, by Optionee's estate or by
a person who acquired the right to exercise the Option by Bequest or
inheritance, but only to the extent of the right to exercise that had
accrued at the date of termination.

9. Adjustments Upon Changes in Capitalization or Merger. Subject to any
-----------------------------------------------------
required action by the shareholders of the Company, the number of shares
of Common Stock covered by this Option, as well as the price per share of
Common Stock covered by this Option, shall be proportionately adjusted for
any increase or decrease in the number of issued shares of Common Stock
resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase
or decrease in the number of issued shares of Common Stock effected without
receipt of consideration by the Company; provided, however, that conversion
of any convertible securities of the Company shall not be deemed to have
been "effected without receipt of consideration." Such adjustment shall be
made by the Board, whose determination in that respect shall be final,
binding and conclusive. Except as expressly provided herein, no issuance
by the Company of shares of stock of any class, or securities convertible
into shares of stock of any class, shall affect, and no adjustment by
reason thereof shall be made with respect to, the number or price of shares
of Common Stock subject to an Option.

In the event of the proposed dissolution or liquidation of the Company, the
Option will terminate immediately prior to the consummation of such
proposed action, unless otherwise provided by the Board.

-3-
<PAGE>

The Board may, in the exercise of its sole discretion, in such instances,
declare that this Option shall terminate as of a date fixed by the Board
and give Optionee the right to exercise this Option as to all or any part
of the Shares, including Shares as to which the Option would not otherwise
be exercisable. In the event of a proposed sale of all or substantially all
of the assets of the Company, or the merger of the Company with or into
another corporation, the Option shall be assumed or an equivalent option
shall be substituted by such successor corporation or a parent or
subsidiary of each in lieu of such assumption or substituted by such
successor corporation or a parent or subsidiary of each successor
corporation, unless the Board determines, in the exercise of its sole
discretion and in lieu of such assumption or substitution, that Optionee
shall have the right to exercise the Option as to all of the Shares,
including Shares as to which the Option would not otherwise be exercisable.
If the Board makes this Option fully exercisable in lieu of assumption or
substitution in the event of a merger or sale of assets, the Board shall
notify Optionee that this Option shall be fully exercisable for a period of
thirty (30) days from the date of such notice, and this Option will
terminate upon the expiration of such period.

10. Non-Transferability of Option. This Option may not be transferred in any
-----------------------------
manner. The terms of this Option shall be binding upon the successors and
assigns of the Optionee.

11. Term of Option. This Option may not be exercised more than five years from
--------------
the date of grant of this Option.

12. Restrictions on Common Stock. The Common Stock issuable upon exercise of
----------------------------
this Option shall be subject to the terms, conditions, rights and
restrictions of that certain Shareholders' Agreement and/or Voting
Agreement by and among the Company and its shareholders, if any, which such
agreement is incorporated herein by this reference.

13. Definitions. As used herein, the following definitions shall
-----------

-4-
<PAGE>

apply:

(i) "Code" shall mean the Internal Revenue Code of 1986, as amended.
----

(ii) "Continuous Status as a Director" shall mean the absence of any
-------------------------------
interruption or termination of service as a Director. Continuous
Status as a Director shall not be considered interrupted in the case
of sick leave, military leave, or any other leave of absence approved
by the Board.

DATE OF GRANT: June 29, 1995

STAT Healthcare, Inc.
a Delaware Corporation

By: ______________________________

Dated:

______________________________
Russell D. Schneider, Optionee

-5-

<PAGE>

EXHIBIT 5.1

December 11, 1996

American Medical Response, Inc.
2821 South Parker Road, 10th Floor
Aurora, Colorado 80014

Ladies and Gentlemen:

This opinion is furnished to you in connection with a registration
statement on Form S-8 (the "Registration Statement") filed with the Securities
and Exchange Commission under the Securities Act of 1933, as amended, for the
registration of 86,125 shares (the "Plan Shares") of common stock, $.01 par
value (the "American Common Stock"), of American Medical Response, Inc. (the
"Company") to be issued upon exercise of options awarded under STAT Healthcare,
Inc.'s 1996 Stock Incentive Plan (the "Plan") and 2,500 shares (collectively
with the Plan Shares, the "Shares") under a Non-Statutory Stock Option Agreement
(the "Agreement") dated June 29, 1995 between STAT Healthcare, Inc. and Russell
D. Schneider.

We have acted as special counsel for the Company and are familiar with the
action taken by the Company in connection with the Plan and the Agreement. For
purposes of this opinion we have examined the Plan, the Agreement, and such
other documents as we deemed appropriate.

Based upon the foregoing, we are of the opinion that the Shares have been
duly authorized and, when issued and sold and consideration received therefor by
the Company in accordance with the terms of the Plan or the Agreement, as the
case may be, the Shares will be validly issued, fully paid and non-assessable.

We hereby consent to your filing this opinion as an exhibit to the
Registration Statement.

Very truly yours,

/s/ Ropes & Gray
-----------------
Ropes & Gray

<PAGE>

EXHIBIT 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------

We consent to incorporation by reference in the registration statement on Form
S-8 of American Medical Response, Inc. of our reports dated February 9, 1996
relating to the consolidated balance sheets of American Medical Response, Inc.
and subsidiaries as of December 31, 1995 and 1994, and the related consolidated
statements of earnings, stockholders' equity and cash flows and related
schedules for each of the years in the three-year period ended December 31,
1995, and the related schedule, which reports appear in the December 31, 1995
annual report on Form 10-K of American Medical Response, Inc.

Denver, Colorado
December 11, 1996