NATIONAL HEALTH INVESTORS, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
March 20, 1997
To the Stockholders:
The Annual Meeting (the "Meeting") of Stockholders of National Health
Investors, Inc. (the "Company") will be held at City Center, 14th Floor, 100
Vine Street, Murfreesboro, Tennessee on Thursday, March 20, 1997, at 5:00 p.m.
C.S.T., for the following purposes:
1. To re-elect one Director;
2. To adopt the 1997 Stock Option Plan;
3. To ratify the selection of Arthur Andersen LLP as independent
accountants for the year ending December 31, 1997; and
4. To transact such other business as may properly come before the
meeting or any adjournments thereof.
The nominee for re-election as director is Robert T. Webb. He is
currently serving as a director of the Company.
The Board of Directors has fixed the close of business on Wednesday,
February 5, 1997, as the record date for the determination of stockholders who
are entitled to notice of and to vote at the Annual Meeting of the
Stockholders or any adjournments thereof.
We encourage you to attend the Meeting. Whether you are able to attend
or not, we urge you to indicate your vote on the enclosed proxy card FOR the
re-election of Mr. Webb as Director, FOR the adoption of the 1997 Stock Option
Plan, and FOR ratification of the selection of Arthur Andersen LLP as
independent accountants for the year ending December 31, 1997. Please sign,
date, and return the proxy card promptly in the enclosed envelope. If you
attend the Meeting, you may vote in person even if you have previously mailed
a proxy card.
By Order of the Board of Directors
Richard F. LaRoche, Jr.
February 13, 1997 Secretary
Murfreesboro, Tennessee
<PAGE>
NATIONAL HEALTH INVESTORS, INC.
100 Vine Street
Murfreesboro, Tennessee 37130
------------------------------
PROXY STATEMENT
------------------------------
ANNUAL MEETING OF STOCKHOLDERS
March 20, 1997
The accompanying proxy is solicited by the Board of Directors of
National Health Investors, Inc., (the "Company") to be voted at the Annual
Meeting (the "Meeting") of Stockholders to be held on Thursday, March 20,
1997, commencing at 5:00 p.m. C.S.T. and at any adjournments of the Meeting.
It is anticipated that this proxy material will be mailed on or about February
13, 1997 to all Stockholders of record on February 5, 1997.
A copy of the Annual Report of the Company for the year ended December
31, 1996, including financial statements, is enclosed herewith. THE COMPANY
WILL PROVIDE WITHOUT CHARGE TO ANY PERSON SOLICITED HEREBY, UPON THE WRITTEN
REQUEST OF SUCH PERSON, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR
THE YEAR ENDED DECEMBER 31, 1996, AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION. SUCH REQUESTS SHOULD BE DIRECTED TO RICHARD F. LaROCHE, JR.,
SECRETARY OF THE COMPANY, AT 100 VINE STREET, SUITE 1202, MURFREESBORO,
TENNESSEE 37130.
A stockholder giving a proxy has the power to revoke it at any time
before it is exercised. A proxy may be revoked by filing with the Secretary
of the Company (i) an instrument revoking the proxy or (ii) a duly executed
proxy bearing a later date. The powers of the proxy holders will be suspended
if the person executing the proxy is present at the Meeting and elects to vote
in person. If the proxy is neither revoked nor suspended, it will be voted by
those therein named.
Votes Required
Shares of Common Stock represented in person or by proxy at the Meeting
(including shares which abstain or do not vote with respect to one or more of
the matters presented at the Meeting) will be tabulated by the Company's
Secretary who will determine whether or not a quorum is present. Abstentions
will be counted as shares that are present and entitled to vote for purposes
of determining the number of shares that are present and entitled to vote with
respect to any particular matter, but will not be counted as votes in favor of
such matter. Accordingly, an abstention from voting on Proposals II and III
by a stockholder present in person or represented by proxy at the Meeting
will have the same legal effect as a vote "against" the matter even though the
stockholder or interested parties analyzing the results of the voting may
interpret such vote differently. An abstention on Proposal I will have no
effect on the voting on such matter. If a broker holding stock in "street name"
indicates on the proxy that it does not have discretionary authority as to
certain shares to vote on a particular matter, those shares will not be
considered as present and entitled to vote with respect to that matter.
Accordingly, a "broker non-vote" may affect establishment of a quorum, but
once a quorum is established, will have no effect on the voting on such
matter.
A majority of the issued and outstanding shares of Common Stock entitled
to vote constitutes a quorum at the Meeting. The affirmative vote of the
holders of a majority of the votes cast at the Meeting is required for the
election of a director, while the adoption of the 1997 Stock Option Plan and
the ratification of the appointment of the Company's independent accountants
requires the affirmative vote of the holders of a majority of the issued and
outstanding shares of Common Stock.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The Board of Directors has fixed the close of business on Wednesday,
February 5, 1997 as the record date. The outstanding voting securities of the
Company as of January 27, 1997, consisted of 23,633,201 shares of Common
Stock, par value $.01 per share ("Common Stock"). Stockholders of record as
of the record date are entitled to notice of and to vote at the Meeting or any
adjournments thereof. Each holder of the shares of Common Stock is entitled
to one vote per share on all matters properly brought before the Meeting.
Stockholders are not permitted to cumulate votes for the purpose of electing
directors or otherwise.
The following information is based upon filings made by the entities
identified below with the Securities and Exchange Commission: at January 27,
1997, no person was known to the Company to own beneficially more than 5% of
the outstanding shares of Common Stock.
PROPOSAL I
ELECTION OF DIRECTOR
Pursuant to the Company's Articles of Incorporation, the directors have
been divided into three groups. At the March 20, 1997 Meeting, one director
will be elected to hold office for a term of three years or until his
successor shall have been duly elected and qualified.
The nominee for election to the position of director to be voted upon at
the Meeting is Robert T. Webb, a current Director of the Company. Unless
authority to vote for the election of director has been specifically withheld,
the persons named in the accompanying proxy intend to vote for the election of
Mr. Webb to hold office as a director for a term of three years or until his
successor has been duly elected and qualified.
If the nominee becomes unavailable for any reason (which event is not
anticipated), the shares represented by the enclosed proxy may (unless such
proxy contains instructions to the contrary) be voted for such other person as
may be determined by the holders of such proxies.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEE.
The following information relates to the nominee for election as a
director of the Company and the other persons whose terms as directors
continue after the Meeting, as well as officers and directors of the Company
as a group:
<TABLE>
<CAPTION>
Common Percent
Stock of
Expiration Beneficially Shares
of term as Owned at Outstanding
Name Age Position Director<F1> 12/31/96<F2> 12/31/96
<S> <C> <C> <C> <C> <C>
Robert T. Webb 52 Director 1997 33,450 *
Ted H. Welch 63 Director 1998 17,000 *
Jack Tyrrell 50 Director 1999 15,586 *
W. Andrew Adams 51 Director &
President 1999 994,557 4.2%
Richard F. LaRoche, Jr. 51 Director &
Secretary 1998 290,505 1.2%
All Directors and Executive Officers as a group (5 people) 1,351,098 5.8%
<FN>
*Less than 1%
<F1>All directors were first elected in 1991.
