<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /x/
Filed by a Party other than the Registrant / /
<TABLE>
<S> <C>
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
/x/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
AMERICAN HEALTH PROPERTIES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/x/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing
fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid: $125.00
- --------------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form of Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
American Health Properties, Inc.
6400 SOUTH FIDDLER'S GREEN CIRCLE, SUITE 1800
ENGLEWOOD, COLORADO 80111
---------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 23, 1996
The 1996 Annual Meeting of Shareholders of American Health Properties,
Inc., a Delaware corporation (the "Company"), will be held at the Regent Beverly
Wilshire Hotel, 9500 Wilshire Boulevard, Beverly Hills, California at 1:30 p.m.
local time, on May 23, 1996, for the following purposes:
(1) To elect three Class III directors to a term of three years.
(2) To approve the appointment of the accounting firm of Arthur
Andersen LLP as the Company's auditors and independent public accountants
for the fiscal year ending December 31, 1996.
(3) To transact such other business as may properly come before the
meeting or any adjournment thereof.
Holders of record of the Company's common stock, $.01 par value (the
"Common Stock") and Psychiatric Group Depositary Shares (the "Depositary
Shares") as of the close of business on March 29, 1996 (the "Record Date") are
entitled to notice of and to vote on the matters presented at the Annual
Meeting. Each Depositary Share represents one-tenth of one share of the
Company's Psychiatric Group Preferred Stock, $.01 par value (the "Psychiatric
Group Preferred Stock"), which has been deposited with Chemical Mellon
Shareholder Services, L.L.C., as Depositary (the "Depositary"). The Common Stock
and the Psychiatric Group Preferred Stock vote as a single class at the Annual
Meeting, with each holder of Common Stock being entitled to one vote per share
and each holder of Depositary Shares being entitled to instruct that .7015 of a
vote per Depositary Share be cast by the Depositary.
YOUR VOTE IS IMPORTANT. PLEASE COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED
PROXY OR INSTRUCTION CARD, AS THE CASE MAY BE, AS SOON AS POSSIBLE.
HOLDERS OF COMMON STOCK MAY VOTE BY COMPLETING THE ENCLOSED PROXY AND
RETURNING IT IN THE ENCLOSED ENVELOPE. THE PROXY IS REVOCABLE AT ANY TIME. ANY
HOLDER OF COMMON STOCK ENTITLED TO VOTE AND WHO ATTENDS THE ANNUAL MEETING MAY
VOTE PERSONALLY ON ALL MATTERS BROUGHT BEFORE THE ANNUAL MEETING AND, IN THAT
EVENT, HIS OR HER PROXY WILL NOT BE USED.
HOLDERS OF DEPOSITARY SHARES MAY ONLY VOTE BY COMPLETING THE ENCLOSED
INSTRUCTION CARD AND RETURNING THE CARD TO THE DEPOSITARY IN THE ENCLOSED
ENVELOPE. THE INSTRUCTION CARD MAY BE REVOKED AT ANY TIME PRIOR TO 5:00 P.M.
PACIFIC DAYLIGHT TIME ON MAY 22, 1996 BY GIVING NOTICE TO THE DEPOSITARY OR BY
FILING A LATER DATED INSTRUCTION CARD WITH THE DEPOSITARY. THE DEPOSITARY WILL
VOTE THE PSYCHIATRIC GROUP PREFERRED STOCK REPRESENTED BY THE DEPOSITARY SHARES
IN ACCORDANCE WITH SUCH INSTRUCTIONS. IN THE ABSENCE OF SPECIFIC INSTRUCTIONS
FROM ANY HOLDER OF DEPOSITARY SHARES, THE DEPOSITARY WILL ABSTAIN FROM VOTING
WITH RESPECT TO THE PSYCHIATRIC GROUP PREFERRED STOCK UNDERLYING SUCH DEPOSITARY
SHARES.
By Order of the Board of Directors,
/s/ MICHAEL J. MCGEE
Michael J. McGee
Corporate Secretary
April 15, 1996
<PAGE> 3
American Health Properties, Inc.
6400 SOUTH FIDDLER'S GREEN CIRCLE, SUITE 1800
ENGLEWOOD, COLORADO 80111
------------------------
PROXY STATEMENT
------------------------
This proxy statement and the enclosed Proxy or Instruction Card, as the
case may be, are first being mailed on or about April 25, 1996 to shareholders
of the Company, in connection with the solicitation by the Board of Directors of
the Company of proxies for use at the annual meeting of shareholders to be held
on May 23, 1996, and any adjournments thereof.
The total cost of soliciting proxies will be borne by the Company. The
Company has engaged the firm of Corporate Investor Communications, Inc. as proxy
solicitors. The fee to such firm for solicitation services is estimated to be
$4,500, plus reimbursement of out-of-pocket expenses. In addition, proxies may
be solicited by officers and regular employees of the Company, without extra
remuneration, by personal interviews, telephone and telegraph. It is anticipated
that banks, brokerage houses and other custodians, nominees and fiduciaries will
forward soliciting material to beneficial owners of shares entitled to vote on
the matters presented at the meeting, and such persons will be reimbursed for
the out-of-pocket expenses incurred by them in this connection.
RECORD DATE AND VOTING SECURITIES
Only holders of the Company's $.01 par value Common Stock (the "Common
Stock") and Psychiatric Group Depositary Shares (the "Depositary Shares") as of
the close of business on March 29, 1996 (the "Record Date") are entitled to
notice of and to vote on the matters presented at the Annual Meeting. Each
Depositary Share represents one-tenth of one share of the Company's Psychiatric
Group Preferred Stock, $.01 par value (the "Psychiatric Group Preferred Stock").
The Psychiatric Group Preferred Stock has been deposited with Chemical Mellon
Shareholder Services, L.L.C., as Depositary (the "Depositary"). As the
registered holder of the Psychiatric Group Preferred Stock, the Depositary will
vote the Psychiatric Group Preferred Stock represented by the Depositary Shares
at the Annual Meeting pursuant to instructions given to the Depositary by the
holders of the Depositary Shares. Holders of Depositary Shares will therefore
exercise their vote by instructing the Depositary pursuant to the Instruction
Card enclosed with this proxy statement. In the absence of specific instructions
from any holder of Depositary Shares, the Depositary will abstain from voting
with respect to the Psychiatric Group Preferred Stock underlying such Depositary
Shares.
On the Record Date, there were outstanding 23,446,973 shares of Common
Stock as well as 2,084,282 Depositary Shares representing approximately 208,428
shares of Psychiatric Group Preferred Stock, which constituted all of the
outstanding voting securities of the Company. Each share of Common Stock is
entitled to one vote on all matters presented at the Annual Meeting. Each full
share of Psychiatric Group Preferred Stock is entitled to 7.015 votes on all
matters presented at the Annual Meeting; accordingly, each Depositary
<PAGE> 4
Share is entitled to instruct that .7015 of a vote per Depositary Share be cast
by the Depositary on all matters presented at the Annual Meeting. The number of
votes to which the Psychiatric Group Preferred Stock (and thereby the Depositary
Shares) is entitled differs from year to year, but is based on a ratio of the
average market price of one share of the Psychiatric Group Preferred Stock to
the average market price of one share of Common Stock for the ten trading days
preceding the Record Date. There is no cumulative voting. The presence of a
majority of the votes represented by the Common Stock and the Psychiatric Group
Preferred Stock outstanding and entitled to vote, considered as a single class,
is required to constitute a quorum. The affirmative vote of a majority of the
total number of votes represented by the shares of Common Stock and Psychiatric
Group Preferred Stock represented and voted at the Annual Meeting, assuming a
quorum is present, is necessary for the approval of all matters presented at the
meeting. Abstentions and broker non-votes are counted for purposes of
determining the presence or absence of a quorum for the transaction of business.
Abstentions are counted in tabulations of the vote cast on proposals presented
to the shareholders and thus have the same effect as a negative vote, whereas
broker non-votes are not tabulated for any purpose in determining whether a
proposal has been approved.
A list of the shareholders entitled to vote on the matters presented at the
Annual Meeting may be examined at the Company's principal executive offices,
which are located at 6400 South Fiddler's Green Circle, Suite 1800, Englewood,
Colorado, 80111, during the ten-day period preceding the Annual Meeting.
