SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
(xx) Filed by the Registrant
( ) Filed by a Party other than the Registrant
Check the appropriate box:
(xx) Preliminary Proxy Statement
( ) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to (section mark)240.14a-11(c) or
(section mark)240.14a-12
Health Equity Properties, Inc.
(Name of Registrant as Specified In Its Charter)
Susan Christiansen
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (Check the appropriate box):
(xx) $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2).
( ) $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11: *
* Set forth the amount on which the filing fee is calculated and state how
it was determined.
( ) Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid: $
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
(xx) Filing Fee of $125.00 was previously paid on February 10, 1994,
the date the Preliminary Proxy Statement was filed.
<PAGE>
HEALTH EQUITY PROPERTIES INCORPORATED
915 West Fourth Street
Winston-Salem, North Carolina 27101
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be Held April 28, 1994
NOTICE IS HEREBY GIVEN that the Annual Meeting of
Shareholders of Health Equity Properties Incorporated (the
"Company") will be held in Forsyth Ballroom B on the second floor
of the Adams Mark Winston Plaza Hotel, 435 North Cherry Street,
Winston-Salem, North Carolina on Thursday, April 28, 1994 at
10:00 o'clock a.m. for the following purposes:
1. To elect Directors;
2. To approve certain amendments to the Company's Stock
Option Plan;
3. To authorize the Board of Directors to purchase, or
cause to be purchased on behalf of the Company, shares
of the Company's common stock with an aggregate maximum
purchase price of $7,000,000; and
4. To transact such other business as may properly come
before the meeting or any adjournment thereof.
The transfer books of the Company will not be closed. The
date fixed by management as the record date for the determination
of shareholders entitled to notice of and to vote at the Annual
Meeting or any adjournment thereof is the close of business on
March 11, 1994.
Winston-Salem, North Carolina
March 15, 1994
By Order of the Board of Directors
SUSAN L. CHRISTIANSEN, Secretary
IF YOU ARE UNABLE TO ATTEND THE MEETING IN PERSON,
MANAGEMENT REQUESTS THAT YOU SIGN AND DATE THE ENCLOSED PROXY AND
MAIL IT AT ONCE IN THE ENCLOSED ENVELOPE WHICH REQUIRES NO
POSTAGE IF MAILED WITHIN THE UNITED STATES.
<PAGE>
HEALTH EQUITY PROPERTIES INCORPORATED
915 West Fourth Street
Winston-Salem, North Carolina 27101
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
To be Held April 28, 1994
The enclosed proxy is solicited by the Board of Directors of
Health Equity Properties Incorporated (the "Company") to be voted
at the annual meeting of shareholders to be held on April 28,
1994, or at any adjournment thereof. The proxy may be revoked at
any time before it is voted by: (a) giving written notice to the
Secretary of the Company before the annual meeting; (b) attending
the annual meeting and voting in person; or (c) delivering a
proxy bearing a later date to the Company before the annual
meeting or to a person attending the meeting. The cost of the
preparation of the Proxy Statement and solicitation of proxies,
which is anticipated to be the amount normally expended for such
a solicitation, will be borne by the Company. The solicitation
will be by mail. Certain officers and regular employees of the
Company may solicit proxies by letter, telephone and personal
interview. No additional compensation shall be paid to any such
persons participating in such further solicitation. Further, the
Company has retained Doring & Co. to aid in the solicitation of
proxies for a fee not to exceed $3,000, plus out-of-pocket
expenses. Arrangements have also been made for brokerage houses,
nominees and other custodians to send this Proxy Statement, Form
of Proxy and Annual Report to their principals and the Company
will reimburse them for doing so.
The Company intends to mail Proxy Statements, Forms of Proxy
and Annual Reports to shareholders on or about March 15, 1994.
Shareholders of record at the close of business on March 11,
1994 and no other persons shall be entitled to notice of, and to
vote at, the meeting. The shares represented by all properly
executed proxies which are received prior to the final call for
delivery of proxies at the meeting will be voted in accordance
with the directions given thereon. If no directions are given on
a proxy, the shares represented by such proxy will be counted for
purposes of determining the presence of a quorum and will be
voted for the nominees for directors named herein, for the
amendments to the Stock Option Plan and for the authorization of
the Board of Directors to repurchase shares of the Company's
common stock. A shareholder marking the proxy "Abstain" will be
counted as present for determining a quorum, but will not be
counted as voting in favor or against the particular proposal
from which the shareholder has elected to abstain.
As of March 4, 1994, there were outstanding 14,581,237
shares of common stock, $0.01 par value per share, of the
Company. Each shareholder is entitled to one vote for each of
said shares. At the election of directors, each shareholder is
entitled to vote the number of shares held by him or her for as
many persons as there are directors to be elected. The
shareholders will not be entitled to cumulative voting.
A majority of the shares of the Company entitled to vote
represented in person or by proxy shall constitute a quorum at
the annual meeting. For purposes of determining the presence of
a quorum, all signed proxies shall be included as shares
represented by proxy regardless of whether or how the proxy has
been voted.
1. ELECTION OF DIRECTORS - The number of directors of the
Company constituting the entire Board of Directors shall be not
less than nine nor more than 12 directors, with the actual number
constituting the entire Board of Directors to be established by
resolution adopted from time to time by the Board of Directors.
The Board of Directors has established the number of directors at
nine. The Board of Directors is staggered by division into three
classes. Class Three directors have terms expiring at the Annual
Meeting of Shareholders to be held April 28, 1994. The Class
Three directors whose terms will expire at the Annual Shareholder
Meeting and who are being nominated for re-election shall be
elected to hold office until the third succeeding Annual Meeting
of Shareholders.
<PAGE>
The Class Three directors who have been nominated for
election to a three year term are as follows: William G. Benton,
Susan L. Christiansen and David Weil.
Management knows of no reason why the nominees for election
as directors will not be available for election or, if elected,
will not be able to serve. If any individual nominee shall not
be available for election as contemplated, it is the intention of
those persons named in the proxy to vote for such other persons
as the directors of the Company may recommend. The Form of Proxy
does not authorize a vote for more than three directors.
Unless otherwise directed, the enclosed proxy will be voted
in favor of William G. Benton, Susan L. Christiansen and David
Weil in the election of directors, all of whom are currently
members of the Board of Directors.
NOMINEES FOR DIRECTORS; DIRECTORS; AND CERTAIN STOCK OWNERSHIP
Set forth below are the names of the nominees for election
to the Board of Directors, all of whom are currently directors of
the Company; the names of the directors whose terms are not
subject to re-election at this meeting; the principal occupation
or employment of both nominees and other directors during the
past five years; all their positions with the Company; and
certain other information with respect to such persons:
William G. Benton - Director since 1987 (1)(4) Chairman of
the Board and Chief Executive Officer since June 1989;
President of the Company from October 1987 to June 1989 and
since April 1991; Director and Chief Executive Officer of
ACREMS, Inc. through November 1991 (the company which served
as the Company's advisor from January 1988 through July
1990); principal shareholder, director and Chief Executive
Officer of Taylor House Enterprises Limited since October,
1992, a holding company with several real estate related
operating subsidiaries (ACREMS, Inc. merged with Taylor
House Enterprises Limited in November 1991); sole Director
of Benton Investment Company from its incorporation in 1984,
President of Benton Investment Company from 1984 to August
1989, and Chief Executive Officer from August 1989 to
present; Director of MBG Management Company, a company which
manages residential real estate, and affiliated companies,
from January 1992; Chairman since July 1992; President from
January 1992 to June 1993; Director of Tanger Factory Outlet
Centers, Inc., a publicly traded REIT, since May 1993;
active in real estate development since 1972. Age 48.
