NOVAMED, INC.
AMENDED AND RESTATED
2001 EMPLOYEE STOCK INCENTIVE PLAN

 

(as of December 12, 2006)

 

--------------------------------------------------------------------------------

TABLE OF CONTENTS

   Page        ARTICLE I      ESTABLISHMENT 1    ARTICLE II DEFINITIONS 1   
ARTICLE III  ADMINISTRATION  5              3.1  Committee Structure and
Authority  5    ARTICLE IV  SHARES SUBJECT TO PLAN  8              4.1  Number
of Shares  8              4.2  Release of Shares  8              4.3 
Restrictions on Shares  8              4.4  Shareholder Rights  8
             4.5  Anti-Dilution  8    ARTICLE V  ELIGIBILITY  9
             5.1  Eligibility  9    ARTICLE VI  OPTIONS  9              6.1 
General  9              6.2  Grant  10              6.3  Terms and Conditions 
10              6.4  Termination by Reason of Death  12              6.5 
Termination by Reason of Disability  12              6.6  Other Termination  12
             6.7  Cashing-Out of Options  12    ARTICLE VII  CHANGE IN CONTROL
PROVISIONS  13              7.1  Impact of Event  13              7.2 
Definition of Change in Control  13              7.3  Change in Control Price 
13    ARTICLE VIII  MISCELLANEOUS  14              8.1  Amendments and
Termination  14              8.2  Unfunded Status of Plan  14              8.3 
Limits on Transferability  14              8.4  Status of Options Under Code
Section 162(m)  15              8.5  General Provisions  15              8.6 
Mitigation of Excise Tax  17              8.7  Options in Substitution for
Options Granted by Other Entities  17              8.8  Procedure for Adoption 
17              8.9 Procedure for Withdrawal 17              8.10 Delay 17
             8.11 Headings 18              8.12 Severability 18
             8.13 Successors and Assigns 18              8.14 Entire Agreement
18

--------------------------------------------------------------------------------

NOVAMED, INC.
AMENDED AND RESTATED
2001 STOCK INCENTIVE PLAN

ARTICLE I

ESTABLISHMENT

     In April 2001, NovaMed, Inc. (f/k/a NovaMed Eyecare, Inc.) (the “Company”),
a Delaware corporation, originally established the Plan (as defined herein). The
Plan was amended and restated effective December 12, 2006, to modify the
anti-dilution provisions set forth in Section 4.5 herein. The purpose of the
Plan is to promote the overall financial objectives of the Company, its
shareholders and its Affiliates by motivating those persons selected to
participate in the Plan to achieve long-term growth in the shareholder equity in
the Company and by retaining the association of those individuals who are
instrumental in achieving this growth. The Plan was adopted as of April 2, 2001.

ARTICLE II

DEFINITIONS

     For purposes of the Plan, the following terms are defined as set forth
below:

     "Affiliate" means any individual, corporation, partnership, limited
liability company, association, joint-stock company, trust, unincorporated
association or other entity (other than the Company) that directly, or
indirectly through one or more intermediaries, controls, is controlled by, or is
under common control with, the Company, including, without limitation, any
shareholder of an affiliated group of which the Company is a common parent
corporation as provided in Section 1504 of the Code.

     "Agreement" or "Option Agreement" means, individually or collectively, any
agreement entered into pursuant to the Plan pursuant to which an Option is
granted to a Participant.

     "Beneficiary" means the person, persons, trust or trusts which have been
designated by a Participant in his or her most recent written beneficiary
designation filed with the Committee to receive the benefits specified under the
Plan upon such Participant's death or to which Options are transferred if and to
the extent permitted hereunder. If, upon a Participant's death, there is no
designated Beneficiary or surviving designated Beneficiary, then the term
Beneficiary means person, persons, trust or trust entitled by will or the laws
of descent and distribution to receive such benefits.

     "Board of Directors" or "Board" means the Board of Directors of the
Company.

--------------------------------------------------------------------------------

     "Cause" means, for purposes of whether and when a Participant has incurred
a Termination of Employment for Cause, any act or omission which permits the
Company or an Affiliate to terminate the Participant's employment with the
Company or an Affiliate for "cause" as defined in such agreement or arrangement,
or in the event there is no such agreement or arrangement or the agreement or
arrangement does not define the term "cause" or a substantially equivalent term,
then Cause means, unless otherwise defined in the Option Agreement with respect
to the corresponding Option:

          (a) any act or failure to act deemed to constitute cause under the
Company's or an Affiliate's established practices, policies or guidelines
applicable to the Participant;

          (b) breach of a covenant made by the Participant in conjunction with
the grant of an Option or the transfer of Shares hereunder;

          (c) the Participant's gross negligence in the performance of his
duties or material failure or willful refusal to perform his duties;

          (d) the determination by the Committee in the exercise of its
reasonable judgment that Participant has committed an act that (i) negatively
affects the Company's or Affiliate's business or reputation or (ii) indicates
alcohol or drug abuse by Participant that adversely affects his performance
hereunder; or

          (e) the determination by the Committee in the exercise of its
reasonable judgment that Participant has committed an act or acts constituting a
felony or other act involving dishonesty, disloyalty or fraud against the
Company or an Affiliate.

     "Change in Control" and "Change in Control Price" have the meanings set
forth in Sections 7.2 and 7.3, respectively.

     "Code" or "Internal Revenue Code" means the Internal Revenue Code of 1986,
as amended, any Treasury Regulations (including proposed regulations) thereunder
and any subsequent Internal Revenue Code.

     "Commission" means the Securities and Exchange Commission or any successor
agency.

     "Committee" means the person or persons appointed to administer the Plan,
as further described herein.

