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                                                                   EXHIBIT 10.10


                   AMENDED AND RESTATED 1997 STOCK OPTION PLAN
                                FOR EMPLOYEES OF
                            PHYSICIAN PARTNERS, INC.


1.      PURPOSE OF THE PLAN

        The Amended and Restated 1997 Stock Option Plan for Employees of
Physician Partners, Inc. (the "Plan") was established by Physician Partners,
Inc. (the "Company"), effective as of the effective time (the "Effective Date")
of the transaction contemplated under the Amended and Restated Agreement and
Plan of Reorganization and Merger, dated as of September 19, 1996, as amended on
November 4, 1996, November 29, 1996 and December 31, 1996 (referred to herein,
as so amended, as the "Reorganization and Merger Agreement") to:

        1.1 furnish incentives to eligible employees chosen to receive options
because they are considered capable of responding by improving operations and
increasing profits;

        1.2 encourage selected employees to accept or continue employment with
the Company or its Affiliates; and

        1.3 increase the interest of selected employees and officers in the
Company's welfare through their participation in the growth in value of Class A
Common Stock, $.01 par value, of the Company ("Class A Common Stock").

        To accomplish the foregoing objectives, this Plan provides a means
whereby employees may receive options to purchase Class A Common Stock. Options
granted under this Plan ("Options") will be either nonqualified options ("NQOs")
subject to federal income taxation upon exercise or Options intended to be
incentive stock options ("ISOs") not subject to immediate federal income
taxation upon exercise.


2.      ELIGIBLE PERSONS

        2.1 General. Every person who at the date on which an Option granted to
the person becomes effective (the "Grant Date") and who is an employee or
officer of the Company or of any Affiliate.

        2.2 Definition of Affiliate. The term "Affiliate," as used in this Plan,
means a "parent corporation" or "subsidiary corporation," as defined in Section
424 of the Internal Revenue 


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Code of 1986 (the "Code"). The term "employee" shall have the meaning ascribed
for purposes of Section 3401(c) of the Code and the Treasury Regulations
promulgated thereunder and shall include an officer who is also an employee.


3.      STOCK SUBJECT TO THIS PLAN

        The total number of shares of stock reserved for issuance upon the
exercise of Options is 900,000 shares of Class A Common Stock. The shares
covered by the portion of any grant that expires unexercised under this Plan
shall become available again for grants under this Plan. The number of shares
reserved for issuance under this Plan is subject to adjustment in accordance
with the provisions for adjustment in this Plan.


4.      ADMINISTRATION

        This Plan shall be administered by a committee (the "Committee") of not
less than three (3) members appointed by the Board of Directors of the Company.
The Committee may delegate nondiscretionary administrative duties to other
employees of the Company as it deems proper. Subject to the approval of the
Board of Directors and the provisions of this Plan, the Committee shall have the
authority to select the persons to receive Options under this Plan, to fix the
number of shares that each optionee may purchase, to set the terms and
conditions of each Option and to determine all other matters relating to this
Plan. Any act approved in writing by a majority of the members of the Committee
shall be a valid act of the Committee. Such determinations shall be final and
binding on all persons. No member of the Board of Directors or the Committee
shall be liable for any action or determination made in good faith with respect
to the Plan or any option granted under the Plan.


5.      GRANTING OF THE RIGHTS

        5.1 Ten Year Limitation. No Options shall be granted under this Plan
after ten years from the date the Board of Directors of the Company adopts this
Plan.

        5.2 Written Agreement; Effect. Each Option shall be evidenced by a
written agreement (the "Option Agreement"), in a form satisfactory to the
Committee, executed by the Company and by the person to whom such Option is
granted. The Option Agreement shall specify whether each Option it evidences is
a NQO or an ISO. Failure of the grantee to execute an Option Agreement shall not
void or invalidate the grant of any Option; the Option may not be exercised,
however, until the Option Agreement is executed. Each 


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optionee who is or is expected to become an employee shall contemporaneously
with the grant of an option execute an Employee Noncompetition, Nondisclosure
and Developments Agreement in a form satisfactory to the Committee.

        5.3 Annual $100,000 Limitation on ISOs. To the extent required by
Section 422(d) of the Code, the aggregate fair market value of the shares of the
Class A Common Stock with respect to which ISOs are exercisable for the first
time by any individual during any calendar year shall not exceed $100,000. For
this purpose, fair market value shall be the fair market value of the shares
covered by the ISOs when the ISOs were granted. If by their terms, such ISOs
taken together would first become exercisable at a faster rate, this $100,000
limitation shall be applied by deferring the exercisability of those ISOs or
portions of ISOs which have the highest per share exercise prices. The ISOs or
portions of ISOs, the exercisability of which is so deferred, shall become
exercisable on the first day of the first subsequent calendar year during which
they may be exercised, as determined by applying these same principles of this
Section and all other provisions of this Section and all other provisions of
this Plan, including those relating to the expiration and termination of ISOs.

