<PAGE> 1
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 14, 1997
TO THE STOCKHOLDERS OF AMERICAN HOMEPATIENT, INC.:
The Annual Meeting of Stockholders of American HomePatient, Inc. (the
"Company") will be held at 1800 First American Center, 315 Deaderick Street,
Nashville, Tennessee, 37238 on May 14, 1997, at 9:00 a.m. Central Daylight Time,
for the purposes of considering and voting upon the following matters:
1. To elect three Class 3 directors to hold office for a three (3) year
term and until their successors are duly elected and qualified;
2. To amend the Company's 1991 Nonqualified Stock Option Plan to increase
the number of shares of common stock reserved for issuance from
2,762,475 shares to 3,200,000 shares;
3. To transact such other business as may properly come before the meeting
or any adjournment thereof.
Stockholders of record at the close of business on March 28, 1997 will
be entitled to vote at the meeting.
The Company's Board of Directors urges all stockholders of record to
exercise their right to vote at the meeting personally or by proxy. Accordingly,
we are sending you the accompanying Proxy Statement and the enclosed proxy card.
Your attention is directed to the Proxy Statement accompanying this
notice for a statement regarding matters to be acted upon at the meeting.
By Order of the Board of Directors,
Mary Ellen Rodgers, Secretary
Brentwood, Tennessee
April 14, 1997
YOUR REPRESENTATION AT THE ANNUAL MEETING OF STOCKHOLDERS IS IMPORTANT.
TO ENSURE YOUR REPRESENTATION, WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING,
PLEASE COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD. SHOULD YOU
DESIRE TO REVOKE YOUR PROXY, YOU MAY DO SO AT ANY TIME BEFORE IT IS VOTED IN THE
MANNER PROVIDED IN THE ACCOMPANYING PROXY STATEMENT.
<PAGE> 2
AMERICAN HOMEPATIENT, INC.
5200 MARYLAND WAY, SUITE 400
BRENTWOOD, TENNESSEE 37027-5018
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 14, 1997
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of American HomePatient, Inc. (the
"Company") to be used at the Annual Meeting of Stockholders, and at any
adjournment thereof, for the purposes set forth in the accompanying Notice of
Annual Meeting of Stockholders. The Annual Meeting will be held at 1800 First
American Center, 315 Deaderick Street, Nashville, Tennessee 37238 on Wednesday,
May 14, 1997, at 9:00 a.m. Central Daylight Time. This Proxy Statement and the
accompanying form of proxy are being mailed to stockholders on or about April
14, 1997.
A stockholder who executes and returns the accompanying form of proxy
may revoke it at any time before it is voted by giving written notice of
revocation to the Secretary of the Company, by executing a proxy bearing a later
date, or by attending the Annual Meeting of Stockholders and voting in person.
Proxies will be voted in accordance with instructions noted on the proxies.
Unless otherwise specifically instructed in the proxies, it is the intention of
the persons named in the proxy to vote all proxies received by them FOR THE
ELECTION OF ALL OF THE NOMINEES NAMED HEREIN WHO ARE STANDING FOR ELECTION AS
CLASS 3 DIRECTORS AND FOR THE AMENDMENT TO THE 1991 NONQUALIFIED STOCK OPTION
PLAN ("1991 OPTION PLAN") TO INCREASE THE NUMBER OF SHARES OF COMMON STOCK
RESERVED FOR ISSUANCE FROM 2,762,475 TO 3,200,000. Management does not know of
any other matters which will be presented for action at the Annual Meeting of
Stockholders. If any other matter does properly come before the meeting,
however, the persons appointed in the proxy will vote in accordance with their
best judgment on such matter.
The cost of this proxy solicitation will be borne by the Company. It is
contemplated that proxies will be solicited solely by mail. Banks, brokers and
other custodians will be requested to forward proxy soliciting materials to
their customers where appropriate, and the Company will reimburse such banks,
brokers and custodians for their reasonable out-of-pocket expenses in sending
the proxy materials to beneficial owners of the Company's shares.
1
<PAGE> 3
SUMMARY OF MATTERS TO BE CONSIDERED
At the Annual Meeting of Stockholders, the stockholders of the Company
will be asked to vote on the following matters: (1) the election of three
nominees to serve as Class 3 directors for a three (3) year term and until their
successors are duly elected and qualified (see Proposal 1: "Election of
Directors"); and (2) the amendment of the 1991 Option Plan to increase the
number of shares of Common Stock reserved for issuance from 2,762,475 shares to
3,200,000 shares (see Proposal 2: "Amendment to 1991 Nonqualified Stock Option
Plan Increasing Shares Available for Grant").
VOTING
Stockholders of record as of March 28, 1997 will be entitled to vote at
the Annual Meeting. At the close of business on March 27, 1997, there were
outstanding 14,776,964 shares of the Company's common stock, par value $.01 per
share (the "Common Stock"). See "Stock Ownership of Directors, Executive
Officers and Principal Holders." Each share of Common Stock is entitled to one
vote, which may be given in person or by proxy authorized in writing. The
Company has no other classes of voting stock issued. The Company has the
authority to issue shares of preferred stock in one or more series, although no
series of preferred stock have been designated or issued.
In 1996, the Company approved a 3-for-2 stock split with a record date
on the close of trading on June 28, 1996. Distribution pursuant to the stock
split occurred on July 12, 1996. The number of shares outstanding, available for
grant under the Company's option plans, and underlying previous option grants
were adjusted to reflect the stock split. All references to number of shares
contained herein, including the number of shares proposed to be authorized for
issuance under the 1991 Option Plan in Proposal 2, refer to share amounts
subsequent to effectuating the stock split.
To vote by proxy, a stockholder should complete, sign, date and return
the enclosed proxy to the Secretary of the Company. The Board of Directors urges
you to complete the proxy card whether or not you plan to attend the meeting. If
you attend the meeting in person, you may, if you wish, vote in person on all
matters brought before the meeting even if you have previously delivered your
proxy. Any stockholder who has given a proxy may revoke it at any time prior to
exercise by filing an instrument revoking it with the Secretary of the Company,
by duly executing a proxy bearing a later date, or by attending the meeting and
voting in person. The mere presence at the meeting of a stockholder who has
appointed a proxy will not revoke the appointment.
The director nominees will be elected by a plurality of the votes of
the shares of Common Stock present or represented and entitled to vote at the
Annual Meeting. There are no cumulative voting rights. All other matters
submitted to the stockholders will be approved by the affirmative vote of a
majority of shares of Common Stock present or represented and entitled to vote
at the Annual Meeting. Abstentions and broker non-votes will not be counted as
affirmative votes, but will be counted for purposes of determining the presence
or absence of a quorum. Abstentions and broker non-votes have no legal effect on
the election of directors. On matters requiring majority vote for approval,
abstentions have the effect of negative votes.
2
<PAGE> 4
STOCK OWNERSHIP OF DIRECTORS,
EXECUTIVE OFFICERS AND PRINCIPAL HOLDERS
The following table sets forth, as of March 27, 1997, the number and
percentage of shares of the Company's Common Stock owned by (i) all persons
known to the Company to be holders of 5% or more of such securities, (ii) each
director and nominee, (iii) each of the executive officers named in the Summary
Compensation Table appearing elsewhere herein, and (iv) all directors and
executive officers of the Company, as of March 27, 1997, as a group. Unless
otherwise indicated, all holdings are of record and beneficial. The number and
percentage of shares reflect the June 1996 3-for-2 stock split.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE OF
NAME BENEFICIALLY OWNED(1) TOTAL SHARES(2)
- ---- ------------------- -------------
<S> <C> <C>
Counsel Corporation(3).................................. 3,843,625 26.0%
Two First Canadian Place, Suite 1300
Toronto, Ontario, Canada MX5 1E3
A I M Management Group Inc.(4).......................... 1,217,250 8.2
11 Greenway Plaza, Suite 1919
Houston, Texas 77049
Edward K. Wissing(5).................................... 291,978 1.9
Thomas E. Mills(6)...................................... 16,698 *
Mary Ellen Rodgers(7)................................... 24,000 *
David R. Gnass(8)....................................... 19,167 *
Allan C. Silber(3),(9).................................. 231,000 1.5
Henry T. Blackstock(10)................................. 13,500 *
Edward Sonshine(11)..................................... 6,000 *
Morris A. Perlis(12).................................... 231,000 1.5
Thomas A. Dattilo(13)................................... 28,500 *
Joseph F. Furlong, III(14).............................. 53,551 *
Mark Manner(15)......................................... 21,000 *
All directors and executive officers 971,302 6.2
as a group(16) (12 persons)...........................
</TABLE>
- -----------------
* Indicates less than 1%
(1) Unless otherwise indicated, the persons or entities identified in this table
have sole voting and investment power with respect to all shares shown as
beneficially owned by them, subject to community property laws, where
applicable.
(2) The percentages shown are based on 14,776,964 shares of Common Stock
outstanding on March 27, 1997, plus, as to each individual and group listed,
the number of shares of Common Stock deemed to be owned by such holder
pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, which
includes shares subject to stock options and warrants held by such holder
which are exercisable within sixty (60) days of March 27, 1997.
(3) Counsel Corporation, a Toronto, Ontario, Canada corporation ("Counsel") owns
100% of Counsel Healthcare Assets Inc. ("CHA"), which owns 100% of
Counselcare Ltd. ("Limited"), which owns 100% of DCAmerica Inc. ("DCA"),
which owns 100% of AHOM Holdings, Inc. ("AHOM"), which directly beneficially
owns the shares of Common Stock listed above. Directors Silber, Sonshine and
Perlis are directors of Counsel and CHA, and directors Silber and Perlis are
directors of Limited, DCA and AHOM. Director Silber beneficially owns or
controls approximately 18% of the common stock of Counsel, approximately
half of which is pledged to a lender. Directors Sonshine and Perlis own in
the aggregate less than 5% of Counsel's common stock. All of the directors
listed in this footnote (3) disclaim beneficial ownership of shares of
Common Stock in their capacity as directors of Counsel, CHA, Limited, DCA
and AHOM. Mr. Silber also disclaims beneficial ownership of shares of Common
Stock in his capacity as a shareholder of Counsel.
(4) Information included was derived from a Schedule 13G filed by A I M
Management Group Inc. claiming shared voting and dispositive power with
respect to 1,217,250 shares.
(5) Includes 17,500, 37,500, 75,000, and 150,000 shares purchasable upon
exercise of options at $10.00, $15.83, $16.50, and $17.50 per share,
respectively, issued under the 1991 Option Plan and 3,000 and 3,000 shares
purchasable upon exercise of options at $19.67 and $26.25, respectively
issued under the 1995 Nonqualified Stock Option Plan for Directors (the
"1995 Director Plan").
(6) Includes 5,500, 8,000 and 2,000 shares purchasable upon exercise of options
at $16.50, $17.50 and $21.50 per share, respectively, issued under the 1991
Option Plan.
3
<PAGE> 5
(7) Includes 20,000 and 3,000 shares purchasable upon exercise of options at
$22.50 and $21.50 issued under the 1991 Option Plan.
(8) Includes 12,500 and 6,667 shares purchasable upon exercise of options at
$26.916 and $21.50 issued under the 1991 Option Plan.