G. L. "Bud" Clark, Jr. - Director since 1988 Vice
President of the Company since March 1989; Treasurer of the
Company from March 1989 to April 1991; Chief Financial
Officer since April 1991; Vice President, Chief Financial
Officer and Director of ACREMS, Inc. through November 1991,
(the company which served as the Company's Advisor from
January 1988 through July 1990); Vice President and Chief
Financial Officer of Taylor House Enterprises Limited since
October 1991; Vice President of Benton Investment Company
from 1986 to August 1989 and President of Benton Investment
Company since August 1989; Vice President of MBG Management
Company, a company which manages residential real estate,
and affiliated companies, from January 1992 to present and
Director of MBG Management Company, and affiliated
companies, from July 1993 to present. Age 48.
Susan L. Christiansen - Director since 1990(4) Vice
President and General Counsel of the Company since September
1990, Secretary of the Company since December 1989; Vice
President and General Counsel of Taylor House Enterprises
Limited since October 1991; attorney with the law firm of
House & Blanco, P.A., Winston-Salem, North Carolina from
August 1977 through September 1990 and a director and
executive officer of House & Blanco, P.A. from March 1983
through September 1990. Age 41.
Lisbeth C. Evans - Director since 1987(1) President,
Director and sole shareholder of Clark, Evans & Tate, Inc.
since its organization in 1991, a company which invests in
long-term healthcare properties; Chief Executive Officer and
Director of Salem Villages, Inc. since June 1991, a
nonprofit corporation which invests in long-term healthcare
properties; President and Chief Operating Officer of the
Company from June 1989 to April 1991; Vice President and
Secretary of the Company from October 1987 to June 1989;
<PAGE>
Director of ACREMS, Inc. through December 1991, (the company
which served as the Company's advisor from January 1988
through July 1990); Vice President and Chief Financial
Officer of ACREMS, Inc. from December 1986 to March 1990;
President of ACREMS, Inc. through November 1991. Age 41.
Perry C. Craven - Director since 1987(1)(2)(3)(5) Sole
shareholder and Director of Perry C. Craven Associates, Inc.
since 1977, a company which specializes in elderly housing
development, nonprofit development, housing training, rural
housing development and communications. Age 53.
Dr. Walter H. Ettinger, Jr. - Director since
1987(1)(2)(3)(5) Associate Professor of Medicine, Head of
Section on Internal Medicine and Gerontology, Department of
Medicine, Bowman Gray School of Medicine, Winston-Salem,
North Carolina and Deputy Director of the J. Paul Sticht
Center on Aging, Bowman Gray/Baptist Hospital Medical Center
since 1987; from 1985 to 1987 Assistant Professor of
Medicine, Division of Geriatrics and Gerontology, The Johns
Hopkins University School of Medicine, Baltimore, Maryland;
from 1982 to 1987, staff of Francis Scott Key Medical
Center, Baltimore, Maryland. Age 42.
Dr. Thomas K. Hearn, Jr. - Director since 1987(2)(3)(5)
President of Wake Forest University, Winston-Salem, North
Carolina since October 1983. Mr. Hearn also serves as a
Director of Wachovia Corporation. Age 57.
Floyd A. Schlossberg - Director since 1990(2)(5) Sole
shareholder and President of Alden Management Services, Inc.
since formation in 1977, a company which owns and manages
long-term care nursing homes and, through subsidiaries,
leases five properties of the Company; sole shareholder and
President of Alden Realty Services, established in 1980 to
purchase and manage property; sole shareholder and President
of Alden Bennett Construction Co., Inc., a general
contracting firm established in 1961. Age 56.
David Weil - Director since 1987(1)(2)(4)(5)(6) Involved
in several diversified businesses in the past five years,
including serving as Chairman of the Board and a shareholder
of Southco Distributing Company, a wholesaler of cigarettes,
groceries and candies, since 1981; a director and
shareholder of Mount Olive Pickle Company, a pickle
manufacturing company, since 1988; an officer, director and
shareholder of Stackhouse Incorporated, a company which
installs utility lines, since 1987 ; Director and Chief
Executive Officer of MBG Management Company, a company which
manages residential real estate, and affiliated companies,
from January 1992 to June 1993. Age 58.
NOTES:
(1) Member of Property Committee.
(2) Member of Audit Committee.
(3) Member of Compensation Committee.
(4) The indicated directors are nominees for re-election at
the meeting of shareholders.
(5) The indicated directors are Independent Directors.
(6) In April 1993 Mr. Weil and his spouse filed a petition
for reorganization under Federal Bankruptcy Law.
Although Mr. Weil's assets exceed his liabilities by an
estimated $10 million, the filing was precipitated by
an aggressive stance taken by a creditor bank. Prior to
the filing, Mr. Weil informed the Board of his decision
to file and offered to tender his resignation from the
Board. The remaining Board members voted unanimously to
reject Mr. Weil's offer and to confirm his continuation
as a Board member. The Board does not believe that the
filing negatively impacts Mr. Weil's ability to
continue to serve as a valued Board member.
___________
<PAGE>
Information Concerning Security Ownership
Under regulations of the Securities and Exchange Commission,
persons who have power to vote or dispose of shares of the
Company either alone or jointly with others, are deemed to be
beneficial owners of such shares. Because the voting or
dispositive power of certain shares listed in the following table
is shared, the same securities in such cases are listed opposite
more than one name in the table. The total number of shares of
Common Stock of the Company listed below for directors and
executive officers as a group eliminates such duplication.
Members of management intend to vote their shares in favor of all
the proposals.
Set forth in the following table are the beneficial holdings
as of the close of business on March 4, 1994 of individual
directors and nominees, and directors and executive officers as a
group. As of March 4, 1994, to the knowledge of the directors
and executive officers, there were no persons who beneficially
owned more than 5% of the outstanding stock of the Company.
<TABLE>
<CAPTION>
Name Sole Voting Shared Voting Options
and/or and/or Exercisable
Dispositive Dispositive Within 60 % of
Power Power Days Class
<S> <C> <C> <C> <C>
William G. Benton 287,245(1) 16,950(5) 81,228(6) 3%
G.L."Bud" Clark, Jr. 5,032(2) 16,950(5) 74,703(6) *
Susan L. Christiansen 1,161 16,950(5) 73,616(6) *
Lisbeth C. Evans 4,200 -- -- *
Perry C. Craven 625 -- -- *
Dr. Walter H. Ettinger, Jr. 500(3) -- -- *
Dr. Thomas K. Hearn, Jr. 750 -- -- *
Floyd A. Schlossberg 17,340 -- -- *
David Weil 23,825(4) -- -- *
Directors and Executive
Officers as a Group
(10 persons) 341,178 16,950 127,237 3%
* Less than 1%
</TABLE>
NOTES:
(1) The amount indicated includes 9,275 shares which Mr.
Benton owns in his own name, 254,211 shares owned by
Taylor House Enterprises, Limited and 23,759 shares
owned by Mr. Benton's spouse. Mr. Benton is the
controlling shareholder of Taylor House Enterprises,
Limited. Mr. Benton disclaims beneficial ownership of
the shares owned by his spouse.
(2) Mr. Clark has sole voting and investment power over
1,732 shares owned directly by him and 3,300 shares
owned by a family partnership.
(3) Dr. Ettinger co-owns the shares indicated with his
spouse.
(4) Includes 1,525 shares owned by Mr. Weil's spouse, as to
which shares Mr. Weil disclaims beneficial ownership.
(5) The indicated shares are owned by a limited partnership
for which Messrs. Benton and Clark and Ms. Christiansen
serve as general partners. The percentage interest of
each is as follows: Mr. Benton - 12.6%; Mr. Clark -
16.1%; Ms. Christiansen - 7.6%.
(6) 56,422 of the indicated option shares are owned by the
limited partnership referred to in Note 5 above. Option
shares are owned directly as follows: Mr. Benton -
24,806; Mr. Clark - 18,281; Ms. Christiansen - 17,194.