     "Common Stock" means the regular voting common stock, $0.01 par value per
share, of the Company, whether presently or hereafter issued, and any other
stock or security resulting from adjustment thereof as described hereinafter or
the equity of any successor to the Company which is designated for the purposes
of this Plan.

-2-

--------------------------------------------------------------------------------

     "Company" means NovaMed, Inc., a Delaware corporation, and includes any
successor or assignee entity or entities into which the Company may be merged,
changed or consolidated; any entity for whose securities the securities of the
Company shall be exchanged; and any assignee of or successor to substantially
all of the assets of the Company.

     "Covered Employee" means a Participant who is a "covered employee" within
the meaning of Section 162(m) of the Code.

     "Disability" means a mental or physical illness that entitles the
Participant to receive benefits under the long term disability plan of the
Company or an Affiliate, or if the Participant is not covered by such a plan or
the Participant is not an employee of the Company or an Affiliate, a mental or
physical illness that renders a Participant totally and permanently incapable of
performing the Participant's duties for the Company or an Affiliate.
Notwithstanding the foregoing, a Disability will not qualify under this Plan if
it is the result of (i) a willfully self-inflicted injury or willfully
self-induced sickness; or (ii) an injury or disease contracted, suffered, or
incurred, while participating in a criminal offense. The determination of
Disability will be made by the Committee. The determination of Disability for
purposes of this Plan will not be construed to be an admission of disability for
any other purpose.

     "Effective Date" means April 2, 2001.

     "Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.

     "Fair Market Value" means, unless otherwise determined by the Committee,
the closing sale price per share reported on a consolidated basis for stock
listed on the principal stock exchange or market on which Common Stock is traded
on the date as of which such value is being determined or, if there is no sale
on that date, then on the last previous day on which a sale was reported.

     "Grant Date" means the date as of which an Option is granted pursuant to
the Plan.

     "Incentive Stock Option" means an Option to purchase shares of Common Stock
granted under this Plan which satisfies the requirements of Section 422 of the
Code.

     "NASDAQ" means the Nasdaq Stock Market, including the Nasdaq National
Market.

     "Nonqualified Stock Option" means an Option to purchase Shares granted
under this Plan, the taxation of which is pursuant to Section 83 of the Code.

     "Option" or "Stock Option" means an option or right granted to a
Participant (under Article VI hereof) to purchase Shares at a specified price
during specified time periods.

-3-

--------------------------------------------------------------------------------

     "Option Period" means the period during which an Option shall be
exercisable in accordance with the related Agreement and Article VI.

     "Option Price" means the price at which Shares may be purchased under an
Option as provided in Section 6.3.

     "Participant" means a person who satisfies the eligibility conditions of
Article V and to whom an Option has been granted by the Committee under this
Plan, and in the event a Representative is appointed for a Participant or
another person becomes a Representative, then the term "Participant" shall mean
such Representative. The term shall also include a trust for the benefit of the
Participant, a partnership the interest of which is held by or for the benefit
of the Participant, the Participant's parents, spouse or descendants, or a
custodian under a uniform gifts to minors act or similar statute for the benefit
of the Participant's descendants, to the extent permitted by the Committee and
not inconsistent with the Rule 16b-3 or the status of the Option as an Incentive
Stock Option, to the extent intended. Notwithstanding the foregoing, the term
"Termination of Employment" shall mean the Termination of Employment of the
person to whom the Option was originally granted.

     "Plan" means the NovaMed, Inc. Amended and Restated 2001 Employee Stock
Incentive Plan, as herein set forth and as may be amended from time to time.

     "Representative" means (a) the person or entity acting as the executor or
administrator of a Participant's estate pursuant to the last will and testament
of a Participant or pursuant to the laws of the jurisdiction in which the
Participant had the Participant's primary residence at the date of the
Participant's death; (b) the person or entity acting as the guardian or
temporary guardian of a Participant; (c) the person or entity which is the
Beneficiary of the Participant upon or following the Participant's death; or (d)
any person to whom an Option has been transferred with the permission of the
Committee or by operation of law; provided that only one of the foregoing shall
be the Representative at any point in time as determined under applicable law
and recognized by the Committee. Any Representative shall be subject to all
terms and conditions applicable to the Participant.

     "Retirement" means the Participant's Termination of Employment after
attaining either the normal retirement age or the early retirement age as
defined in the principal (as determined by the Committee) tax-qualified plan of
the Company or an Affiliate, if the Participant is covered by such plan, and if
the Participant is not covered by such a plan, then age 65, or age 55 with the
accrual of 10 years of service.

     "Rule 16b-3" means Rule 16b-3, as from time to time in effect and
applicable to the Plan and Participants, promulgated by the Securities and
Exchange Commission under Section 16 of the Exchange Act.  

-4-

--------------------------------------------------------------------------------

     "Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.

     "Shares" means shares of Common Stock.

     "Termination of Employment" means the occurrence of any act or event,
whether pursuant to an employment agreement or otherwise, that actually or
effectively causes or results in the person's ceasing, for whatever reason, to
be an officer, independent contractor, board member, consultant, director or
employee of the Company or of any Affiliate, or to be an officer, independent
contractor, board member, consultant, director or employee of any entity that
provides services to the Company or an Affiliate, including, without limitation,
death, Disability, dismissal, severance at the election of the Participant,
Retirement, or severance as a result of the discontinuance, liquidation, sale or
transfer by the Company or its Affiliates of all businesses owned or operated by
the Company or its Affiliates. With respect to any person who is not an employee
with respect to the Company or an Affiliate, the Agreement will establish what
act or event shall constitute a Termination of Employment for purposes of the
Plan. A transfer of employment from the Company to an Affiliate, or from an
Affiliate to the Company, shall not be a Termination of Employment, unless
expressly determined by the Committee. A Termination of Employment shall occur
for an employee who is employed by an Affiliate if the Affiliate shall cease to
be an Affiliate and the Participant does not immediately thereafter become an
employee of the Company or an Affiliate.