(9) Includes 75,000 and 150,000 shares purchasable upon exercise of options at
$16.50 and $17.50 per share, respectively, issued under the 1991 Option
Plan and 3,000 and 3,000 shares purchasable upon exercise of options at
$19.67 and $26.25, respectively, issued under the 1995 Director Plan.
Does not include shares of Common Stock beneficially owned by Counsel.
See note (3) above.
(10) Includes 7,500 shares purchasable upon exercise of options at $6.00 per
share issued under 1991 Option Plan and 3,000 and 3,000 shares
purchasable upon exercise of options at $19.67 and $26.25, respectively,
issued under the 1995 Director Plan.
(11) Includes 3,000 and 3,000 shares purchasable upon exercise of options at
$19.67 and $26.25, respectively, per share issued under the 1995 Director
Plan.
(12) Includes 75,000 and 150,000 shares purchasable upon exercise of options
at $16.50 and $17.50 per share, respectively, issued under the 1991
Option Plan and 3,000 and 3,000 shares purchasable upon exercise of
options at $19.67 and $26.25, respectively, issued under the 1995
Director Plan.
(13) Includes 15,000 and 7,500 shares purchasable upon exercise of options
at $10.04 and $16.50 per share, respectively, issued under the 1991
Option Plan and 3,000 and 3,000 shares purchasable upon exercise of
options at $19.67 and $26.25, respectively, issued under the 1995
Director Plan.
(14) Includes 9,045 restricted shares and another 16,006 shares subject to a
stock purchase warrant at $7.33 per share in connection with consulting
services provided to the Company. Also includes 15,000 and 7,500 shares
purchasable upon exercise of options at $10.04 and $16.50 per share,
respectively, issued under the 1991 Option Plan and 3,000 and 3,000
shares purchasable upon exercise of options at $19.67 and $26.25,
respectively, issued under the 1995 Director Plan.
(15) Includes 7,500 shares purchasable upon exercise of options at $20.67
issued under the 1991 Option Plan and 7,500, 3,000 and 3,000 shares
purchasable upon exercise of options at $20.67, $19.67 and $26.25,
respectively, issued under the 1995 Director Plan.
(16) Includes 881,917 and 55,500 shares purchasable upon exercise of options
issued under the 1991 Option Plan and the 1995 Director Plan,
respectively, and 16,006 shares purchasable upon exercise of a warrant.
Includes ownership interests of Rita N. Hill, who became an executive
officer of the Company on March 13, 1997.
COMPLIANCE WITH SECTION 16 OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's executive officers and directors and
persons who own more than 10% of a registered class of the Company's equity
securities to file reports of ownership and changes in ownership with the
Securities and Exchange Commission ("SEC") (and, if such security is registered
on a national securities exchange, also with the exchange). Such executive
officers, directors and greater than 10% stockholders are required by SEC
regulations to furnish the Company with copies of all Section 16(a) forms they
file.
The Company is aware that Counsel filed one report on Form 4 late
during the 1996 fiscal year and Director Silber filed one report on Form 4 late
during the 1996 fiscal year. Each report pertained to a single purchase by AHOM
on September 19, 1996 of 50,000 shares of the Company's Common Stock. Based
solely upon representations submitted by the Company's directors and executive
officers and the Company's review of filings on Forms 3, 4 and 5, including
amendments thereto, the Company has concluded that, other than as specified
above, all such forms were timely filed.
4
<PAGE> 6
EXECUTIVE OFFICERS
The Company's executive officers are as follows:
<TABLE>
<CAPTION>
EXECUTIVE PRINCIPAL OCCUPATION;
NAME OF OFFICER AGE OFFICER SINCE OCCUPATION LAST FIVE YEARS
- --------------- ------ ---------------- ----------------------------------------------------
<S> <C> <C> <C>
Edward K. Wissing 59 September 1991 President and Chief Executive Officer of the Company
(since May 1994); Executive Vice President of the
Company and President and Chief Executive Officer of
American HomePatient, Inc., a Tennessee corporation
and subsidiary of the Company ("AHPT") (September
1991 to May 1994); Executive Vice President of
Diversicare Inc. ("Diversicare") (September 1991 to
April 1994).
Thomas E. Mills 42 August 1992 Senior Vice President-Strategic Alliances of the
Company (since February 1996); Senior Vice President
and Chief Operating Officer of the Company (May 1994
to February 1996); Secretary of the Company (May 1994
to June 1994); Chief Operating Officer and Vice
President of AHPT (August 1992 to May 1994); Senior
Vice President of AHPT (February 1992 to August
1992).
Mary Ellen Rodgers 44 April 1996 Senior Vice President, Chief Financial Officer and
Secretary of the Company (since April 1996); Senior
Vice President and Chief Financial Officer of AHPT
(since July 1996); Financial Director/Controller of Eli
Lilly and Company (Information Technology Division),
an international pharmaceutical company (September
1994 to October 1995); Controller of Eli Lilly and
Company (Lilly Research Laboratories) (March 1990 to
May 1994); Director of Peoples Bank & Trust Company,
Indianapolis, Indiana (since April 1991).
David R. Gnass 43 June 1996 Senior Vice President of the Company (since June 1996);
Senior Vice President of AHPT (since June 1996); Senior
Vice President of Homedco, Inc., a home health care
company ("Homedco") (April 1993 to June 1995); Vice
President and General Manager of Homedco (January
1992 to April 1993).
Rita N. Hill 41 March 1997 Senior Vice President-Business Development of the
Company (since March 1997); Vice President-Business
Development of the Company (April 1994 to March
1997); Assistant Secretary of the Company (since April
1994); Vice President and Assistant Secretary of AHPT
(since April 1996); Vice President - Development of
Diversicare (January 1994 to April 1994); Vice President
- Finance of Diversicare (March 1992 to January 1994);
Director of Finance for Diversicare (January 1992 to
March 1992).
</TABLE>
5
<PAGE> 7
EXECUTIVE COMPENSATION
The following table sets forth the compensation for the services in all
capacities to the Company for the fiscal years ended December 31, 1994, 1995 and
1996 of those persons who were, during fiscal 1996, the Company's chief
executive officer and, at December 31, 1996 the Company's other executive
officers:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
------------------------------------ ---------------------------------------
Awards Payouts
------------------------ ----------
Securities Long-Term
Other Restricted Underlying Incentive
Annual Stock Options/ Plan All Other
Name and Principal Salary Bonus Compensation(2) Award(s) SARs(3) Payouts Compensation(4)
Position(1) Year ($) ($) ($) ($) (#) ($) ($)
- ------------------------ ---- ------- ------ ------------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Edward K. Wissing 1996 275,000 123,750 -- -0- 3,000(5) -0- 16,500
President and CEO 1995 253,000 102,465 -- -0- 228,000(5),(6) -0- 15,180
1994 230,000 92,000 -- -0- 112,500(7) -0- 13,800
Thomas E. Mills 1996 154,000 34,650 -- -0- 8,000(8) -0- 9,240
Senior Vice President - 1995 154,000 34,650 -- -0- 12,000(6) -0- 9,240
Strategic Alliances 1994 145,300 43,590 -- -0- 45,000(7) -0- 8,718
David R. Gnass(9) 1996 80,000 33,000 -- -0- 57,500(8) -0- -0-
Senior Vice President 1995 * * * * * * *
1994 * * * * * * *
Mary Ellen Rodgers(9) 1996 112,500 37,800 -- -0- 42,000(8) -0- 3,014
Senior Vice President, 1995 * * * * * * *
Chief Financial Officer 1994 * * * * * * *
and Secretary
</TABLE>
- ---------------------
* The Company employed Mr. Gnass in June 1996 and Ms. Rodgers in March 1996.
Accordingly, no compensation was paid to such individuals in the 1994 and
1995 fiscal years.
(1) Principal position given in table is as of March 28, 1997.
(2) Perquisites for each executive officer are in amounts which do not require
disclosure.
(3) Reflects 3-for-2 stock split effected June 1996.
(4) Reflects matching contributions made by the Company under its Supplemental
Executive Retirement Plan ("SERP").
(5) Includes options granted under 1995 Director Plan for services as a
director.
(6) Includes options granted in January 1996 that relate to 1995 performance.
(7) Includes options granted in January 1995 that relate to 1994 performance.
(8) Includes options granted in the first fiscal quarter of 1997 that relate to
1996 performance.
(9) Table reflects compensation for less than full year service since Mr. Gnass
was employed in June 1996 and Ms. Rodgers was employed in March 1996.
6
<PAGE> 8
EMPLOYMENT AND OTHER AGREEMENTS
On October 1, 1991, the Company entered into an employment agreement
with Mr. Wissing which was last amended as of December 1, 1995 (the "Wissing
Employment Agreement"). The Wissing Employment Agreement provides for a 1997
base annual salary of $300,000 which is to be increased to $325,000 for the 1998
fiscal year. The Wissing Employment Agreement provides annual incentive bonuses
equal to an amount up to 50% of Mr. Wissing's then current base salary for
fiscal 1996 and thereafter. The annual incentive bonuses are subject to
performance criteria as set by the Board of Directors and Mr. Wissing.
The Wissing Employment Agreement is subject to an annual renewal
unless notice is given by either the Company or Mr. Wissing. In addition, the
Wissing Employment Agreement may be terminated by the Company without cause at
any time and by Mr. Wissing as a result of "constructive discharge" (e.g., a
reduction in compensation or a material change in responsibilities) or a "change
in control." In the event of a termination by the Company without cause, at the
election of Mr. Wissing upon a constructive discharge or change in control, or
upon the Company giving notice of its intent not to renew the Wissing Employment
Agreement, Mr. Wissing shall be entitled to receive a lump sum severance payment
in an amount equal to 18 times his then current base monthly salary.
Furthermore, upon such termination, Mr. Wissing may elect to require the Company
to repurchase options granted to him for a purchase price equal to the
difference between the fair market value of the Common Stock at the date of
termination and the stated option exercise price. In the event that the Wissing
Employment Agreement is terminated by the Company for cause, or by Mr. Wissing
other than upon a constructive discharge or a change in control, Mr. Wissing
shall not be entitled to any compensation following the date of such termination
other than the pro rata amount of his then current base salary through such
date. Upon termination of employment, other than in the case of termination
without cause, a constructive discharge or upon a change in control, Mr. Wissing
is prohibited from competing with the Company for 12 months.
On February 8, 1995, the Company entered into a three-year employment
agreement with Thomas E. Mills (the "Mills Employment Agreement"). The Mills
Employment Agreement provides for a base salary of approximately $12,000 per
month. In the event of a termination by the Company without cause, Mr. Mills
will be entitled to receive a severance payment in an amount equal to 12 times
his then currently monthly base salary, as well as certain other benefits. The
Company may elect to make this severance payment in a lump sum or over a
12-month period following termination. Further, in the event Mr. Mills is
terminated either by the Company or resigns within 90 days following a "change
in control," Mr. Mills will be entitled to receive a lump sum severance payment
in an amount equal to 12 times his then current monthly base salary, in addition
to certain other benefits. In the event that the Mills Employment Agreement is
terminated either by the Company for cause, or by Mr. Mills, he shall not be
entitled to any compensation following the date of such termination other than
the pro rata amount of his then current base salary through such date. Upon
termination of employment, other than in the case of termination without cause,
Mr. Mills is prohibited from competing with the Company for 12 months.