_____________
<PAGE>
Meetings and Committees of the Board
The Board of Directors of the Company has standing Audit,
Compensation and Property Committees. The members of the
committees are indicated in the preceding table. The Audit
Committee held two meetings during the fiscal year for the
purpose of reviewing the financial statements for the year ended
December 31, 1992 and for the purpose of determining the scope of
the engagement of the Company's auditors for the audit of
financial statements for fiscal year ended December 31, 1993.
The Property Committee and the Compensation Committee each met
once during 1993. As discussed in more detail below, the
Compensation Committee reviews compensation matters and
administers the Company's Stock Option and Employee Stock
Purchase Plans. See "Plans" and "Report of Compensation
Committee" below. The Property Committee reviews proposed
acquisitions and dispositions of properties and makes
recommendations to the Board of Directors. The Board of
Directors held five meetings during the past fiscal year ended
December 31, 1993.
Compliance with Section 16(a) of the Securities and
Exchange Act
Section 16(a) of the Securities and Exchange Act of 1934, as
amended, requires officers, directors, and persons owning more
than 10% of the Company's common stock to file initial statements
of beneficial ownership on Form 3 and statements of changes in
beneficial ownership on Forms 4 or 5 with the Securities and
Exchange Commission and the New York Stock Exchange. The persons
subject to these filing requirements are also required to provide
the Company with copies of all such forms filed. To the Company's
knowledge, based solely on review of the copies of such forms
received by it and written representations received from persons
subject to the reporting requirements that no additional forms
were required to be filed, the Company believes that all filing
requirements applicable to the reporting persons during year
ended December 31, 1993 were complied with except as follows:
Lisbeth C. Evans, one of the Company's directors, sold 300
shares of the Company's common stock in December of 1993. The
Form 4 reflecting the sale was filed on January 21, 1994, 11 days
after its due date.
<PAGE>
Compensation of Directors and Executive Officers
(a) Compensation to Directors
The Company pays each independent director a fee of
$10,000 per year for services as a director, plus $500 for each
meeting of the Board of Directors attended. The Company
reimburses all directors for travel expenses incurred in
connection with their duties as directors of the Company.
(b) Compensation to Executive Officers
The following tables provide compensation information
regarding executive officers of the Company:
TABLE 1. SUMMARY COMPENSATION TABLE
Annual Long-Term
Compensation Compensation
Name and Principal Stock Option
Position Year Salary(1) Bonus(2) Shares
$ $ #
William G. Benton 1993 183,750 0 40,929
Chairman of the Board, 1992 175,000 21,000 43,558
Chief Executive Officer 1991 175,000 88,649 18,842
and President
G. L. Clark, Jr. 1993 90,000 7,500 22,947
Vice President and 1992 80,000 24,500 23,852
Chief Financial Officer 1991 80,000 41,333 20,215
Susan L. Christiansen 1993 99,750 7,500 22,451
Vice President, General 1992 95,000 35,000 15,304
Counsel and Secretary 1991 95,000 44,333 16,907
NOTES:
(1) The following table indicates the amount reimbursed the
Company in 1993 and 1992 by Taylor House Enterprises,
Limited and in 1991 by Benton Investment Company for
services rendered by the named individuals to that
company during those years:
Amount Net Salary Paid
Name of Individual Year Reimbursed by the Company
William G. Benton 1993 $27,563 $156,187
1992 $26,250 $148,750
1991 $17,500 $157,500
G. L. Clark, Jr. 1993 $18,000 $72,000
1992 $16,000 $64,000
1991 $12,000 $68,000
Susan L. Christiansen 1993 $9,975 $89,775
1992 $14,250 $80,750
1991 $9,500 $85,500
(2) A portion of the 1991 cash bonus was contributed on
behalf of each named executive to a limited partnership
as follows: Benton - $18,649; Clark - $9,333 and
Christiansen - $11,083.
_____________
<PAGE>
TABLE 2. OPTION GRANTS IN YEAR ENDED 12/31/93
<TABLE>
<CAPTION>
Individual Grants Potential Realizable
Value at Assumed
Percent of Annual Rates of Stock
Total Options Price Appreciation
Granted to for Option Term
Options Employees in Exercise
Granted(1) Year Ended Price Expiration
Name (#) 12/31/93 ($/Sh) Date 0% 5% 10%
<S> <C> <C> <C> <C> <C> <C> <C>
William G. Benton 40,929 28% $9.19 2003 $0 $236,487 $599,303
G. L. Clark, Jr. 22,947 16% $9.19 2003 $0 $132,587 $336,002
Susan L. Christiansen 22,451 15% $9.19 2003 $0 $129,721 $328,739
</TABLE>
NOTES:
(1) The options granted have a vesting schedule as follows:
30% 12/31/94; 30% 12/31/95; 30% 12/31/96; and 10%
12/31/97
______________
TABLE 3. AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
Value of
Number Unexercised
of Unexercised in-the-Money
Options Options
Shares at Fiscal at Fiscal
Acquired Year End (#) Year End ($)
on Value
Exercise Realized Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexercisable
<S> <C> <C> <C> <C>
William G. Benton 0 0 31,910/71,419 $33,810/$34,353
G. L. Clark, Jr. 0 0 27,371/39,643 $30,267/$18,912
Susan L. Christiansen 0 0 21,499/33,163 $24,095/$13,582
</TABLE>
(c) Plans
1. Agreements with Executive Officers. Mr. Benton, Mr.
Clark and Ms. Christiansen have employment agreements with the
Company. The Employment Agreements provide for a base salary
with increases as authorized by the Board of Directors. The
Agreements are for terms of five years, with each day worked
being deemed to extend the term by an additional day. The
Agreements allow for the performance of services for other
entities with the Company being entitled to reimbursement from
any such entity for the time required to perform such services.
The Agreements provide for the payment to each executive
officer of a lump-sum payment if the Company terminates such
executive employment during the term of the Agreements other than
for cause, or if the employment is terminated for certain
reasons, including a change of control of the Company. The
lump-sum payment is equal to three times the amount of such
executive's average base salary for the previous five years. In
addition, Mr. Benton's Agreement provides an alternative
termination payment equal to five times the highest gross
<PAGE>
compensation received by Mr. Benton during the immediately
preceding five fiscal years, which shall include all cash and
noncash compensation received by Mr. Benton, at Mr. Benton's
election. Mr. Benton's Agreement also provides that the Company
will reimburse Mr. Benton for the amount of excise tax, if any,
on his termination payments, as well as any incremental income
taxes payable on the reimbursed amount.
In all other respects the Agreements provide that the terms
of employment will be subject to policies affecting all
employees.
2. Stock Option Plan. The Company's Stock Option Plan
provides that an aggregate of 564,927 shares of the Company's
$0.01 par value common stock may be optioned by the Board of
Directors as nonqualified options to officers and directors of
the Company selected by the Compensation Committee of the Board
of Directors (the "Committee"). For a period one year prior to
serving on the Committee, and while serving on the Committee, no
member may be granted an option to purchase stock of the Company
under the plan or any other stock option plan of the Company.
The exercise price of options granted under the plan will be the
fair market value of the shares on the date of grant. All options
granted under the plan will expire not later than ten years after
the date of the grant and will be subject to such other terms and
conditions as may be determined by the Committee at the date of
the grant. All options granted under the plan expire no later
than 60 days after termination of the relationship under which
the optionee provides services to the Company, except when the
termination is by reason of retirement, by reason of age or
disability, or by reason of the optionee's death. In the case of
retirement by reason of age or disability, options expire three
months after termination of the optionee's relationship with the
Company. In the case of death, options may be exercised by the
personal representative of the deceased within one year after the
date of death. Options are not transferable by the holder other
than by will or by applicable laws of descent and distribution.