     "Voluntary Termination of Employment" means a Termination of Employment at
the election of the Participant, including, with limitation, resignation by the
Participant, but excluding Retirement.

     In addition, certain other terms used herein have definitions given to them
in the first place in which they are used.

ARTICLE III

ADMINISTRATION

     3.1 Committee Structure and Authority. The Plan shall be administered by
the Committee, which shall be composed of one or more members of the Board of
Directors, each of whom is a "non-employee director" within the meaning of Rule
16b-3 of the Exchange Act and an "outside director" for purposes of the
deduction of compensation under Section 162(m) of the Code. The Committee shall
be the Compensation Committee of the Board of Directors, unless such committee
does not exist or the Board establishes a committee whose purpose is the
administration of this Plan. In the absence of an appointment of a Compensation
Committee or another specific committee, the Board shall constitute the
Committee. A majority of the Committee shall constitute a quorum at any meeting
thereof (including by telephone conference) and the acts of a majority of the
members present, or acts approved in writing by a majority of the entire
Committee without a meeting, shall be the acts of the Committee for purposes of
this Plan. The Committee may authorize any one or more of its shareholders or an
officer of the Company to execute and deliver documents on behalf of the
Committee. A member of the Committee shall not exercise any discretion
respecting himself or herself under the Plan. In the event that the Compensation
Committee of the Board no longer is the Committee, the Board shall have the
authority to remove, replace or fill any vacancy of any member of the Committee
upon notice to the Committee and the affected member. Any member of the
Committee may resign upon notice to the Board. The Committee may allocate among
one or more of its members, or may delegate to one or more of its agents, such
duties and responsibilities as it determines. 

-5-

--------------------------------------------------------------------------------

     Among other things, the Committee shall have the authority, subject to the
terms of the Plan:

          (a) to select those persons to whom Options may be granted from time
to time;

          (b) to determine whether and to what extent Options are to be granted
hereunder;

          (c) to determine the number of Shares to be covered by each Option
granted hereunder;

     (d) to determine the terms and conditions of any Option granted hereunder
(including, but not limited to, the Option Price, the Option Period, any
exercise restriction or limitation and any exercise acceleration, forfeiture or
waiver regarding any Option and the Shares relating thereto);

     (e) to adjust the terms and conditions, at any time or from time to time,
of any Option, subject to the limitations of Section 8.1;

          (f) to determine under what circumstances an Option may be settled in
cash or Shares;

          (g) to provide for the forms of Agreement to be utilized in connection
with the Plan;

          (h) to determine whether a Participant has a Disability or a
Retirement;

          (i) to determine whether and with what effect an individual has
incurred a Termination of Employment;

     (j) to determine what securities law requirements are applicable to the
Plan, Options, and the issuance of Shares and to require of a Participant that
appropriate action be taken with respect to such requirements;

     (k) to cancel, with the consent of the Participant or as otherwise provided
in the Plan or an Agreement, outstanding Options;  

-6-

--------------------------------------------------------------------------------

     (l) to interpret and make final determinations with respect to the
remaining number of Shares available under this Plan;

     (m) to require as a condition of the exercise of an Option or the issuance
or transfer of a certificate for Shares, the withholding from a Participant of
the amount of any federal, state or local taxes as may be required by law;

     (n) to determine whether the Company or any other person has a right or
obligation to purchase Shares from a Participant and, if so, the terms and
conditions on which such Shares are to be purchased;

     (o) to determine the restrictions or limitations on the transfer of Shares;

     (p) to determine whether an Option is to be adjusted, modified or
purchased, or is to become fully exercisable, under the Plan or the terms of an
Agreement;

     (q) to determine the permissible methods of Option exercise and payment,
including cashless exercise arrangements;

     (r) to adopt, amend and rescind such rules and regulations as, in its
opinion, may be advisable in the administration of the Plan; and

     (s) to appoint and compensate agents, counsel, auditors or other
specialists to aid it in the discharge of its duties.

     The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall,
from time to time, deem advisable, to interpret the terms and provisions of the
Plan and any Option issued under the Plan (and any Agreement) and to otherwise
supervise the administration of the Plan. The Committee's policies and
procedures may differ with respect to Options granted at different times or to
different Participants.

     Any determination made by the Committee pursuant to the provisions of the
Plan shall be made in its sole discretion, and in the case of any determination
relating to an Option, may be made at the time of the grant of the Option or,
unless in contravention of any express term of the Plan or an Agreement, at any
time thereafter. All decisions made by the Committee pursuant to the provisions
of the Plan shall be final and binding on all persons, including the Company and
Participants. No determination shall be subject to de novo review if challenged
in court.

-7-

--------------------------------------------------------------------------------

ARTICLE IV

SHARES SUBJECT TO PLAN

     4.1 Number of Shares. Subject to adjustment under Section 4.5, the total
number of Shares reserved and available for distribution pursuant to Options
under the Plan shall be 700,000 shares of Common Stock, as authorized for
issuance on the Effective Date and thereafter from time to time. Such Shares may
consist, in whole or in part, of authorized and unissued Shares or shares of
treasury stock.