As of April 1, 1996, the Company entered into a Confidentiality,
Non-Competition and Severance Pay Agreement with Mary Ellen Rodgers, and as of
June 16, 1996, the Company entered into a similar agreement with David R. Gnass
(collectively, the "Severance Agreements"). In the event either Ms. Rodgers' or
Mr. Gnass' employment is terminated within six (6) months of a "change in
control," the officer will be entitled to receive a lump sum severance payment
in an amount equal to her or his then annual base salary, exclusive of incentive
compensation. In the event Ms. Rodgers' or Mr. Gnass' employment is terminated
without cause in a circumstance unrelated to a change in control during the
first 12 months of her or his employment, the officer will be entitled to
receive a lump sum severance payment equal to the greater of six (6) months
salary or the remaining salary due with respect to such 12-month period. In
addition, any stock options granted to the officers will become fully vested
upon a "change in control," whether or not employment is terminated, or upon a
termination without cause occurring during the first 12 months of employment.
Upon termination of her or his employment, each officer is prohibited from
competing with the Company for 12 months.
7
<PAGE> 9
OPTION GRANTS
The following table sets forth information concerning grants of stock
options pursuant to the 1991 Option Plan and the 1995 Director Plan during the
fiscal year ended December 31, 1996 to each of the executive officers named in
the Summary Compensation Table. The table reflects the 3-for-2 stock split
effected in June 1996. The Company grants no stock appreciation rights.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATE
OF STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM (1)
----------------------------------------------------------------------- -----------------------------
NUMBER % OF TOTAL
OF SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS/SARS EMPLOYEES BASE PRICE EXPIRATION
NAME GRANTED (#) (2) IN FISCAL YEAR ($/SH) DATE 5% ($) 10%($)
- ---------------------------- --------------- ------------------- ------------------ --------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Edward K. Wissing 225,000 22.1 17.50 01/16/06 2,476,273 6,275,361
3,000 * 26.25 12/31/06 49,525 125,507
Thomas E. Mills 12,000 1.2 17.50 01/16/06 132,068 334,686
David R. Gnass 37,500 3.7 26.916 07/15/06 634,775 1,608,644
Mary Ellen Rodgers 30,000 2.9 22.50 03/13/06 424,504 1,075,776
</TABLE>
- ---------------------
* Less than 1%
(1) The dollar amounts under these columns are the result of calculations at the
5% and 10% rates set by the Securities and Exchange Commission and,
therefore, are not intended to forecast possible future appreciation, if
any, of the Company's Common Stock price.
(2) On February 25, 1997, Mr. Mills, Mr. Gnass and Ms. Rodgers were granted
options to acquire 8,000 shares, 20,000 shares and 12,000 shares,
respectively, which relate to 1996 performance. Mr. Mills' and Ms. Rodgers'
options shall vest one-quarter upon grant and one-quarter upon each of the
three subsequent anniversaries thereof. By contract, Mr. Gnass' options
shall vest one-third upon grant and one-third upon each of the two
subsequent anniversaries thereof. See "Summary Compensation Table."
8
<PAGE> 10
OPTION EXERCISES AND VALUES
The following table sets forth information concerning each exercise during the
1996 fiscal year of options under the 1991 Option Plan and the 1995 Directors
Plan by the executive officers named in the Summary Compensation Table and the
year-end value of unexercised options held by each such officer. The table
reflects the 3-for-2 stock split effected in June 1996. The Company grants no
stock appreciation rights.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Shares
Acquired Number of Securities Underlying Value of Unexercised
on Exercise Value Realized Unexercised Options/SARs at In-the-Money Options/SARs at
Name (#) ($) 1996 Fiscal Year-End(#)(1) 1996 Fiscal Year End ($)(1),(2)
- ------------------------- -------------- ---------------- ------------------------------------ --------------------------------
Exercisable/Unexercisable Exercisable/Unexercisable
------------------------- -------------------------
<S> <C> <C> <C> <C>
Edward K. Wissing 37,500 482,500 306,000/75,000 3,063,615/656,250
Thomas E. Mills 18,000 114,000 35,000/4,000 333,250/35,000
David R. Gnass -0- -0- 12,500/25,000 -0-/-0-
Mary Ellen Rodgers -0- -0- 10,000/20,000 37,500/75,000
</TABLE>
- ---------------------
(1) Does not include options to acquire shares granted after December 31, 1996
which related to 1996 performance. See "Summary Compensation Table."
(2) Options are classified as "in-the-money" if the market value of the
underlying Common Stock exceeds the exercise price of the option. The value
of such in-the-money options is the difference between the option exercise
price and $26.25, the per-share market value of the underlying Common Stock
as of December 31, 1996. Such amounts may not necessarily be realized.
Actual values which may be realized, if any, upon the exercise of options
will be based on the per-share market price of the Common Stock at the time
of exercise and are thus dependent upon future performance of the Common
Stock.
9
<PAGE> 11
COMPENSATION COMMITTEE REPORT
The following Compensation Committee Report is not deemed to be part of
a document filed with the Securities and Exchange Commission pursuant to the
Securities Act of 1933 (the "Securities Act") or the Exchange Act and is not to
be deemed incorporated by reference in any documents filed under the Securities
Act or the Exchange Act without the express written consent of the persons named
below.
Decisions on compensation of the Company's senior executives, except
for decisions related to awards under the Company's 1991 Option Plan (which are
made by a separate Committee of the board), are made by the Compensation
Committee of the Company's Board of Directors. It is the task of the
Compensation Committee to establish executive compensation guidelines for the
Company which are reasonable and appropriate, meet their stated purpose and
effectively serve the needs of the Company and its stockholders.
Compensation Philosophy and Policies for Executive Officers
The Company's primary business goal is to provide high quality patient
care while maximizing stockholder value. The Company believes it can best
achieve this goal by achieving leadership in the provision of relevant and high
quality health services, expanding its operations primarily through acquisitions
and same store growth without imperiling the achievement of other strategic
objectives, and establishing a reputation as a desirable employer and
responsible corporate citizen. The Compensation Committee seeks to forge a
strong link between the Company's business goal and its compensation program by
aligning the interests of its stockholders and management personnel, including
executive officers. The Company's executive compensation program is consistent
with this overall philosophy for compensation at all management levels. The
Company believes that by aligning management compensation with the Company's
business goal, the likelihood of the Company's success on both a short-term and
long-term basis is increased. As an example, all of the executives and key
employees participate in the Company's 1991 Option Plan and the Company has
established an Employee Stock Purchase Plan in which approximately 16% of the
Company's eligible employees participate.
The Company's executive compensation program supports the Company's
strategy and objective of creating stockholder value by:
- Emphasizing pay for performance by making a significant
portion of executive compensation "at risk."
- Directly aligning the interest of executives with the
long-term interest of stockholders by awarding stock options
at current market prices which have value to the executives
through long-term stock appreciation.
- Providing compensation opportunities that attract and retain
talented and committed executives on a long-term basis.
- Appropriately balancing the Company's short-term and long-term
business, financial and strategic goals.
Currently, the Company's executive compensation program is comprised of
three principal components: base salary, annual incentive bonus, and long-term
incentive opportunity through nonqualified stock options. The annual executive
pay targets (base salary plus incentive) are intended to be competitive with
executive compensation of other U.S. public health care companies when the
Company meets or exceeds its annual operating goals. The combination of these
various compensation elements is designed to encourage management to balance the
Company's short-term and long-term goals.
The Company attempts to compare its executive pay targets with the
annual pay of those companies which are included in the Home Health Care
Services Group, subject to available information. This group is the peer group
used for comparison purposes in the Stock Performance Graph appearing elsewhere
herein. Since the Home Health Care Services Group is small, however, the
Compensation Committee retains the discretion to compare the Company's executive
pay targets with those of companies outside of this group. The Compensation
Committee believes that the Company's most direct competitors for executive
talent is likely
10
<PAGE> 12
more numerous than the entities included in the Home Health Care Services Group,
and, accordingly, a broader-based comparison may be justified. In this way the
Compensation Committee seeks to meet the objective of attracting and retaining
talented and committed executives on a long-term basis.
Base Salary
All management salaries, including those of the executives, are
evaluated on a regular basis. In evaluating appropriate pay levels and salary
increases for Company executives, the Compensation Committee considers level of
responsibility of the executive, individual performance, internal equity and
external pay practices, and achievement of the Company's strategic goals.
Regarding external pay practices, the Compensation Committee has sought to
conform base salaries for executive officers at approximately the market rate of
the Company's competitors for executive talent, as determined from information
gathered by the Company from outside sources. The Compensation Committee has
defined "market rate" as the 50th percentile.
Annual Incentives
Annual incentive bonus awards are designed to focus management
attention on key operational goals for the current fiscal year. In this way the
Compensation Committee hopes to meet the objective of emphasizing
performance-based compensation. The key operational goals are specific to each
executive's area of responsibility. Specific weighting is assigned for
identified financial, strategic and management practices goals. At least 50% of
the available bonus percentage for each named executive officer is tied to
Company profitability, generally defined by achievement of the annual budget as
approved by the Board of Directors. The remaining percentages are based on such
goals as quality of care, accounts receivable management and continuation of the
Company's strategic imperatives dedicated to same store growth, achieving
regional density through acquisitions and strategic alliances, and control of
expenses. The nature of the operational goals and the weighting assigned to each
is subject to change annually.
Company executives may earn a bonus with a value equal to between 20%
and 50% of their annual base salaries based upon achievement of their specific
operational goals and achievement by the Company or business unit of its
financial targets. At the end of the year, performance in light of these goals
is determined on an arithmetic scale with the pre-established weighting.
Discretionary adjustments by the Compensation Committee are possible if the
Committee believes the circumstances so warrant.
Long-Term Incentives
The Company's long-term incentive compensation program consists of
nonqualified stock options which are related to improvement in long-term
stockholder value. Stock option grants are designed to focus an executive's
attention on managing the Company from the perspective of long-term owner with
an equity stake in the business. Stock options are granted under the 1991 Option
Plan by the Board of Directors' Disinterested Stock Option Committee.
The option grants to executive officers offer the right to purchase
shares of Common Stock at their fair market value on the trading day next
preceding the date of grant. These options will have value only if the Company's
stock price increases. The number of shares covered by each grant is selected
based on the executive's level of responsibility and past and anticipated
contributions to the Company.
Inclusion of stock options are designed to meet the objective of
aligning executive interests with the long-term interest of stockholders.
Chief Executive Officer Compensation
Mr. Wissing is the Company's Chief Executive Officer. As Chief
Executive Officer, Mr. Wissing is eligible to participate in the same executive
compensation plans available to the Company's senior executive officers. The
Compensation Committee's general approach in setting the Chief Executive
Officer's annual compensation is derived from the same considerations described
above, that is to be competitive with other U.S. public health care
corporations, but also to have a significant portion of annual incentive
compensation "at risk"
11
<PAGE> 13
based upon specific corporate-wide operating performance criteria. The
Committee's approach is reflected in the Company's Employment Agreement with Mr.
Wissing, which was most recently amended as of December 1, 1995. See "Employment
And Other Agreements." As a result, Mr. Wissing's base compensation and his
maximum bonus is set for the next two fiscal years.