VOTING PROCEDURES
PROXY FOR COMMON STOCK
If the enclosed Proxy is properly executed and returned, the shares of
Common Stock represented thereby will be voted in the manner specified. If no
specification is made on the Proxy, then the shares shall be voted in accordance
with the recommendations of the Board of Directors. A Proxy may be revoked by a
shareholder at any time prior to the exercise thereof by written notice to the
Secretary of the Company, by submission of any other Proxy bearing a later date
or by attending the Annual Meeting and voting in person.
The accompanying Proxy will also be voted in connection with the
transaction of such other business as may properly come before the Annual
Meeting or any adjournment thereof. Management knows of no other matters other
than the matters set forth above to be considered at the Annual Meeting. If,
however, any other matters properly come before the Annual Meeting or any
adjournment or adjournments thereof, the person named in the accompanying Proxy
will vote such Proxy in accordance with his best judgment on such matter. The
persons named in the accompanying Proxy will also, if in their judgment it is
deemed to be advisable, vote to adjourn the Annual Meeting from time to time.
Only those Proxies that are properly executed and received by 1:30 p.m.
Pacific Daylight Time on May 23, 1996 will be voted at the Annual Meeting.
INSTRUCTION CARD FOR DEPOSITARY SHARES
Holders of Depositary Shares may only vote by completing the enclosed
Instruction Card and returning the card to the Depositary. The Depositary will
vote the Psychiatric Group Preferred Stock represented by the Depositary Shares
in accordance with such instructions. In the absence of specific instructions
from a holder
2
<PAGE> 5
of Depositary Shares, the Depositary will abstain from voting with respect to
the Psychiatric Group Preferred Stock underlying such Depositary Shares. An
Instruction Card may be revoked by a shareholder at any time prior to 5:00 p.m.
Pacific Daylight Time on May 22, 1996 by written notice to the Depositary or by
filing a later dated Instruction Card with the Depositary.
The accompanying Instruction Card will also be voted in connection with the
transaction of such other business as may properly come before the Annual
Meeting or any adjournment thereof. Management knows of no other matters other
than the matters set forth above to be considered at the Annual Meeting. If,
however, any other matters properly come before the Annual Meeting or any
adjournment or adjournments thereof, the Depositary will vote in accordance with
its best judgment on such matter. The Depositary will also, if in its judgment
it is deemed to be advisable, vote to adjourn the Annual Meeting from time to
time.
Only those Instruction Cards that are properly executed and received by the
Depositary by 5:00 p.m. Pacific Daylight Time on May 22, 1996 will be utilized
by the Depositary to vote the Psychiatric Group Preferred Stock at the Annual
Meeting.
ELECTION OF DIRECTORS
(PROPOSAL NO. 1)
There are currently eight members of the Board of Directors. The members of
the Board of Directors are divided into three classes. Class I consists of two
directors who are serving a three-year term expiring at the 1997 annual meeting
of shareholders. Class II consists of three directors who are serving a
three-year term expiring at the 1998 annual meeting of shareholders. Class III
consists of three directors who will be elected to a three-year term expiring at
the 1999 annual meeting of shareholders. In each case, a director serves for the
designated term and until his respective successor is elected and qualified.
Vacancies on the Board of Directors may be filled by the affirmative vote of a
majority of the remaining directors then in office. A director elected to fill a
vacancy (including a vacancy created by an increase in the Board of Directors)
shall serve for the remainder of the full term of the class of directors in
which the vacancy occurred or the new directorship was created.
The Board of Directors has nominated Sheldon S. King, Walter J. McNerney
and Louis T. Rosso for election as Class III directors. Messrs. King, McNerney
and Rosso are presently directors of the Company. In the event any nominee is
unable to or declines to serve as a director at the time of the Annual Meeting
(which is not anticipated), Proxies will be voted for the election of such
person or persons, if any, as may be designated by the present Board of
Directors. Information with respect to each nominee is set forth under the
heading entitled "Management -- Directors and Executive Officers."
Nominations to the Board of the Directors will not be accepted at the
Annual Meeting. The affirmative vote of a majority of the total number of votes
represented by the shares of Common Stock and Psychiatric Group Preferred Stock
represented and voted at the Annual Meeting, assuming a quorum is present, is
necessary for the election of directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF SHELDON S. KING,
WALTER J. MCNERNEY AND LOUIS T. ROSSO AS DIRECTORS OF THE COMPANY.
3
<PAGE> 6
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the names and titles of the executive
officers and the members of the Board of Directors of the Company.
<TABLE>
<CAPTION>
NAME POSITION
- ------------------------------ ---------------------------------------------------
<S> <C>
Walter J. McNerney............ Chairman of the Board of Directors of the Company,
Class III Director
Joseph P. Sullivan............ President and Chief Executive Officer of the
Company, Class II Director
C. Gregory Schonert........... Senior Vice President and Chief Development Officer
of the Company
Michael J. McGee.............. Senior Vice President, Chief Financial Officer,
Treasurer and Secretary of the Company
Thomas T. Schleck............. Senior Vice President and Chief Investment Officer
of the Company
Norman Barker, Jr............. Class I Director
Royce Diener.................. Class II Director
James L. Fishel............... Class I Director
Charles M. Haar............... Class II Director
Sheldon S. King............... Class III Director
Louis T. Rosso................ Class III Director
</TABLE>
Mr. McNerney has been the Chairman of the Board since February 1988 and was
the Chief Executive Officer of the Company from February 1988 to May 15, 1992
and from January 15, 1993 to February 11, 1993. He has also been Herman Smith
Professor of Health Policy, J.L. Kellogg Graduate School of Management,
Northwestern University since 1982 and was managing partner of Walter J.
McNerney and Associates, a management consulting firm in the health field,
during 1982-1992. He is a director of The Stanley Works, Nellcor Incorporated,
Value Health, Inc., Medicus Systems, Inc., Hanger Orthopedic, Inc., Osteotech,
Inc. and Ventritex, Inc. Mr. McNerney has been a director of the Company since
January 1987 and is 70 years old.
Mr. Sullivan has been the President and Chief Executive Officer of the
Company since February 11, 1993. Prior to that, Mr. Sullivan spent 20 years with
Goldman, Sachs & Co. where he had overall investment banking responsibility for
numerous companies in the health care field. He is a member of the Board of
Governors of the National Association of Real Estate Investment Trusts (NAREIT).
He has been a director of the Company since February 1993 and is 53 years old.
Mr. Schonert has been the Senior Vice President and Chief Development
Officer of the Company since April 1988. Prior to that, Mr. Schonert had been
the Assistant Administrator of Marketing and Planning at
4
<PAGE> 7
St. Joseph's Hospital, Houston, Texas since February 1987. From September 1985
until February 1987, Mr. Schonert was a Manager in the Corporate Development
Department of American Medical International, Inc. ("AMI"), an international
owner and operator of for-profit hospitals, and is 40 years old.
Mr. McGee has been the Senior Vice President and Chief Financial Officer
and Secretary of the Company since January 1996, has served as Treasurer of the
Company since August 1995 and has served as Controller of the Company since
November 1989. Mr. McGee was a certified public accountant with Arthur Andersen
LLP from 1977 to November 1989 and is 40 years old.
Mr. Schleck has been the Senior Vice President and Chief Investment Officer
of the Company since April 1996. Prior to that, Mr. Schleck was a Managing
Director/Partner of Covington Group, LC from July 1994 to April 1996, and from
October 1988 to May 1994 he was Chief Financial Officer and Treasurer of EPIC
Healthcare Group, Inc. From March 1982 to October 1988, Mr. Schleck was
Corporate Vice President/Treasurer of AMI, and prior to that, he held various
positions in health care lending with Bank of America NT&SA from June 1970 to
March 1982. Mr. Schleck is 48 years old.
Mr. Barker is the retired Chairman of the Board of Directors of First
Interstate Bank of California. He served in that position from 1973 to 1986. He
is Chairman of the Board of Pacific American Income Shares, Inc., Chairman of
the Board of Fidelity Federal Bank, a director of TCW Convertible Securities
Fund, Inc. and ICN Pharmaceuticals, Inc. Mr. Barker has been a director of the
Company since its formation in 1986 and is 73 years old.