The Board of Directors is proposing that the Stock Option Plan
be amended to increase the number of shares reserved to 1,500,000
and to include the grant of restricted shares of stock as a form
of incentive compensation. See Proposal 2 - Proposal to Amend
Stock Option Plan and Report of Compensation Committee below.
3. Employee Stock Purchase Plan. The Company's Employee
Stock Purchase Plan, which is intended to qualify under Section
423 of the Internal Revenue Code, authorizes the issuance of up
to an aggregate of 100,000 shares of common stock to
participating employees. Employees of the Company are eligible
to participate in the plan if they are employed by the Company
for at least 20 hours per week and more than five months per
year. Employees who own 5% or more of the common stock of the
Company and directors who are not employees are not eligible to
participate. The plan is administered by the Compensation
Committee of the Board of Directors. The plan permits eligible
employees to purchase common stock through payroll deductions,
which may not exceed 10% of an employee's base compensation. The
price at which the stock is purchased under the plan is equal to
85% of the fair market value of the common stock on the first day
of each six month offering period. The plan became effective
during 1992 after approval by the shareholders at the annual
meeting held April 30, 1992 and the first offering period under
the plan was the six months beginning July 1, 1992. During 1992,
employees invested $21,255 in 2,819 shares of the Company's
common stock under the plan, and during 1993 employees invested
$46,733 in 6,238 shares of the Company's common stock under the
plan.
Report of Compensation Committee
THE FOLLOWING REPORT OF THE COMPENSATION COMMITTEE IS
PROVIDED FOR INFORMATION PURPOSES ONLY AND SHALL NOT BE DEEMED TO
BE SOLICITATION MATERIAL OR TO BE FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION.
1. The Committee and General Philosophy. The Company's
compensation policies are determined by the Compensation
Committee of the Board of Directors which makes its compensation
recommendations to the full board for approval. The Committee is
comprised of three directors of the Company, none of whom is
employed by the Company. In addition to making recommendations
with respect to compensation, the Committee also administers the
Company's Nonqualified Stock Option Plan and Employee Stock
Purchase Plan. These plans are described above.
<PAGE>
The Company's approach to compensation places primary
emphasis on team performance and secondary emphasis on individual
performance. As such, compensation is awarded to all employees
as a whole with specific allocations based on deemed contribution
to the team effort.
The Company's compensation program currently is comprised of
two elements: base salary and annual bonus. Base salaries of
executive officers are generally in the 25th percentile or below
of base salaries in comparable companies, as determined by the
Committee's outside consultant. Bonus is based on the Company's
annual incentive plan and is comprised of a combination of cash
and fair market value stock options, with the amount of cash
bonus and the vesting schedule of stock options being tied to
specific performance goals.
2. Annual Incentive Bonus Plan. The Company's Annual
Incentive Bonus Plan provides for a cash bonus pool and a stock
option pool. The cash bonus pool is subject to adjustment from
zero to 125% based on Company performance. The vesting schedule
of the stock option pool is subject to a range of three years to
ten years based on Company performance. Stock options utilized
in the Annual Incentive Bonus Plan ar granted under the terms of
the Company's Stock Option Plan. Goals for Company performance
are established annually. Points are awarded based on the
achievement of the targeted goals. The aggregate number of
points "earned" determines the percentage of the bonus pool
available for award and the vesting schedule for stock options in
the stock option pool. All employees are eligible for
participation in the plan.
Goals for 1993 were: (1) increasing funds from operations;
(2) increasing total market capitalization; and (3) increasing
the Company's return on equity. In addition, the Company
established a special goal for 1993 of reducing the Company's
dependence on any one lessee to no more than 30% of base
revenues. The base pool for cash bonuses for 1993 was established
at $191,000, which was determined as a percentage of historical
cash flow from operations, as well as a percentage of the
projected increase in cash flow from operation for 1993. In the
event that management had been successful in achieving the
specific goal for 1993, the base pool for cash bonuses would have
doubled. The stock option pool is determined by taking 1% of the
Company's outstanding shares at year end.
Based on 1993 performance, management was successful in the
three general goals set for 1993 and "earned" sufficient points
to justify a cash bonus pool of 115% of the base amount, or
$219,650, and a vesting schedule for stock options of four years
as follows: 30% 1994, 30% 1995, 30% 1996 and 10% 1997. The
special goal for 1993 was not achieved, however, and management
recommended that the cash pool be reduced to $100,000.
Executive officers received 15% of the aggregate annual cash
bonus pool awarded for 1993 and 59% of the stock options granted.
As reflected in Table 2 above, of the total of 145,812 stock
options granted with respect to the 1993 Incentive Bonus Plan,
options for 86,327 shares were granted to executive officers.
To provided additional flexibility in the Annual Incentive
Bonus Plan, the Board of Directors is proposing that the number
of shares reserved under the Company's Stock Option Plan be
increased to 1,500,000 shares and the plan be amended to provide
for the grant of restricted shares. If approved by the
shareholders, it is anticipated that rather than awarding 100% of
the bonus pool in cash, that a percentage of the pool would be
awarded in restricted shares of stock. In general, the restricted
shares would be subject to continued employment during the five
year term. During the restricted period the employee receiving
the award would be entitled to receive dividends and to vote the
stock awarded but could not sell or transfer the stock.
3. Compensation to Chief Executive Officer. Mr. Benton's
base salary of $183,750 was set in 1993. Mr. Benton's prior
salary of $175,000 was reviewed by the Compensation Committee's
outside advisor during 1992 and was determined to be in the 25th
percentile for comparable companies. The Board has approved a
budgeted increase of up to 5% for Mr. Benton during 1994, but the
Committee has not yet implemented an increase. Mr. Benton's
participation in the annual incentive bonus is based on his
relative performance as compared to the performance of all team
members. Mr. Benton's allocation for 1993 was 0% of the total
cash bonus pool and 28% of the total stock option pool. Company
performance as measured by the annual incentive bonus plan can
account for up to 50% of Mr. Benton's total compensation.
<PAGE>
Mr. Benton's bonus decreased substantially for 1993 and 1992
as compared to 1991. Although the Company's stock traded above
1992 levels during 1993, the Company's dividend continues to pay
the highest percentage yield among the health care REITs.
Management believes that as a result the Company's stock is
undervalued. Although the Company's stock price has improved as a
result of the Company's stronger balance sheet, Mr. Benton
believes that the Company must reduce its dependence on lessees
providing more than 30% of the Company's base revenues to
increase the market's confidence in the Company and thereby
effect an increase in the market price of the Company's common
stock. As a result, Mr. Benton recommended to the Committee that
bonuses to executive officers be reduced in 1993, his own bonus
being reduced to zero, until this overriding objective is
achieved.
Thomas K. Hearn, Jr. Perry C. Craven Walter H. Ettinger, Jr.
Performance Graph
THE FOLLOWING IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND
SHALL NOT BE DEEMED TO BE SOLICITATION MATERIAL OR TO BE FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION
5 YEAR CUMULATIVE TOTAL RETURNS(1)
HEALTH EQUITY PROPERTIES, S & P 500, ALL REIT
ALL EQUITY S & P
REIT REIT 500 REGISTRANT S & P ALL REIT FOR THE
RETURN(2) RETURN RETURN YR-ENDS YR-ENDS YR-ENDS YEARS
-- -- -- 100.00 100.00 100.00 1988
-- -- -- 101.12 131.49 98.19 1989
-- -- -- 97.52 127.32 81.16 1990
-- -- -- 154.43 166.21 110.11 1991
-- -- -- 150.95 178.96 123.52 1992
-- -- -- 168.74 196.84 146.43 1993
Assumes $100 invested December 31, 1988.
NOTES:
(1) Assumes dividends reinvested and fiscal years ending
December 31 for each of the years 1989 through 1993
(2) Based on information published by the National
Association of Real Estate Investment Trusts
________________
<PAGE>
Certain Transactions
1. Alden. The Company leases five properties to Alden
Management Services, Inc. ("Alden"), which is wholly owned by Mr.