In December 1995, the Compensation Committee approved a $275,000 base
salary for Mr. Wissing for the calendar year 1996 and established his target
incentive bonus value at 50% of his base salary, or $137,500. According to
market data, such base salary and annual incentive target were below the average
market rates and appropriately within the Company's overall internal pay
practices. Mr. Wissing earned a bonus for 1996 performance valued at $123,750,
which was 45% of his base salary and which represented 90% of his target. The
basis for Mr. Wissing's 1996 bonus includes: (1) achievement of specific
operational goals, including an increase in profitability and acquisitions in
excess of budget, (2) attainment of the Company's overall operating results for
calendar year 1996 and continuation of the Company's strategic imperatives
during 1996, all described above under "Annual Incentives," and (3) achievement
of organizational goals by the hiring of new members of the Company's senior
management. The factors were weighted in the manner described above under
"Annual Incentives."
The Disinterested Stock Option Committee has not granted Mr. Wissing
options to acquire shares of Common Stock in relation to performance during the
1996 fiscal year.
Tax Regulations
Section 162(m) of the Internal Revenue Code of 1986, as amended,
generally disallows a tax deduction to public companies for executive
compensation in excess of $1 million. It is not anticipated that the Company
will pay any of its executive officers compensation in excess of $1 million in
the 1997 fiscal year and, accordingly, to date the Company has not adopted a
policy in this regard.
THE FOREGOING REPORT IS SUBMITTED BY ALL OF THE CURRENT MEMBERS OF
THE COMPENSATION COMMITTEE OF THE COMPANY'S BOARD OF DIRECTORS, WHOSE
MEMBERS ARE AS FOLLOWS: HENRY T. BLACKSTOCK, THOMAS A. DATTILO AND ALLAN
C. SILBER.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is currently composed of Directors
Blackstock, Silber and Dattilo. No member of the Compensation Committee is an
employee of the Company; however, Director Silber is a consultant to the
Company.
The Company has entered into a consulting agreement (the "Consulting
Agreement") with Mr. Silber, a director of the Company and Chairman of the Board
of Directors, Chief Executive Officer and principal shareholder of Counsel, to
provide certain services to the Company, including the identification and
analysis of potential new businesses to be considered for acquisition. The
Consulting Agreement had an initial term of one year beginning January 1992 and
is renewable by agreement of Mr. Silber and the Company, subject to approval by
a majority of the disinterested members (currently Messrs. Blackstock, Sonshine,
Furlong, Dattilo and Manner) of the Company's Board of Directors. The Consulting
Agreement was most recently renewed on March 13, 1997 for an additional one-year
term. The Consulting Agreement provides for a base monthly consulting fee of
$20,000, with a bonus at the discretion of the Board of Directors of up to
$60,000 annually based on performance. Mr. Silber received a bonus of $60,000 in
1996 in connection with services performed in 1995 and received a bonus of
$54,000 in 1997 for services performed in 1996.
12
<PAGE> 14
STOCK PERFORMANCE GRAPH
The stock performance graph depicted below is not deemed to be part of
a document filed with the Securities and Exchange Commission pursuant to the
Securities Act or the Exchange Act and is not to be deemed incorporated by
reference in any documents filed under the Securities Act or the Exchange Act
without the express written consent of the Company.
The following graph compares the cumulative total returns of the
Company with those of the Nasdaq Market Index and a peer group index. Cumulative
return assumes $100 invested in the Company or respective index on January 1,
1992, with dividend reinvestment through December 31, 1996. The Company has
selected a peer group known as the Home Health Care Services Group (SIC Number
8082), as compiled by Media General Financial Services. This peer group index is
comprised of approximately 28 companies, excluding the Company.
[PERFORMANCE GRAPH]
COMPARE 5-YEAR CUMULATIVE TOTAL RETURN
AMONG AMERICAN HOMEPATIENT, INC.,
NASDAQ MARKET INDEX AND SIC CODE INDEX
<TABLE>
<CAPTION>
- --------------------------------FISCAL YEAR ENDING-----------------------------------
COMPANY 1991 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C>
AMERICAN HOMEPATIENT INC 100 109.09 120.45 215.91 268.18 556.83
INDUSTRY INDEX 100 64.10 54.04 50.96 49.31 44.74
BROAD MARKET 100 100.98 121.13 127.17 164.96 204.98
</TABLE>
The graph presents information since January 1, 1992. To date, the
Company has not directly tied executive compensation to stock performance. The
future impact of stock performance on executive compensation will be determined
by the Compensation Committee of the Board of Directors.
13
<PAGE> 15
PROPOSAL 1:
ELECTION OF DIRECTORS
The Board of Directors of the Company currently consists of eight
members and is divided into three classes (Class 1, Class 2 and Class 3), as
nearly equal in number as possible. All directors generally hold office for
three-year terms and then until their successors have been duly elected and
qualified. The term of the Class 3 directors is set to expire at this Annual
Meeting of Stockholders; the term of the Class 1 directors is set to expire at
the 1998 Annual Meeting of Stockholders; and the term of the Class 2 directors
is set to expire at the 1999 Annual Meeting of Stockholders. At each Annual
Meeting of Stockholders, successors to the class of directors whose term expires
at such meeting will be elected to serve for a three-year term and until their
successors are duly elected and qualified.
The Board of Directors proposes that the three nominees indicated below
be elected as Class 3 directors to serve for a three (3) year term and until
their successors are duly elected and qualified. Messrs. Silber, Sonshine and
Wissing are currently Class 3 directors first elected to the Board of Directors
in September 1991, September 1991 and June 1994, respectively. Should any
nominee for the office of director become unable to accept nomination or
election, which is not anticipated, it is the intention of the persons named in
the proxy, unless otherwise specifically instructed in the proxy, to vote for
the election of such other person as the Board of Directors may recommend.
<TABLE>
<CAPTION>
NOMINEES FOR ELECTION AS CLASS 3 DIRECTORS
CURRENT PRINCIPAL OCCUPATION;
NAME OF NOMINEE AGE DIRECTOR SINCE OCCUPATION LAST FIVE YEARS
- --------------- ---- -------------- -----------------------------------------
<S> <C> <C> <C>
Allan C. Silber (3)(4)(5) 48 September 1991 Chairman, Chief Executive Officer and Director of
Counsel (since August 1979); President of Counsel
(August 1979 to January 1994); Chairman of the Board
of Directors of the Company (September 1991 to May
1994); Director of the Company (since September
1991); Chairman of Limited, DCA and certain
subsidiaries of Counsel (since October 1988);
President of DCA (since May 1994); Director of CHA
(since March 1983); Director of Advocat Inc., a long
term care company ("Advocat") (January 1994 to
November 1996); Director of Capstone (since December
1994); Chairman of the Board of Directors of
Stadtlander Drug Company, Inc. ("Stadtlander") (since
July 1996); Member of the Advisory Committee of
RioCan Real Estate Investment Trust, a Canadian real
estate company ("RioCan") (since July 1995); Director
of O&Y Properties, Inc., a retail and office property
management company ("O&Y") (November 1995 to November
1996).
Edward Sonshine (3)(6)(7) 50 September 1991 Director of the Company (since September 1991); Vice
Chairman of Counsel (since January 1994); Director of
Counsel (since August 1979); Executive Vice President of
Counsel (February 1987 to January 1994); Chairman,
President and Chief Executive Officer of Counsel
Management Services, Inc., an affiliate of Counsel
(October 1993 to July 1995); Director of CHA (since
March 1983); Director of Capstone (since December
1994); Director of O&Y (November 1995 to November
1996); Director of Advocat (May 1995 to November
1996); President and Chief Executive Officer of RioCan
(since July 1995); President and Chief Executive Officer
of Icarus Realty Corporation (February 1987 to September
1993).
</TABLE>
14
<PAGE> 16
<TABLE>
<CAPTION>
CURRENT PRINCIPAL OCCUPATION;
NAME OF NOMINEE AGE DIRECTOR SINCE OCCUPATION LAST FIVE YEARS
- --------------- ---- -------------- ---------------------------------------------------------------
<S> <C> <C> <C>
Edward K. Wissing (3)(4) 59 June 1994 President and Chief Executive Officer of the Company
(since May 1994); Executive Vice President of the
Company and President and Chief Executive Officer of
AHPT (September 1991 to May 1994).
<CAPTION>
CONTINUING CLASS 1 AND 2 DIRECTORS
CURRENT PRINCIPAL OCCUPATION;
NAME OF DIRECTOR AGE DIRECTOR SINCE OCCUPATION LAST FIVE YEARS
- ---------------- ---- -------------- ---------------------------------------------------------------
<S> <C> <C> <C>
Henry T. Blackstock (1)(5)(6)(7) 53 September 1991 Director of the Company (since September 1991);
Chairman and Chief Executive Officer of Tucker
Management Group, a hedge fund management firm (since
July 1989).
Thomas A. Dattilo (1)(5) 45 June 1994 Director of the Company (since June 1994); President of
Dana Corporation, Victor Products Division, a
manufacturer and distributor of sealing products (since
January 1993); President and Director of Hayes-Dana,
Inc., a manufacturer of automobile parts (March 1990 to
March 1993).
Mark Manner (1) 45 May 1995 Director of the Company (since May 1995); shareholder
of Harwell Howard Hyne Gabbert & Manner, P.C., a
Nashville law firm (since July 1984).
Morris A. Perlis (2)(4) 48 March 1993 Chairman of the Board of Directors of the Company (since
May 1994); Director of the Company (since March 1993);
President of Counsel (since January 1994); Chairman and
President of CHA (since January 1994); Director of and
consultant to Counsel (since September 1992); President
of Morris A. Perlis & Assoc., an executive management
consulting firm (September 1992 to January 1994);
Director of NOMA, Inc., a manufacturer of consumer wire
and cable (September 1993 to July 1996); Director of
Capstone Pharmacy Services, Inc. ("Capstone"), an
institutional pharmacy company (since December 1994);
Chief Executive Officer and Secretary of Stadtlander
(since July 1996); Director of Stadtlander (since July
1996); Director of Advocat (March 1994 to May 1995).
Joseph F. Furlong, III (2)(6) 48 June 1994 Director of the Company (since June 1994); President of
Adirondack Capital Advisors, LLC ("Adirondack") (since
May 1996); Director of Healthy Planet Products, Inc., an
environmentally friendly manufacturer of greeting cards
(since June 1996); Partner of Colman Furlong & Co., a
merchant banking firm (February 1991 to May 1996);
Director of Capstone (since December 1994).
</TABLE>
- -------------------------------
(1) Class 1 director.
(2) Class 2 director.
(3) Class 3 director.
(4) Member of Executive Committee.
(5) Member of Compensation Committee.
(6) Member of Audit Committee.
(7) Member of Disinterested Stock Option Committee.
15
<PAGE> 17
Directors who are not officers, employees or consultants of the Company
(currently Directors Blackstock, Dattilo, Furlong, Sonshine and Manner) receive
an annual director's fee of $10,000, a fee of $500 for each meeting of the Board
of Directors or a Committee of the Board attended by telephone and a fee of
$1,000 for each such meeting attended in person; provided, however, that no fees
are to be paid for attendance at a Committee meeting occurring on the same day
as a meeting of the Board. All directors are reimbursed for actual expenses
incurred in connection with attendance at meetings of the Board of Directors or
Committees of the Board.