     4.2 Release of Shares. If any Shares that are subject to an Option cease to
be such, if any Shares that are subject to any Option are forfeited, if any
Option otherwise terminates without issuance of Shares being made to the
Participant, or if any Shares are received by the Company in connection with the
exercise of an Option or the satisfaction of a tax withholding obligation, such
Shares, in the discretion of the Committee, may again be available for
distribution in connection with Options (other than Incentive Stock Options)
under the Plan. If any Shares could not again be available for Options to a
particular Participant under any applicable law, such Shares shall be available
exclusively for Options to Participants who are not subject to such limitations.

     4.3 Restrictions on Shares. Shares issued upon exercise of an Option shall
be subject to the terms and conditions specified herein and to such other terms,
conditions and restrictions as the Committee in its discretion may determine or
provide in an Option Agreement. The Company shall not be required to issue or
deliver any certificates for Shares, cash or other property prior to: (i) the
Participant executing any agreement that the Committee has required the
Participant to execute as a condition for the grant of Shares; (ii) the listing
of such shares on any stock exchange or NASDAQ (or other public market) on which
the Shares may then be listed (or regularly traded), (iii) the completion of any
registration or qualification of such Shares under federal or state law, or any
ruling or regulation of any government body which the Committee determines to be
necessary or advisable, and (iv) the satisfaction of any applicable withholding
obligation in order for the Company or an Affiliate to obtain a deduction with
respect to the exercise of an Option. The Company may cause any certificate for
any Shares to be delivered to be properly marked with a legend or other notation
reflecting the limitations on transfer of such Shares as provided in this Plan
or as the Committee may otherwise require. The Committee may require any person
exercising an Option to make such representations and furnish such information
as it may consider appropriate in connection with the issuance or delivery of
the Shares in compliance with applicable law or otherwise. Fractional shares
shall not be delivered, but shall be rounded to the next lower whole number of
shares.

     4.4 Shareholder Rights. No person shall have any rights of a shareholder as
to Shares subject to an Option until, after proper exercise of the Option or
other action required, such Shares have been recorded on the Company's official
shareholder records as having been issued and transferred. Upon exercise of the
Option or any portion thereof, the Company shall have thirty (30) days in which
to issue the Shares, and the Participant will not be treated as a shareholder
for any purpose whatsoever prior to such issuance. No adjustment shall be made
for cash dividends or other rights for which the record date is prior to the
date such Shares are recorded as issued and transferred in the Company's
official shareholder records, except as provided herein or in an Agreement.

     4.5 Anti-Dilution. In the event of any Company stock dividend, stock split,
reverse stock split, combination or exchange of shares, recapitalization or
other change in the capital structure of the Company, corporate separation or
division of the Company (including, but not limited to, a split-up, spin-off,
split-off or distribution to Company stockholders other than a normal cash than
dividend), sale by the Company of all or a substantial portion of its assets
(measured either on a stand-alone or consolidated basis), reorganization, rights
offering, a partial or complete liquidation, or any other corporate transaction
or event involving the Company and having an effect similar to any of the
foregoing, then the Committee shall adjust or substitute, as the case may be,
the number of Shares available for Awards under the Plan, the number of Shares
covered by outstanding Awards, the exercise price per Share of outstanding
Options, and any other characteristics or terms of the Awards as the Committee
shall deem necessary or appropriate to reflect equitably the effects of such
changes to the Participants; provided, however, that the Committee may limit any
such adjustment so as to maintain the deductibility of the Awards under Section
162(m) of the Code, and that any fractional shares resulting from such
adjustment shall be eliminated by rounding to the next lower whole number of
shares with appropriate payment for such fractional share as shall reasonably be
determined by the Committee.

-8-

--------------------------------------------------------------------------------

ARTICLE V

ELIGIBILITY

     5.1 Eligibility. Except as herein provided, the persons who shall be
eligible to participate in the Plan and be granted Options shall be those
persons who are directors, officers, employees, independent contractors or
consultants with respect to the Company or any Affiliate, who are in a position,
in the opinion of the Committee, to make contributions to the growth,
management, protection and success of the Company and its Affiliates. Of those
persons described in the preceding sentence, the Committee may, from time to
time, select persons to be granted Options and shall determine the terms and
conditions with respect thereto. In making any such selection and in determining
the form of the Option, the Committee may give consideration to the functions
and responsibilities of the person's contributions to the Company and its
Affiliates, the value of the individual's service to the Company and its
Affiliates and such other factors deemed relevant by the Committee. The
Committee may designate as ineligible to participate in the Plan any person who
would otherwise be eligible to participate. To the extent approval of the Plan
by the Company’s stockholders is necessary for a person to participate in the
Plan, such person will not participate in the Plan until such approval is
obtained.

ARTICLE VI

OPTIONS

     6.1 General. The Committee shall have authority to grant Options under the
Plan at any time or from time to time. Options may be either Incentive Stock
Options or Nonqualified Stock Options, provided that no Incentive Stock Options
may be granted if the Plan is not approved by the Company’s stockholders within
twelve (12) months after the date the Plan has been adopted. An Option shall
entitle the Participant to receive Shares upon the exercise of such Option,
subject to the Participant's satisfaction in full of any conditions,
restrictions or limitations imposed in accordance with the Plan or an Agreement
(the terms and provisions of which may differ from other Agreements) including
without limitation, payment of the Option Price. During any three-calendar-year
period, Options for no more than 700,000 shares of Common Stock shall be granted
to any Participant.