        5.4 Advance Approvals. The Board of Directors may approve the grant of
Options to persons who are expected to become employees of the Company, but are
not employees at the date of approval. In such cases, the Option shall be deemed
granted, without further approval, on the date the grantee becomes an employee
and must satisfy all requirements of this Plan for Options granted on that date.


6.      TERMS AND CONDITIONS OF OPTIONS

        Each Option shall be designated as an ISO or a NQO and shall be subject
to the terms and conditions set forth in Section 6.1. NQOs shall also be subject
to the terms and conditions set forth in Section 6.2, but not those set forth in
Section 6.3. ISOs shall also be subject to the terms and conditions set forth in
Section 6.3, but not those set forth in Section 6.2.

        6.1 Terms and Conditions to Which All Options Are Subject. All Options
shall be subject to the following terms and conditions:

               (a) Changes in Capital Structure. Subject to Section 6.1(b), if
        the stock of the Company is changed by reason of a stock split, reverse
        stock split, stock dividend, or recapitalization, or converted into or
        exchanged for other securities as a result of a merger, consolidation,
        or 


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        reorganization, appropriate adjustments shall be made in (A) the number
        and class of shares of stock subject to this Plan and each outstanding
        Option, and (B) the exercise price of each outstanding Option; provided,
        however, that the Company shall not be required to issue fractional
        shares as a result of any such adjustment. Each such adjustment shall be
        determined by the Committee in its sole discretion, which determination
        shall be final and binding on all persons.

               (b) Corporate Transactions. Notwithstanding any contrary waiting
        period or installment period in any Option Agreement or in the Plan,
        each outstanding Option granted under the Plan shall become exercisable
        in full for the aggregate number of shares covered thereby, in the event
        (a) the Board of Directors (or, if approval of the Board of Directors is
        not required as a matter of law, the stockholders of the Company) shall
        approve (i) any consolidation or merger of the Company in which the
        Company is not the continuing or surviving corporation or pursuant to
        which shares of Common Stock would be converted into cash, securities or
        other property, other than any merger of the Company in which the
        holders of Common Stock immediately prior to the merger have the same
        proportionate ownership of common stock of the surviving corporation
        immediately after such merger, (ii) any sale, lease, exchange, or other
        transfer (in one transaction or a series of related transactions) of
        all, or substantially all, of the assets of the Company or (iii) the
        adoption of any plan or proposal for the liquidation or dissolution of
        the Company, or (b) any person (as such term is defined in Sections
        13(d)(3) and 14(d)(2) of the Securities Exchange Act of 1934, as amended
        from time to time (the "Exchange Act")), corporation or other entity
        (other than the Company or any employee benefit plan sponsored by the
        Company or any subsidiary of the Company) (i) shall purchase any Common
        Stock of the Company (or securities convertible into the Company's
        Common Stock) for cash, securities or any other consideration pursuant
        to a tender offer or exchange offer, without the prior consent of the
        Board of Directors and (ii) shall become the "beneficial owner" (as such
        term is defined in Rule 13d-3 under the Exchange Act), directly or
        indirectly, of securities of the Company representing 20 percent or more
        of the combined voting power of the then outstanding securities of the
        Company ordinarily (and apart from rights accruing under special
        circumstances) having the right to vote in the election of directors
        (calculated as provided in paragraph (d) of such Rule 13d-3 in the case
        of rights to acquire the Company's securities), or (c) during any period
        of two consecutive years, individuals who at the beginning of such
        period constitute the entire Board of Directors shall cease for any
        reason to constitute a majority thereof unless the 



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        election, or the nomination for election by the Company's stockholders,
        of each new director was approved by a vote of at least two-thirds of
        the directors then still in office who were directors at the beginning
        of the period. Any transaction referred to in the foregoing clause (a)
        is herein called an Approved Transaction, any purchase pursuant to a
        tender offer or exchange offer or otherwise as described in the
        foregoing clause (b) is herein called a Control Purchase and the
        cessation of individuals constituting a majority of the Board as
        described in the foregoing clause (c) is herein called a Board Change.

               (c) Option Grant Date. Each Option Agreement shall specify the
        date as of which it shall be effective, which date shall be the Grant
        Date (determined pursuant to Section 5.4 in the case of advance
        approvals).

               (d) Fair Market Value. For purposes of this Plan, the fair market
        value of the Company's Class A Common Stock shall be determined as
        follows:

                      (1) if the stock is listed on any established stock
               exchange or a national market system, including without
               limitation the National Market System of the National Association
               of Securities Dealers Automated Quotation System, its fair market
               value shall be the closing sales price for the stock, or the mean
               between the high bid and low asked prices if no sales were
               reported, as quoted on such system or exchange (or the largest
               such exchange) for the date the value is to be determined (or if
               there are no sales or bids for such date, then for the last
               preceding business day on which there were sales or bids), as
               reported in the Wall Street Journal or similar publication;

                      (2) if the stock is regularly quoted by a recognized
               securities dealer but selling prices are not reported, its fair
               market value shall be the mean between the high bid and low
               asking prices for the stock on the date the value is to be
               determined (or if there are no quoted prices for the date of
               grant, then for the last preceding business day on which there
               were quoted prices);

                      (3) in the absence of an established market for the stock,
               the fair market value shall be determined in "good faith" by the
               Committee, with reference to the Company's net worth, prospective
               earning power, dividend-paying capacity, and other relevant
               factors, including sales for the most recent 12 month period, the
               goodwill of the Company, the economic outlook in 



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               the Company's industry, the Company's position in the industry
               and its management and the values of stock of other corporations
               in the same or a similar line of business.