Since June 1, 1994, Director Perlis has received a $8,500 monthly fee
for serving as Chairman of the Board of Directors. Director Silber receives
additional compensation pursuant to a Consulting Agreement. See "Executive
Officers - Compensation Committee Interlocks and Insider Participation."
Mark Manner, a director of the Company, is a shareholder of the law
firm of Harwell Howard Hyne Gabbert & Manner, P.C. ("Harwell Howard"). The
Company engaged Harwell Howard during 1996 to render legal advice in a variety
of activities, for which the firm was paid legal fees of approximately $1.1
million. Harwell Howard continues to render legal advice to the Company and has,
during 1997, been paid legal fees in excess of $305,000. The terms of Harwell
Howard's engagement are reviewed and approved by members of the Board of
Directors not affiliated with Mr. Manner.
Mr. Sonshine, a director of the Company, is also a director of Counsel
and CHA and President and Chief Executive Officer of Counsel Management
Services, Inc. Mr. Perlis, the Chairman of the Company's Board of Directors, is
also a director and President of Counsel and a director, Chairman of the Board
of Directors and President of CHA.
The Company believes that any past transactions with its affiliates
have been at prices and on terms no less favorable to the Company than
transactions with independent third parties. The Company may enter into
transactions with its affiliates in the future. However, the Company intends to
enter into such transactions only at prices and on terms no less favorable to
the Company than transactions with independent third parties and with approval
of the disinterested members of the Board of Directors or a committee thereof.
In addition, the Company's debt instruments generally prohibit the Company from
entering into any such affiliate transaction on other than arm's-length terms.
The Board of Directors currently has standing Audit, Executive,
Compensation and Disinterested Stock Option Plan Committees. The Board of
Directors does not have a nominating committee.
The Executive Committee presently is composed of Directors Perlis,
Silber and Wissing. The Delaware General Corporation Law and the Company's
Bylaws provide that the Board may designate such a committee from their number
to carry out the functions of the Board as permitted by law. Between meetings of
the Board, the Executive Committee may exercise all powers of the Board. During
fiscal year 1996, the Executive Committee held 12 meetings and adopted 56
written consent actions.
The Compensation Committee presently is composed of Directors
Blackstock, Dattilo and Silber. Responsibilities of this Committee include
approval of remuneration arrangements for executive officers of the Company,
administration of the Company's Supplemental Executive Retirement Plan, review
of compensation plans relating to executive officers and directors, including
benefits under the Company's compensation plans, and general review of the
Company's employee compensation policies. During fiscal year 1996, the
Compensation Committee held two meetings and adopted no written consent actions.
16
<PAGE> 18
The Audit Committee presently is composed of Directors Blackstock,
Furlong and Sonshine. Responsibilities of this Committee include engagement of
independent auditors, review of audit fees, supervision of matters relating to
audit functions, and review and setting of internal polices and procedures
regarding audits, accounts and other financial controls. During fiscal year
1996, the Audit Committee held two meetings and adopted no written consent
actions.
The Disinterested Stock Option Plan Committee presently is composed of
Directors Blackstock and Sonshine. The Disinterested Stock Option Committee is
authorized to grant options to employees of the Company under the Company's 1991
Option Plan and 1995 Director Plan. During fiscal year 1996, the Disinterested
Stock Option Plan Committee held one meeting and adopted three written consent
actions.
During the Company's fiscal year ended December 31, 1996, its Board of
Directors held five meetings and adopted five written consent actions. Each
current director who was serving on the Board of Directors during the 1996
fiscal year attended meetings or executed written consent actions with respect
to at least 75% of the meetings and consent actions of the Board of Directors
and Committees held or taken during the period in which he served as a director
of the Company and committee member during fiscal year 1996.
A plurality of the votes of the shares of Common Stock present or
represented by proxy at the Annual Meeting of Stockholders and entitled to vote
is required to elect the three nominees as directors of the Company. AHOM
Holdings, Inc., an indirect, wholly owned subsidiary of Counsel, has expressed
its intention to vote all its shares in favor of the election of the nominees.
THE BOARD OF DIRECTORS RECOMMENDS THAT ALL STOCKHOLDERS VOTE IN FAVOR OF THE
ELECTION OF THE NOMINEES AS CLASS 3 DIRECTORS.
17
<PAGE> 19
PROPOSAL 2:
AMENDMENT TO 1991 NONQUALIFIED STOCK OPTION PLAN
INCREASING SHARES AVAILABLE FOR GRANT
On September 5, 1991, the Company's Board of Directors and stockholders
approved the adoption of the 1991 Nonqualified Stock Option Plan (the "1991
Option Plan"), under which options to purchase shares of the Company's Common
Stock are available for grant (1) to officers, directors and key employees of
the Company and its affiliates as an incentive to such persons, and (2) as
substitute stock options for outstanding stock options granted by companies
acquired by the Company. Five executive officers (one of whom is a director)
five non-officer directors and approximately 160 key employees are currently
eligible to participate in the 1991 Option Plan.
During the Company's most recent fiscal year, options to purchase
1,013,000 shares at exercise prices of $17.50, $22.50, and $26.916 per share
were granted under the 1991 Option Plan to executive officers, directors and key
employees of the Company and its affiliates. See "Option Grants." Since January
1, 1997, an option to purchase 5,000 shares at the exercise price of $24.25 per
share and options to purchase 254,500 shares at exercise prices of $21.50 per
share were granted under the 1991 Option Plan to executive officers, directors
and key employees of the Company and its affiliates, 75,149 of which are
contingent upon adoption by the Company's stockholders of the proposed amendment
to the 1991 Option Plan. As of March 27, 1997, there were outstanding under the
1991 Option Plan options, contingent and otherwise, to purchase 1,768,347 shares
of Common Stock with an aggregate market value of approximately $40.2 million
(based on the March 27, 1997 closing price of $22.75 for the Company's Common
Stock). The outstanding options have expiration dates ranging from 2001 to 2007.
The 1991 Option Plan provides that the exercise price of an option must
not be less than the fair market value of the Common Stock on the trading day
next preceding the date of grant. The fair market value of the Common Stock as
of the close of business on March 27, 1997, was $22.75. Payment for shares of
Common Stock to be issued upon exercise of an option may be made either in cash,
Common Stock or any combination thereof, at the discretion of the option holder.
The maximum term of any option granted pursuant to the 1991 Option Plan
is 10 years. Options are nontransferable, other than by will, the laws of
descent and distribution or pursuant to certain domestic relations orders.
Shares subject to options granted under the 1991 Option Plan which expire,
terminate or are canceled without having been exercised in full become available
again for option grants.
The 1991 Option Plan is administered by the Board of Directors, which
may, in the alternative, select a committee of disinterested directors to
administer the plan. The Disinterested Stock Option Committee of the Board
currently administers the plan. Subject to certain limitations, the Board and
its Committee have the authority to determine the recipients of, as well as the
exercise prices, exercise periods, length and other terms of, stock options
granted pursuant to the 1991 Option Plan. In making such determinations, the
Board may take into account the nature of the services rendered or to be
rendered by option recipients, and their past, present or potential
contributions to the Company.
The number of shares of Common Stock which may be granted under the
1991 Option Plan or under any outstanding options will be proportionately
adjusted, to the nearest whole share, in the event of any stock dividend, stock
split, share combination or similar recapitalization involving the Common Stock
or any spin-off, spin-out or other significant distribution of the Company's
assets to its stockholders for which the Company receives no consideration. The
total number of shares available for grant under the 1991 Option Plan increased
from 1,841,650 to 2,762,475 as a result of the 3-for-2 stock split effectuated
in June 1996.
18
<PAGE> 20
Generally, no option may be exercised until the holder has been
employed by the Company or one of its subsidiaries continuously for at least
three months from the date of grant. If the option holder is terminated as an
employee by reason of disability or death, the holder or his or her
representative may exercise the option for a period of 12 months following such
termination unless the Board of Directors elects, in its sole discretion, to
extend the exercise period. If the employment of an option holder is terminated
for "cause," as defined in the 1991 Option Plan, the unexercised options expire.
If the option holder is terminated as an employee for any reason other than
disability, death or cause, the holder may exercise his or her option for a
period of three months following termination, unless extended by agreement of
the Company. In addition, the Company may elect to purchase from such holder any
Common Stock held by the holder at the time of termination for a price per share
equal to the fair market value of the Common Stock at the time the Company
exercises its repurchase option. The Company has the right to repurchase such
stock for a period of one year from the date of termination of employment.
In the event of a dissolution or sale of all or substantially all of
the assets of the Company, or a merger or consolidation in which the Company is
not the surviving corporation, each outstanding option will terminate, unless
there is an express assumption of the option by the surviving corporation. These
termination provisions are subject to change by contract. As to any option which
is to so terminate, however, each holder will have the right immediately prior
to the dissolution, sale, merger or consolidation to exercise his or her
options, in whole or in part.
No federal income tax consequences occur to either the Company or the
optionee upon the Company's grant or issuance of a stock option under the 1991
Option Plan. Upon an optionee's exercise of a 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
30 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 generally recognize capital gain to the extent
the sales proceeds exceed the optionee's cost of the stock plus the previously
recognized ordinary income.
As originally adopted, the 1991 Option Plan allowed for the purchase of
up to 320,000 shares of Common Stock. This number has since been increased to
2,762,475 as a result of amendments and the 3-for-2 stock split. As of March 27,
1997, there were 1,069,277 options which have been exercised and options to
purchase an additional 1,768,347 shares of Common Stock remain outstanding. The
Board of Directors has unanimously adopted a proposed amendment to the Company's
1991 Option Plan to increase the number of shares of Common Stock reserved for
issuance from 2,762,475 to 3,200,000 shares. The purpose of the amendment is (i)
to render options granted in February 1997 to acquire 75,149 shares no longer
contingent, and (ii) to allow for grants of options under the 1991 Option Plan
to acquire additional shares. Both purposes are designed to provide greater
opportunity for those employees who are most responsible for the Company's
growth to share in that growth. A copy of the proposed amendment is attached
hereto as Exhibit A. For a description of benefits received and to be received
under the 1991 Option Plan as proposed to be amended, see "New Plan Benefits"
below.
A majority of the shares of Common Stock present or represented by
proxy at the Annual Meeting of Stockholders and entitled to vote is required to
amend the 1991 Option Plan. AHOM Holdings, Inc., an indirect, wholly owned
subsidiary of Counsel, has expressed its intention to vote all of its shares in
favor of the amendment. THE BOARD OF DIRECTORS, THROUGH ITS EXECUTIVE COMMITTEE,
HAS APPROVED OF THE AMENDMENT TO THE 1991 OPTION PLAN AND RECOMMENDS THAT ALL
STOCKHOLDERS VOTE IN FAVOR OF THE AMENDMENT.
19
<PAGE> 21
NEW PLAN BENEFITS
Since December 31, 1996, options to acquire an aggregate of 259,000
shares of Common Stock were granted, of which options covering 75,149 shares are
subject to approval by the stockholders of the amendment to the 1991 Option
Plan. Approval of the amendment will allow the Company to reserve 3,200,000
shares of Common Stock for issuance under the plan, 362,376 of which are
expected to be available for grant following approval. The following table sets
forth those granted options that are subject to adoption of the amendment and
held by (i) each executive officer named in the Summary Compensation Table, (ii)
all current executive officers as a group, (iii) all current directors who are
not executive officers as a group, and (iv) all employees, including all current
officers who are not executive officers, as a group. The following table does
not reflect options granted under the 1991 Option Plan which are not contingent
upon adoption of the amendment. These options are instead noted in footnote 2 to
the table. All numbers contained in the table and footnotes reflect the June
1996 3-for-2 stock split, even though some of the options were granted and/or
exercised prior to such stock split.