<F2>Except as otherwise noted, all shares are owned beneficially with sole
voting and investment power. Included in the amounts above are 5,000 shares
to Mr. Webb, 8,000 shares to Mr. Tyrrell, 9,000 shares to Mr. Welch, 40,000
shares to Mr. Adams and 8,000 shares to Mr. LaRoche of which all may be
acquired upon the exercise of stock options granted under the Company's 1991
Stock Option Plan.
</TABLE>
Mr. Webb has served as a Director of the Company since its inception in
1991. Mr. Webb is the owner of commercial buildings and rental properties in
the Middle Tennessee area, a subdivision developer, and a partner in
commercial properties located in Rosslyn, Virginia, and Phoenix, Arizona. Mr.
Webb is the President and sole owner of Webb's Refreshments, Inc., which has
been in operation serving the Middle Tennessee area since 1976. Mr. Webb
attended David Lipscomb College and received a B.A. in business marketing
from Middle Tennessee State University in 1969.
Mr. Welch has owned and operated income producing real estate (primarily
office buildings) in the southeastern United States since 1976. From 1953
until 1971, Mr. Welch worked for the Southwestern Company where he became
Executive Vice President. From 1971 to 1974, he served as the Commissioner of
Finance and Administration for the State of Tennessee, in which capacity he
was responsible for all construction and maintenance of State of Tennessee
real property, along with being chief operating officer. Mr. Welch received
a B.S. from the University of Tennessee at Martin and attended the Graduate
School of Management at Indiana University. Mr. Welch is President and Chief
Executive Officer of Eagle Communications. Mr. Welch serves on the Board of
Directors of American Constructors, Inc.; First American National Bank,
Nashville, Tennessee; Logan's Roadhouse, Inc.; and Southeast Service
Corporation.
Mr. Tyrrell has served as a Director of the Company since its inception
in 1991. Mr. Tyrrell is a partner of Richland Ventures, L.P. and Richland
Ventures, L.P. II, venture capital firms based in Nashville, Tennessee, which
were founded in May 1994 and September 1996. He also currently serves as a
general partner of Lawrence, Tyrrell, Ortale & Smith and Lawrence, Tyrrell,
Ortale & Smith, II, L.P., venture capital partnerships based in Nashville,
Tennessee and New York, New York. Mr. Tyrrell serves as a director of Regal
Cinemas and Premier Parks, both of which are publicly held entities.
Mr. Adams has been President and a Director of the Company since its
inception in 1991. Mr. Adams has also been President of National HealthCare
L.P., the Company's Investment Advisor ("NHC") since 1974. He
has served on the Multi-Facility Committee of the American Health Care
Association, the trade association for long-term health care center companies.
He has an M.B.A. from Middle Tennessee State University. Mr. Adams serves on
the Board of Directors of David Lipscomb University in Nashville, Tennessee,
and of SunTrust Bank in Nashville, Tennessee.
Mr. LaRoche has served as Vice President, Secretary and a Director of
the Company since its inception in 1991. He also has been General Counsel of
NHC since 1971, Secretary of NHC since 1974 and Senior Vice President of NHC
since 1986. He received a J.D. from Vanderbilt University and an A.B. from
Dartmouth College. Mr. LaRoche is responsible for legal affairs, acquisitions
and finance for both companies.
Board of Directors and Committees of the Board
The Board of Directors held 4 meetings during 1996. All directors were
present at the meetings of the Board and of committees on which he served.
The Board as a whole serves as the Audit Committee, and the Compensation
Committee is comprised of non-employee Directors (Mr. Webb, Mr. Welch and Mr.
Tyrrell).
The Audit Committee, which met one time in 1996, selects the Company's
independent accountants, fixes the compensation to be paid to such
accountants, reports to the Board with respect to the scope of audit
procedures and determines compliance as to the company's policies and
procedures.
Except for the issuance of stock options pursuant to the existing 1991
Stock Option Plan, the Compensation Committee, which did not meet in 1996,
currently has no responsibility since the Company contracts with NHC to act
as its Investment Advisor, one responsibility of which is to employ and
compensate all officers and employees.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
AND CERTAIN TRANSACTIONS
Cash Compensation
Directors not affiliated with NHC, the Company's Investment Advisor, receive
compensation for their Board service in the amount of $2,500 per meeting
attended. The Company reimburses all directors for travel expenses incurred
in connection with their duties as directors of the Company.
The Company's executive officers (Mr. Adams and Mr. LaRoche) are also
employees of NHC. Their compensation is determined solely by NHC, which
allocates a portion of their annual performance bonus to the Company. Payment
of the allocated amount by the Company is credited against the Advisory Fee
paid NHC. Neither Mr. Adams nor Mr. LaRoche have yet had allocated any
performance bonus for 1996. Mr. Adams and Mr. LaRoche received $450,000 and
$225,000 respectively in 1995, and $400,000 and $200,000 respectively in 1994.
The Company paid no other perquisites or bonuses to its executive officers.
Because NHC sets the salaries of the Company's two executive officers, the
Company's Compensation Committee does not issue a Compensation Committee
Report for its proxy statements.
Director and Officer Options
The 1991 Option Plan as amended in 1994, provides for an automatic grant
to each non-NHC affiliated director of an option to purchase 5,000 shares of
Common Stock on the date of the Annual Stockholder's Meeting at the then
fair market value.
The 1991 Option Plan permits options to be exercised for cash or by
surrender of shares of Common Stock of the Company valued at the then fair
market value. Unless otherwise specifically provided in the option agreement,
no option or SAR shall be transferable other than by will, family gift, or the
laws of descent and distribution. The 400,000 shares which may be issued
under the 1991 Option Plan and the exercise prices for outstanding options are
subject to adjustment in the event that the number of outstanding shares of
Common Stock will be changed by reason of stock splits, stock dividends,
reclassifications or recapitalizations. Options on 249,000 shares have been
granted through December, 1996, and the balance available granted in January,
1997. In addition, upon a merger or consolidation involving the Company,
participants are entitled to shares in the surviving corporation upon the
terms set forth in the 1991 Option Plan.
Pursuant to the automatic grant provisions of the Plan, the three non-NHC
affiliated directors have each received options to purchase shares at
$25.00 per share in 1993, $28.75 per share in 1994, $25.375 in 1995, and
$33.50 in 1996. The outside directors have exercised all options granted in
1993, all but 1,000 shares granted in 1994, all but 9,000 of the 1995 grants
and none of the 1996 grants.
In 1993 the Board awarded options on 100,000 shares at the then fair
market value of $25.00 to its Investment Advisor, with the direction that they
be allocated among those employees who were directly involved in the provision
of investment advisory services to the Company. Of those 100,000 shares,
28,000 were allocated to Director Adams, 20,000 to Director LaRoche, and
52,000 to other NHC employees. Of the 100,000 shares, 16,000 shares were
purchased by NHC employees during 1996, 28,500 shares in 1995, and 22,500
shares in 1994. On June 1, 1995, the Company awarded options on another
100,000 shares at the then fair market value of $26.00 per share to key NHC
employees, 28,000 of which were awarded to Mr. Adams and 20,000 of which were
awarded to Mr. LaRoche. Of the 100,000 shares granted in 1993, 10,202 shares
were purchased by NHC employees during 1995, and 48,086 shares were purchased
during 1996.