Mr. Diener was the President and Chief Executive Officer of AMI from 1975
until 1979, and continued with AMI as Chairman and Chief Executive Officer until
1985. From 1985 until January 1988, Mr. Diener served as Chairman of AMI. He
again served as Chairman and Chief Executive Officer from September 1988 until
February 1989, after which he continued as a director until his retirement from
the board of AMI in November 1989. He is a member of the Board of Directors of
Acuson, Inc. and Advanced Technology Venture Fund. Mr. Diener has been a
director of the Company since its organization in 1986 and is 77 years old.
Mr. Fishel was the Vice President and Chief Credit Officer of General
Electric Capital Corporation, the financial arm of General Electric Corporation
from 1984 to 1994. Mr. Fishel is a director of Noble Drilling Corporation. Mr.
Fishel has been a director of the Company since May 1994 and is 64 years old.
Mr. Haar has been the Louis D. Brandeis Professor of Law at Harvard
University since 1975. Mr. Haar is a director of Banner Aerospace, Inc. He has
been a director of the Company since its organization in 1986 and is 75 years
old.
Mr. King has been the Executive Vice President of Salick Health Care, Inc.
since February 8, 1994. He was formerly the President of Cedars-Sinai Medical
Center, Los Angeles, California from 1989 to January 15, 1994. Previously, he
served as President of Stanford University Hospital from 1986 to 1989. He has
been a director of the Company since February 1988 and is 64 years old.
Mr. Rosso has been the Chairman of the Board and Chief Executive Officer of
Beckman Instruments, Inc., a leading supplier of laboratory systems for life
sciences and diagnostics since 1989. He is a member of the Board of Directors of
Allergan, Inc. Mr. Rosso has been a director of the Company since May 1994 and
is 62 years old.
5
<PAGE> 8
BOARD COMMITTEES AND MEETINGS
The Board of Directors held 14 meetings during 1995. No director attended
fewer than 75% of the meetings of the Board and its committees on which he
served.
The Company's Board of Directors has standing Audit, Finance, Investment
and Compensation and Board Affairs Committees.
The Audit Committee, composed exclusively of directors who are not
employees of the Company, meets with the Company's independent auditors from
time to time during the course of their audit and throughout the year to review
audit procedures and receive recommendations and reports from the auditors. The
Audit Committee monitors the Company's compliance with federal tax laws and
regulations necessary to maintain the Company's status as a real estate
investment trust ("REIT"). In addition, this Committee monitors all corporate
activities to assure conformity with good practice and government regulations.
The Audit Committee consists of Messrs. Haar (chairman), Barker and Diener. The
Audit Committee met three times during 1995.
The Finance Committee is charged with the responsibility of evaluating the
overall financial needs and financial strategy of the Company. The Finance
Committee met two times during 1995. This Committee is composed of Messrs. King
(chairman), Barker, Diener, Haar, McNerney and Sullivan.
The members of the Investment Committee are Messrs. Diener (chairman),
Fishel, King, McNerney and Sullivan. This Committee is responsible for reviewing
proposed investments and divestitures to be made by the Company. The Investment
Committee met seven times during 1995.
The members of the Compensation and Board Affairs Committee are Messrs.
Barker (chairman), King, McNerney and Rosso. This Committee is responsible for
reviewing and recommending to the full Board compensation of officers and
directors, management's nominees for officers of the Company and the terms of
employment agreements to assure continuity of a well-qualified management team.
The Compensation and Board Affairs Committee is also responsible for corporate
governance, Board governance and policies, nominations to the Board of Directors
and Board Committee structure and membership. This Committee met five times
during 1995.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES AND EXCHANGE ACT OF 1934
The Company's directors and executive officers and persons who are
beneficial owners of more than 10% of the Common Stock or the Depositary Shares
("10% beneficial owners") are required to file reports of their holdings and
transactions in Common Stock and the Depositary Shares with the Securities and
Exchange Commission (the "Commission") and to furnish the Company with such
reports. Based solely upon its review of the copies of such reports the Company
has received or upon written representations it has obtained from certain of
these persons, the Company believes that, as of February 14, 1996, all of the
Company's directors, executive officers and 10% beneficial owners had complied
with all applicable Section 16(a) filing requirements.
6
<PAGE> 9
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of April 15, 1996, the shares of Common
Stock and Depositary Shares beneficially owned (including shares subject to
options exercisable within 60 days of such date) by each Director and Named
Executive Officer and all Directors and Named Executive Officers as a group.
Except as otherwise indicated, to the knowledge of the Company, all persons
listed below have sole voting and investment power with respect to their shares
of Common Stock and Depositary Shares. The beneficial holdings of each person
listed below represent less than 1% of the outstanding shares of Common Stock
and Depositary Shares.
<TABLE>
<CAPTION>
COMMON STOCK DEPOSITARY SHARES
------------------------------------ ------------------------------------
OPTIONS TOTAL OPTIONS TOTAL
SHARES EXERCISABLE SHARES SHARES EXERCISABLE SHARES
NAME OF HELD WITHIN 60 BENEFICIALLY HELD WITHIN 60 BENEFICIALLY
BENEFICIAL OWNER OF RECORD DAYS OWNED OF RECORD DAYS OWNED
- ------------------------------------------ --------- ----------- ------------ --------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Norman Barker, Jr......................... 1,000 45,000 46,000 100 4,500 4,600
Royce Diener(1)........................... 4,500 65,000 69,500 750 6,500 7,250
James L. Fishel........................... 500 25,000 25,500 0 2,500 2,500
Charles M. Haar........................... 6,000 65,000 71,000 600 6,500 7,100
Sheldon S. King........................... 1,000 65,000 66,000 100 6,500 6,600
Geoffrey D. Lewis(2)...................... 0 0 0 0 0 0
Michael J. McGee.......................... 12,723 39,024 51,747 1,271 3,903 5,174
Walter J. McNerney........................ 5,000 105,000 110,000 500 10,500 11,000
Louis T. Rosso............................ 1,000 25,000 26,000 0 2,500 2,500
C. Gregory Schonert....................... 12,294 62,555 74,849 1,228 6,256 7,484
Victor C. Streufert(3).................... 0 0 0 0 0 0
Joseph P. Sullivan........................ 36,513 145,500 182,013 3,260 14,551 17,811
All Directors and Executive Officers as a
Group (12 persons)(4)................... 80,530 642,079 722,609 7,809 64,210 72,019
</TABLE>
- ---------------
(1) Mr. Diener disclaims beneficial ownership of 300 Depositary Shares that are
owned by his wife.
(2) Mr. Lewis resigned from the Company in September 1995.
(3) Mr. Streufert resigned from the Company in August 1995.
(4) Total beneficially owned represents approximately 3.0% of the outstanding
shares of Common Stock and approximately 3.4% of the outstanding Depositary
Shares.
7
<PAGE> 10
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth compensation paid or earned for services
rendered during the fiscal years ended December 31, 1995, 1994 and 1993, to or
by the Company's Chief Executive Officer, the two other executive officers who
were serving as executive officers of the Company at December 31, 1995, and two
former executive officers of the Company (collectively, the "Named Executive
Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-------------------------
NUMBER OF
ANNUAL COMPENSATION RESTRICTED SECURITIES
------------------- STOCK UNDERLYING ALL OTHER
NAME AND POSITION SALARY BONUS AWARDS(1) OPTIONS(2) COMPENSATION(3)
- ---------------------------------- -------- -------- ---------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Joseph P. Sullivan 1995 $477,000 $384,700 $143,100 53,193 $58,100
President and Chief 1994 474,800 190,800 0(5) 50,000(5) 35,900
Executive Officer 1993(4) 398,800 450,000(5) 500,000 63,096 36,800
C. Gregory Schonert 1995 167,200 100,000 27,100 13,509 34,000
Senior Vice President and 1994 160,400 40,600 0 4,458 32,900
Chief Development Officer 1993 147,000 106,400 0 9,500 32,000
Michael J. McGee 1995 142,900 85,500 25,100(6) 10,258(6) 30,600
Senior Vice President, 1994 137,200 37,700(6) 0 3,303 30,600
Chief Financial Officer, 1993 125,000 78,000 0 7,500 30,500
Treasurer and Secretary
Victor C. Streufert(7) 1995 134,700 92,200 46,700 19,488 34,500
Former Executive Vice 1994 194,200 70,100 0 6,294 31,800
President and 1993 177,900 147,200 0 13,500 33,400
Chief Financial Officer
Geoffrey D. Lewis(7) 1995 143,400 85,800 36,200 15,717 35,000
Former Senior Vice 1994 183,600 54,200 0 5,102 32,100
President, General Counsel 1993 169,300 121,800 0 11,000 33,100
and Secretary
</TABLE>
- ---------------
(1) The dollar amount of restricted stock awards is based on the fair market
price of the Company's Common Stock on the date of grant. Such prices for
1993, 1994 and 1995 were $23.625, $27.125 and $20.625, respectively. On July
25, 1995, the Company distributed one Depositary Share for every ten shares
of Common Stock held of record on July 14, 1995, each such Depositary Share
representing a one-tenth interest in one share of Psychiatric Group
Preferred Stock (the "Distribution"). Each holder of restricted Common Stock
also received in the Distribution one Depositary Share for every ten shares
of restricted Common Stock held on July 14, 1995. See "-- Adjustments to
Stock and Option Awards to Reflect the Distribution." Restricted stock
awards for 1993 vest ratably over five years. Restricted stock awards for
1995 vest ratably over two years. Dividends are paid on the restricted
shares at the same rate as all other shares of Common Stock or Depositary
Shares, as the case may be.