NEW PLAN BENEFITS
<TABLE>
<CAPTION>
DOLLAR NUMBER
NAME AND POSITION VALUE ($)(1) OF UNITS(2)
- ---------------------------------------------------- ----------- ----------
<S> <C> <C>
Edward K. Wissing, -0- -0-
President, Chief Executive Officer,
Director
Thomas E. Mills, -0- 8,000
Senior Vice President-Strategic Alliances
David R. Gnass, -0- 20,000
Senior Vice President
Mary Ellen Rodgers, -0- 12,000
Senior Vice President, Chief Financial
Officer, Secretary
All current Executive Officers -0- 52,000
as a group (5 persons)3
All current Directors who are not Executive -0- -0-
Officers as a group (7 persons)
All Employees including Officers -0- 23,149
who are not Executive Officers
as a group (160 persons)
</TABLE>
- ----------------
(1) The Dollar Value of all contingent options is -0- because the exercise price
of each option is equal to the fair market value of the underlying common
stock on the date of grant. Actual dollar values which may be realized will
be based on the exercise price and the market price of the Common Stock on
the date of exercise, and are thus indeterminable at this time.
(2) Number of Units references number of shares of Common Stock underlying
options granted under the 1991 Option Plan contingent upon shareholder
approval. Options granted under the 1991 Option and not subject to the
proposed amendment to the plan are as follows: 562,500 to Mr. Wissing
(207,500 of which have been exercised and 75,000 of which are not yet
vested); 154,500 to Mr. Mills (137,000 of which have been exercised and
4,000 of which are not yet vested); 37,500 to Mr. Gnass (none of which have
been exercised and 25,000 of which are not yet vested); 30,000 to Ms.
Rodgers (none of which have been exercised and 10,000 of which are not yet
vested); 375,000 to Director Perlis (75,000 of which have been exercised and
75,000 of which are not yet vested); 375,000 to Director Silber (75,000 of
which have been exercised and 75,000 of which are not yet vested); 22,500 to
each of Director Dattilo and Director Furlong (none of which have been
exercised); 15,000 to Director Blackstock (7,500 of which have been
exercised); 15,000 to Director Sonshine (all of which have been exercised);
7,500 to Director Manner (none of which have been exercised); 844,500 to all
current executive officers as a group (359,500 of which have been exercised
and 127,750 of which are not yet vested); 832,500 to all current directors
who are not executive officers as a group (172,500 of which have been
exercised and 150,000 of which are not yet vested); and 1,126,601 to all
employees including officers who are not executive officers, as a group
(550,497 of which have been exercised, 160,690 of which are not yet vested
and 41,626 of which have been canceled or expired). No individual other than
Allan C. Silber, Morris A. Perlis, Edward K. Wissing and Thomas E. Mills has
received or is expected to receive options to acquire five percent (5%) or
more of the Common Stock available upon exercise of options under the 1991
Option Plan.
(3) Includes options granted to Rita N. Hill, who became an executive officer of
the Company on March 13, 1997.
20
<PAGE> 22
INDEPENDENT PUBLIC ACCOUNTANTS
The accounting firm of Arthur Andersen, LLP was appointed by the
Board of Directors to serve as the Company's Independent Public Accountants for
the fiscal year ended December 31, 1996, and it is expected that Arthur
Andersen, LLP will be appointed to serve as the Company's auditor for the
current fiscal year. A representative of that firm will be present at the
meeting and will have the opportunity to make a statement if he so desires and
to respond to appropriate questions.
DEADLINE FOR SUBMITTING
STOCKHOLDER PROPOSALS
Proposals of stockholders intended for consideration at the Company's
1998 Annual Meeting of Stockholders must be received by the Company's executive
offices at 5200 Maryland Way, Suite 400, Brentwood, Tennessee 37027-5018, no
later than December 15, 1997, if any such proposal is to be eligible for
inclusion in the Company's proxy materials for that meeting.
OTHER MATTERS
The management of the Company knows of no other matters to be brought
before the Annual Meeting of Stockholders. If any other matter is duly presented
for action, it is the intention of the persons named in the enclosed proxy to
vote on such matter in accordance with their best judgment.
A copy of the Company's 1997 Annual Report to Stockholders is being
mailed to stockholders together with this Proxy Statement.
EACH STOCKHOLDER IS URGED TO EXECUTE AND RETURN THE ENCLOSED PROXY
PROMPTLY. IN THE EVENT A STOCKHOLDER DECIDES TO ATTEND THE MEETING, IT MAY, IF
IT WISHES, REVOKE ITS PROXY AND VOTE SUCH SHARES IN PERSON. IN ADDITION, A
STOCKHOLDER MAY REVOKE ITS PROXY AT ANY TIME BEFORE SUCH PROXY IS VOTED.
21
<PAGE> 23
EXHIBIT A
AMENDMENT OF 1991 NONQUALIFIED STOCK OPTION PLAN
AMENDMENT NO. 6 TO
1991 NONQUALIFIED STOCK OPTION PLAN OF
AMERICAN HOMEPATIENT, INC.
Amendment No. 6 to 1991 Nonqualified Stock Option Plan (the "Plan") of
American HomePatient, Inc. (the "Corporation") as approved by the Executive
Committee of the Board of Directors of the Corporation on March 13, 1997, and as
approved by the Shareholders of the Corporation on May 14, 1997.
The Plan shall be amended by deleting paragraph 3 thereof and replacing
it with a new number 3 so that, as amended, said paragraph 3 shall be and read
as follows:
3. Stock Subject to the Plan. There will be reserved for issuance
upon the exercise of Options 3,200,000 shares of Common Stock, which
will be authorized and unissued Common Stock. If an Option expires or
terminates for any reason without being exercised in full, the shares
subject thereto which have not been purchased will again be available
for purposes of the Plan. The number of shares as to which Options may
be granted under the Plan will be proportionately adjusted, to the
nearest whole share, in the event of any stock dividend, stock split,
share combination or similar recapitalization involving the Common
Stock or any spin-off, spin-out or other significant distribution of
assets of stockholders for which the Corporation receives no
consideration. In the event that there is an insufficient number of
authorized shares of Common Stock available to allow exercise of the
Options on the date of any grant hereunder, such Options will not be
exercisable until there are sufficient shares of Common Stock
authorized for issuance.
-End of Amendment-
22
<PAGE> 24
APPENDIX A
DIVERSICARE INC.
1991 NONQUALIFIED STOCK OPTION PLAN
1. The Purpose of the Plan. This Plan is intended to provide an
opportunity for Key Employees and directors performing services to the
Corporation and its Subsidiaries to acquire shares of the Corporation's Common
Stock, providing an equity interest in the Corporation and additional
compensation based on appreciation of the value of such stock. The Plan provides
for the grant of stock options which do not qualify as "incentive stock
options," as defined in Section 422A of the Code, (a) as an incentive to service
or continued service to the Corporation in order to aid the Corporation in
obtaining and retaining key personnel and directors of outstanding ability, and
(b) in substitution for stock options of entities which may be acquired by the
Corporation.
2. Definitions. For purposes of this Plan, the following terms
will be defined as indicated:
(a) "Board" means the Board of Directors of the
Corporation.
(b) "Cause" means habitual drug use or drunkenness,
embezzlement of Corporation funds, conduct which is demonstrably injurious to
the Corporation, or conviction of a felony, all as determined in good faith by
the Board or Committee.
(c) "Code" means the Internal Revenue Code of 1986, as
amended.
(d) "Committee" has the meanings prescribed in
paragraph 4.
(e) "Common Stock" means the common stock of the
Corporation, $.01 par value.
(f) "Corporation" means Diversicare Inc., a Delaware
corporation.
(g) "Disinterested" has the meaning prescribed by Rule
16b-3 from time to time.
(h) "Fair Market Value" means the closing price of the
Common Stock, as reported by NASDAQ/NMS or by any national securities exchange
upon which the Common Stock is traded. In the event the Common Stock is not
listed on an exchange or traded in the over-the-counter market, then the Board
or Committee will determine Fair Market Value, which determination will be made
in good faith and will be binding.
(i) "Key Employee" means a full-time salaried employee
who, in the judgment of the Board or Committee, is instrumental to the success
of the Corporation or one of its Subsidiaries; including officers.
(j) "NASDAQ/NMS" means the National Association of
Securities Dealers, Inc. Automated Quotation System, National Market System.
(k) "Option" means an option granted pursuant to the
Plan.
<PAGE> 25
(l) "Plan" means the Corporation's 1991 nonqualified
stock option plan described herein.
(m) "Rule 16b-3" means Rule 16b-3 as promulgated under
the Securities Exchange Act of 1934, as amended, as the rule may be amended from
time to time, or any successor rule or other comparable regulatory requirements.
(n) "Subsidiary" means any person or entity which is
controlled by the Corporation, including, without limitation, American Home
Patient Centers, Inc. and Diversicare Management Services Co.
(o) "Substitute Option" means an Option granted in
substitution for options to purchase equity securities of an entity acquired by
the Corporation.
3. Stock Subject to the Plan. There will be reserved for issuance
upon the exercise of Options 320,000 shares of Common Stock, which will be
authorized and unissued Common Stock. If an Option expires or terminates for any
reason without being exercised in full, the shares subject thereto which have
not been purchased will again be available for purposes of the Plan. The number
of shares as to which Options may be granted under the Plan will be
proportionately adjusted, to the nearest whole share, in the event of any stock
dividend, stock split, share combination or similar recapitalization involving
the Common Stock or any spin-off, spin-out or other significant distribution of
assets to stockholders for which the Corporation receives no consideration. In
the event that there is an insufficient number of authorized shares of Common
Stock available to allow exercise of the Options on the date of any grant
hereunder, such Options will not be exercisable until there are sufficient
shares of Common Stock authorized for issuance.
4. Administration of the Plan.
(a) Granting of Options in General. The Board may administer
this Plan itself or may appoint a Committee of the Board to administer the Plan.
The Committee will be so constituted as to permit the Plan to comply with Rule
16b-3. Subject to the provisions of the Plan, the Committee will have full
authority and discretion to determine the Key Employees and directors of the
Corporation and its Subsidiaries to whom Options will be granted, the number of
shares to be subject to each Option, the Option prices, and the exercise period
for the Options. In making such determinations, the Committee may take into
account the nature of the services rendered or to be rendered by such
individuals, their past, present or potential contributions to the Corporation,
and any other factors which the Committee deems relevant. Subject to the
provisions of the Plan, the Committee will have full and conclusive authority to
interpret the Plan; to prescribe, amend and rescind rules and regulations
relating to the Plan; to determine the terms and provisions of the respective
Option agreements (which need not be identical); and to make all other
determinations necessary or advisable for the proper administration of the Plan.
The Board may at any time remove members from or add members to the Committee,
or may abolish the Committee and revest in the Board the administration of the
Plan. Vacancies on the Committee, howsoever caused, will be filled by the Board.
(b) Granting of Options to Directors and Officers.