Table A and B below set forth information regarding options which are
outstanding, granted or exercised under the 1991 Option Plan as of December
31, 1996, for the Company's two executive officers. Table C sets forth
information regarding options outstanding and exercised during 1996 for the
Executive Officers, all non-NHC affiliated directors and all other NHC
employees as a group. The Company has not granted any SARs.
<TABLE>
TABLE A
Option/SAR Grants in Last Fiscal Year
<CAPTION>
Potential Realizable
Value at Assumed Annual
Rates of Stock Price
Appreciation for Option
Individual Grants Term
-------------------------------------------------------------------------------
Percent of
Total
Number of Options/
Securities SARs
underlying Granted to
option/ Employees Exercise of
SARS in Fiscal Base Price
Granted Year ($/Sh) Expiration
($) Date
5%($) 10%($)
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
W. Andrew Adams -0- -0- -0- -0- -0- -0-
Richard F.LaRoche,
Jr. -0- -0- -0- -0- -0- -0-
</TABLE>
<TABLE>
TABLE B
Aggregated Option/SAR Exercises in Last Fiscal Year
and FY-End Option/SAR Values
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised in-the
Options/ Money
SARs at Options/
Fiscal Year- SARs at
Shares Value End Fiscal Year-
Acquired on Realized (#) End ($)
Name Exercise(#) ($) Exercisable Exercisable
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
W. Andrew Adams 4,000 34,500 40,000 482,000
Richard F. LaRoche, Jr. 24,000 149,500 8,000 102,000
</TABLE>
<TABLE>
TABLE C
<CAPTION>
Shares Under Expiration Options Remaining Exercise
Name of Participant Option: 1996 Date Exercised:1996 Options Price
<S> <C> <C> <C> <C> <C>
W. Andrew Adams 16,000 3/4/94 4,000 12,000 $25.00
28,000 6/1/00 -0- 28,000 $26.00
Richard F. LaRoche, Jr. 12,000 3/4/98 4,000 8,000 $25.00
20,000 6/1/00 20,000 -0- $26.00
All Executive Officers 28,000 3/4/98 8,000 20,000 $25.00
(2 persons) 48,000 6/1/00 20,000 28,000 $26.00
All Non-NHC Affiliated 3,800 3/4/98 1,800 1,000 $25.00
Directors (3 persons) 2,000 3/10/99 1,000 1,000 $28.75
12,193 3/16/00 3,193 9,000 $25.38
15,000 3/21/01 -0- 15,000 $33.50
All Other NHC Employees 21,000 3/4/98 9,000 12,000 $25.00
(12 persons) 41,798 6/1/00 28,086 13,712 $26.00
</TABLE>
The Company's grant or issuance of an incentive stock option under the
1991 Option Plan has no federal income tax consequences to either the Company
or the optionee. Nor do any federal income tax consequences occur to either
the Company or the optionee upon the optionee's exercise of his or her
incentive stock option and purchase of Common Stock up to $100,000 per year,
except that the difference between the fair market value of the stock
purchased pursuant to the exercise of the option and the amounts paid upon the
option's exercise (the "Spread") would be included in the optionee's
alternative minimum taxable income for alternative minimum tax purposes. For
options purchased in excess of the $100,000 limit, or which are not held for
the time discussed in the next paragraph, the Spread is taxable as ordinary
income to the key employee and deductible by the Company at the time of
exercise.
If the optionee holds the stock purchased upon the exercise of the
option for the requisite period under the Internal Revenue Code, then upon the
optionee's disposition of the stock he or she will recognize capital gain (or
loss) for federal income tax purposes on the amount of the Spread. The
Company would not be entitled to a deduction upon such a disposition. To be
entitled to such capital gains treatment the optionee must not dispose of the
underlying stock within two (2) years after the date the option is granted or
one (1) year after the option is exercised.
If the optionee disposes of the stock prior to such time, then the
optionee will recognize ordinary income in an amount equal to the lesser of
(i) the difference between the sales proceeds and the optionee's cost, and
(ii) the difference between the fair market value of the stock on the date of
exercise and the optionee's cost. The balance of the gain on a premature
disposition of the stock, if any, will be capital gain for federal income tax
purposes. Such a premature disposition will entitle the Company to a deduction
equal to the amount of ordinary income recognized by the optionee.
No federal income tax consequences occur to either the Company or the
optionee upon the Company's grant or issuance of a non-qualified stock option
under the 1991 Option Plan so long as the option does not have a "readily
ascertainable fair market value" at the time of grant. Upon an optionee's
exercise of a non-qualified stock option, the optionee will recognize ordinary
income in an amount equal to the difference between the fair market value of
the stock purchased pursuant to the exercise of the option and the exercise
price of the option. However, if the stock purchased upon exercise of the
option is not transferable or is subject to a substantial risk of forfeiture,
then the optionee will not recognize income until the stock becomes
transferable or is no longer subject to such a risk of forfeiture (unless the
optionee makes an election under Internal Revenue Code Section 83(b) to
recognize the income in the year of exercise, which election must be made
within thirty days of the option exercise). The Company will be entitled to a
deduction in an amount equal to the ordinary income recognized by the optionee
in the year in which such income is recognized by the optionee. Upon a
subsequent disposition of the stock, the optionee will recognize capital gain
to the extent the sales proceeds exceed the optionee's cost of the stock plus
the previously recognized ordinary income.
The Company has implemented an option exercise loan guaranty program,
the purpose of which is to facilitate Directors and Key Employees (of either
NHI or the Investment Advisor) exercising options to purchase NHI common
stock. Each Director and Key Employee to whom options to purchase NHI common
shares have been granted is eligible to have up to $100,000 per year of loans
made from commercial banking institutions, the proceeds of which are used to
exercise NHI options, guaranteed by NHI. The guarantee is structured as
follows: Option holders must pledge to NHI 125% of the loan amount in
publicly traded stock as additional collateral for the guarantee; the option
holder must personally guarantee the loan to the bank and indemnify NHI for
any loss or liability on its guaranty; the interest rate charged by the bank
and all expenses pertaining to the loan are to be borne by the Director or
Employee, and the maximum outstanding amount of loan guarantees is $5,000,000.
Although the facility has a one year term, the guarantee will continue for
five years, and is renewable at the discretion of the Directors. The below
table indicates the current amount of loans outstanding by Directors of NHI
individually and by all designated NHC employees collectively as of December
31, 1996.
Current Maximum
Loan Loan Commercial Bank
Outstanding Outstanding Originating Loan
W. Andrew Adams -0- -0- N/A
Richard F. LaRoche, Jr. $ 300,000 $ 300,000 SouthTrust Bank of TN
Jack Tyrrell -0- -0- N/A
Robert T. Webb 225,686 225,686 Union Planters
Ted H. Welch 99,125 99,125 SouthTrust Bank of TN
NHC Employees 1,323,265 1,300,000 SouthTrust/U.P.
Section 16(a) Beneficial Ownership Compliance
Section 16(a) of the Securities and Exchange Act of 1934 as amended
requires officers, directors, and persons who own more than 10% of the
Company's equity securities to file statements of changes in beneficial
ownership (Forms 4 or 5) with the Securities and Exchange Commission (the SEC)
and the New York Stock Exchange. Officers, directors and greater than 10%
shareholders are required by SEC regulations to furnish the Company with
copies of all such forms they file.