               (e) Time of Option Exercise. The Company shall not grant any
        Options which may become exercisable at a rate in excess of 20% per
        annum from the date of such grant without the written consent of a
        majority of the members of the Committee.

               (f) Nonassignability of Option Rights. No Option shall be
        assignable or otherwise transferable by the optionee except by will or
        by the laws of descent and distribution. During the life of the
        optionee, an Option shall be exercisable only by the optionee or the
        optionee's guardian or legal representative.

               (g) Payment. Except as provided below, payment in full, in cash,
        shall be made for all stock purchased at the time written notice of
        exercise of an Option is given to the Company, and proceeds of any
        payment shall constitute general funds of the Company. At the time an
        Option is granted or before it is exercised, the Committee, in the
        exercise of its absolute discretion, may authorize any one or more of
        the following additional methods of payment:

                      (1) acceptance of the optionee's full recourse promissory
               note for some or all of the aggregate exercise price of the
               shares being acquired (except for the aggregate par value of the
               shares being acquired, which must be paid in cash or other lawful
               consideration under applicable law), payable on such terms and
               bearing such interest rate as determined by the Committee, and
               secured in such manner as the Committee shall approve; including,
               without limitation, by a security interest in Class A Common
               Stock or other securities of the Company;

                      (2) delivery by the optionee of Class A Common Stock or
               other securities of the Company already owned by the optionee for
               all or part of the aggregate exercise price of the shares being
               acquired, provided the fair market value of such Class A Common
               Stock or securities is equal on the date of exercise to the
               aggregate exercise price of the shares being acquired, or such
               portion thereof as the optionee is authorized to pay by delivery
               of such Class A Common Stock or securities; and

                      (3) any other property, so long as such property 



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               is acceptable to the Committee and constitutes valid
               consideration under applicable law for the shares being acquired
               and is surrendered in good form for transfer.

               (h)  Termination.

                      (1) Any Option or portion thereof which has not expired or
               been exercised on or before the date on which an optionee ceases
               to be an employee or officer ("Termination") for cause, shall
               expire upon Termination.

                      (2) Any Option or portion thereof which has not expired or
               been exercised on or before the date of Termination without
               cause, shall expire ninety (90) days after the date of
               Termination or a break in continuous employment.

                      (3) Notwithstanding the foregoing, if Termination is due
               to the permanent disability or death of the optionee, the
               optionee, the optionee's personal representative or any other
               person who acquires option rights from the optionee by will or
               the applicable laws of descent and distribution, may, within
               twelve months after the date of Termination, exercise such option
               rights to the extent they were exercisable on the date of
               Termination.

               (i) Other Provisions. Each Option Agreement may contain such
        other terms, provisions, and conditions not inconsistent with this Plan,
        including rights of repurchase, as may be determined by the Committee,
        and each ISO granted under this Plan shall include such provisions and
        conditions as are necessary to qualify such option as an "incentive
        stock option" within the meaning of Section 422 of the Code.

               (j) Withholding and Employment Taxes. At the time of exercise of
        an Option, the optionee shall remit to the Company in cash all
        applicable federal and state withholding and employment taxes. If and to
        the extent authorized and approved by the Committee in its sole
        discretion, an optionee may elect, by means of a form of election to be
        prescribed by the Committee, to have shares which are acquired upon
        exercise of an Option withheld by the Company or tender other shares of
        Class A Common Stock or other securities of the Company owned by the
        optionee to the Company at the time the amount of such taxes is
        determined in order to pay the amount of such tax obligations. Any Class
        A Common Stock or other securities so withheld or tendered will be
        valued by the Company as of the date they are withheld or tendered.
        Unless the Committee otherwise determines, the optionee shall pay to 



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        the Company in cash, promptly when the amount of such obligation becomes
        determinable, all applicable federal and state withholding taxes
        resulting from the lapse of restrictions imposed on exercise of any
        Option, for a transfer or other disposition of shares acquired upon
        exercise of an Option or otherwise related to the Option or the shares
        acquired upon exercise of the Option.