Administrative discretion regarding the selection of any director of the
Corporation to whom Options may be granted pursuant to this Plan, or the
determination of the number of shares of Common Stock which may be allocated
under such Options, will be exercised by a Committee of two or more directors
having full authority to act in the matter, all of
<PAGE> 26
whom are Disinterested. Administrative discretion regarding the selection of any
officer of the Corporation (who is not a director) to whom Options may be
granted pursuant to this Plan, or the determination of the number of shares of
Common Stock which may be allocated under such Options, will be exercised by (i)
the Board, if each of its members is Disinterested, or (ii) a Committee of two
or more directors, all of whom are Disinterested.
5. Option Agreement. Each grant of an Option will be evidenced by
an Option agreement, executed by the holder of the Option and the Corporation,
and such other instruments in such form as the Board or Committee approves from
time to time, which instruments will (i) comply with and include expressly or by
reference the terms and conditions set forth in this Plan, and (ii) may include
such other provisions not inconsistent with the provisions of this Plan as the
Board or Committee deems advisable, including provisions granting the holder the
right to receive property at the time of exercise of the Option (provided that
Section 83 of the Code applies to any such property other than cash). The terms
and conditions of the Option agreements need not contain similar provisions. The
granting of any Option under the Plan will not be deemed either to entitle the
holder of the Option to, or to disqualify such holder from, participation in any
other grant of Options under the Plan.
6. Eligibility. Options may be granted to Key Employees and
directors of the Corporation and its present or future Subsidiaries, provided,
however, that Options granted to directors and officers of the Corporation will
comply with the provisions of paragraph 4(b) of this Plan. Substitute Options
may be granted to Key Employees and directors of any entity acquired by the
Corporation (or any subsidiary of such acquired entity).
7. Terms and Conditions of Options. Subject to the following
provisions, all Options will be in such form and upon such terms and conditions
as the Board or Committee, in its discretion, may from time to time determine.
(a) Option Price. Except in the case of Substitute Options,
the Option price per share will be an amount determined by the Committee or the
Board at the time the Option is granted, taking into account the market price of
the Common Stock on such date, the value of services provided or to be provided
by the recipient of the Options, and the overall value of the compensation of
the recipient by the Corporation and its Subsidiaries. The Option price per
share will in no event be less than the Fair Market Value of the Common Stock on
the trading day next preceding the date the Option is granted. In the case of
Substitute Options, the Option price per share will be determined by multiplying
the market price of the Common Stock immediately prior to acquisition by the
exchange ratio applicable to the class of equity securities of the acquired
entity subject to the acquired entity's options immediately prior to
acquisition, if any, or, if no such exchange ratio is applicable, by a factor
determined by the Board. The Corporation will not be required to issue Options
or Substitute Options for fractional shares, but may, in the discretion of the
Board or Committee, round to the nearest whole share.
(b) Option Term. No Option will be exercisable after the
expiration of ten (10) years from the date the Option is granted. The date of
grant will be the date on which the Board or Committee has approved the terms
and conditions of the Option agreement evidencing the Option, has determined the
recipient of the Option, the number of shares covered by the Option and the
Option price per share, and has taken all other action necessary to complete the
grant of the Option.
(c) Payment and Withholding. Payment for all shares purchased
pursuant to exercise of an Option will be made in cash, by delivery of
unrestricted shares of Common Stock at Fair Market
<PAGE> 27
Value on the date of exercise, or a combination thereof. The payment will be
made at the time the Option or any part thereof is exercised, and no shares will
be issued until full payment therefor has been made. Payment in currency or by
check, bank draft, cashier's check or postal money order will be considered
payment in cash. In addition to the Option price, the Corporation will have the
right, if applicable, to require the holder of an Option to remit to the
Corporation an amount sufficient to satisfy any federal, state or local
withholding tax liability prior to the delivery of any certificate or
certificates for shares issuable upon exercise of the Option.
(d) Conditions to Exercise of an Option. Except in the
case of a Substitute Option, no Option may be exercised to any extent until the
holder will have been employed by the Corporation or one of its Subsidiaries
continuously for at least three (3) months from the date of grant. Except as
provided in subparagraph (f) below, an Option may not be exercised by the holder
unless he is then, and continuously after the grant of the Option has been a Key
Employee of the Corporation or one of its Subsidiaries. No Option may be
exercised by a holder with respect to fractional shares unless approved by the
Board or Committee.
(e) Nontransferability of Options. An Option will not be
transferable or assignable except by will, by the laws of descent and
distribution, or pursuant to a qualified domestic relations order as defined by
the Code, Title I of the Employee Retirement Income Security Act or the rules
thereunder, and will be exercisable, during the holder's lifetime, only by him.
(f) Termination of Employment or Death. In the event that
a holder ceases to be employed by the Corporation or any of its Subsidiaries for
any reason other than his death, disability or termination for Cause and will no
longer be employed by any of them, such holder will have the right to exercise
the Option under the Plan at any time within three (3) months after his
termination of employment to the extent his right to exercise the Option has
accrued pursuant to the grant and had not previously been exercised at the date
of termination. In the event of termination of employment of the holder by
reason of disability, the holder may not exercise an Option later than twelve
(12) months after the date of such termination. If the holder of an Option dies
while he is employed by the Corporation or one of its Subsidiaries, his Option
may be exercised (to the extent that the holder will have been entitled to do so
at the date of his death) by a legatee or legatees of the holder under his last
will, or by his personal representatives or distributees, at any time during the
twelve-month period following his death. In all of the cases cited above, the
Corporation's Board of Directors or the Committee may, in its discretion, extend
the exercise period of the Option in question; provided, however, that
notwithstanding this subparagraph (f), no Option may be exercised more than ten
(10) years after the date on which such Option was granted. For purposes of this
subparagraph (f), employment of a holder will not be deemed terminated so long
as the holder is employed by the Corporation, a Subsidiary or another entity (or
an affiliate of another entity) which has assumed this Option in a transaction
to which Section 425(a) of the Code is applicable.
(g) Corporation's Purchase of Common Stock. If a holder's
employment by the Corporation or any of its Subsidiaries terminates for Cause,
the Corporation, at its discretion, may elect to purchase from the holder or his
legal representative any or all Common Stock held by the holder as of the date
of termination for a price per share equal to the Fair Market Value of a share
of Common Stock at the time the Corporation exercises its option. The
Corporation's right to purchase the Common Stock will continue for a period of
one year from the date of the holder's termination. The payment for shares
acquired by the Corporation pursuant hereto will be made, in cash or by check,
at the address of the holder as set forth in the stock records of the
Corporation, or at such other location as the parties to the purchase may
mutually agree. Upon payment by the Corporation in compliance with the
provisions of this
<PAGE> 28
subparagraph (g), the holder or his legal representative will deliver to the
Corporation for cancellation the certificate(s) evidencing the Common Stock
purchased by the Corporation. The failure of the holder or his legal
representative to so deliver the certificate(s) will not impinge the validity of
the Corporation's purchase.
(h) Changes in Capitalization; Merger; Liquidation. The
number of shares of Common Stock covered by each outstanding Option will be
proportionately adjusted, to the nearest whole share (i) for any increase or
decrease in the number of issued shares of Common Stock resulting from a
subdivision or combination of shares or the payment of a stock dividend (but
only on the Common Stock) or any other increase or decrease in the number of
such shares effected without receipt of consideration by the Corporation, or
(ii) for any spin-off or spin-out of assets to the Corporation's stockholders or
any other significant distribution of assets by the Corporation to its
stockholders without receipt of consideration by the Corporation. Any such
adjustment to an outstanding Option will be made without changing the total
price applicable to the unexercised portion of the Option, but with a
corresponding adjustment in the price for each share covered by the Option. If
the Corporation is the surviving corporation in any merger or consolidation,
each outstanding Option will pertain to and apply to the securities to which a
holder of the number of shares of Common Stock subject to the Option would have
been entitled to receive in such merger or consolidation. A dissolution or
liquidation of the Corporation or a merger or consolidation in which the
Corporation is not the surviving corporation will cause each outstanding Option
to terminate, except for Options as to which another entity assumes or
substitutes another option in a transaction to which Section 425(a) of the Code
is applicable; provided, however, that, as to any Options which so terminate,
each holder will have the right immediately prior to such dissolution,
liquidation, merger or consolidation, to exercise his Option in whole or in part
without regard to any provisions deferring exercise contained herein. To the
extent that the foregoing adjustments relate to stock or securities of the
Corporation, the adjustments will be made by the Board or Committee, whose
determination will be conclusive. Except as expressly provided in this
subparagraph (h), the holder of an Option will have no rights by reason of any
subdivision or combination of shares of stock of any class, or the payment of
any stock dividend or any other increase or decrease in the number of shares of
stock of any class, or by reason of any spin-off, spin-out or comparable
distribution of assets to the Corporation's stockholders, or by reason of any
dissolution, liquidation, merger or consolidation or distribution to the
Corporation's stockholders of assets or securities of another entity; and any
issue by the Corporation of shares of stock of any class, or securities
convertible into shares of stock of any class, will not affect, and no
adjustment by reason thereof will be made with respect to, the number or price
of shares of Common Stock subject to the Option. The existence of the Plan and
the Options granted pursuant to the Plan will not affect in any way the right or
power of the Corporation to make or authorize any adjustment, reclassification,
reorganization or other change in its capital or business structure, any merger
or consolidation of the Corporation, any issue of debt or equity securities
having preferences or priorities as to the Common Stock or the rights thereof,
the dissolution or liquidation of the Corporation, any sale or transfer of all
or any part of the Corporation's business or assets, or any other corporate act
or proceeding.
(i) Each Option will be subject to the requirement that
if at any time the Board or Committee determines that the listing, registration
or qualification of the shares subject to the Options upon any securities
exchange or under any state or federal securities or other law or regulation, or
the consent or approval of any governmental regulatory body, is necessary or
desirable as a condition to or in connection with the granting of the Option or
the issue or purchase of Common Stock thereunder, the Option may not be
exercised, in whole or in part, unless such listing, registration,
qualification, consent or approval will have been effected or obtained free of
any conditions not acceptable to the Board or Committee. The holder of the
Option will supply the Corporation with such certificates, representations,
<PAGE> 29
opinions of counsel and information as the Corporation may request, including,
without limitation, an investment letter certifying that all shares being
purchased under an Option are being acquired for investment and not for the
purpose of resale or distribution, and will otherwise cooperate with the
Corporation in obtaining such listing, registration, qualification, consent or
approval.
8. Termination and Amendment of the Plan. The Plan shall
terminate at midnight on September 5, 2001, ten (10) years after the date of its
initial adoption by the Board. No Option will be granted under the Plan after
that date, but Options granted before termination of the Plan will remain
exercisable thereafter until they expire or lapse according to their terms. The
Plan may be terminated, modified or amended by the Corporation's stockholders or
Board, so long as such modification or amendment does not result in the Plan no
longer being in compliance with Rule 16b-3. The Corporation will use its best
efforts to maintain this Plan and to assure that Options are granted and
exercised under this Plan in accordance with Rule 16b-3, including, without
limitation, the seeking of any appropriate modifications or amendments to this
Plan and all requisite approvals and consents of the same.