To the Company's knowledge based solely on the review of the copies of
such forms received by it, the Company believes that during 1996 all filing
requirements applicable to its officers, directors, and greater than 10%
beneficial owners were complied with and were timely filed.
Investment Advisor
The Company has entered into an Advisory Administrative Services and
Facilities Agreement (the "Advisory Agreement") with NHC as Advisor under
which NHC will provide management and advisory services during the term of the
Advisory Agreement.
Under the terms of the Advisory Agreement, NHC, as advisor, agrees to
use its best efforts:
a) To present to the Company a continuing and suitable investment
program consistent with the investment policy of the Company as adopted by the
Directors from time to time;
b) To manage the day-to-day affairs and operations of the Company,
including the employment of and compensation to all personnel; and
c) To provide administrative services and facilities appropriate for
such management.
In performing its obligations under the Agreement, the advisor is
subject to the supervision of and policies established by the Company's Board
of Directors.
The Advisory Agreement is for a stated term expiring December 31, 1996,
and thereafter from year-to-year unless earlier terminated. However, either
party may terminate the Advisory Agreement at any time, on 90 days notice, and
the Company may terminate the Advisory Agreement for cause at any time.
For its services under the Advisory Agreement, the advisor is entitled
to annual compensation of $1,625,000 payable in monthly installments of
$135,417. Salaries paid by the Company to its executive officers are credited
against these installments. From 1993 and later years in which Per Share
Funds From Operations of the Company exceed Per Common Share Funds From
Operations during 1992, the $1,625,000 annual compensation increases by the
same percentage that Per Common Share Funds From Operations in such later
years exceed those in 1992. $3,101,000 was earned in 1996. The Advisory
Agreement conditions payment of such annual compensation in any year upon the
Company's having funds from operations in such year sufficient to enable the
Company to pay from funds from operations annual dividends of at least $2.00
per share. Unpaid compensation will accrue together with interest at Prime +
2 percentage points to be paid in later years to the extent that funds from
operations exceed the dividend requirements. All payments are current.
Comparison of Cumulative Total Return
Since the Company's creation in October, 1991, the Company's cumulative
total return as compared with the S & P 500 Index and all other publicly
traded real estate investment companies (NAREIT MORTGAGE) is as shown in the
graph on the back cover of this Proxy Statement.
PROPOSAL II
RATIFICATION AND ADOPTION OF 1997 STOCK OPTION PLAN
The Company and the shareholders have previously approved the 1991 Stock
Option Plan, which made available a total of 400,000 shares of common stock
for issuance of incentive stock options qualifying under Section 422A of the
Internal Revenue Code of 1986 as amended, non-qualified stock options and
Stock Appreciation Rights. As of December 31, 1996 options to purchase
251,000 shares have been granted, of which 99,712 have not yet been exercised.
In early 1997 options were granted on the balance of the available shares
under the 1991 Stock Option Plan.
In reviewing the 1991 Plan the Board found that the Plan had significantly
contributed to the objectives of i) providing incentive based compensation for
key employees of the Investment Advisor as well as the non-NHC affiliated
board members, and ii) enhanced the longevity of the Investment Advisor's key
employees. Accordingly, the Board has now passed and recommended for
shareholder approval the 1997 Stock Option Plan, pursuant to which, and for up
to a ten year period of time, the Board can award grants of the common stock
of the Company to its employees, the Investment Advisor and/or key employees
of the Investment Advisor. Additionally, and within the 600,000 shares made
available, non-NHC affiliated directors will each receive an option for 15,000
shares annually to be issued at the closing price of the Company's stock on
the day of that year's annual meeting, except during 1997 when their grants
shall be on the date and at the price of the final grants pursuant to the 1991
Stock Option Plan. Other significant provisions of the 1997 Stock Option Plan
are:
* If an option holder who is employed by the Company, a subsidiary or its
Investment Advisor shall cease to be employed in a full time position for any
reason other than death, the Company may elect to repurchase any and all
Common Stock held by such option holder at a price per share equal to the
exercise price of such option. The Company's right to repurchase shall
continue for a period of six years from the date of grant of such option.
* Incentive stock options may be granted at an exercise price of not less than
100% of the fair market value of the Common Stock on the date of grant.
Incentive Stock Options may not be exercised later than 10 years after the
date of grant, and sooner if so directed by the committee at the time of the
grant.
* Non-qualified stock options may be granted to such key employees, directors,
consultants and advisors and on such terms as determined by the Committee.
Non-qualified stock options may be granted with an exercise price less than
the fair market price of the Common Stock. SARs may be granted separately or
attached to non-qualified stock options. SARs shall include in their terms
the fair market value of one share of the Company's Common Stock and shall
provide that the SARs are not exercisable prior to such date as determined by
the Committee. SARs may be called for exercise at any time by the Committee
without the approval of the holder of such SAR. SARs attached to non-qualified
stock options may only be exercised to the extent the non-qualified stock
option is exercisable.
* In the event any option holder ceases to be a full time employee for any
reason other than permanent and total disability or death, any option granted
to such employee may be exercised within 90 days after the date of such
termination of employment to the extent the option was otherwise exercisable
and only with the then approval of the Board of Directors. In the event the
option holder ceases to be an employee of the Company or the Investment
Advisor by reason of permanent and total disability, the holder or his or her
representative may exercise the option for a period of one year following such
termination of employment to the extent the option was otherwise exercisable.
In the event of the death of an optionee while an employee of the Company, any
option granted to such employee may be exercised in whole or in part to the
extent the option was otherwise exercisable for a period of one year following
such employee's death. In the event an option holder is discharged for cause,
any option shall terminate upon notice of discharge. In no event under any of
these provisions may any option be exercised beyond the expiration of the term
of the option.
* The 1997 Stock Option Plan permits options to be exercised for cash or by
surrender of shares of Common Stock of the Company valued at the then fair
market value. Unless otherwise specifically provided in the option agreement,
no option or SAR shall be transferable other than by will, family gift, or the
laws of descent and distribution. The number of shares which may be issued
under the 1997 Option Plan and the exercise prices for outstanding options are
subject to adjustment in the event that the number of outstanding shares of
Common Stock will be changed by reason of stock splits, stock dividends,
reclassifications or recapitalizations. In addition, upon a merger or
consolidation involving the Company, participants are entitled to shares in
the surviving corporation upon the terms set forth in the 1997 Stock Option
Plan.
The federal income tax consequences to the Company or the optionee at
the time of the grant or at the time of the exercise are reviewed in detail
following Table C in this proxy.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
"FOR" PROPOSAL II.
PROPOSAL III
RATIFICATION OF APPOINTMENT OF AND
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The Company has selected Arthur Andersen LLP as its independent auditors
for fiscal year ending December 31, 1997. Although a stockholder vote is not
required, the Board would like the approval of stockholders for this
appointment. Arthur Andersen LLP audited the Company's financial statements
for the year ended December 31, 1996.
If the stockholders do not ratify the selection of Arthur Andersen LLP,
the selection of independent accountants will be reconsidered by the Board of
Directors, although the Board of Directors would not be required to select
different independent accountants for the Company. The Board of Directors
retains the power to select another firm as independent accountants for the
Company to replace the firm whose selection was ratified by the Company's
stockholders in the event the Board of Directors determines that the best
interest of the Company warrants a change of its independent accountants.