8
<PAGE> 11
The table below shows the aggregate shares of restricted stock that were
held and remain restricted at December 31, 1995, the value of such shares
on December 31, 1995 and the number of shares granted in 1993, 1994 and
1995.
<TABLE>
<CAPTION>
AGGREGATE VALUE OF
RESTRICTED AGGREGATE GRANTS
STOCK HELD RESTRICTED -------------------------
AT DECEMBER 31, 1995 STOCK 1993 1994 1995
-------------------- ---------- ------ ---- -----
<S> <C> <C> <C> <C> <C>
Joseph P. Sullivan(5)
Common Stock 11,934 $256,600 21,164 0 6,938
Depositary Shares 1,193 17,900
C. Gregory Schonert
Common Stock 3,084 66,300 0 0 1,313
Depositary Shares 308 4,600
Michael J. McGee(6)
Common Stock 4,031(8) 86,700(8) 0 0 1,219
Depositary Shares 403(8) 6,100(8)
Victor C. Streufert(7)
Common Stock 0 0 0 0 2,264
Depositary Shares 0 0
Geoffrey D. Lewis(7)
Common Stock 0 0 0 0 1,753
Depositary Shares 0 0
</TABLE>
(2) Amounts included represent options to purchase Common Stock on the date of
grant and have not been adjusted for the Distribution. Stock options vest
ratably over two years and are coupled with dividend equivalent rights.
(3) Includes amounts paid for 1995 under the Company's Money Purchase Retirement
Plan, Executive Medical and Financial Planning Reimbursement Plan and for
life insurance policies as follows:
<TABLE>
<CAPTION>
MEDICAL AND
FINANCIAL LIFE
RETIREMENT PLANNING INSURANCE
---------- ----------- ---------
<S> <C> <C> <C>
Joseph P. Sullivan $ 30,000 $22,200 $ 5,900
C. Gregory Schonert 30,000 2,800 1,200
Michael J. McGee 30,000 0 600
Victor C. Streufert(7) 30,000 4,000 500
Geoffrey D. Lewis(7) 30,000 4,100 900
</TABLE>
(4) Mr. Sullivan commenced employment with the Company on February 11, 1993.
(5) Pursuant to an election made by Mr. Sullivan, in lieu of $157,500 of the
amount shown for his 1993 bonus, he received 5,807 shares of restricted
stock and options to purchase 5,807 shares of Common Stock (together with
dividend equivalent rights) at the fair market value thereof on the date the
bonus was awarded. Such restricted stock and options are included as bonus
in 1993 and not as a grant of restricted stock or options in 1994.
9
<PAGE> 12
(6) Pursuant to an election made by Mr. McGee, in lieu of $28,300 of the amount
shown for his 1994 bonus, he received 1,372 shares of restricted stock and
options to purchase 1,372 shares of Common Stock (together with dividend
equivalent rights) at the fair market value thereof on the date the bonus
was awarded. Such restricted stock and options are included as bonus in 1994
and not as a grant of restricted stock or options in 1995.
(7) Messrs. Streufert and Lewis resigned from the Company in August 1995 and
September 1995, respectively. Pursuant to negotiated resignation agreements,
each officer's salary and bonus for 1995 was prorated based on his period of
service during 1995, the vesting of options to purchase 28,160 shares of
Common Stock (together with dividend equivalent rights) was accelerated, all
other unvested options to purchase Common Stock and Depositary Shares were
cancelled, and all restricted stock was forfeited.
(8) Includes restricted stock received by Mr. McGee, at his election, in lieu of
a portion of Mr. McGee's 1994 bonus, as set forth in Note 6 above.
The following table sets forth certain information concerning individual
grants of options to purchase Common Stock made to each of the Named Executive
Officers during the year ended December 31, 1995:
OPTION GRANTS IN 1995
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF
SECURITIES TOTAL STOCK AVERAGE
UNDERLYING OPTIONS EXERCISE
OPTIONS GRANTED TO PRICE EXPIRATION PRESENT VALUE ON
NAME GRANTED(1) EMPLOYEES ($/SH)(1) DATE DATE OF GRANT(2)
--------------------- ----------- ------------- --------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Joseph P. Sullivan 53,193 47.42% $20.625 01/25/05 $118,600
C. Gregory Schonert 13,509 12.04% 20.625 01/25/05 30,100
Michael J. McGee 10,258 9.15% 20.625 01/25/05 22,900
Victor C.
Streufert(3) 19,488 17.38% 20.625 01/25/05 43,500
Geoffrey D. Lewis(3) 15,717 14.01% 20.625 01/25/05 35,000
</TABLE>
- ---------------
(1) Stock options were granted in tandem with dividend equivalent rights
("DERs") on January 25, 1995 at the fair market price of the Company's
Common Stock on that date. All stock options granted in 1995 were options to
purchase Common Stock. In July 1995, the Company adjusted all then
outstanding stock options to reflect the Distribution. See "-- Adjustments
to Stock and Option Awards to Reflect the Distribution." At December 31,
1995, after giving effect to the Distribution, the number of DER shares
relating to options for Common Stock held by the Named Executive Officers
were as follows: Mr. Sullivan: 5,802; Mr. Schonert: 1,474; Mr. McGee: 1,119;
Mr. Streufert: 0; and Mr. Lewis: 0. The dollar value of all such DER shares
at December 31, 1995, based on the closing price of the Common Stock on
December 31, 1995, was $180,500. At December 31, 1995, after giving effect
to the Distribution, the number of DER shares relating to options for
Depositary Shares held by the Named Executive Officers were as follows: Mr.
Sullivan: 734; Mr. Schonert: 187; Mr. McGee: 142; Mr. Streufert: 0; and Mr.
Lewis: 0. The dollar value of all such DER shares at December 31, 1995,
based on the closing price of the Depositary Shares on December 31, 1995,
was $15,900.
10
<PAGE> 13
(2) Estimated present values as of January 25, 1995 are based on the
Black-Scholes Model, a mathematical formula used to value options traded on
stock exchanges. The Black-Scholes Model considers a number of factors,
including the stock's volatility and dividend rate, the term of the option,
and interest rates. The ultimate value of the options will depend on the
future market price of the Common Stock, which cannot be forecast with
reasonable accuracy. The expected volatility of the Common Stock used in
valuing the options is .25, and is based on the 60-month historical
volatility of the Common Stock. The future dividend yield assumed in valuing
the options is 8.5%. The options are valued assuming they will be exercised
just prior to their expiration in 10 years. The risk-free rate of return
used in valuing the options is 7.87%. This risk-free rate of return was
determined based upon the quoted yields for 10-Year U.S. Treasury Strips
(principal only securities) at the approximate date the options were
granted. Estimated present values do not include DERs. In July 1995, the
Company adjusted all then outstanding stock options to reflect the
Distribution. See "-- Adjustments to Stock and Option Awards to Reflect the
Distribution."
(3) Messrs. Streufert and Lewis resigned from the Company in August 1995 and
September 1995, respectively.