9. Holding Period. The grant of an Option under the Plan will
be exempt from Section 16(b) of the Securities Exchange Act of 1934, as amended,
so long as at least six (6) months elapse from the date of grant of the Option
until the date of its disposition (other than upon exercise or conversion) or
the disposition of the underlying Common Stock.
10. No Rights as Stockholder. A holder of an Option will have no
rights as a stockholder with respect to any Common Stock covered by his Option
until the date of issuance of a stock certificate to him by the Corporation
following exercise, in whole or in part, of the Option.
11. Indemnification of Board or Committee. In addition to other
rights of indemnification as they may have as members of the Board, each member
of the Board or Committee will be indemnified by the Corporation against all
costs and expenses reasonably incurred by him in connection with any action,
suit or proceeding to which he may be party by reason of any action taken or
failure to act under or in connection with the Plan, or any Option granted
thereunder, and against all amounts paid by him in settlement thereof (provided
the settlement is approved by legal counsel selected by the Corporation) or paid
by him in satisfaction of a judgment in any such action, suit or proceeding,
except a judgment based upon a finding of a breach of the duty of loyalty or
acts or omissions either not in good faith or which involve intentional
misconduct or a knowing violation of law. Upon the institution of any such
action, suit or proceeding, each Board or Committee member affected will notify
the Corporation in writing of the same, giving the Corporation an opportunity,
at its own expense, to defend the same before the member undertakes to defend it
on his own behalf.
12. Stockholder Approval. This Plan, as amended, is subject to the
approval of the holders of a majority of the outstanding shares of Common Stock
of the Corporation.
<PAGE> 30
AMENDMENT NO. 1 TO
1991 NONQUALIFIED STOCK OPTION PLAN OF
DIVERSICARE INC.
Amendment No. 1 to 1991 Nonqualified Stock Option Plan (the "Plan") of
Diversicare Inc. (the "Corporation") as approved by the Board of Directors of
the Corporation on February 21, 1992 and by the Shareholders of the Corporation
on May 7, 1992.
The Plan shall be amended by deleting number 3 thereof and replacing it
with a new number 3 so that, as amended, said number 3 shall be and read as
follows:
3. Stock Subject to the Plan. There will be reserved for issuance
upon the exercise of Options 429,000 shares of Common Stock, which will be
authorized and unissued Common Stock. If an Option expires or terminates for any
reason without being exercised in full, the shares subject thereto which have
not been purchased will again be available for purposes of the Plan. The number
of shares as to which Options may be granted under the Plan will be
proportionately adjusted, to the nearest whole share, in the event of any stock
dividend, stock split, share combination or similar recapitalization involving
the Common Stock or any spin-off, spin-out or other significant distribution of
assets to stockholders for which the Corporation receives no consideration. In
the event that there is an insufficient number of authorized shares of Common
Stock available to allow exercise of the Options on the date of any grant
hereunder, such Options will not be exercisable until there are sufficient
shares of Common Stock authorized for issuance.
-End of Amendment-
<PAGE> 31
AMENDMENT NO. 2 TO
1991 NONQUALIFIED STOCK OPTION PLAN OF
DIVERSICARE INC.
Amendment No. 2 to 1991 Nonqualified Stock Option Plan (the "Plan") of
Diversicare Inc. (the "Corporation") as approved by the Board of Directors of
the Corporation on March 23, 1993 and by the Shareholders of the Corporation on
May 7, 1993.
The Plan shall be amended by deleting number 3 thereof and replacing it
with a new number 3 so that, as amended, said number 3 shall be and read as
follows:
3. Stock Subject to the Plan. There will be reserved for issuance
upon the exercise of Options 500,000 shares of Common Stock, which will be
authorized and unissued Common Stock. If an Option expires or terminates for any
reason without being exercised in full, the shares subject thereto which have
not been purchased will again be available for purposes of the Plan. The number
of shares as to which Options may be granted under the Plan will be
proportionately adjusted, to the nearest whole share, in the event of any stock
dividend, stock split, share combination or similar recapitalization involving
the Common Stock or any spin-off, spin-out or other significant distribution of
assets of stockholders for which the Corporation receives no consideration. In
the event that there is an insufficient number of authorized shares of Common
Stock available to allow exercise of the Options on the date of any grant
hereunder, such Options will not be exercisable until there are sufficient
shares of Common Stock authorized for issuance.
-End of Amendment-
<PAGE> 32
AMENDMENT NO. 3 TO
1991 NONQUALIFIED STOCK OPTION PLAN OF
AMERICAN HOMEPATIENT, INC.
Amendment No. 3 to 1991 Nonqualified Stock Option Plan (the "Plan") of
American HomePatient, Inc. (the "Corporation") as approved by the Board of
Directors of the Corporation on February 24, 1994 and by the Shareholders of the
Corporation on July 28, 1994.
The Plan shall be amended by deleting number 3 thereof and replacing it
with a new number 3 so that, as amended, said number 3 shall be and read as
follows:
3. Stock Subject to the Plan. There will be reserved for issuance
upon the exercise of Options 760,000 shares of Common Stock, which will be
authorized and unissued Common Stock. If an Option expires or terminates for any
reason without being exercised in full, the shares subject thereto which have
not been purchased will again be available for purposes of the Plan. The number
of shares as to which Options may be granted under the Plan will be
proportionately adjusted, to the nearest whole share, in the event of any stock
dividend, stock split, share combination or similar recapitalization involving
the Common Stock or any spin-off, spin-out or other significant distribution of
assets of stockholders for which the Corporation receives no consideration. In
the event that there is an insufficient number of authorized shares of Common
Stock available to allow exercise of the Options on the date of any grant
hereunder, such Options will not be exercisable until there are sufficient
shares of Common Stock authorized for issuance.
<PAGE> 33
AMENDMENT OF 1991 NONQUALIFIED STOCK OPTION PLAN
AMENDMENT NO. 4 TO
1991 NONQUALIFIED STOCK OPTION PLAN OF
AMERICAN HOMEPATIENT, INC.
Amendment No. 4 to 1991 Nonqualified Stock Option Plan (the "Plan") of
American HomePatient, Inc. (the "Corporation") as approved by the Executive
Committee of the Board of Directors of the Company on January 23, 1995, and
ratified by the Board of Directors of the Corporation on February 8, 1995, and
as approved by the Shareholders of the Corporation on May 17, 1995.
The Plan shall be amended by deleting number 3 thereof and replacing it
with a new number 3 so that, as amended, said paragraph 3 shall be and read as
follows:
3. Stock Subject to the Plan. There will be reserved for issuance
upon the exercise of Options 1,171,500 shares of Common Stock, which
will be authorized and unissued Common Stock. If an Option expires or
terminates for any reason without being exercised in full, the shares
subject thereto which have not been purchased will again be available
for purposes of the Plan. The number of shares as to which Options may
be granted under the Plan will be proportionately adjusted, to the
nearest whole share, in the event of any stock dividend, stock split,
share combination or similar recapitalization involving the Common
Stock or any spin-off, spin-out or other significant distribution of
assets of stockholders for which the Corporation receives no
consideration. In the event that there is an insufficient number of
authorized shares of Common Stock available to allow exercise of the
Options on the date of any grant hereunder, such Options will not be
exercisable until there are sufficient shares of Common Stock
authorized for issuance.
-End of Amendment-
<PAGE> 34
AMENDMENT OF 1991 NONQUALIFIED STOCK OPTION PLAN
AMENDMENT NO. 5 TO
1991 NONQUALIFIED STOCK OPTION PLAN OF
AMERICAN HOMEPATIENT, INC.
Amendment No. 5 to 1991 Nonqualified Stock Option Plan (the "Plan") of
American HomePatient, Inc. (the "Corporation") as approved by the Board of
Directors of the Corporation on March 7, 1996, and as approved by the
Shareholders of the Corporation on May 14, 1996.
The Plan shall be amended by deleting paragraph 3 thereof and replacing
it with a new number 3 so that, as amended, said paragraph 3 shall be and read
as follows:
3. Stock Subject to the Plan. There will be reserved for issuance
upon the exercise of Options 1,841,650 shares of Common Stock, which
will be authorized and unissued Common Stock. If an Option expires or
terminates for any reason without being exercised in full, the shares
subject thereto which have not been purchased will again be available
for purposes of the Plan. The number of shares as to which Options may
be granted under the Plan will be proportionately adjusted, to the
nearest whole share, in the event of any stock dividend, stock split,
share combination or similar recapitalization involving the Common
Stock or any spin-off, spin-out or other significant distribution of
assets of stockholders for which the Corporation receives no
consideration. In the event that there is an insufficient number of
authorized shares of Common Stock available to allow exercise of the
Options on the date of any grant hereunder, such Options will not be
exercisable until there are sufficient shares of Common Stock
authorized for issuance.
-End of Amendment-
<PAGE> 35
APPENDIX B
PROXY AMERICAN HOMEPATIENT, INC. PROXY
ANNUAL MEETING OF STOCKHOLDERS, MAY 14, 1997
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Edward K. Wissing and Mary Ellen
Rodgers, or either of them, as proxies, with power of substitution, to vote all
shares of the undersigned at the Annual Meeting of the Stockholders of American
HomePatient, Inc., to be held on May 14, 1997, at 9:00 a.m. Central Daylight
Time, at 1800 First American Center, 315 Deaderick Street, Nashville, Tennessee,
37238, and at any adjournments or postponements thereof, in accordance with the
following instructions:
<TABLE>
<S> <C> <C>
(1) ELECTION OF CLASS 3 DIRECTORS
|__| FOR all nominees listed below |__| WITHHOLD AUTHORITY to vote
(except as marked to the for all nominees listed below
contrary below)
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE CHECK THE BOX TO VOTE "FOR" ALL NOMINEES AND
STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW.)
Allan C. Silber Edward Sonshine Edward K. Wissing
(2) To approve an amendment to the Company's 1991 Nonqualified Stock Option Plan to increase the number of
shares of Common Stock reserved for issuance from 2,762,475 to 3,200,000 shares.
|__| FOR |__| AGAINST |__| ABSTAIN
(3) In their discretion, on such other matters as may properly come before the meeting.
|__| FOR DISCRETION |__| AGAINST DISCRETION |__| ABSTAIN
(CONTINUED ON REVERSE SIDE)
- -------------------------------------------------------------------------------------------------------------------------------
(CONTINUED FROM OTHER SIDE)
</TABLE>
THE SHARES REPRESENTED HEREBY WILL BE VOTED AS SPECIFIED. IF NO
SPECIFICATION IS MADE, THE SHARES WILL BE VOTED FOR THE NOMINEES IN THE ELECTION
OF DIRECTORS, FOR THE AMENDMENT TO THE 1991 NONQUALIFIED STOCK OPTION PLAN, AND,
IN THE DISCRETION OF THE PROXIES, ON SUCH OTHER MATTERS AS MAY PROPERLY COME
BEFORE THE MEETING.
PLEASE SIGN AND DATE BELOW AND RETURN PROMPTLY.
Dated:__________________, 1997
__________________________________________
Dated:__________________, 1997
__________________________________________
Signatures of stockholder(s) should
correspond exactly with the name printed
hereon. Joint owners should each sign
personally. Executors, administrators,
trustees, etc., should give full title and
authority.
AMERICAN HOMEPATIENT, INC.
5200 MARYLAND WAY, SUITE 400
BRENTWOOD, TENNESSEE 37027-5018