Representatives of Arthur Andersen LLP will be present at the Annual
Meeting and will be given the opportunity to make a statement if they desire
to do so. They will also be available to respond to appropriate questions
from stockholders at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
"FOR" PROPOSAL III.
STOCKHOLDER PROPOSALS
October 16, 1997, is the date by which proposals of stockholders intended
to be presented at the 1998 Annual Meeting of Stockholders must be received by
the Company for inclusion in the Company's proxy statement and form of proxy
relating to that meeting.
EXPENSES OF SOLICITATION
The total cost of this solicitation will be borne by the Company. In
addition to use of the mail, proxies may be solicited by directors and
officers of the Company personally and by telephone, telegraph, or facsimile
transmission.
OTHER MATTERS
The Board of Directors knows of no other business to be presented at the
Meeting, but if other matters do properly come before the Meeting, it is
intended that the persons named in the proxy will vote on such matters in
accordance with their best judgment.
s/Richard F. LaRoche, Jr.
Richard F. LaRoche, Jr., Secretary
February 13, 1997
Murfreesboro, Tennessee
<PAGE>
<TABLE>
NATIONAL HEALTH INVESTORS, INC.
Comparison of Cumulative Total Return
<CAPTION>
1991 1992 1993 1994 1995 1996
---------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
National Health Investors, Inc. 100 103.5 135.9 139.1 193.3 240.4
S & P 500 100 107.7 118.4 119.9 164.9 202.7
NAREIT Hybrid 100 116.6 141.3 146.9 180.7 233.8
Assumes $100 invested October, 1991 in National Health Investors, S & P 500
and NAREIT All
</TABLE>
<PAGE>
PROXY
NATIONAL HEALTH INVESTORS, INC.
100 Vine Street, Murfreesboro, TN 37130
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints W. Andrew Adams and/or Richard F. LaRoche, Jr.
as Proxies, each of them with power of substitution, to represent and vote on
behalf of the undersigned all of the shares of National Health Investors, Inc.
which the undersigned is entitled to vote at the Annual Meeting of Shareholders
to be held at 100 Vine Street, 14th Floor, Murfreesboro, Tennessee, on Thursday,
March 20, 1997, at 5:00 p.m. Central Standard Time and at any adjournment or
adjournments therof, hereby revoking all proxies heretofore given with respect
to such stock, upon the following proposals more fully described in the notice
of and proxy statement for the meeting (receipt whereof is hereby acknowledged).
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR I, II, AND III
I. ELECTION OF DIRECTORS
___ For nominee ___ Withhold Authority
Listed Below to vote for the
nominee listed below
Robert T. Webb
II. RATIFICATION OF THE 1997 STOCK OPTION PLAN
___ FOR --- AGAINST --- ABSTAIN
III. PROPOSAL TO RATIFY THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE
COMPANY'S INDEPENDENT ACCOUNTANTS
--- FOR --- AGAINST --- ABSTAIN
In their discretion, the Proxies are authorized to vote upon such other
matters as may properly come before the meeting.
THIS PROXY WHEN PROPERTY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR PROPOSALS I, II, AND III.
Please sign exactly as name appears below.
When shares are hold by joint tenants, both
should sign. When signing as attorney, as
executor, administrator, trustee or guardian,
please give full name as such. If a
corporation, please sign in full corporate
name by President or other authorized
officer. If a partnership, please sign in
partnership name by authorized person.
Dated: __________________________________
_________________________________________
Signature
_________________________________________
Signature, if held jointly.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD
IN THE ENCLOSED ENVELOPE
National Health Investors, Inc.
1997 Stock Option Plan
January 15, 1997
<PAGE>
TABLE OF CONTENTS
Page
Section 1. Purpose . . . . . . . . . . . . . . . . . . . . .1
Section 2. Definitions. . . . . . . . . . . . . . . . . . .1
2.1 "Board of Directors" . . . . . . . . . . . . . . . . .1
2.2 "Code" . . . . . . . . . . . . . . . . . . . . . . . .1
2.3 "Committee". . . . . . . . . . . . . . . . . . . . . .1
2.4 "Common Stock" . . . . . . . . . . . . . . . . . . . .1
2.5 "Key Employee" . . . . . . . . . . . . . . . . . . . .1
2.6 "Investment Advisor". . . . . . . . . . . . . . . . . 1
2.7 "ISO". . . . . . . . . . . . . . . . . . . . . . . . .1
2.8 "Non-Qualified Option" . . . . . . . . . . . . . . . .2
2.9 "Option" . . . . . . . . . . . . . . . . . . . . . . .2
2.10 "Participant". . . . . . . . . . . . . . . . . . . . .2
2.11 "Parent of the Company". . . . . . . . . . . . . . . .2
2.12 "Subsidiary of the Company". . . . . . . . . . . . . .2
Section 3. Eligibility . . . . . . . . . . . . . . . . . . .2
Section 4. Common Stock Subject to the Plan. . . . . . . . .2
4.1 Number . . . . . . . . . . . . . . . . . . . . . . . .2
4.2 Terminated/Reacquired Options. . . . . . . . . . . . .2
4.3 Special ISO Limitations. . . . . . . . . . . . . . . .2
4.4 Nonqualified Provisions. . . . . . . . . . . . . . . .3
Section 5. Administration of the Plan. . . . . . . . . . . .3
5.1 Committee. . . . . . . . . . . . . . . . . . . . . . .3
5.2 Options. . . . . . . . . . . . . . . . . . . . . . . .3
5.3 Interpretations. . . . . . . . . . . . . . . . . . . .3
5.4 Board Interpretations Conclusive . . . . . . . . . . .4
5.5 Committee Voting . . . . . . . . . . . . . . . . . . .4
5.6 Board Exculpation. . . . . . . . . . . . . . . . . . .4
5.7 Granting of Options to Directors and Officers. . . . .4
Section 6. Terms and Conditions of Options . . . . . . . . .5
6.1 ISO's. . . . . . . . . . . . . . . . . . . . . . . . .5
6.2 Non-Qualified Options. . . . . . . . . . . . . . . . .7
6.3 Payment of Exercise Price with Previously Issued Stock8
6.4 Modification, Extension and Renewal of Options . . . .8
Section 7. Adjustments . . . . . . . . . . . . . . . . . . .8
Section 8. Effect of the Plan on Employment Relationship . .9
Section 9. Amendment of the Plan . . . . . . . . . . . . . .9
Section 10. Non-Compete Provisions. . . . . . . . . . . . . .9
Section 11. Termination of the Plan . . . . . . . . . . . . .9
Section 12. Effective Date of the Plan. . . . . . . . . . . .9
<PAGE>
National Health Investors, Inc.
1997 Stock Option Plan
Section 1. Purpose. The purpose of the National Health Investors, Inc.