        6.2 Terms and Conditions to Which Only NQOs Are Subject. Options granted
under this Plan which are designated as NQOs shall be subject to the following
terms and conditions:

               (a) Exercise Price. The exercise price of an NQO shall not be
        less than 85 percent of the fair market value of the stock subject to
        the Option on the Grant Date; provided, however, that the exercise price
        of an NQO granted to any person who owns, directly or indirectly (or is
        treated as owning by reason of attribution rules, currently set forth in
        Code Section 424), stock of the Company constituting more than ten
        percent of the total combined voting power of all classes of outstanding
        stock of the Company or of any Affiliate of the Company, shall in no
        event be less than 100 percent of such fair market value.

               (b) Option Term. Unless an earlier expiration date is specified
        by the Committee at the Grant Date in the Option Agreement, each NQO
        shall expire ten years from its Grant Date.

        6.3 Terms and Conditions to Which Only ISOs Are Subject. Options granted
under this Plan which are designated as ISOs shall be subject to the following
terms and conditions:

               (a) Exercise Price. The exercise price of an ISO shall be
        determined in accordance with the applicable provisions of the Code and
        shall in no event be less than the fair market value of the stock
        covered by the ISO at the Grant Date; provided, however, that the
        exercise price of an ISO granted to any person who owns, directly or
        indirectly (or is treated as owning by reason of attribution rules,
        currently set forth in Code Section 424), stock of the Company
        constituting more than ten percent of the total combined voting power of
        all classes of outstanding stock of the Company or of any Affiliate of
        the Company, shall in no event be less than 110 percent of such fair
        market value.

               (b) Option Term. Unless an earlier expiration date is specified
        by the Committee at the Grant Date in the Option Agreement, each ISO
        shall expire ten (10) years from its Grant Date; except that an ISO
        granted to any person who owns, directly or indirectly (or is treated as
        owning by 



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        reason of applicable attribution rules currently set forth in Section
        424 of the Code) stock of the Company constituting more than ten percent
        of the total combined voting power of the Company's outstanding stock,
        or the stock of any Affiliate of the Company, shall expire five years
        from its Grant Date.

               (c) Disqualifying Dispositions. If stock acquired by exercise of
        an ISO is disposed of within two years from the Grant Date or within one
        year after the transfer of the stock to the optionee, the holder of the
        stock immediately prior to the disposition shall promptly notify the
        Company in writing of the date and terms of the disposition and shall
        provide such other information regarding the disposition as the Company
        may reasonably require. Such holder shall pay to the Company any
        withholding and employment taxes which the Company in its sole
        discretion deems applicable. The Company may instruct its stock transfer
        agent by appropriate means, including placement of legends on stock
        certificates, not to transfer stock acquired by exercise of an ISO
        unless it has been advised by the Company that the requirements of this
        Section have been satisfied.


7.      MANNER OF EXERCISE

        An optionee wishing to exercise an Option shall give written notice to
the Company at its principal executive office, to the attention of the Secretary
of the Company, accompanied by an executed stock purchase agreement in form and
substance satisfactory to the Company, by payment of the exercise price and by
such other documents as the Committee may request. The date the Company receives
written notice of an exercise hereunder accompanied by payment of the exercise
price and all such other documents will be considered the date the Option was
exercised. Promptly after receipt of written notice of exercise of an Option,
the Company shall, without stock issue or transfer taxes to the optionee or any
other person entitled to exercise the Option, deliver to the optionee or such
other person a certificate or certificates for the requisite number of shares of
stock. An optionee or transferee of an Option shall not have any privileges as
stockholder with respect to any stock covered by the Option until the date of
issuance of a stock certificate.



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8.      RELATIONSHIP WITH THE COMPANY

        Nothing in this Plan or any Option granted hereunder shall interfere
with or limit in any way the right of the Company to terminate any optionee's
employment, affiliation or other relationship with the Company at any time, nor
confer upon any optionee any right to continue in the employ of the Company.


9.      AMENDMENT, SUSPENSION OR TERMINATION OF THIS PLAN

        The Board of Directors may at any time amend, alter, suspend or
discontinue this Plan. The Board of Directors may amend this Plan and the terms
of any Option outstanding hereunder if the amendment is designed to maximize
federal income tax benefits accorded to Options; provided, that with respect to
outstanding Options, the optionee consents to such amendment.


10.     LIABILITY AND INDEMNIFICATION OF COMMITTEE

        No member of the Committee shall be liable for any act or omission on
such member's own part, including but not limited to the exercise of any power
or discretion given to such member under this Plan, except for those acts or
omissions resulting from such member's own gross negligence or willful
misconduct. The Company shall indemnify each present and future member of the
Committee against, and each member of the Committee shall be entitled without
further act on his or her part to indemnity from the Company for, all expenses
(including attorney's fees and the amount of judgments and the amount of
approved settlements made with a view to the curtailment of costs of litigation,
other than amounts paid to the Company itself) reasonably incurred by such
person in connection with or arising out of any action, suit, or proceeding to
which the Committee or any member of the Committee may be a party by reason of
any action taken or failure to act under or in connection with the Plan or any
option granted under the Plan to the full extent permitted by law and by the
Certificate of Incorporation and Bylaws of the Company. The right of indemnity
described in this Section 10 shall be in addition to such other rights of
indemnification as the members of the Committee shall otherwise be entitled
because of their serving on the Board of Directors of the Company or as an
employee of the Company.