The following table sets forth certain information concerning the exercise
of stock options by the Named Executive Officers during the year ended December
31, 1995 and the value of stock options held as of December 31, 1995 by each of
the Named Executive Officers:
AGGREGATED OPTION EXERCISES IN 1995 AND OPTION VALUES AT DECEMBER 31, 1995
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES DECEMBER 31, 1995 DECEMBER 31, 1995(2)
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Joseph P. Sullivan(3)
Common Stock 0 $ 0 91,000 81,096 $ 345,200 $ 310,800
Depositary Shares 0 0 9,101 8,109 0 0
C. Gregory Schonert
Common Stock 0 0 53,571 15,738 63,500 72,100
Depositary Shares 0 0 5,357 1,574 0 0
Michael J. McGee(3)
Common Stock 0 0 32,244 13,281 27,500 61,600
Depositary Shares 0 0 3,225 1,328 0 0
Victor C. Streufert(4)
Common Stock 33,859 82,300 0 0 0 0
Depositary Shares 0 0 0 0 0 0
Geoffrey D. Lewis(4)
Common Stock 38,074 90,900 0 0 0 0
Depositary Shares 0 0 0 0 0 0
</TABLE>
11
<PAGE> 14
- ---------------
(1) Value realized at exercise is the difference between the closing price on
the date of exercise less the exercise price per share of Common Stock or
Depositary Share, multiplied by the number of shares acquired upon
exercise, including accumulated tandem DER shares.
(2) Calculated based on the closing prices of the Common Stock and the
Depositary Shares at December 31, 1995 multiplied by the number of
applicable shares in-the-money, less the total exercise price for such
shares and considering accumulated tandem DER shares.
(3) Includes options received by Messrs. Sullivan and McGee, at their election,
in lieu of a portion of their 1993 and 1994 bonuses, respectively, as set
forth in Notes 5 and 6 to the "Summary Compensation Table".
(4) Messrs. Streufert and Lewis resigned from the Company in August 1995 and
September 1995, respectively.
EMPLOYMENT AGREEMENTS
Joseph P. Sullivan, who commenced employment as President and Chief
Executive Officer of the Company on February 11, 1993, is entitled to receive
minimum compensation under a three-year employment agreement with the Company at
a rate of $494,000 per annum in 1996. Messrs. Schonert and McGee are entitled to
receive minimum compensation under two-year employment agreements with the
Company at the rate of $175,250 and $165,000 per annum in 1996, respectively. If
the employment of Mr. Sullivan is terminated by reason of a "change of control"
(as defined in his employment agreement), he will be entitled to receive a
payment equal to three times his average salary plus bonus for the three most
recent years. If the employment of either Messrs. Schonert or McGee is
terminated by reason of a "change of control" (as defined in their employment
agreements), he will be entitled to receive a payment equal to two times his
average salary plus bonus for the two most recent years.
INCENTIVE BONUS PLAN
The Company's incentive bonus plan for fiscal 1995 covered a total of 14
employees, including executive officers. The incentive program is designed to
reward the Company's employees based upon the Company's attaining or surpassing
goals for annual cash flow per share and other operating and strategic goals.
Actual incentive bonus awards granted are determined by a "base" award schedule
specified by the Compensation and Board Affairs Committee of the Board of
Directors and are contingent upon achievement of specified goals. Awards are
determined at year end and depend upon (a) the Company's actual cash flow per
share versus the goals set at the start of the year, (b) growth in the current
year's cash flow per share, and (c) a judgmental review by the Committee of the
Company's operational and strategic performance.
STOCK INCENTIVE PLANS
The Company's Board of Directors and shareholders have approved the 1988
Stock Option Plan (the "1988 Plan"), the 1990 Stock Incentive Plan (the "1990
Plan") and the 1994 Stock Incentive Plan (the "1994 Plan") (collectively, the
"Plans"). A total of (i) 450,000 shares of Common Stock have been reserved for
issuance under the 1988 Plan, (ii) 750,000 shares of Common Stock have been
reserved for issuance under the 1990 Plan, and (iii) 1,000,000 shares of Common
Stock have been reserved for issuance under the 1994
12
<PAGE> 15
Plan. Each of the Plans provides for the granting of stock options, shares of
restricted stock and stock appreciation rights to key employees, and the 1994
Plan also provides for the granting of deferred shares, performance shares and
performance units to key employees. The number of shares covered by the Plans
and outstanding awards are subject to an adjustment in the case of changes in
the Company's capital structure, business combinations, reorganizations and
similar events. In July 1995, the Company adjusted then outstanding awards under
the Plans to reflect the Distribution, which resulted in the Company's issuance
pursuant to the Plans of a limited number of restricted Depositary Shares and
options to purchase Depositary Shares (together with DERs). The Company does not
intend to award any additional restricted Depositary Shares or options to
purchase Depositary Shares, but may issue additional Depositary Shares in
connection with existing dividend equivalent rights with respect to options to
purchase Depositary Shares. See "-- Adjustments to Stock and Option Awards to
Reflect the Distribution."
Stock options and deferred shares may be granted in tandem with DERs.
Holders of restricted stock are entitled immediately to voting, dividend and
other ownership rights in the shares, but are subject to restrictions based
upon, among other things, continued service with the Company or the achievement
of specified performance objectives ("Management Objectives"). Stock
appreciation rights may either be related to specific stock options or may be
granted independent of any stock options. An award of deferred shares
constitutes an agreement by the Company to deliver shares of Common Stock to the
participant in the future in consideration of the performance of services,
subject to the fulfillment of such conditions during the period of deferral.
During the deferral period, the participant has no right to transfer any rights
covered by the deferred share award and no right to vote the shares covered by
the award. Performance shares and performance units may be granted, the payment
of which is conditioned on the achievement by the participant of one or more
Management Objectives within a specified period. If by the end of the
performance period the participant has achieved the specified Management
Objectives, the participant will be deemed to have fully earned the performance
shares or performance units.
Options granted under the Plans may be either incentive stock options
within the meaning of Section 422A of the Internal Revenue Code (the "Code") or
nonstatutory options. The exercise price of incentive stock options granted
under the Plans must not be less than the fair market value of the Common Stock
on the date of grant and the maximum term of each option may not be longer than
10 years. In the case of incentive stock options, the aggregate fair market
value of optioned shares (determined at the time of the grant) becoming
exercisable by any optionee in any calendar year may not exceed $100,000.
The number of outstanding options to purchase Common Stock and Depositary
Shares and the number of shares of restricted stock held by employees of the
Company as of December 31, 1995 are set forth above in "Aggregated Option
Exercises in 1995 and Option Values at December 31, 1995" and in the Notes to
the "Summary Compensation Table," respectively. As of December 31, 1995, no
stock appreciation rights, deferred shares, performance shares or performance
units had been granted pursuant to the Plans.
The Plans presently are administered by the Board of Directors and the
Compensation and Board Affairs Committee. The Compensation and Board Affairs
Committee selects the employees to whom awards will be granted and recommends
the type and amount of each award, subject to the terms of the Plans.
13
<PAGE> 16
MONEY PURCHASE RETIREMENT PLAN
The Company has a Money Purchase Retirement Plan (the "Money Purchase
Plan") pursuant to which it provides retirement benefits for all of its
employees. The Company is required to make an annual contribution pursuant to
the Money Purchase Plan on behalf of its employees, subject to a maximum
contribution for each participant not to exceed the lesser of $30,000 or 25% of
the participant's annual compensation. A participant's interest in contributions
made to the Money Purchase Plan for his account become 100% vested after one
year of service with the Company. Benefits are payable to participants upon
their retirement, termination or death. The Company is required to fund annual
contributions pursuant to the direction of participants into various investment
funds managed by a brokerage firm. The Company plans to adopt a senior executive
retirement plan that will provide retirement benefits to the Company's chief
executive officer that will not be subject to the maximum contribution
limitations of the Money Purchase Retirement Plan.
MEDICAL EXPENSE AND FINANCIAL PLANNING REIMBURSEMENT PLAN
The Company has a medical expense and financial planning reimbursement plan
for executive officers. Participants in this plan are entitled to reimbursement
for (i) certain medical, dental and vision expenses incurred by them and their
dependents to the extent such expenses are not covered by other health care
plans and insurance policies maintained by them or by the Company and (ii)
certain financial, tax and estate planning expenses incurred by them. The
maximum amount of such expenses for any one year that may be reimbursed is
$10,000 for each participant.