("NHI") 1997 Stock Option Plan (the "Plan") is to promote the interests of
NHI, a Maryland corporation (the "Company"), and its stockholders by providing
an opportunity to selected employees, officers and directors of the Company,
any Subsidiary thereof, or its Investment Advisor and its directors, officers
and employees to purchase Common Stock of the Company. By encouraging such
stock ownership, the Company seeks to attract, retain and motivate such
employees and persons and to encourage such employees and persons to devote
their best efforts to the business and financial success of the Company. It
is intended that this purpose will be effected by the granting of "non-
qualified stock options" and/or "incentive stock options" to acquire the
Common Stock of the Company. Under the Plan, the Board of Directors (or the
Committee) shall have the authority (in its sole discretion) to grant
"incentive stock options" within the meaning of Section 422(b) of the Code or
"non-qualified stock options" to which Code Section 421 does not apply. The
Plan is not subject to the provisions of the Employee Retirement Income
Security Act of 1974 ("ERISA").
Section 2. Definitions. For purposes of this Plan, the following
terms used herein shall have the following meanings, unless a different
meaning is clearly required by the context.
2.1 "Board of Directors" shall mean the Board of Directors of
the Company.
2.2 "Code" shall mean the Internal Revenue Code of 1986, as
amended.
2.3 "Committee" shall mean the committee of the Board of
Directors referred to in Section 5 hereof.
2.4 "Common Stock" shall mean the Common Stock, $.01 par
value, of the Company.
2.5 "Key Employee" shall mean (i) with respect to an ISO, any
person, including an officer or director of the Company or its Investment
Advisor and its directors, officers and employees, who, at the time an ISO is
granted to such person hereunder, is employed, as defined by Code Section 422
and the Treasury Regulations promulgated thereunder, on a full-time basis by
the Company, any Subsidiary of the Company, or its Investment Advisor, and
(ii) with respect to a Non-Qualified Option shall mean any person employed by
or performing services for the Company, any Subsidiary of the Company, or its
Investment Advisor, including, without limitation, directors and officers.
2.6 "Investment Advisor" shall mean National HealthCare L.P. or
such other company as chosen by the Board of Directors.
2.7 "ISO" shall mean an Option granted under the Plan that
constitutes and shall be treated as an "incentive stock option", as defined in
Section 422(b) of the Code.
2.8 "Non-Qualified Option" shall mean an Option granted to a
Participant pursuant to the Plan that is intended to be, and qualifies as, a
"non-qualified stock option", with respect to which Code Section 421 does not
apply, and that shall not constitute or be treated as an ISO.
2.9 "Option" shall mean any ISO or Non-Qualified Option granted
to a Key Employee pursuant to this Plan.
2.10 "Participant" shall mean any Key Employee to whom an Option
is granted under this Plan.
2.11 "Parent of the Company" shall have the meaning set forth in
Section 424(e) of the Code.
2.12 "Subsidiary of the Company" shall have the meaning set forth
in Section 424(f) of the Code.
Section 3. Eligibility. Options may be granted to any Key Employee.
The Board of Directors (or the Committee) shall have the sole authority to
select the persons to whom Options are to be granted hereunder (or ratify
selections made by the Investment Advisor), and to determine whether a person
is to be granted a Non-Qualified Option or an ISO or any combination thereof.
No person shall have any right to participate in the Plan. Any person
selected by the Board of Directors for participation during any one period
will not by virtue of such participation have the right to be selected as a
Participant for any other period.
Section 4. Common Stock Subject to the Plan.
4.1 Number. The total number of shares of Common Stock for
which Options may be granted under this Plan shall not exceed in the aggregate
600,000 shares of Common Stock.
4.2 Terminated/Reacquired Options. The shares of Common Stock
that may be subject to Options granted under this Plan may be either
authorized and unissued shares or shares reacquired at any time and now or
hereafter held as treasury stock as the Board of Directors may determine. In
the event that any outstanding Option expires or is terminated for any reason,
the shares allocable to the unexercised portion of such Option shall again
become available for issuance pursuant to this Plan. If any shares of Common
Stock acquired pursuant to the exercise of an Option shall have been
repurchased or reacquired by the Company, pursuant to the repurchase option in
the original grant, then such shares shall again become available for issuance
pursuant to the Plan.
4.3 Special ISO Limitations. An ISO shall not be granted to a
Key Employee who, at the time the ISO is granted, owns (actually or
constructively under the provisions of Section 424(d) of the Code) stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company or any Parent or Subsidiary of the Company, unless the
option price is at least 110% of the fair market value (determined as of the
time the ISO is granted) of the shares of Common Stock subject to the ISO and
the ISO by its terms is not exercisable more than five years from the date it
is granted.
4.4 Nonqualified Provisions. Notwithstanding any other
provision of the Plan, the provisions of Section 4.3 shall not apply, or be
construed to apply, to any Non-Qualified Option granted under the Plan.
Section 5. Administration of the Plan.
5.1 Committee. The Plan shall be administered by the Board of
Directors or, if established at any time by the Board of Directors, by a
committee thereof (the "Committee"). The Committee may be appointed from time
to time by, and shall serve at the pleasure of, the Board of Directors.
Notwithstanding any other provision of the Plan, Options may only be granted
under this Plan in compliance with Section 5.7 hereof.
5.2 Options. The Board of Directors (or the Committee) shall
have the sole authority and discretion under the Plan (i) to select the
Participants who are to be granted Options hereunder; (ii) to designate
whether any Option to be granted hereunder is to be an ISO or a Non-Qualified
Option; (iii) to establish the number of shares of Common Stock that may be
issued under each Option; (iv) to determine the time and the conditions
subject to which Options may be exercised in whole or in part; (v) to
determine the form of the consideration that may be used to purchase shares of
Common Stock upon exercise of any Option (including the circumstances under
which the Company's issued and outstanding shares of Common Stock may be used
by a Participant to exercise an Option); (vi) to impose restrictions and/or
conditions with respect to shares of Common Stock acquired upon exercise of an
Option; (vii) to determine the circumstances under which shares of Common
Stock acquired upon exercise of any Option may be subject to repurchase by the
Company; (viii) to determine the circumstances and conditions subject to which
shares acquired upon exercise of an Option may be sold or otherwise
transferred, including, without limitation, the circumstances and conditions
subject to which a proposed sale of shares of Common Stock acquired upon
exercise of an Option may be subject to the Company's right of first refusal
(as well as the terms and conditions of any such right of first refusal); (ix)
to establish a vesting provision for any Option relating to the time (or the
circumstance) when the Option may be exercised by a Participant, including
vesting provisions which may be contingent upon the Company meeting specified
financial goals; (x) to accelerate the time when outstanding Options may be
exercised, provided, however, that any ISO's shall be "accelerated" only
within the meaning of Section 424(h) of the Code, and (xi) to establish any
other terms, restrictions and/or conditions applicable to any Option not
inconsistent with the provisions of this Plan, and, with respect to ISO's, not
inconsistent with the provisions of Code Section 422.
5.3 Interpretations. The Board of Directors (or the Committee)
shall be authorized to interpret the Plan and may, from time to time, adopt
such rules and regulations, not inconsistent with the provisions of the Plan,
as it may deem advisable to carry out the purpose of the Plan.
5.4 Board Interpretations Conclusive. The interpretation and
construction by the Board of Directors (or the Committee) of any provision of
the Plan, any Option granted hereunder or any agreement evidencing any such
Option shall be final and conclusive upon all parties.