Floyd A. Schlossberg, a director of the Company. For the year
ended December 31, 1993, the Company received $4,657,000 in
rental income from Alden representing 24% of the Company's total
rental income for the year. The leases with Alden were entered
into in 1986. Since the leases were entered into and negotiated
prior to Mr. Schlossberg's appointment to the Board of Directors
of the Company, the Company considers such leases to have been
negotiated at arm's length and to have terms comparable to those
obtainable from other unaffiliated third parties. The leases
provide for an initial term of ten years with three renewal
options of five years each. The lessee is required to pay a
minimum rental amount with provisions for additional rent based
on increases in revenue. The leases are triple net and pass the
obligation of taxes, insurance, operating expenses and
maintenance on to the lessee. The facilities must be operated as
nursing homes and cannot be subleased without the Company's
approval. The leases provide Alden with a right of first refusal
to purchase the nursing home facilities on the same terms and
conditions as offered by bonafide third party offeror in the
event the Company proposes to accept such bonafide offer.
In December 1987, the Company entered into a loan agreement
with Alden providing for a loan in the amount of $500,000 for the
purpose of making certain capital improvements to the Company's
properties leased by Alden. Pursuant to the terms of the loan
agreement, the Company has advanced $500,000 to Alden. The
$500,000 loan is represented by a promissory note which bears
interest at an annual rate of 12.18% and is payable in equal
monthly installments of principal and interest based on a 25-year
amortization of the principal balance. Upon the termination of
the leases with Alden, the Company may declare the entire
outstanding balance due and payable. The highest outstanding
balance of the note during 1993 was $484,575 and the outstanding
balance on December 31, 1993 was $479,316.
2. Equipment Lease. The Company paid Taylor House
Enterprises Limited, a company controlled by Mr. William G.
Benton, a director, Chairman of the Board and Chief Executive
Officer of the Company, $100,000 for the year ended December 31,
1992 pursuant to an equipment lease. The equipment lease was
entered into in September 1990 and was approved by the
independent members of the Board of Directors, who deemed the
terms to be at least as favorable to the Company as those that
would have been obtained from an unaffiliated party.
3. Shared Expenses. The Company shares office space and
certain overhead expenses with other companies affiliated with
Mr. William G. Benton, director, Chairman of the Board and Chief
Executive Officer of the Company. For the year ended December 31,
1993, the Company's share of these expenses (excluding payroll)
was $135,521 compared to an aggregate of $47,615 contributed by
Mr. Benton's affiliates. With respect to the allocation of
expenses, items directly attributable to the Company are
allocated 100% to the Company. These items include postage,
audit expense, employee education and training, insurance and
similar items. Direct items account for approximately 92% of the
Company's administrative expenses. Items shared by all entities
are allocated based on relative payroll expense. These items
include rent, office supplies, utilities and similar items.
These items account for approximately 8% of the Company's
administration expenses.
2. AMENDMENT TO STOCK OPTION PLAN - The Board of Directors
has approved certain amendments to the Company's Stock Option
Plan to increase the number of shares reserved for the Plan from
564,927 to 1,500,000 shares and to provide for the grant of
restricted shares of stock under the Plan. The Stock Option Plan
plays an important role in the Company's overall compensation and
provides the key long-term incentive component of the Plan. The
increase in the number of shares reserved, as well as the
establishment of restricted share grants under the Plan, will
provide the Compensation Committee with increased flexible in
rewarding the Company's employees based on performance. A basic
description of the Stock Option Plan appears under Proposal 1 -
Election of Directors, under the heading "Compensation of
Directors and Officers - Plans." In addition, the contribution
of stock options to the Company's annual compensation is
discussed in the Report of Compensation Committee which appears
under that heading in Proposal 1 - Election of Directors.
In general, the Plan provides for the granting of stock
options to all employees. The Participants are selected by the
Compensation Committee, which is composed of three persons
appointed by the Board of Directors. No member of the
<PAGE>
Compensation Committee is eligible during his appointment, nor
during the year preceding appointment, to participate in the
Plan. The Compensation Committee is currently comprised of three
of the Company's independent directors.
Stock Options - All other existing terms of the Plan which
relate to stock options will remain unchanged. The exercise
price of options granted under the Stock Option Plan is the fair
market value of the shares on the date of grant, or any such
other price as the Compensation Committee may establish, but in
no event shall such price be less than the fair market value of
the shares on the date of grant. All options granted under the
Plan expire no later than ten years after the date of the grant
and are subject to such other terms and conditions as may be
determined by the Compensation Committee at the date of the
grant. The last reported sale price of the Company's stock on
the New York Stock Exchange on March 11, 1994 was $_______ per
share. An option granted under the plan is exercisable only
after one year of continuous service to the Company immediately
following the date the option is granted. All options granted
under the Plan expire no later than 60 days after the termination
of service to the Company, except when the termination is by
reason of retirement due to age or disability, or by reason of
the optionee's death. In the case of retirement due to age or
disability, options expire three months after termination of the
optionee's relationship with the Company. In the case of death,
options may be exercised by the personal representative of the
deceased within one year after the date of death. Options are
not transferable by the holder other than by way of applicable
laws of descent and distribution.
Restricted Shares - The amendments to the Plan provide for
the issuance of shares of Common Stock to participants without
the payment of consideration. The shares of stock are subject to
restriction that the participant continue employment with the
Company for a period of five years after grant. The restriction
applies to the participant's right to transfer or sell the
shares, but does not affect the ability of the participant to
participate in the dividend and voting rights relating to the
shares. In the event employment is terminated while the shares
are restricted, the shares are forfeited unless the termination
is due to certain fundamental changes relating to the Company,
retirement, disability or death. Under these circumstances the
restriction lapses and the shares are no longer restricted.
The increase in the number of shares reserved for the Plan
as well as the authorization of grants of restricted shares under
the proposed amendments would increase the dilutive potential to
shareholders upon the exercise of stock options and the issuance
of restricted shares. Because many of the persons eligible to
participate in the Plan are deemed to be affiliates of the
Company, such persons may only resell any shares acquired
pursuant to exercise of the options in compliance with the
provisions of Rule 144. Conditions of Rule 144 that apply to the
affiliates include restrictions on the manner of the offering,
restriction on the number of shares which may be sold during any
calendar quarter, requirement that current public information be
available on the Company and a requirement that a notice of the
proposed Rule 144 transaction be filed with the Securities and
Exchange Commission.
The timing of the federal income tax consequences of
nonqualified stock options and restricted shares is governed by
Section 83 of the Internal Revenue Code of 1986, as amended (the
"Code"). Generally, the grant of options and restricted shares
to participants in the Plan is not a taxable event to the
participant. With respect to nonqualified stock options, in the
year of exercise the participant will have compensation income in
the amount that the fair market value of the shares on the date
of exercise exceeds the exercise price. With respect to grants
of restricted stock, generally, the participant will have
compensation income in the amount of the fair market value of the
shares on the date the restriction lapses. The Company is
entitled to a deduction in the amount of the aggregate exercise
price with respect to stock options and the fair market value of
restricted shares in the year the participant incurs the
compensation income.
The Board of Directors recommends that shareholders vote
"FOR" the proposal amending the Stock Option Plan. The proposal
will be approved if a majority of the Company's shares
represented in person or by proxy at the Annual Meeting vote in
favor of the amendments, assuming the presence of a quorum.