11.     EFFECTIVE DATE OF THIS PLAN

        This Plan shall become effective as of the Effective Time; provided,
that the Plan is approved by the affirmative votes of the holders of a majority
of the share of Class A Common Stock 



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present, or represented, and entitled to vote at a meeting of the stockholders
duly held not later than January 31, 1997.


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                   AMENDED AND RESTATED 1997 STOCK OPTION PLAN
                          FOR NON-EMPLOYEE DIRECTORS OF
                            PHYSICIAN PARTNERS, INC.


                                R E C I T A L S:

        The purpose of this Amended and Restated 1997 Stock Option Plan for
Non-Employee Directors of Physician Partners, Inc. (the "Plan") is to provide
the directors of Physician Partners, Inc. (the "Company"), who are not either
employees or officers of the Company, added incentive to continue in the service
of the Company and a more direct interest in the future success of the
operations of the Company by granting to such directors options (the "Options",
or individually, the "Option"), to purchase shares of the common stock, par
value $0.01 per share (the "Common Stock"), of the Company subject to the terms
and conditions described below. The Plan shall be effective as of the effective
time (the "Effective Date") of the transaction contemplated under the Amended
and Restated Agreement and Plan of Reorganization and Merger, dated as of
September 19, 1996, as amended on November 4, 1996, November 29, 1996 and
December 31, 1996 (referred to herein, as so amended, as the "Reorganization and
Merger Agreement").


                                    ARTICLE I
                                     GENERAL

        1.01 Definitions. For Purposes of the Plan and as used herein,
"non-employee director" shall mean an individual who (a) is now, or hereafter
becomes, a member of the Board of Directors of the Company, (b) is neither an
employee nor an officer of the Company and (c) has not elected to decline to
participate in the Plan pursuant to the next succeeding sentence. A director
otherwise eligible to participate in the Plan may make an irrevocable, one-time
election, by written notice to the Company within 30 days after his initial
election to the Board of Directors of the Company or, in the case of a director
in office on the Effective Date, prior to the Effective Date, to decline to
participate in the Plan. For purposes of this Plan, "employee" shall mean an
individual whose wages are subject to the withholding of federal income tax
under Section 3401 of the Internal Revenue Code of 1986, as amended from time to
time (the "Code"), and "officer" shall mean an individual elected or appointed
by the Board of Directors of the Company or chosen in such other manner as may
be prescribed in the Bylaws of the Company to serve as such except that for the
purposes of this Plan any individual serving as the Chairman of the Board, but
in no other capacity as an officer or employee, will not be deemed to be 



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an officer of the Company.

        For purposes of this Plan, and as used herein, non-employee directors
shall be divided into two groups. The first group of non-employee directors
consists of providers whose practice of medicine is associated with an entity or
organization for which the Company performs management services ("affiliated
directors"). The second group consists of directors who are not affiliated
directors ("non-affiliated directors").

        For purposes of this Plan, an as used herein, the fair market value of
the Company's Common Stock shall be determined as follows:

               (a) if the stock is listed on any established stock exchange or a
        national market system, including without limitation the National Market
        System of the National Association of Securities Dealers Automated
        Quotation System, its fair market value shall be the closing sales price
        for the stock, or the mean between the high bid and low asked prices if
        no sales were reported, as quoted on such system or exchange (or the
        largest such exchange) for the date the value is to be determined (or if
        there are no sales or bids for such date, then for the last preceding
        business day on which there were sales or bids), as reported in the Wall
        Street Journal or similar publication;

               (b) if the stock is regularly quoted by a recognized securities
        dealer but selling prices are not reported, its fair market value shall
        be the mean between the high bid and low asking prices for the stock on
        the date the value is to be determined (or if there are no quoted prices
        for the date of grant, then for the last preceding business day on which
        there were quoted prices);

               (c) in the absence of an established market for the stock, the
        fair market value shall be determined in "good faith" by the Board of
        Directors of the Company or a committee thereof, with reference to the
        Company's net worth, prospective earning power, dividend-paying
        capacity, and other relevant factors, including sales for the most
        recent 12 month period, the goodwill of the Company, the economic
        outlook in the Company's industry, the Company's position in the
        industry and its management and the values of stock of other
        corporations in the same or a similar line of business.