5.5 Committee Voting. Subject to Section 5.7 hereof, directors
of the Company (or members of the Committee, if established) who are either
eligible for Options hereunder, or to whom Options have been granted
hereunder, may vote on any matter affecting the administration of the Plan or
the granting of Options under the Plan; provided, however, that no director
(or member of the Committee) shall vote upon the granting of an Option to
himself (unless that action is ratified by the Shareholders of the Company),
but any such director may be counted in determining the existence of a quorum
at any meeting of the Board of Directors (or the Committee) at which the Plan
is administered or action is taken with respect to the granting of any Option.
5.6 Board Exculpation. All expenses and liabilities
incurred by the Board of Directors (or the Committee) in the administration of
the Plan shall be borne by the Company. The Board of Directors (or the
Committee) may employ attorneys, consultants, accountants or other persons in
connection with the administration of the Plan. The Company, and its officers
and directors, shall be entitled to rely upon the advice, opinions or
valuations of any such persons. No member of the Board of Directors (or the
Committee) shall be liable for any action, determination or interpretation
taken or made in good faith with respect to the Plan or any Option granted
hereunder.
5.7 Granting of Options.
(a) The Company shall use its best efforts to comply with
the provisions of Rule 16b-3 under the Securities and Exchange Act of 1934, as
amended (or any successor or replacement rule) with respect to the granting of
Options to Directors, executive officers and Key Employees.
(b) Directors of the Company, who are not affiliated with
the Investment Advisor or otherwise compensated by the Company as an officer,
shall receive an annual Option to purchase 15,000 shares of the Common Stock,
which shall be dated as of the date of the Annual Meeting of Stockholders of
each calendar year, and the exercise price of which shall be the closing price
on the national exchange on which the Company's Common Stock is listed on that
date. This automatic grant shall not, however, be effective until calendar
year 1998. This option must be exercised within five years of the date of
grant.
(c) Directors of the Company, who are not affiliated with
the Investment Advisor or otherwise receiving compensation for services to the
Company as an officer, are hereby granted an option to purchase 15,000 shares
of the Common Stock effective January 15, 1997, and at an exercise price of
$36.00 per share. This option must be exercised within five years of the date
of grant.
Section 6. Terms and Conditions of Options.
6.1 ISO's. The terms and conditions of each ISO granted under
the Plan shall be specified by the Board of Directors (or the Committee),
shall be set forth in an ISO agreement between the Company and the Participant
in such form as the Board of Directors (or the Committee) shall approve, and
shall be clearly identified therein as an ISO. The terms and conditions of
each ISO shall be such that each ISO issued hereunder shall constitute and
shall be treated as an "incentive stock option" as defined in Section 422 of
the Code. The terms and conditions of any ISO granted hereunder need not be
identical to those of any other ISO granted hereunder.
The terms and conditions of each ISO shall include the following:
(a) The option price shall be 100% (or 110% in the case of a Key
Employee referred to in Section 4.3 hereof) of the fair market value, as
determined in accordance with Code Section 422(c)(7) and as determined in good
faith by the Board of Directors, of the shares of Common Stock subject to the
ISO on the date the ISO is granted, but in no event shall the option price be
less than the par value of such shares.
(b) ISO's, by their terms, shall not be transferable otherwise
than by will, family gift, or the laws of descent and distribution, and,
during a Key Employee's lifetime, an ISO shall be exercisable only by the Key
Employee.
(c) Except as otherwise provided pursuant to Section 6.1(f), in
the event a Participant shall cease to be employed by the Company or any
Parent or Subsidiary of the Company on a full-time basis for any reason other
than as a result of his death or "permanent and total disability" (within the
meaning of Section 22(e)(3) of the Code) and other than for "cause" as defined
in Section 6.1(h)(i), the unexercised portion of any ISO held by such
Participant at that time may only be exercised within 90 days after the date
on which the Participant ceased to be so employed, and only to the extent that
the Participant could have otherwise exercised such ISO as of the date on
which he ceased to be so employed; provided, however, if the Participant shall
die within said 90 day period, then the period during which ISO may be
exercised shall be extended for a period of one year following such
Participant's death; provided, further, that in no event may such option be
exercised beyond the expiration of the term of the Option.
(d) In the event a Participant shall cease to be employed by the
Company or any Parent or Subsidiary of the Company on a full-time basis by
reason of his "permanent and total disability" (within the meaning of Section
22(e)(3) of the Code), the unexercised portion of any ISO held by such
Participant at that time may only be exercised within one year after the date
on which the Participant ceased to be so employed, and only to the extent that
the Optionee could have otherwise exercised such ISO as of the date on which
he ceased to be so employed; provided that in no event may such Option be
exercised beyond the expiration of the term of the Option.
(e) In the event a Participant shall die while in the full-time
employ of the Company or a Parent or Subsidiary of the Company, the
unexercised portion of any ISO held by such Participant at the time of his
death may only be exercised within one year after the date of such
Participant's death, and only to the extent that the Participant could have
otherwise exercised such ISO at the time of his death. In such event, such
ISO may be exercised by the executor or administrator of the Participant's
estate or by any person or persons who shall have acquired the ISO directly
from the Participant by bequest or inheritance.
(f) The Board of Directors (or the Committee) shall fix the term
of all ISOs granted pursuant to the Plan, including the date on which such ISO
shall expire and terminate, provided, however, that such term shall in no
event exceed ten years from the date on which such ISO is granted (or, in the
case of an ISO granted to a Key Employee referred to in Section 4.3 hereof,
such term shall in no event exceed five years from the date on which such ISO
is granted). Each ISO shall be exercisable in such amount or amounts, under
such conditions and at such times or intervals or in such installments as
shall be determined by the Board of Directors (or the Committee) in its sole
discretion.
(g) In the event that the Company or any Parent or Subsidiary of
the Company is required to withhold any Federal, state or local taxes in
respect of any compensation income realized by the Participant as a result of
any "disqualifying disposition" of any shares of Common Stock acquired upon
exercise of an ISO granted hereunder, the Company shall deduct from any
payments of any kind otherwise due to such Participant the aggregate amount of
such Federal, state or local taxes required to be so withheld or, if such
payments are insufficient to satisfy such Federal, state or local taxes, or if
no such payments are due or to become due to such Participant, then such
Participant will be required to pay to the Company, or make other arrangements
satisfactory to the Company regarding payment to the Company of, the aggregate
amount of any such taxes. All matters with respect to the total amount of
taxes to be withheld in respect of any such compensation income shall be
determined by the Board of Directors in its sole discretion.
(h) Unless stated otherwise in an ISO Agreement, at any time
after the date a Participant's employment with the Company or Investment
Advisor terminates, the Company shall have the right to purchase such
Participant's shares obtained upon exercise by repaying Participant his or her
purchase price; provided further, that this right expires six years from the
date of grant.
(i) If upon the exercise of one or more ISOs issued pursuant to
this or any other plan of the Company or any Parent or Subsidiary of the
Company, a portion of such exercised Options are not treated as ISOs pursuant
to Code Section 422(d), then the Company shall issue one or more certificates
evidencing the Common Stock acquired pursuant to the exercise of ISOs and one
or more certificates evidencing the Common Stock acquired pursuant to the
exercise of Options not treated as ISOs in accordance with Code Section 422
and shall so identify such certificates in the Company's stock transfer
records.
(j) Following a transfer of stock to any person pursuant to such
person's exercise of an ISO, the Company or any Parent or Subsidiary of the
Company shall (on or before January 31 of the calendar year following the year
of such transfer) furnish to such person the written statement prescribed by
Code Section 6039 and the Treasury Regulations promulgated thereunder.