<PAGE>
3. AUTHORIZATION TO PURCHASE SHARES OF COMMON STOCK OF THE
COMPANY UP TO AN AGGREGATE PURCHASE PRICE OF $7,000,000 - The
Board of Directors is submitting to the Company's shareholders
for their approval a proposal that the Board of Directors, on
behalf of the Company, be authorized, subject to the limitations
of applicable laws or regulations to purchase or cause to be
purchased within one year after the date of the Annual Meeting,
shares of the common stock up to an aggregate purchase price of
$7,000,000. Notwithstanding the foregoing, at no time shall the
aggregate shares purchased pursuant to this authorization exceed
5% of the shares outstanding at the time of purchase less one (1)
share. Purchases would only be made if in the determination of
the Board of Directors such purchase would not have an adverse
effect on the liquidity or capital resources of the Company.
The purchases for which authorization is sought in this
Proxy Statement will be made for cash and at such prevailing
purchase prices as are available and as the Board of Directors,
in its discretion, shall deem advisable and in the best interest
of the Company. The Company could purchase shares only upon
authorization of the Board of Directors, but without further
notice to shareholders, from any public (open market) transaction
and in accordance with any applicable rules of the Securities and
Exchange Commission. Any purchases would be made with the use of
general corporate funds and revenues that may be generated from
the Company's rental activities. Management of the Company
presently is not aware of any affiliates of the Company who
contemplate offering or selling any securities to the Company.
As of March 11, 1994 there were 14,581,237 shares of the
Company's common stock outstanding.
Any shares acquired by the Company would be deemed part of
the Company's shares but would not be deemed outstanding. The
sole purpose for reaquiring shares would be in the event that the
effective annual dividend rate on the shares was sufficiently
high to make a repurchase of shares a better use of Company funds
than other investments or the repayment of debt with lower annual
interest rates. The Company would not effect any repurchase of
shares at any time in which the Company was otherwise making a
distribution of its securities.
One effect of a purchase by the Company of its shares would
be to decrease the number of outstanding shares, thus increasing
the percentage ownership of, and commensurate ability to control
the Company by, those shareholders who do not sell their shares,
including present management and affiliates of the Company. The
bylaws of the Company provide that no shareholder may acquire
more than 9.8% of the Company's stock. Based on the closing
price of $9.___ per share on March 11, 1994, if the Company were
to purchase all shares authorized by this proposal, the Company
would purchase 729,060 shares, constituting approximately 4.99%
of the total shares of the Company which were outstanding as of
March 11, 1994. Purchase of the Company's shares over the next
year may have a dilutive effect on shareholder's equity with the
amount thereof dependent upon the purchase price for the shares,
the number of shares purchased, the book value of the shares and
other factors.
The Board of Directors recommends that shareholders vote
"FOR" the proposal authorizing such purchases. The proposal will
be adopted if approved by a majority of the Company's shares
represented in person or proxy at the Annual Meeting, assuming
the presence of a quorum. If the proposal is adopted, the
purchase of shares will depend upon the availability of funds of
the Company, market conditions and other considerations. The
Board of Directors, in its discretion, may purchase some, all or
none of the shares authorized for purchase and may terminate the
purchase program at any time. To vote for the proposal
shareholders voting by proxy must mark their proxies "FOR" this
proposal. A properly executed but unmarked proxy cannot be
counted as a vote in favor of this proposal.
4. SELECTION OF AUDITORS - Coopers & Lybrand, independent
certified public accountants, has been selected by the Board of
Directors as auditors of the Company for fiscal year ending
December 31, 1994. Representatives of Coopers & Lybrand are
expected to be present at the shareholders' meeting with the
opportunity to make a statement, if they desire to do so, and
will be available to respond to appropriate questions.
5. OTHER MATTERS - Management knows of no other matters
that may properly be, or which are likely to be, brought before
the meeting. However, if any other matters are properly brought
<PAGE>
before the meeting, the persons named in the enclosed proxy or
their substitutes will vote in accordance with their best
judgment on such matters.
6. ANNUAL REPORT ON FORM 10-K TO THE SECURITIES AND
EXCHANGE COMMISSION - The Form 10-K was filed on February 1,
1994.
7. DATE FOR THE RECEIPT OF PROPOSALS - In order for
shareholder proposals to be included in the proxy materials for
the 1995 Annual Meeting, any such proposal must be received by
the Company at its executive offices not later than November 15,
1994, and meet all other applicable requirements for inclusion
therein.
By Order of the Board of Directors
WILLIAM G. BENTON, Chairman
March 15, 1994
<PAGE>
Front
HEALTH EQUITY PROPERTIES INCORPORATED
SHAREHOLDER'S PROXY
The undersigned, revoking previous proxies of such shares of common stock,
hereby appoints WILLIAM G. BENTON and SUSAN L. CHRISTIANSEN, or either of
them, proxies for the undersigned with several power of substitution or
resubstitution, to vote all of the shares of common stock of Health Equity
Properties Incorporated held of record by the undersigned on March 11, 1994
at the Annual Meeting of Shareholders to be held on April 28, 1994, or any
adjournment thereof, as follows:
1. The election as Directors of all nominees listed (except as marked to
the contrary below).
( ) FOR ( ) VOTE WITHHELD
William G. Benton, Susan L. Christiansen and David Weil
INSTRUCTION: To withhold your vote for any individual nominee, write that
nominee's name on the space provided.
_________________________________________________________________________
2. To approve certain amendments to the Company's Stock Option Plan.
( ) FOR ( ) AGAINST ( ) ABSTAIN
3. To authorize the Board of Directors to purchase, or cause to be purchased
on behalf of the Company, shares of the Company's common Stock with an
aggregate maximum purchase price of $7,000,000.
( ) FOR ( ) AGAINST ( ) ABSTAIN
In their discretion, the Proxies are authorized to vote upon such matters as
may properly come before the meeting. The Board of Directors recommends a
vote "FOR" each of the listed proposals.
THIS PROXY IS REVOCABLE AND WILL BE VOTED AS DIRECTED. IF NO INSTRUCTIONS ARE
SPECIFIED, THIS PROXY WILL BE VOTED FOR THE ELECTION OF DIRECTORS. SPECIFIED
VOTE IS REQUIRED FOR PROPOSAL 3. IF ANY OTHER BUSINESS IS PRESENTED AT SUCH
MEETING, THIS PROXY WILL BE VOTED BY THOSE NAMED IN THIS PROXY IN THEIR BEST
JUDGMENT. AT THE PRESENT TIME THE BOARD OF DIRECTORS KNOWS OF NO OTHER
BUSINESS TO BE PRESENTED AT THE MEETING.
<PAGE>
Back
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned acknowledges receipt from Health Equity Properties
Incorporated prior to the execution of this proxy of a Notice of Meeting
and of a proxy statement dated March 15, 1994.
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS Dated:______________, 1994
PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE. RETURNING YOUR __________________________
PROXY DOES NOT DEPRIVE YOU OF YOUR RIGHT TO PRINT NAME OF SHAREHOLDER
ATTEND AND VOTE AT THE MEETING AND IT WILL
HELP TO AVOID THE EXPENSE OF ADDITIONAL __________________________
SOLICITATION IF REQUIRED TO ENSURE A QUORUM. SIGNATURE OF SHAREHOLDER
__________________________
PRINT NAME OF SHAREHOLDER
__________________________
SIGNATURE OF SHAREHOLDER
Please sign exactly as your
name appears on this card.
When signing as attorney,
executor, administrator,
trustee or guardian,
please give your full
title. If shares are held
jointly, each holder
should sign.
<PAGE>
HEALTH EQUITY PROPERTIES INCORPORATED
THIRD AMENDED AND RESTATED
1989 NONQUALIFIED STOCK OPTION PLAN
1. Purpose of the Plan
This Stock Option Plan (the "Plan") for Health Equity
Properties Incorporated (the "Company") is intended to advance
the interests of the Company by providing Officers, Directors and
Employees of the Company (the "Eligible Participants") with
additional incentive to promote the success of the business, to
acquire and increase their proprietary interest in the success of
the Company, and to encourage them to continue providing services
to the Company. The above aims will be effected through the
granting of certain stock options ("Options") and certain
restricted shares ("Shares"). It is understood that options
issued under the Plan will not qualify as Incentive Stock Options
("ISO's") under Section 422A of the Internal Revenue Code and the
terms of the Plan shall be interpreted in accordance with this
intention.