-9-

--------------------------------------------------------------------------------

     6.2 Grant. The grant of an Option shall occur as of the date the Committee
determines. Each Option granted under this Plan shall be evidenced by an
Agreement, in a form approved by the Committee, which shall embody the terms and
conditions of such Option and which shall be subject to the express terms and
conditions set forth in the Plan. Such Agreement shall become effective upon
execution by the Company and the Participant. Only a person who is a common-law
employee of the Company, any parent corporation of the Company or a subsidiary
(as such terms are defined in Section 424 of the Code) on the date of grant
shall be eligible to be granted an Option which is intended to be and is an
Incentive Stock Option. To the extent that any Option is not designated as an
Incentive Stock Option or even if so designated does not qualify as an Incentive
Stock Option, it shall constitute a Nonqualified Stock Option.

     6.3 Terms and Conditions. Except to the extent determined to be appropriate
by the Committee and consented to by the Participant, an Option granted pursuant
to the Plan shall be subject to such terms and conditions as shall be determined
by the Committee, including the following:

     (a) Option Period. The Option Period of each Option will be fixed by the
Committee; provided that the Option Period of a Nonqualified Stock Option shall
not exceed ten (10) years from the date the Option is granted. In the case of an
Incentive Stock Option, the Option Period shall not exceed ten (10) years from
the date of grant or five (5) years in the case of an individual who owns more
than ten percent (10%) of the combined voting power of all classes of stock of
the Company, a corporation which is a parent corporation of the Company or any
subsidiary of the Company (each as defined in Section 424 of the Code). No
Option which is intended to be an Incentive Stock Option shall be granted more
than ten (10) years from the date this Plan is adopted by the Company or the
date this Plan is approved by the shareholders of the Company, whichever is
earlier.

     (b) Option Price. The Option Price per share of Common Stock purchasable
under an Option shall be determined by the Committee. If an Option is intended
to qualify as an Incentive Stock Option, the Option Price per share of Common
Stock shall be not less than the Fair Market Value per share of Common Stock on
the date the Option is granted, or where granted to an individual who owns or
who is deemed to own stock possessing more than ten percent (10%) of the
combined voting power of all classes of stock of the Company, a corporation
which is a parent corporation of the Company or any subsidiary of the Company
(each as defined in Section 424 of the Code), not less than one hundred ten
percent (110%) of such Fair Market Value per share.

-10-

--------------------------------------------------------------------------------

     (c) Exercisability. Subject to Section 7.1, Options shall be exercisable at
such time or times and subject to such terms and conditions as shall be
determined by the Committee. If the Committee provides that any Option is
exercisable only in installments, the Committee may at any time waive such
installment exercise provisions, in whole or in part. In addition, the Committee
may at any time accelerate the exercisability of any Option. If the Committee
intends that an Option be an Incentive Stock Option, the Committee may, in its
discretion, provide that the aggregate Fair Market Value (determined at the
Grant Date) of an Incentive Stock Option which is exercisable for the first time
during the calendar year shall not exceed $100,000.

     (d) Method of Exercise. Subject to the provisions of this Article VI, a
Participant may exercise Options, in whole or in part, at any time during the
Option Period by the Participant's giving written notice of exercise on a form
provided by the Committee (if available) to the Company specifying the number of
Shares subject to the Option to be purchased. Such notice shall be accompanied
by payment in full of the purchase price by cash or check or such other form of
payment as the Company may accept. If approved by the Committee, payment in full
or in part may also be made (i) by delivering Shares already owned by the
Participant for a period of at least six (6) months prior to payment having a
total Fair Market Value on the date of such delivery equal to the Option Price;
(ii) by the execution and delivery of a note or other full recourse evidence of
indebtedness (and any security agreement thereunder) satisfactory to the
Committee; (iii) by the delivery of cash or the extension of credit by a
broker-dealer to whom the Participant has submitted a notice of exercise or
otherwise indicated an intent to exercise an Option (in accordance with Part
220, Chapter II, Title 12 of the Code of Federal Regulations, so-called
"cashless" exercise); (iv) by certifying ownership of shares owned by the
Participant to the satisfaction of the Committee for later delivery to the
Company as expected by the Committee and (v) by any combination of the
foregoing. No Shares will be issued until full payment therefor has been made
and the Participant has executed any and all agreements that the Company may
require the Participant to execute. A Participant will have all of the rights of
a shareholder of the Company holding the Shares that are subject to such Option
(including, if applicable, the right to vote the Shares and the right to receive
dividends), when the Participant has given written notice of exercise, has paid
in full for such Shares, executed all relevant agreements, and such Shares have
been recorded on the Company's official records as having been issued and
transferred.

     (e) Non-transferability of Options. Except as provided herein or in an
Agreement, no Option or interest therein shall be transferable by the
Participant other than by will or by the laws of descent and distribution or by
a designation of Beneficiary effective upon the death of the Participant, and
all Options shall be exercisable during the Participant's lifetime only by the
Participant or the Participant's Representative. If and to the extent
transferability is permitted by the Committee as provided by an Agreement, the
Option shall be transferable only if such transfer does not result in liability
under Section 16 of the Exchange Act to the Participant or other Participants
and is consistent with registration of the Option and sale of Common Stock on
Form S-8 (or a successor form) or is consistent with the use of Form S-8 (or the
Committee's waiver of such condition) and consistent with an Option's intended
status as an Incentive Stock Option (if applicable).

-11-

--------------------------------------------------------------------------------

     6.4 Termination by Reason of Death. Unless otherwise provided in an
Agreement or determined by the Committee, if a Participant incurs a Termination
of Employment due to death, any unexpired and unexercised Option held by such
Participant shall thereafter be fully exercisable for a period of one (1) year
following the date of the appointment of a Representative (or such other period
or no period as the Committee may specify) or until the expiration of the Option
Period, whichever period is the shorter.