        1.02. Options. The Options granted hereunder shall be options that are
not qualified under Section 422 of the Code.



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                                   ARTICLE II
                                 ADMINISTRATION

        The Plan shall be administered by the Board of Directors of the Company
or a committee thereof. The Board of Directors shall have no authority,
discretion or power to select the non-affiliated directors who will receive
Options, to set the number of shares to be covered by each Option granted to a
non-affiliated director, to set the exercise price or the exercise period of a
non-affiliated director's Options, or to alter any other terms or conditions
specified herein applicable to a non-affiliated director, except in the sense of
administering the Plan subject to the express provision of the Plan and except
in accordance with Sections 3.02 and 5.02 hereof. The Board of Directors shall
have the authority, discretion or power to select the affiliated directors who
receive Options, to set the number of shares covered by each affiliated
director's Options, to set the exercise price or exercise period of an
affiliated director's Options, or to alter any other term or conditions
specified herein, except in the sense of administering the Plan subject to the
express Plan provisions and in accordance with Sections 3.02 and 5.02 hereof.
Subject to the foregoing limitations, the Board of Directors or such committee
shall have authority and power to adopt such rules and regulations and to take
such action as it shall consider necessary or advisable for the administration
of the Plan, and to construe, interpret and administer the Plan. The decisions
of the Board of Directors or committee relating to the Plan shall be final and
binding upon the Company, the Holders (as such term is defined in Section 3.02
hereof) and all other persons. No member of the Board of Directors shall incur
any liability by reason of any action or determination made in good faith with
respect to the Plan or any stock option agreement entered into pursuant to the
Plan.


                                   ARTICLE III
                                     OPTIONS

        3.01. Participation. A non-employee director shall be granted Options to
purchase the Common Stock under the Plan on the terms and conditions herein
described.

        3.02. Stock Option Agreements. Each Option granted under the Plan shall
be evidenced by a written stock option agreement, which agreement shall be
entered into by the Company and the non-employee director to whom the Option is
granted (the "Holder"). Failure of the grantee to execute a stock option
agreement shall not void or invalidate the grant of any Option; the Option may
not be exercised, however, until the stock option agreement is executed. The
stock option agreement shall include, incorporate or conform to the following
terms and conditions, and such other terms and conditions of this Plan as the
Board of Directors considers appropriate in each case:



<PAGE>   15
               (a) Option Grant Date. Options shall be granted initially as of
the Effective Date to each non-affiliated director serving the Company as a
director on such date. Options may be granted initially as of the Effective Date
to each affiliated director as the Board of Directors determines. Thereafter,
each person who becomes a non-affiliated director shall be automatically granted
on the date of appointment as a director and without further action of the Board
of Directors or the stockholders of the Company, an Option to purchase the
Common Stock under the Plan. In addition, on each January 1 during this term of
the Plan, Options shall be granted automatically to the non-affiliated directors
serving the Company as directors on such date. As of each January 1 during the
term of the Plan, the Board of Directors will determine each affiliated director
who will receive Options on such date. The date of grant of an Option pursuant
to the Plan shall be referred to hereinafter as the "Grant Date" of such Option.
Notwithstanding anything herein to the contrary, the Board of Directors may
revoke, on or prior to each January 1, the next automatic grant of Options
otherwise provided for by the Plan if no options have been granted to employees
since the preceding January 1 under the Amended and Restated 1997 Stock Option
Plan for Employees of Physician Partners, Inc. or any other employee stock
option plan that the Company may adopt.

               (b) Number. Each non-affiliated director serving the Company as a
director on the Effective Date and on each Grant Date shall be granted, as of
such date, an Option to purchase 7,500 shares of Common Stock, subject to
adjustment in accordance with Section 4.02 hereof; provided, however, that any
non-affiliated director (other than the non-affiliated directors who were
serving as directors on the Effective Date) who became a director after January
1 shall be granted (i) on such date, an Option to purchase 7,500 shares of
Common Stock and (ii) on January 1 of the next succeeding year, an Option to
purchase (instead of 7,500 shares of Common Stock under paragraph (a) of this
Section 3.02) such number of shares of Common Stock as is equal to the product
of 7,500 multiplied by a fraction, the numerator of which is the number of days
from the date such director became a director until December 31 of the same
calendar year and the denominator of which is 365. The Board of Directors shall
determine the number of shares of Common Stock subject to an Option granted to
an affiliated director who is serving the Company on the Effective Date and on
each Grant Date, subject to adjustment in accordance with Section 4.02 hereof.
If, on any January 1 during the term of the Plan, the number of Options
scheduled to be granted to non-affiliated directors is greater than the number
of shares of Common Stock (subject to adjustment in accordance with Section 4.02
hereof) then available for grant on that date, the available shares shall be
allocated pro rata in determining the number of shares of Common Stock to be
subject to each Option to be granted to each such non-affiliated director on
such date.



<PAGE>   16
               (c) Price. The price at which each share of Common Stock covered
by a non-affiliated director's Option may be purchased pursuant to this Plan
shall be the fair market value of the shares on the Grant Date of such Option.
The Board of Directors shall determine the price at which each share of Common
Stock covered by an affiliated director's Option may be purchased pursuant to
this Plan.