DIRECTOR COMPENSATION AND DIRECTOR STOCK OPTION PLANS
Cash Compensation. Outside directors of the Company (other than the
Chairman) receive a retainer fee for their Board work in the amount of $24,000
per year. The Chairman of the Board receives a retainer fee for his Board work
in the amount of $48,000 per year. Outside directors receive an additional
$1,000 payment for each meeting attended of any Committee on which they serve
(except for the Chairman of the Committee, who receives $1,500 for each
Committee meeting attended).
Stock Option Plans for Nonemployee Directors. Outside directors who were
directors of the Company on the date the 1988 Plan was approved by the Company's
shareholders received an option to purchase 20,000 shares of Common Stock
pursuant to the 1988 Plan. In addition, outside directors who were directors of
the Company on the date the 1990 Plan was approved by the Company's shareholders
received an option to purchase 20,000 shares of Common Stock pursuant to the
1990 Plan. Furthermore, pursuant to either the 1990 Plan or the Company's
Nonqualified Stock Option Plan for Nonemployee Directors (the "Directors Option
Plan"), which was approved by the shareholders of the Company on May 11, 1994,
an option for 20,000 shares of Common Stock will be granted to a new nonemployee
director upon his election to the Board, and an option for 10,000 shares of
Common Stock will be granted to each incumbent nonemployee director on each
January 31 during the period such person continues to serve as a nonemployee
director. A total of 400,000 shares of Common Stock have been reserved for
issuance under the Directors Option Plan.
The exercise price of the options granted under the 1988 Plan and the 1990
Plan must not be less than the fair market value of the Common Stock on the date
of grant. The exercise price of the options granted under
14
<PAGE> 17
the Directors Option Plan is equal to the average of the closing price of the
Common Stock on the NYSE for the five trading days commencing on February 15 (or
the first trading day thereafter if such date is not a trading day) of the year
in which the grant is made. The maximum term of each option granted under the
1988 Plan, the 1990 Plan and the Directors Option Plan may not be longer than 10
years.
Under the terms of the Directors Option Plan, a nonemployee director may
elect to have his or her director's fees credited to an account in Units (an
accounting unit equal in value to one share of Common Stock). Deferred fees
payable in Units will be credited to a nonemployee director's account at the end
of each fiscal quarter on the basis of the average of the closing prices of the
Common Stock on the NYSE on the last trading day of each calendar month during
the quarter. After the end of the third fiscal year after each fiscal year in
which any deferred fees have been credited to a nonemployee director's account,
unless such nonemployee director shall have elected to have his or her entire
deferred amount distributed upon termination of services as a director, the
Company shall deliver to such nonemployee director that number of full shares of
Common Stock that is equal to the number of Units credited to such nonemployee
director's account with respect to such fiscal year, including the dividend
equivalents allocable to such Units. Upon the termination of service of the
nonemployee director as a director of the Company for any reason, the Company
shall pay the nonemployee director or his or her beneficiary, as the case may
be, the balance of his or her account in full shares of Common Stock in one lump
sum. One nonemployee director elected to have his director's fees credit to his
account pursuant to the Directors Option Plan in 1995.
Directors Retirement Plan. The Retirement Plan for Outside Directors (the
"Director Retirement Plan") provides that nonemployee directors are eligible for
a retirement benefit if they retire from the Board with at least five years of
service. An eligible retiring director will receive an annual benefit for a
number of years equal to his years of service on the Board up to a maximum of 10
years. The annual benefit is equal to the annual base director fee in effect as
of the date of a director's retirement. All benefit payments terminate upon the
death of a director. The Director Retirement Plan is unfunded.
Directors Deferred Compensation Plan. The Company has a Directors Deferred
Compensation Plan that allows a member of the Board of Directors to defer the
payment of compensation payable by reason of that person's capacity as a
director. Pursuant to the Plan a director may elect to defer payment of between
50% to 100% of such compensation in any calendar year. Any compensation that is
deferred shall be paid in accordance with the election by the director, together
with accrued interest at a rate equal to the prime rate used by Wells Fargo
Bank, N.A. No director deferred any compensation pursuant to this plan in 1995.
ADJUSTMENTS TO STOCK AND OPTION AWARDS TO REFLECT THE DISTRIBUTION
In July 1995, the Company sought to separate the economic attributes of its
core portfolio of investments and its portfolio of psychiatric hospital
investments into two distinct portfolios, with two distinct classes of publicly
traded shares intended to represent those portfolios. On July 25, 1995, the
Company distributed one Depositary Share for every ten shares of Common Stock
held of record on July 14, 1995, each such Depositary Share representing a
one-tenth interest in the Psychiatric Group Preferred Stock. Each holder of
restricted stock also received in the Distribution one Depositary Share for
every ten shares of restricted Common Stock held on July 14, 1995. Restrictions
on Depositary Shares distributed to holders of restricted Common Stock lapse on
the same terms as the restrictions on the Common Stock held by such persons.
15
<PAGE> 18
In connection with the Distribution and the anti-dilution provisions of the
Plans, the Company has adjusted each stock option outstanding at the date of the
Distribution to reflect the issuance of the Depositary Shares. Each option and
the accumulated tandem DER shares outstanding on July 25, 1995 was converted
into two awards: one for the same number of shares of Common Stock and the other
for one-tenth of that number of Depositary Shares, separately exercisable at
prices based on the former exercise price apportioned on the basis of the fair
market value of the Common Stock and the Depositary Shares on July 25, 1995.
COMPENSATION AND BOARD AFFAIRS COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The Company's executive compensation program is administered by the
Compensation and Board Affairs Committee of the Board of Directors, which is
composed of the nonemployee Directors listed below this report. None of these
nonemployee Directors has any interlocking or other relationship with the
Company that would call into question his independence as a member of the
Compensation and Board Affairs Committee.
The Compensation and Board Affairs Committee retained the services of
Frederic W. Cook & Co., Inc., a nationally-recognized executive compensation
consulting firm, to assist the Committee in the development and ongoing
implementation of the Company's compensation program. Based largely on the
information provided by Frederic W. Cook and Co., Inc., which included a survey
of other REITs in the health care industry, the Committee believes that the
Company's compensation program is within the intermediate range for comparable
companies.
COMPENSATION PHILOSOPHY
The Compensation and Board Affairs Committee believes that the primary
focus of the Company's compensation program should be related to creating value
for shareholders. The Committee also believes that the compensation program
should be designed to retain key executives as employees and to encourage them
to accumulate ownership of the Company's stock. In structuring the compensation
program, the Committee has designed the program to balance short and long-term
incentive compensation to achieve desired results and, above all, to pay for
performance. In arriving at its conclusions as to total appropriate compensation
for a particular year, the Committee takes into account management's
accomplishments that may impact short-term performance but that are expected to
enhance long-term total return.
COMPENSATION MIX
The Company's executive compensation is based on three components designed
in each case to accomplish the Company's compensation philosophy.
Base Salary. Salaries for executives are reviewed by the Compensation and
Board Affairs Committee on an annual basis and may be adjusted based upon an
assessment of the individual's contribution to the asset and financial growth of
the Company; competitive pay levels; the executive's demonstrated ability to
work as a member of the management team; and increases in the cost of living.
Annual Cash Incentive Awards. Annual cash bonus incentive awards are based
on the performance of the Company. The Committee believes that annual financial,
operational and strategic goals should be set for the organization and that
executive officers should receive incentive compensation when these goals are
met or exceeded. Conversely, the Company believes that there should be risk when
the goals are not met.
16
<PAGE> 19
Awards granted are determined by a performance schedule specified by the
Committee and are contingent upon achievement of specified goals. Awards are
determined at year end and depend upon (a) the Company's cash flow per share
versus the goals set at the start of the year, (b) growth in the fiscal year's
cash flow per share, and (c) a judgmental review by the Committee of the
Company's overall operational and strategic performance.