     6.5 Termination by Reason of Disability. Unless otherwise provided in an
Agreement or determined by the Committee, if a Participant incurs a Termination
of Employment due to a Disability, any unexpired and unexercised Option held by
such Participant shall thereafter be fully exercisable by the Participant for
the period of one (1) year (or such other period or no period as the Committee
may specify) immediately following the date of such Termination of Employment or
until the expiration of the Option Period, whichever period is shorter, and the
Participant's death at any time following such Termination of Employment due to
Disability will not affect the foregoing. In the event of Termination of
Employment by reason of Disability, if an Incentive Stock Option is exercised
after the expiration of the exercise periods that apply for purposes of Section
422 of the Code, such Option will thereafter be treated as a Nonqualified Stock
Option.

     6.6 Other Termination. Unless otherwise provided in an Agreement or
determined by the Committee, if a Participant incurs a Termination of Employment
due to Retirement, or the Termination of Employment is involuntary on the part
of the Participant (but is not due to death or Disability or for Cause), any
Option held by such Participant shall thereupon terminate, except that such
Option, to the extent then exercisable, may be exercised for the lesser of the
ninety (90)-day period commencing with the date of such Termination of
Employment or until the expiration of the Option Period, whichever period is
shorter. If the Participant incurs a Termination of Employment which is either
(a) for Cause or (b) a Voluntary Termination of Employment on the part of the
Participant, the Option will terminate immediately. The death or Disability of a
Participant after a Termination of Employment otherwise provided herein will not
extend the time permitted to exercise an Option.

     6.7 Cashing-Out of Options. Unless otherwise provided in the Agreement, on
receipt of written notice of exercise, the Committee may elect to cash-out all
or part of the portion of any Option to be exercised by paying the Participant
an amount, in cash or Shares, equal to the excess of (a) the Fair Market Value
of the Shares that are subject to the portion of the Option being cashed-out
over (b) the Option Price, such difference multiplied by (c) the number of
Shares subject to the portion of the Option being cashed out, all as of the
effective date of such cash-out.

-12-

--------------------------------------------------------------------------------

ARTICLE VII

CHANGE IN CONTROL PROVISIONS

     7.1 Impact of Event. An Agreement may provide that in the event of a Change
in Control (as defined in Section 7.2):

      (a)    Any Options outstanding as of the date of such Change in Control
and not then exercisable shall become fully exercisable to the full extent of
the original grant.

      (b)    Notwithstanding any other provision of the Plan, unless the
Committee shall provide otherwise in an Agreement, in the event of a Change in
Control, a Participant shall have the right, whether or not the Option is fully
exercisable or may be otherwise realized by the Participant, by giving notice to
the Company during the sixty (60)-day period from and after a Change in Control,
to elect to surrender all or part of the Option to the Company and to receive
cash, within thirty (30) days of such notice, in an amount equal to the amount
by which the "Change in Control Price" (as defined in Section 7.3) per share of
the Shares on the date of such election shall exceed the amount which the
Participant must pay to exercise the Option per share of Shares under the Option
(the "Spread") multiplied by the number of Shares granted under the Option.
Notwithstanding the foregoing, if any right under this Section would cause a
transaction to be ineligible for pooling of interest accounting that would but
for the right hereunder be eligible for such accounting treatment, the Committee
may modify or adjust the right so that pooling of interest accounting shall be
available, including the substitution of Shares having a Fair Market Value equal
to the cash otherwise payable hereunder for the right which caused the
transaction to be ineligible for pooling of interest accounting.

     7.2 Definition of Change in Control. For purposes of this Plan, unless
otherwise specified in the Agreement with respect to the corresponding Option, a
"Change in Control" shall be deemed to have occurred if (a) any corporation,
person or other entity (other than the Company, a majority-owned subsidiary of
the Company or any of its subsidiaries, or an employee benefit plan (or related
trust) sponsored or maintained by the Company or an Affiliate), including a
"group" as defined in Section 13(d)(3) of the Securities Exchange Act of 1934,
as amended, becomes the beneficial owner of Shares representing more than fifty
percent of the combined voting power of the Company's then outstanding
securities; (b)(i) the Company approves, in any transaction or series of related
transactions, a definitive agreement to merge or consolidate the Company with or
into another entity other than a majority-owned subsidiary of the Company, or to
sell or otherwise dispose of all or substantially all of the Company's assets,
and (ii) the persons who were the members of the Board of Directors prior to
such approval do not represent a majority of the Board of Directors of the
surviving, resulting or acquiring entity or the parent thereof; or (c) the
shareholders of the Company approve a plan of liquidation of the Company.

     7.3 Change in Control Price. For purposes of the Plan, unless otherwise
specified in the Agreement with respect to the corresponding Option, "Change in
Control Price" means the higher of (a) the highest reported sales price of a
Share in any transaction reported on the principal exchange on which such Shares
are listed or on NASDAQ during the sixty (60)-day period prior to and including
the date of a Change in Control or (b) if the Change in Control is the result of
a tender or exchange offer, merger, consolidation, liquidation or sale of all or
substantially all of the assets of the Company (in each case a "Transaction"),
the highest price per Share paid in such Transaction. To the extent that the
consideration paid in any Transaction consists all or in part of securities or
other non-cash consideration, the value of such securities or other non-cash
consideration shall be determined in the sole discretion of the Committee.

-13-

--------------------------------------------------------------------------------

ARTICLE VIII

MISCELLANEOUS

     8.1 Amendments and Termination. The Board may amend, alter or discontinue
the Plan at any time, but no amendment, alteration or discontinuation shall be
made which would impair the rights of a Participant under an Option theretofore
granted without the Participant's consent, except such an amendment (a) made to
avoid an expense charge to the Company or an Affiliate, (b) made to cause the
Plan to qualify for the exemption provided by Rule 16b-3 or (c) made to permit
the Company or an Affiliate a deduction under the Code. In addition, no such
amendment shall be made without the approval of the Company's shareholders to
the extent such approval is required by law or agreement.