               (d) Option Period. The period during which each non-affiliated
director's Option may be exercised shall expire, in all cases, ten years from
the Grant Date of such Option (the "Option Period"), unless terminated sooner
pursuant to Section 3.02(e) below. The Board of Directors shall determine the
exercise period during which each affiliated director's Option may be exercised
provided that in no event shall such period exceed ten years from the Grant Date
of such Option.

               (e) Termination of Service, Death, Etc. Each stock option shall
provide as follows with respect to the exercise of the Option granted thereby in
the event that the Holder ceases to be a non-employee director for the reasons
described in this Section 3.02(e):

                      (i) If the directorship of the Holder is terminated within
               the Option Period on account of fraud, dishonesty or other acts
               detrimental to the interests of the Company or any direct or
               indirect majority-owned subsidiary of the Company, the Option
               shall automatically terminate as of the date of such termination
               of directorship;

                      (ii) If the Holder shall die during the Option Period
               while a director of the Company (or during the additional
               three-month period provided by paragraph (iii) of this Section
               3.02(e)), the Option may be exercised, to the extent that the
               Holder was entitled to exercise it at the date of Holder's death,
               within one year after such date (if otherwise within the Option
               Period), but not thereafter, by the executor or administrator of
               the estate of Holder, or by any person or person who shall have
               acquired the Option directly from the Holder by bequest or
               inheritance; or



<PAGE>   17
                      (iii) If the directorship of a Holder is terminated for
               any reason (other than the circumstances specified in paragraphs
               (i) and (ii) of this Section 3.02(e)) within the Option Period,
               the Option may be exercised, to the extent the Holder was able to
               do so at the date of termination of the directorship, within
               three months or a longer period as the Board of Directors of the
               Company may determine in its sole discretion, after such
               termination (if otherwise within the Option Period), but not
               thereafter.

               (f) Transferability. No Option shall be assignable or otherwise
transferable by the Holder except by will or by the laws of descent and
distribution. During the life of the Holder, an Option shall be exercisable only
by the Holder or the Holder's guardian or legal representative.

               (g) Agreement to Continue in Service. Each Holder shall agree to
remain in the service of the Company, at the pleasure of the Company's
stockholders, for a continuous period of at least one year after the date of the
grant of any Option, at the retainer rate then in effect or at such changed rate
as the Company from time to time may establish.

               (h) Exercise, Payments, Etc. Each stock option agreement shall
provide that the method for exercising the Option granted thereby shall be by
delivery to the Company of, or by sending by United States registered or
certified mail, postage prepaid, addressed to the Company (for the attention of
its secretary) of, written notice signed by Holder specifying the number of
shares of Common Stock with respect to which such Option is being exercised.
Such notice shall be accompanied by the full amount of the purchase price of
such shares. Payment may be made at the election of the holder of the Option as
follows: (i) in cash; (ii) in outstanding shares of Common Stock at their fair
market value, as determined by the Board of Directors, on the date of exercise;
or (iii) by delivery of vested Options with a value equal to the exercise price
(i.e., the difference between the fair market value of the Common Stock on the
exercise date subject to such Option and the exercise price thereof). Any such
notice shall be deemed to be given three (3) days after the same was deposited
in a regularly maintained receptacle for the deposit of United States mail,
addressed and sent as above stated. In addition to the foregoing, promptly after
demand by the Company, the exercising Holder shall pay to the Company an amount
equal to applicable withholding taxes, if any, due in connection with such
exercise.

               (i) Exercise Period. Each non-affiliated director's Option shall
be exercisable as to one-fourth (1/4) of the shares subject to the Option as of
the last business day of March, June, September and December (each, a "Vesting
Date") of the year of grant, provided that with respect to any non-affiliated
director 



<PAGE>   18
(other than the non-affiliated directors who were serving as directors on the
Effective Date) who became a director after January 1, the initial Vesting Date
shall be the second succeeding Vesting Date. The Board of Directors shall
determine the exercise period for the shares subject to an affiliated director's
Option.


                                   ARTICLE IV
                             AUTHORIZED COMMON STOCK

        4.01 Available Shares of Common Stock. The total number of shares of
Common Stock as to which Options may be granted pursuant to the Plan shall be
100,000, except as such number of shares shall be adjusted from and after the
Effective Date in accordance with the provisions of Section 4.02 hereof. If any
outstanding Option under the Plan shall expire, be terminated, or forfeited for
any reason before the end of the Option Period, the shares of Common Stock
allocable to the unexercised portion of such Option may again be subject to the
Plan. The Company shall, at all times during the life of any outstanding
Options, retain as authorized and unissued Common Stock at least the number of
shares from time to time included in the outstanding Options or otherwise assure
itself of its ability to perform its obligations under the Plan.

        4.02 Adjustments Upon Changes in Common Stock. In the event the Company
shall effect a split of the Common Stock or dividend payable in Common Stock, or
in the event the outstanding Common Stock shall be combined into a smaller
number of shares, the maximum number of shares as to which Options may be
granted under the Plan shall be increased or decreased proportionately. In the
event that before delivery by the Company of all of the shares of Common Stock
in respect of which any Option has been granted under the Plan, the Company
shall have effected such a split, dividend or combination, the shares still
subject to the Option shall be increased or decreased proportionately and the
purchase price per share shall be increased or decreased proportionately so that
the aggregate purchase price for all the then optioned shares shall remain the
same as immediately prior to such split, dividend or combination.