2. Administration of the Plan
The Compensation Committee of the Board of Directors
(hereinafter called the "Committee") shall consist of not less
than three (3) members, all of whom shall be "disinterested
persons" within the meaning of Rule 16b-3 of the Securities and
Exchange Commission, as amended from time to time. Any or all of
the members of the Committee may be members of the Board of
Directors; however, such Directors must be "disinterested
persons" as to the Plan within the meaning of Rule 16b-3.
<PAGE>
Subject to the provisions of the Plan, the Committee shall
have plenary authority, in its discretion: (1) to determine the
Eligible Participants to whom Option/Shares shall be granted; (b)
to determine the time or times at which Options/Shares shall be
granted; (c) to determine the option price of the shares subject
to each Option, which price shall not be less than the minimum
specified in Section 6; (d) to determine (subject to Section 8)
the time or times when each Option shall become exercisable and
the duration of the exercise period; and (e) to interpret the
Plan and to prescribe, amend and rescind rules and regulations
relating to it.
The Board may from time to time appoint members of the
Committee in substitution for members previously appointed and
may fill vacancies, however caused, in the Committee; provided,
however, that at all times at least one member shall be a
Director of the Company. The Committee shall select one of its
members as its Chairman and shall hold its meetings at such times
and places as it shall deem advisable. All action of the
Committee shall be taken by majority vote of its members. Any
action may be taken by a written instrument signed by all of the
members of the Committee, and any action so taken shall be fully
effective as if it has been taken by a majority vote of the
members at a meeting duly called and held. The Committee may
appoint a secretary to keep minutes of its meetings and shall
make such rules and regulations for the conduct of its business
as it shall deem advisable.
<PAGE>
Subject to the provisions of the Plan, the determination or
the interpretation and construction of any provision of the Plan
by the Committee shall be final and conclusive upon all persons
affected thereby.
3. Eligibility
Options/Shares shall be granted only to individuals who meet
the following eligibility requirements:
(a) Such individual must be an Officer, Director or
Employee of the Company (an "Eligible Participant").
(b) Such individual, being otherwise eligible under
this Section 3, shall have been selected by the Committee as a
person to whom Options/Shares shall be granted under the Plan.
(c) In determining the Eligible Participants to whom
Options/Shares shall be granted and the number of shares to be
covered by each grant by Option or by Share grant, the Committee
shall take into account the nature of the services rendered by
the respective Eligible Participants, their present and potential
contributions to the success of the Company and such other
factors as the Committee shall deem relevant. An Eligible
Participant who has been granted Options/Shares under the Plan
may be granted additional Options/Shares under the Plan if the
Committee shall so determine.
4. Limitations on Options Granted Under the Plan
Any option granted hereunto shall be exercisable while there
is outstanding any other stock option (from this or any other
plan) to purchase stock in the Company or in a parent or
<PAGE>
subsidiary of the Company that was granted to the optionee before
the granting of the option in question.
5. Shares of Stock Subject to the Plan
There will be reserved for use upon the grant of Shares and the
exercise of Options granted from time to time under the Plan an
aggregate of One Million, Five Hundred Thousand (1,500,000)
shares of the Common Stock of the Company, having a par value of
$0.01 per share (hereinafter called the "Common Stock"). Such
number of shares is subject to any capital adjustments as
provided in Section 7. Any shares subject to an Option under the
Plan, which Option for any reason expires or is terminated
unexercised as to such shares, may again be subjected to an
Option under the Plan. However, if the expiration or termination
date of an Option is beyond the term of existence of the Plan as
described in Section 12, then any shares covered by unexercised
or terminated options shall not reactivate the existence of this
Plan and, therefore, may not be available for additional grants
under the Plan.
6. Price
(a) Options
The option price of each Option granted under the Plan
shall be not less than one hundred percent (100%) of the fair
market value of the Company's Common Stock on the date of grant
of the Option. The option price is subject to any capital
adjustment as provided in Section 7.
If the Common Stock is traded in the over-the-counter
market, such fair market value shall be deemed to be the mean
<PAGE>
between the asked and the bid prices on the date the Option is
granted as reported by NASDAQ. If the Common Stock is traded on
an exchange, such fair market value shall be deemed to be the
mean of the high and low prices at which it is quoted or traded
on the date the Option is granted on the exchange on which it
generally has the greatest trading volume. If the Common Stock
is neither traded in the over-the-counter market or on an
exchange, then fair market value on the date the Option is
granted shall be determined by the Committee taking into account
such factors as the Committee deems prudent.
The option price shall be payable to the Company either
(i) in cash or by check, bank draft or money order payable to the
order to of the Company, or (ii) at the discretion of the
Committee, through the deliver of shares of the Common Stock of
the Company owned by the optionee with a value equal to the
option price, or (iii) at the discretion of the Committee by a
combination of (i) and (ii) above. No shares shall be delivered
until full payment has been made. The Committee may not approve
a reduction of such purchase price in any such option at a time
when the market value of the shares is lower than it was when
such Option was granted.
(b) Shares
Shares granted to participants pursuant to this Plan
shall be as compensation and no consideration shall be paid by
any participant with respect to such grant.
<PAGE>
7. Capital Adjustments Affecting Common Stock
(a) If, after the date of grant of any Option granted
pursuant to this Plan, the outstanding shares of Commo Stock are
increased, decreased, changed into or exchanged for a different
number or kind of shares or securities of the Company or shares
of a different par value or without par value through
reorganization, recapitalization, reclassification, stock
dividend, stock split, amendment to the Company's Articles of
Incorporation or reverse stock split, an appropriate adjustment
shall be made in the number and/or kind of securities allocated
to the Options previously and subsequently granted under the
Plan, without change in the aggregate purchase price applicable
to the unexercised portion of the outstanding Options but with a
corresponding adjustment in the price for each share or other
unit of any security covered by the Options. In the event of any
of the foregoing detailed adjustments to the outstanding shares
of Common Stock, any Shares still subject to restrictions shall
be deemed to be outstanding for such purposes and shall be
adjusted in the same manner as other outstanding shares of Common
Stock.
(b) Upon the effective date of the dissolution or
liquidation of the Company, or of a reorganization, merger or
consolidation of the Company with one or more corporations in
which the Company is not the surviving corporation, or of a
transfer of substantially all the property or more than eighty
percent (80%), in the aggregate, of the then outstanding shares
of capital stock of the Company to another corporation, any
<PAGE>
Shares subject to restrictions under the terms of this Plan shall
be deeded to no longer be subject to such restrictions, and the
Plan and any Option previously granted hereunder shall terminate
unless provision is made in writing in connection with such
transaction for the continuance of the Plan and for the
assumption of Options theretofore granted, or the substitution
for such Options of new options covering the shares of a
successor corporation or of a parent or subsidiary thereof, with
appropriate adjustments as to number and kind of shares and
prices in which event the Plan and the Options theretofore
granted or the new options substituted therefor, shall continue
in the manner and under the terms so provided. In the event of
such dissolution, liquidations, reorganization, merger,
consolidation, transfer or assets or transfer of shares, and if
provision is not made in such transaction for the continuance of
the Plan and for the assumption of Options theretofore granted or
for the substitution of such Options or new options covering the
shares of a successor corporation or a parent or subsidiary
thereof, then such optionee under the plan shall be entitled,
prior to the effective date of any such transaction, to purchase
the full number of shares under his Option which he would
otherwise have been entitled to purchase during the remaining
term of such Option, whether or not such Option is currently
exercisable.