     The Committee may amend, alter or discontinue the Plan or an Option at any
time on the same conditions and limitations (and exceptions to limitations) as
apply to the Board's authority to amend the Plan and further subject to any
approval or limitations the Board may impose.

     Notwithstanding anything in the Plan to the contrary, if any right under
this Plan would cause a transaction to be ineligible for pooling of interest
accounting that would, but for the right hereunder, be eligible for such
accounting treatment, the Committee may modify or adjust the right so that
pooling of interest accounting shall be available, including the substitution of
equity interests having a Fair Market Value equal to the cash otherwise payable
hereunder for the right which caused the transaction to be ineligible for
pooling of interest accounting.

     8.2 Unfunded Status of Plan. It is intended that the Plan be an "unfunded"
plan for incentive and deferred compensation. The Committee may authorize the
creation of trusts or other arrangements to meet the obligations created under
the Plan to deliver Shares or make payments; provided, however, that, unless the
Committee otherwise determines, the existence of such trusts or other
arrangements is consistent with the "unfunded" status of the Plan.

     8.3 Limits on Transferability. Unless otherwise provided in this Plan or in
an Agreement, no Option shall be subject to the claims of Participant's
creditors and no Option may be sold, transferred, assigned, alienated,
encumbered, hypothecated, gifted, conveyed, pledged or disposed of in any way
other than by will or the laws of descent and distribution or to a
Representative upon the death of the Participant.  

-14-

--------------------------------------------------------------------------------

     8.4 Status of Options Under Code Section 162(m). It is the intent of the
Company that Options granted to persons who are Covered Employees within the
meaning of Code Section 162(m) after the Plan has been approved by the Company’s
stockholders shall constitute "qualified performance-based compensation"
satisfying the requirements of Code Section 162(m). Accordingly, after such
approval the provisions of the Plan shall be interpreted in a manner consistent
with Code Section 162(m). After such approval, if any provision of the Plan or
any agreement relating to such an Option does not comply or is inconsistent with
the requirements of Code Section 162(m), such provision shall be construed or
deemed amended to the extent necessary to conform to such requirements.

     8.5 General Provisions.

          (a) Representation. The Committee may require each person purchasing
or receiving shares pursuant to an Option to represent to and agree with the
Company in writing that such person is acquiring the shares without a view to
the distribution thereof. The certificates for such shares may include any
legend which the Committee deems appropriate to reflect any restrictions on
transfer.

          (b) No Additional Obligation. Nothing contained in the Plan shall
prevent the Company or an Affiliate from adopting other or additional
compensation arrangements for its employees.

          (c) Withholding. No later than the date as of which an amount first
becomes includable in the gross income of the Participant for income tax
purposes with respect to any Option, the Participant shall pay to the Company
(or other entity identified by the Committee), or make arrangements satisfactory
to the Company or other entity identified by the Committee regarding the payment
of, any Federal, state, local or foreign taxes of any kind required by law to be
withheld with respect to such amount required in order for the Company or an
Affiliate to obtain a current deduction. Unless otherwise determined by the
Committee, withholding obligations may be settled with Shares, including Shares
that are part of the Option that gives rise to the withholding requirement,
provided that any applicable requirements under Section 16 of the Exchange Act
are satisfied. The obligations of the Company under the Plan will be conditional
on such payment or arrangements, and the Company and its Affiliates will, to the
extent permitted by law, have the right to deduct any such taxes from any
payment otherwise due to the Participant. If the Participant disposes of shares
of Common Stock acquired pursuant to an Incentive Stock Option in any
transaction considered to be a disqualifying transaction under the Code, the
Participant must give written notice of such transfer and the Company shall have
the right to deduct any taxes required by law to be withheld from any amounts
otherwise payable to the Participant. The obligations of the Company under the
Plan shall be conditional on such payment or arrangements, and the Company and
its Affiliates shall, to the extent permitted by law, have the right to deduct
any such taxes from any payment otherwise due to the Participant.  

-15-

--------------------------------------------------------------------------------

          (d) Representative. The Committee shall establish such procedures as
it deems appropriate for a Participant to designate a Representative to whom any
amounts payable in the event of the Participant's death are to be paid.

          (e) Controlling Law. The Plan and all Options made and actions taken
thereunder will be governed by and construed in accordance with the laws of the
State of Delaware (other than its law respecting choice of law). The Plan shall
be construed to comply with all applicable law and to avoid liability to the
Company, an Affiliate or a Participant or loss of a deduction, including,
without limitation, liability under Section 16(b) of the Exchange Act.

          (f) Offset. Any amounts owed to the Company or an Affiliate by the
Participant of whatever nature may be offset by the Company from the value of
any Shares, cash or other thing of value under this Plan or an Agreement to be
transferred to the Participant, and no Shares, cash or other thing of value
under this Plan or an Agreement shall be transferred unless and until all
disputes between the Company and the Participant have been fully and finally
resolved and the Participant has waived all claims to such against the Company
or an Affiliate.

          (g) No Rights with Respect to Continuance of Employment. Nothing
contained herein shall be deemed to alter the relationship between the Company
or an Affiliate and a Participant, or the contractual relationship between a
Participant and the Company or an Affiliate if there is a written contract
regarding such relationship. Nothing contained herein shall be construed to
constitute a contract of employment between the Company or an Affiliate and a
Participant. The Company or an Affiliate and each of the Participants continue
to have the right to terminate the employment or service relationship at any
time for any reason, except as provided in a written contract. The Company or an
Affiliate shall have no obligation to retain the Participant in its employ or
service as a result of this Plan. There shall be no inference as to the length
of employment or service hereby, and the Company or an Affiliate reserves the
same rights to terminate the Participant's employment or service as existed
prior to the individual's becoming a Participant in this Plan.