               In the event of a reclassification of the Common Stock not
covered by the foregoing provisions of this Section 4.02, or in the event of a
liquidation or reorganization, including a merger, consolidation or sale of
assets, the Board of Directors of the Company shall make such adjustment, if
any, as it may deem appropriate in the number, purchase price and kind of shares
covered by the unexercised portions of Options theretofore granted under the
Plan. The provisions of this Section 4.02 shall only be applicable if, and only
to the extent that, the application thereof does not conflict with any valid
governmental statute, regulation or rule.

        4.03 Corporate Transactions. Notwithstanding any contrary 



<PAGE>   19
waiting period or installment period in any stock option agreement or in the
Plan, each outstanding Option granted under the Plan shall become exercisable in
full for the aggregate number of shares covered thereby, in the event (a) the
Board of Directors (or, if approval of the Board of Directors is not required as
a matter of law, the stockholders of the Company) shall approve (i) any
consolidation or merger of the Company in which the Company is not the
continuing or surviving corporation or pursuant to which shares of Common Stock
would be converted into cash, securities or other property, other than any
merger of the Company in which the holders of Common Stock immediately prior to
the merger have the same proportionate ownership of common stock of the
surviving corporation immediately after such merger, (ii) any sale, lease,
exchange, or other transfer (in one transaction or a series of related
transactions) of all, or substantially all, of the assets of the Company or
(iii) the adoption of any plan or proposal for the liquidation or dissolution of
the Company, or (b) any person (as such term is defined in Sections 13(d)(3) and
14(d)(2) of the Securities Exchange Act of 1934, as amended from time to time
(the "Exchange Act")), corporation or other entity (other than the Company or
any employee benefit plan sponsored by the Company or any subsidiary of the
Company) (i) shall purchase any Common Stock of the Company (or securities
convertible into the Company's Common Stock) for cash, securities or any other
consideration pursuant to a tender offer or exchange offer, without the prior
consent of the Board of Directors and (ii) shall become the "beneficial owner"
(as such term is defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 20 percent or more of the
combined voting power of the then outstanding securities of the Company
ordinarily (and apart from rights accruing under special circumstances) having
the right to vote in the election of directors (calculated as provided in
paragraph (d) of such Rule 13d-3 in the case of rights to acquire the Company's
securities), or (c) during any period of two consecutive years, individuals who
at the beginning of such period constitute the entire Board of Directors shall
cease for any reason to constitute a majority thereof unless the election, or
the nomination for election by the Company's stockholders, of each new director
was approved by a vote of at least two-thirds of the directors then still in
office who were directors at the beginning of the period. Any transaction
referred to in the foregoing clause (a) is herein called an Approved
Transaction, any purchase pursuant to a tender offer or exchange offer or
otherwise as described in the foregoing clause (b) is herein called a Control
Purchase and the cessation of individuals constituting a majority of the Board
as described in the foregoing clause (c) is herein called a Board Change.


                                    ARTICLE V
                               GENERAL PROVISIONS

        5.01. Termination of Plan. The Plan shall terminate 



<PAGE>   20
whenever the Board of Directors adopts a resolution to that effect. If not
sooner terminated under the preceding sentence, the Plan shall expire at the
close of business on December 31, 2005. After termination of the Plan, no
Options shall be granted but the Company shall continue to recognize Options
previously granted.

        5.02. Amendment of Plan. The Board of Directors may from time to time
amend, modify, suspend or terminate the Plan. Nevertheless, no such amendment,
modification, suspension or termination shall (a) impair any Options theretofore
granted under the Plan or deprive any Holder of any shares of Common Stock which
he might have acquired through or as a result of the Plan, or (b) be made
without the approval of the stockholders of the Company where such change would
increase the total number of shares of Common Stock which may be granted under
the Plan.

        5.03 Treatment of Proceeds. Proceeds from the sale of Common Stock
pursuant to Options granted under the Plan shall constitute general funds of the
Company.

        5.04 Effectiveness. The Plan shall become effective as of the Effective
Date, subject to the conditions stated in the following sentence. The Plan and
each Option granted or to be granted hereunder is conditional on and shall be of
no force and effect, and no Option shall be exercised, unless and until,
stockholders have approved the Plan by the affirmative votes of the holders of a
majority of the shares of Common Stock present, or represented, and entitled to
vote at a meeting of stockholders duly held not later than January 31, 1997.

        5.05 Paragraph Headings. The paragraph headings included here are only
for convenience, and they shall have no effect on the interpretation of the
Plan.

        5.06 Governing Law. The Plan shall be governed by, and construed in
accordance with, the laws of the State of Delaware.