(c) To the extent that the foregoing adjustments relate to
particular stock or securities of the Company subject to Option
under this Plan, such adjustments shall be made by the Committee,
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whose determination in that respect shall be final and
conclusive.
(d) The grant of an Option or Shares pursuant to this Plan
shall not affect in any way the right or power of the Company to
make adjustments, reclassifications, reorganizations or changes
of its capital or business structure or to merge or to
consolidate or to dissolve, liquidate or sell, or transfer all or
any part of its business or assets.
(e) No fractional shares of stock shall be issued under the
Plan for any adjustment.
8. Period of Option and Certain Limitations on Right to
Exercise
(a) All Options issued under the Plan shall be for such
period as the Committee shall determine, but for not more than
ten (10) years from the date of grant thereof.
(b) The period of the Option, once it is granted, may be
reduced only as provided for in Section 9 in connection with the
termination of the optionee's relationship with the Company or
death of the optionee.
(c) Each Option granted under this Plan shall become
exercisable only after one (1) year or continuous service to the
Company by the optionee in the capacity which qualified such
optionee as an Eligible Participant immediately following the
date the Option is granted. Notwithstanding the foregoing, the
Committee may, in its sole discretion, (i) prescribe longer time
periods and additional requirements with respect to the exercise
of ah Option and (ii) terminate in whole or in part such portion
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of any Option as has not yet become exercisable at the time of
termination if it determines that an attempt is made to cause the
Option under the Plan or any of the rights and privileges thereby
conferred to be transferred, assigned, pledged or hypothecated in
any way (whether by operation of law or otherwise), and no such
Option, right or privilege shall be subject to execution,
attachment, or similar process. Upon any attempt so to transfer,
assign, pledge, hypothecate or otherwise dispose of the Option or
of any right or privilege conferred thereby, contrary to the
provisions hereof, or upon the levy of any attachment or similar
process upon such Option, right or privilege, the Option and such
rights and privileges shall immediately become null and void.
Each Option granted hereunder shall be exercisable during the
optionee's lifetime only by such optionee and is not transferable
by such optionee otherwise than by will or the laws of descent
and distribution.
(d) The Committee may grant only nonqualified stock options
under this Plan to an Eligible Participant.
(e) The grant of Options shall be evidenced by a written
instrument containing terms and conditions established by the
Committee consistent with the provisions of this Plan.
(f) Not less than one hundred (100) shares may be purchased
at any one time unless the number purchased is the total number
at that time purchasable under the Plan.
(g) The Committee may grant an Option or Options to an
Eligible Participant and stipulate that a portion of such Option
expires or becomes exercisable at a stated interval or that
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portions of such Option expire or become exercisable at several
stated intervals or that all of such Option becomes exercisable
at a single time.
(h) An Eligible Participant to whom an Option has been
granted shall have no rights as a shareholder with respect to any
shares covered by his Option until payment in full by him for the
shares being purchased. No adjustment shall be made for
dividends (ordinary or extraordinary, whether in cash, securities
or other property) or distributions or other rights for which the
record date is prior to the date such stock is fully paid for,
except as provided in Section 7 hereof.
9. Termination of Relationship with Company
(a) Termination of Relationship with Company - Except by
Death or Retirement. If any optionee ceases to continue his
relationship with the Company for any reason other than his death
or retirement by reason of age or disability, he may, at any time
within sixty (60) days thereafter, but no later than the date of
expiration of the Option, exercise any nonqualified Option
granted hereunder to the extent he was entitled to do so at the
date of such cessation, and at the end of such period any
unexercised Options shall immediately terminate.
(b) Termination of Relationship with Company - Death. If
an optionee dies while associated with the Company, the person or
persons to whom the Option is transferred by will or by the laws
of descent and distribution may exercise the Option to the same
extent and upon the same terms and conditions the optionee would
have been entitled to do so had he lived until the term of the
<PAGE>
Option had expired, but in no event later than one (1) year from
the date of death of such optionee. Any Options or portions of
Options of a deceased optionee not so exercised shall terminate.
(c) Termination of Relationship with Company - Retirement.
If an optionee retires by reason of age or disability and thereby
terminates his association with the Company, he may, at any time
within three (3) months thereafter, but no later than the date of
expiration of the Option, exercise any nonqualified Option
granted hereunder to the extent he was entitled to do so at the
date of such cessation, and at the end of such period any
unexercised option shall immediately terminate.
10. Limitations and Rights of Restricted Shares
(a) Subject to the provisions of Section 7(b) of this Plan,
Shares granted pursuant to the Plan shall be restricted for a
term of five (5) years after the date of grant.
(b) In the event that the employment of a participant
receiving Shares terminates during the period in which Shares are
restricted for any reason other than death, disability or
retirement, such Shares shall be forfeited. Any Shares so
forfeited shall immediately become available for future grants
under the Plan. Upon the termination of employment due to death,
disability or retirement, any Shares subject to restriction shall
no longer be deemed subject to such restriction.
(c) During the period that Shares are subject to a
restriction pursuant to the Plan, the participant granted such
Shares shall have no right to sell or transfer such Shares.
<PAGE>
(d) During the period that Shares are subject to
restriction pursuant to the Plan, the Participant granted such
Shares shall be entitled to any dividends declared and paid with
respect to such Shares and shall be entitled to vote such Shares.
(e) The grant of Shares shall be evidenced by written
instrument specifying the term of the restriction and any lapse
thereof consistent with the provisions of this Plan.
(f) Upon the expiration of the term of restriction pursuant
to this Plan, the Shares with respect to which such restriction
has ended shall no longer be subject to the terms of the Plan.
11. Listing and Registration of Shares
Each Option shall be subject to the requirement that, if at
any time the Committee shall determine in its discretion the
listing, registration, or qualification of the shares covered
thereby upon any securities exchange or under any state or
federal law or the consent or approval of any governmental
regulatory body is necessary or desirable as a condition of, or
in connection with, the granting of such Option or the issue or
purchase of shares thereunder, such Option may not be exercised
in whole or in part unless and until such listing, registration,
qualification, consent or approval shall have been effected or
obtained free of any conditions not acceptable to the Committee.
12. Expiration and Termination of the Plan
Options/Shares may be granted under the Plan at any time or
from time to time as long as the total number of shares optioned
or granted under this Plan does not exceed One Million, Five
Hundred Thousand (1,500,000) shares of Common Stock, subject to
<PAGE>
adjustment as provided in Section 7. The Plan may be abandoned
or terminated at any time by the Board of Directors of the
Company except with respect to any Options/Shares then
outstanding under the Plan. No Options/Shares shall be granted
pursuant to the plan after ten (10) years from the effective date
of the Plan.
13. Amendment of Plan
The Board of Directions may at any time and from time to
time modify and amend the Plan (including any form of option
agreement in any respect; provided, however, that no such
amendment shall:(a) increase (except in accordance with Section
7) the maximum number of shares reserved for Options or grants
under the Plan either in the aggregate or to any individual
participant; or (b) reduce (except in accordance with Section 7)
the minimum option prices which may be established under the
Plan; or (c) extend the period of periods during which Options
may be granted or exercised; or (d) change the provisions
relating to the determination of Directors to whom Options/Shares
shall be granted and the number of shares to be covered by such
Options; or (e) change the provisions relating to adjustments to
be made upon changes in capitalization; or (f) change the method
for the selection of the Committee as provided by Section 2
hereof. The termination or any modification or amendment of the
Pan shall not, without the consent of an optionee, affect his
rights under an Option theretofore granted to him
Notwithstanding the foregoing, the Board of Directors may amend
the Plan to the extent necessary to cause Options issued or
<PAGE>
issuable thereunder which were or are designated on the date of
grant by the Committee as nonqualified stock options to be
accorded the tax and accounting treatment applicable to options
of that type.
14. Effective Date of Plan
This Plan shall be effective upon adoption by the
Shareholder of the Company.