6.2 Non-Qualified Options. The terms and conditions of each
Non-Qualified Option granted under the Plan shall be specified by the Board of
Directors (or the Committee), in its sole discretion, shall be set forth in a
written option agreement between the Company and the Participant in such form
as the Board of Directors (or the Committee) shall approve, and shall be
clearly identified therein as a Non-Qualified Stock Option. The terms and
conditions of each Option will be such that each Option issued hereunder shall
not constitute or be treated as an "incentive stock option", as defined in
Section 422 of the Code, and will be a "non-qualified stock option" for
Federal income tax purposes. The terms and conditions of any Non-Qualified
Option granted hereunder need not be identical to those of any other Option
granted hereunder.
The terms and conditions of each Non-Qualified Option Agreement
shall include the following:
(a) The option price shall be as determined by the Board of
Directors, but in no event shall the option Price be less than the par value
of such shares.
(b) The Board of Directors (or the Committee) shall fix the term
of all Non-Qualified Options granted pursuant to the Plan (including the date
on which such Non-Qualified Option shall expire and terminate). Such term may
not be more than ten years from the date on which such Non-Qualified Option is
granted or this Plan terminates. Each Non-Qualified Option shall be
exercisable in such amount or amounts, under such conditions, and at such
times or intervals or in such installments as shall be determined by the Board
of Directors (or the Committee) in its sole discretion. Unless stated
otherwise in a Non-Qualified Option Agreement, at any time after the date a
Participant's employment with the Company or Investment Advisor terminates,
the Company shall have the right to purchase such Participant's shares
obtained upon exercise by repaying Participant his or her purchase price;
provided further, that this right expires six years from the date of grant.
(c) Non-Qualified Options shall not be transferable otherwise
than by will, family gift, or the laws of descent and distribution, and during
a Participant's lifetime a Non-Qualified Option shall be exercisable only by
the Participant.
(d) In the event that the Company is required to withhold any
Federal, state or local taxes in respect of any compensation income realized
by the Participant in respect of a Non-Qualified Option granted hereunder or
in respect of any shares of Common Stock acquired upon exercise of a Non-
Qualified Option, the Company shall deduct from any payments of any kind
otherwise due to such Participant the aggregate amount of such Federal, state
or local taxes required to be so withheld or, if such payments are
insufficient to satisfy such Federal, state or local taxes, or if no such
payments are due or to become due to such Participant, then, such Participant
will be required to pay to the Company, or make other arrangements
satisfactory to the Company regarding payment to the Company of, the aggregate
amount of any such taxes, prior to the Company's being obligated to deliver
shares to the Participant. All matters with respect to the total amount of
taxes to be withheld in respect of any such compensation income shall be
determined by the Board of Directors in its sole discretion.
6.3 Payment of Exercise Price with Previously Issued Stock.
Except as otherwise provided in an Option agreement between the Company and a
Participant granting an ISO or a Non-Qualified Option to such Participant, the
Board of Directors may permit the option price for any Option granted under
the Plan to be paid, in whole or in part, with previously issued Common Stock
of the Company (valued as of the date of exercise of such Option).
6.4 Modification, Extension and Renewal of Options. Subject to
the terms and conditions and within the limitations of the Plan and with
respect to ISOs as permitted by the Code, the Board of Directors (or the
Committee) may modify, extend or renew outstanding Options granted under the
Plan, or accept the surrender of outstanding Options (to the extent not
theretofore exercised) and authorize the granting of new Options and
substitutions therefor (to the extent not theretofore exercised), provided,
however, that no modification, revision or cancellation of an Option shall,
without the consent of the optionee thereof, cause an ISO to become a Non-
Qualified Option or, except as otherwise set forth herein, alter or impair any
rights or obligations under any Option theretofore granted under the Plan.
Section 7. Adjustments.
(a) In the event that, after the adoption of the Plan by the
Board of Directors, the outstanding shares of the Company's Common Stock shall
be increased or decreased or changed into or exchanged for a different number
or kind of shares of stock or other securities of the Company or of another
corporation through reorganization, merger or consolidation, recapitalization,
reclassification, stock split, split-up, combination or exchange of shares or
declaration of any dividends payable in Common Stock or in any other manner
effected without the receipt of consideration by the Company, the Board of
Directors shall appropriately adjust (i) the number of shares of Common Stock
(and the option price per share) subject to the unexercised portion of any
outstanding Option (to the nearest possible full share), provided, however,
that the limitations of Sections 422 and 424 of the Code shall apply with
respect to adjustments made to ISOs, and (ii) the number of shares of Common
Stock for which Options may be granted under this Plan, as set forth in
Section 4.1 hereof, and such adjustments shall be effective and binding for
all purposes of this Plan.
(b) Notwithstanding the foregoing, upon the closing of any offer
to holders of not less than 50% of the Company's Common Stock relating to the
acquisition of their shares in a single transaction or related series of
transactions, including, without limitation, through purchase, merger or
otherwise, or any transaction relating to the acquisition of substantially all
of the assets or business of the Company, the Board of Directors of the
Company may make such adjustment as it deems equitable in respect of
outstanding Options including, without limitation, the revision or
cancellation of any outstanding Options; provided, that, to the extent any
such Options shall be vested, such cancellation or revision shall be based
upon the difference between the acquisition value for the Company's Common
Stock and the exercise price of such Options. Any such equitable
determination by the Board of Directors shall be effective and binding for all
purposes of this Plan and any Stock Option Agreement thereunder.
Section 8. Effect of the Plan on Employment Relationship. Neither this
Plan nor any Option granted hereunder to a Participant shall be construed as
conferring upon such Participant any right to continue in the employ of the
Company or Investment Advisor, or the service of the Company or any
Subsidiary, as the case may be, or limit in any respect the right of the
Company or any Subsidiary to terminate such Participant's employment or other
relationship with the Company or any Subsidiary, as the case may be, at any
time.
Section 9. Amendment of the Plan. The Board of Directors may amend the
Plan from time to time as it deems desirable, unless any federal or state law
requires the approval of the Company's shareholders. Notwithstanding any
other provisions of the Plan, the Board of Directors may modify outstanding
Options in any manner in its reasonable discretion if the Board determines
that intended benefits are not obtainable because of accounting treatment.
Section 10. Non-Compete Provisions. The terms of any Participant's
Option Agreement may, at the discretion of the Board, contain non-compete
provisions.
Section 11. Termination of the Plan. The Board of Directors may
terminate the Plan at any time. Unless the Plan shall theretofore have been
terminated by the Board of Directors, the Plan shall terminate ten years after
the date of its initial adoption by the Board of Directors. No Option may be
granted hereunder after termination of the Plan. The termination or amendment
of the Plan shall not alter or impair any rights or obligations under any
Option theretofore granted under the Plan.
Section 12. Effective Date of the Plan. This Plan shall be effective as
of January 1, 1997, subject to its adoption by the Board of Directors of the
Company on January 17, 1997, and ratification by majority shareholders' vote
at their Annual Meeting to be held on March 20, 1997.
This Plan was adopted and approved by the Board of Directors on the 17th
day of January, 1997.
_________________________________________
Richard F. LaRoche, Jr., Secretary