          (h) Fail-Safe. With respect to persons subject to Section 16 of the
Exchange Act, transactions under this Plan are intended to comply with all
applicable conditions of Rule 16b-3, as applicable. To the extent any provision
of the Plan or action by the Committee fails to so comply, it shall be deemed
null and void, to the extent permitted by law and deemed advisable by the
Committee. Moreover, in the event the Plan does not include a provision required
by Rule 16b-3 to be stated herein, such provision (other than one relating to
eligibility requirements or the price and amount of Options) shall be deemed to
be incorporated by reference into the Plan with respect to Participants subject
to Section 16.

          (i) Right to Capitalize. The grant of an Option shall in no way affect
the right of the Company to adjust, reclassify, reorganize or otherwise change
its capital or business structure or to merge, consolidation, dissolve,
liquidate or sell or transfer all or any part of its business or assets.

-16-

--------------------------------------------------------------------------------

     8.6 Mitigation of Excise Tax. Subject to any agreement with a Participant,
if any payment or right accruing to a Participant under this Plan (without the
application of this Section 8.6), either alone or together with other payments
or rights accruing to the Participant from the Company or an Affiliate ("Total
Payments"), would constitute a "parachute payment" (as defined in Section 280G
of the Code and regulations thereunder), such payment or right shall be reduced
to the largest amount or greatest right that will result in no portion of the
amount payable or right accruing under the Plan being subject to an excise tax
under Section 4999 of the Code or being disallowed as a deduction under Section
280G of the Code. The determination of whether any reduction in the rights or
payments under this Plan is to apply shall be made by the Committee in good
faith after consultation with the Participant, and such determination will be
conclusive and binding on the Participant. The Participant shall cooperate in
good faith with the Committee in making such determination and providing the
necessary information for this purpose. The provisions of this Section 8.6 shall
apply with respect to any Participant only if, after reduction for any
applicable federal excise tax imposed by Section 4999 of the Code and other
federal income tax imposed by the Code, the Total Payments accruing to such
Participant would be less than the amount of the Total Payments as reduced (i)
if applicable, pursuant to the provisions of this Section 8.6 and any similar
provisions under any other plan of the Company or any Affiliate to mitigate the
applicable federal excise tax, and (ii) by federal income taxes (other than such
excise tax).

     8.7 Options in Substitution for Options Granted by Other Entities. Options
may be granted under the Plan from time to time in substitution for options held
by employees, directors or service providers of other entities who are about to
become officers, directors, shareholders or employees of the Company or an
Affiliate. The terms and conditions of the Options so granted may vary from the
terms and conditions set forth in this Plan at the time of such grant as the
majority of the shareholders of the Committee may deem appropriate to conform,
in whole or in part, to the provisions of the Options in substitution for which
they are granted.

     8.8 Procedure for Adoption. Any Affiliate of the Company may by resolution
of such Affiliate's board of directors with the consent of the Board of
Directors and subject to such conditions as may be imposed by the Board of
Directors, adopt the Plan for the benefit of its employees as of the date
specified in the resolution.

     8.9 Procedure for Withdrawal. Any Affiliate which has adopted the Plan may,
by resolution of the board of directors of such Affiliate, with the consent of
the Board of Directors and subject to such conditions as may be imposed by the
Board of Directors, terminate its adoption of the Plan.

     8.10 Delay. If at the time a Participant incurs a Termination of Employment
(other than due to Cause) or if at the time of a Change in Control, the
Participant is subject to "short-swing" liability under Section 16 of the
Exchange Act, any time period provided for under the Plan or an Agreement to the
extent necessary to avoid the imposition of liability will be suspended and
delayed during the period the Participant would be subject to such liability,
but not more than six months and one day and not to exceed the Option Period.
The Company shall have the right to suspend or delay any time period described
in the Plan or an Agreement if the Committee shall determine that the action may
constitute a violation of any law or result in liability under any law to the
Company, an Affiliate or a shareholder in the Company until such time as the
action required or permitted will not constitute a violation of law or result in
liability to the Company, an Affiliate or a shareholder of the Company. The
Committee shall have the discretion to suspend the application of the provisions
of the Plan required solely to comply with Rule 16b-3 if the Committee
determines that Rule 16b-3 does not apply to the Plan.

-17-

--------------------------------------------------------------------------------

     8.11 Headings. The headings contained in this Plan are for reference
purposes only and shall not affect the meaning or interpretation of this Plan.

     8.12 Severability. If any provision of this Plan is for any reason held to
be invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provision of this Plan, and this Plan will be construed as if
such invalid or unenforceable provision were omitted.

     8.13 Successors and Assigns. This Plan shall inure to the benefit of and be
binding upon each successor and assign of the Company. All obligations imposed
upon a Participant, and all rights granted to the Company hereunder, shall be
binding upon the Participant's heirs, legal representatives and successors.

     8.14 Entire Agreement. This Plan and the Agreement constitute the entire
agreement with respect to the subject matter hereof and thereof, provided that
in the event of any inconsistency between the Plan and the Agreement, the terms
and conditions of this Plan shall control.

Executed effective as of the 12th day of December, 2006.

NovaMed, Inc.        By:  /s/ Scott T. Macomber     Its: EVP and CFO 

-18-

--------------------------------------------------------------------------------