For 1995, actual cash bonus incentive awards paid to executive officers
were at 80% to 100% of the level achieved at year end as specified by the
performance schedule adopted by the Committee at the beginning of 1995. The
Committee noted that the Company achieved each of its operational and strategic
objectives for the year. These objectives included the creation and successful
issuance of a psychiatric group targeted stock intended to represent the
economic attributes of the psychiatric group assets, the development and
implementation of a program to broaden the Company's investments into long-term
care, assisted living and Alzheimer's care and the refinancing of the Company's
balance sheet. The targeted stock issuance was a first for the REIT industry and
resulted in a significant positive adjustment in the market valuation of the
Common Stock. During the last four months of 1995, a number of these programs
were carried out by a reduced management team reflecting the loss of two former
officers who had accepted attractive offers elsewhere.
The Committee also considered that the total composite return for the
Company's shareholders over 1995, assuming the reinvestment of all dividends,
was approximately 28%, as compared to the NAREIT Equity REIT index average of
15% for 1995.
In January 1995, the executive officers of the Company were granted shares
of restricted Common Stock vesting over two years in lieu of the additional cash
incentive bonuses that they would have been entitled to according to the
performance schedule adopted by the Committee at the beginning of 1994. These
grants were consistent with the Committee's intent to gradually increase the
amount of equity ownership on the part of the executives. The grants are
reflected in the "Summary Compensation Table" set forth above under the heading
"Restricted Stock Awards."
Long-Term Incentives. The Compensation and Board Affairs Committee
administers the Company's employee stock incentive plans. Pursuant to these
plans, stock options were awarded in 1995 in order to retain and motivate
executives to improve long-term shareholder value.
Options to purchase Common Stock are granted at a price equal to the
current fair market value of the Common Stock at the time of grant and will be
of value to the executive only if the total return to shareholders increases
over time. Stock option awards vest over a two-year period. The Committee
recognizes that, because the Company must distribute at least 95% of its income
in the form of dividends in order to qualify as a REIT, over the long-run the
share price of the Common Stock may be sensitive to market interest rates that
are beyond management's control. Furthermore, much of the value created for
shareholders over time may be in the form of dividends. These factors make
traditional stock options, which reward only for price appreciation, ill-suited
for executive incentive compensation purposes for Company officers. For this
reason, the Committee determined in 1992 to couple stock option awards with
dividend equivalent rights. By adding dividend equivalent rights to stock
options, the options become a reward for total shareholder return instead of for
stock price growth alone. Depending upon individual performance and
contribution, award levels for annual stock option grants are intended to
approximate the fiftieth percentile of long-term incentive compensation for
comparable companies.
17
<PAGE> 20
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M)
Section 162(m) of the Internal Revenue Code, enacted in 1993, generally
disallows a tax deduction to public companies for compensation in excess of
$1,000,000 paid to a company's chief executive officer and the four other most
highly compensated executive officers. Qualifying performance-based compensation
is not subject to the deduction limit if certain requirements are met. The
Committee will continue to review the effects of its compensation programs with
regard to Section 162(m). The Committee will also evaluate alternatives to
ensure executive compensation is reasonable, performance-based and consistent
with the Committee's overall compensation objectives. The Committee reserves the
right to design programs that recognize a full range of performance criteria
important to the Company's success, even where compensation payable under such
programs may not be deductible.
CHIEF EXECUTIVE COMPENSATION
The Company has entered into an employment agreement with Joseph P.
Sullivan, President and Chief Executive Officer of the Company, which runs for a
term of three years and which is automatically extended for an additional year
on the last day of January of each year unless earlier terminated pursuant to
the terms of the agreement. The agreement provides for a base salary of $494,000
for 1996. Under this agreement, Mr. Sullivan was also guaranteed in 1995 (i) a
minimum bonus of 30% of his base salary for 1995 and (ii) a minimum stock option
grant equal to a number of shares calculated by dividing 200% of his base salary
for 1995 by the share price on the date of grant. For the year 1996 and beyond,
Mr. Sullivan is not guaranteed any minimum bonus award or stock option grant.
Mr. Sullivan's salary for 1996 was increased from its previous level by 4%.
The Committee and the full Board believe that the amount and terms of Mr.
Sullivan's compensation are consistent with general compensation levels within
the industry and are appropriate in view of the Company's accomplishments in
1995. These accomplishments include: increasing the Company's funds from
operations; issuing a psychiatric group targeted stock; selling two psychiatric
hospital investments; expanding the Company's investment program into long-term
care, assisted living and Alzheimer's care; making $67 million of new
investments; selling a $26.5 million lower yielding mortgage for a $2.65 million
profit; repayment of all of the Company's outstanding bank loans; issuance of
$50.3 million of new Common Stock; and establishment of a new $150 million
three-year unsecured bank line. As shown above in the "Summary Compensation
Table" set forth under the heading "Restricted Stock Awards," consistent with
the Committee's intent to create additional long-term incentives, the Committee
voted to award Mr. Sullivan, in January 1995, a restricted stock grant of 6,938
shares of Common Stock vesting over two years with the initial vesting occurring
in January 1996. For 1995, Mr. Sullivan received a cash bonus of $384,700, or
81.1% of the maximum potential award under the performance schedule adopted by
the Committee at the beginning of 1995.
The Committee remains committed to establishing and maintaining a
compensation program that appropriately aligns the Company's executive
compensation with corporate performance and the interests of the shareholders
and that offers competitive opportunities in the executive marketplace. As such,
the Committee periodically reviews the compensation program in order to make
such changes as it considers necessary to achieve such objectives.
NORMAN BARKER, JR. SHELDON S. KING WALTER J. McNERNEY LOUIS T. ROSSO
18
<PAGE> 21
STOCK PRICE PERFORMANCE GRAPH
The graph below compares, on a quarterly basis and at July 25, 1995, the
cumulative total return of the Company, the S&P 500 Index and the NAREIT Equity
REIT Index from December 31, 1990 to December 31, 1995 assuming an initial
investment of $100. Total return assumes quarterly reinvestment of dividends
before consideration of income taxes. The cumulative total return represented by
the "AHP Composite" data reflects the cumulative total return on the Common
Stock for periods prior to July 25, 1995, and for periods on and after July 25,
1995, the sum of the cumulative total return on the Common Stock and the
cumulative total return on the Depositary Shares.
AMERICAN HEALTH PROPERTIES, INC.
STOCK PERFORMANCE
(FIVE-YEAR PERIOD ENDED DECEMBER 31, 1995)
<TABLE>
<CAPTION>
AHP COMMON
MEASUREMENT PERIOD AHP COM- STOCK AFTER THE AHP DEPOSITARY
(FISCAL YEAR COVERED) POSITE NAREIT S&P 500 DISTRIBUTION SHARES
<S> <C> <C> <C> <C> <C>
12/90 100.00 100.00 100.00
3/91 114.46 122.74 114.56
6/91 115.98 123.70 114.32
9/91 127.37 128.76 120.48
12/91 152.56 135.70 130.55
3/92 133.22 136.60 127.22
6/92 143.24 140.20 129.72
9/92 98.91 149.76 133.74
12/92 96.76 155.49 140.56
3/93 124.49 189.14 146.59
6/93 129.09 183.71 147.34
9/93 149.02 200.89 151.11
12/93 134.63 186.06 154.60
3/94 137.66 192.39 148.71
6/94 135.07 195.93 149.31
9/94 135.60 191.92 156.67
12/94 117.41 191.95 156.63
3/95 123.59 191.63 171.87
6/95 134.00 202.90 188.18
7/25/95 Distribution Date 141.84 205.72 193.24 128.99 12.85
9/95 149.33 212.46 203.14 138.67 10.66
12/95 151.62 221.26 215.25 141.22 10.40
</TABLE>
19
<PAGE> 22
PRINCIPAL SHAREHOLDERS OF THE COMPANY
The following table sets forth, as of February 8, 1996, information with
respect to persons known by the Company to be beneficial owners of more than
five percent of the shares of Common Stock. The Company is not aware of any
person who is a beneficial owner of more than five percent of the Depositary
Shares.
<TABLE>
<CAPTION>
SHARES OF
NAME OF COMMON STOCK
BENEFICIAL OWNER BENEFICIALLY OWNED
--------------------------------------------------------------------- ------------------
<S> <C>
Franklin Resources, Inc.(1).......................................... 1,827,000
777 Mariners Island Blvd.
San Mateo, California 94403
</TABLE>
- ---------------
(1) Common Stock held by Franklin Resources, Inc. represents 7.8% of the
outstanding Common Stock on April 15, 1996. This information is based solely
on information contained in a Form 13-G filed by Franklin Resources, Inc.
with the Securities and Exchange Commission on February 8, 1996 and
delivered to the Company. According to such schedule, Franklin Resources,
Inc. holds sole voting power with respect to 1,801,900 shares of Common
Stock, shared voting power with respect to 20,600 shares of Common Stock,
and shared dispositive power with respect to 1,827,000 shares of Common
Stock.
SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
(PROPOSAL NO. 2)
The Board of Directors has appointed an Audit Committee, whose members and
functions are described above under "Management -- Board Committees and
Meetings." Upon the recommendation of the Audit Committee, the Board of
Directors has appointed the firm of Arthur Andersen LLP, independent public
accountants, as auditors for the current fiscal year subject to the approval of
the shareholders of the Company. Arthur Andersen LLP have served as auditors of
the Company since 1987. Representatives of the firm are expected to be present
at the Annual Meeting and will have the opportunity to make a statement if they
desire to do so and are expected to be available to respond to appropriate
questions.
The shareholders are requested to approve, ratify and confirm the
appointment of the accounting firm of Arthur Andersen LLP as the auditors and as
independent public accountants for the Company for the year ended December 31,
1996.
The affirmative vote of a majority of the total number of votes represented
by the shares of Common Stock and Psychiatric Group Preferred Stock represented
and voted at the Annual Meeting, assuming a quorum is present, is necessary for
the approval of the appointment of Arthur Andersen LLP as the auditors and
independent public accountants for the Company for the year ended December 31,
1996.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE APPOINTMENT OF
ARTHUR ANDERSEN LLP AS AUDITORS FOR 1996.
20
<PAGE> 23
ANNUAL REPORT TO SHAREHOLDERS
The Company's Annual Report to Shareholders of the Company for the fiscal
year ended December 31, 1995 (the "Annual Report"), which includes financial
statements for the year ended December 31, 1995, has been sent to the Company's
shareholders under separate cover. Requests for additional copies of such report
should be directed to Investor Relations, American Health Properties, Inc.,
Suite 1800, 6400 South Fiddler's Green Circle, Englewood, Colorado 80111,
Telephone (303) 796-9793.
OTHER MATTERS
The Board of Directors knows of no business to be presented at the meeting
other than the matters stated in the notice of the Annual Meeting and described
in this proxy statement. If other matters should properly come before the
meeting, the Proxies will be voted in accordance with the best judgment of the
persons acting under the Proxies, and discretionary authority to do so is
included in the Proxy.
SHAREHOLDER PROPOSALS
Any shareholder proposal intended to be presented at the Company's next
annual meeting of shareholders must be received by the Company at its principal
executive offices on or before January 24, 1997 to be included in the Company's
proxy statement and form of proxy relating to that meeting.
By Order of the Board of Directors,
/s/ MICHAEL J. MCGEE
Michael J. McGee
Corporate Secretary
April 15, 1996
21
<PAGE> 24
- --------------------------------------------------------------------------------
PROXY COMMON STOCK
AMERICAN HEALTH PROPERTIES, INC. PROXY
6400 SOUTH FIDDLER'S GREEN CIRCLE, SUITE 1800, ENGLEWOOD, COLORADO 80111
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby nominates and appoints Joseph P. Sullivan, Michael J.
McGee, and each of them, as attorneys, agents and proxies of the undersigned,
with full powers of substitution to each, and hereby authorizes them to
represent and to vote, as designated below, all shares of Common Stock of
AMERICAN HEALTH PROPERTIES, INC. (the "Company") held of record by the
undersigned as of the close of business on March 29, 1996 at the Annual Meeting
of Shareholders to be held on May 23, 1996 or any adjournment thereof.
1. ELECTION OF DIRECTORS
To elect as Class III Directors for a three-year term expiring at the 1999
Annual Meeting the following nominees: Sheldon S. King, Walter J. McNerney
and Louis T. Rosso.
<TABLE>
<S> <C>
/ / FOR all nominees listed above / / WITHHOLD AUTHORITY to vote for all nominees listed above
(except as indicated to the contrary below)
</TABLE>
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.)
- --------------------------------------------------------------------------------
2. To approve the appointment of Arthur Andersen LLP as auditors and independent
public accountants for the Company's 1996 fiscal year.
/ / FOR / / AGAINST / / ABSTAIN
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
PLEASE CONTINUE ON REVERSE SIDE
- --------------------------------------------------------------------------------
<PAGE> 25
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE PROPOSALS. THIS PROXY
WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE
UNDERSIGNED. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR EACH OF THE
PROPOSALS.
The undersigned hereby ratifies and confirms all that said attorneys and
proxies, or any of them, or their substitutes, shall lawfully do or cause to be
done by virtue hereof, and hereby revokes any and all proxies heretofore given
by the undersigned to vote at said meeting. The undersigned acknowledges receipt
of the notice of said annual meeting and proxy statement accompanying said
notice.
Dated , 1996
-------------------------
------------------------------------
(Signature)
------------------------------------
(Signature)
PLEASE SIGN EXACTLY AS NAMES ARE
SHOWN. WHEN SHARES ARE HELD BY JOINT
TENANTS, BOTH SHOULD SIGN. WHEN
SIGNING AS AN ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN,
PLEASE GIVE FULL TITLE AS SUCH. IF A
CORPORATION, PLEASE SIGN IN FULL
CORPORATION NAME BY PRESIDENT OR
OTHER AUTHORIZED OFFICER. IF A
PARTNERSHIP, PLEASE SIGN IN
PARTNERSHIP NAME BY AUTHORIZED
PERSON.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY
PROMPTLY USING THE ENCLOSED ENVELOPE.
- --------------------------------------------------------------------------------
<PAGE> 26
- --------------------------------------------------------------------------------
DEPOSITARY SHARES
INSTRUCTION CARD AMERICAN HEALTH PROPERTIES, INC. INSTRUCTION CARD
6400 SOUTH FIDDLER'S GREEN CIRCLE, SUITE 1800, ENGLEWOOD, COLORADO 80111
THIS INSTRUCTION CARD IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, a registered holder of Psychiatric Group Depositary Shares,
each representing one-tenth of a share of Psychiatric Group Preferred Stock,
AMERICAN HEALTH PROPERTIES, INC. (the "Company"), hereby authorizes and directs
the Depositary, through its nominee(s), to vote or to execute proxies to vote,
as instructed below, all Psychiatric Group Preferred Stock underlying the
Depositary Shares held of record by the undersigned as of the close of business
on March 29, 1996 at the Annual Meeting of Shareholders to be held on May 23,
1996 or any adjournment thereof.
1. ELECTION OF DIRECTORS
To elect as Class III Directors for a three-year term expiring at the 1999
Annual Meeting the following nominees: Sheldon S. King, Walter J. McNerney
and Louis T. Rosso.
<TABLE>
<S> <C>
/ / FOR all nominees listed above / / WITHHOLD AUTHORITY to vote for all nominees listed above
(except as indicated to the contrary below)
</TABLE>
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.)
- --------------------------------------------------------------------------------
2. To approve the appointment of Arthur Andersen LLP as auditors and independent
public accountants for the Company's 1996 fiscal year.
/ / FOR / / AGAINST / / ABSTAIN
3. In its discretion, the Depositary is authorized to vote upon such other
business as may properly come before the meeting.
PLEASE CONTINUE ON REVERSE SIDE
- --------------------------------------------------------------------------------
<PAGE> 27
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE PROPOSALS. DEPOSITARY
SHARES WILL BE VOTED BY THE DEPOSITARY AS DIRECTED BY THE UNDERSIGNED. IF NO
INSTRUCTION IS GIVEN THE DEPOSITARY WILL ABSTAIN FROM VOTING WITH RESPECT TO THE
PSYCHIATRIC GROUP PREFERRED STOCK UNDERLYING THE DEPOSITARY SHARES FOR WHICH NO
INSTRUCTIONS HAVE BEEN GIVEN.
The undersigned hereby ratifies and confirms all that said Depositary, or any
of its nominee(s), or their substitutes, shall lawfully do or cause to be done
by virtue hereof, and hereby revokes any and all instructions heretofore given
by the undersigned to vote at said meeting. The undersigned acknowledges receipt
of the notice of said annual meeting and proxy statement accompanying said
notice.
Dated , 1996
-------------------------
------------------------------------
(Signature)
------------------------------------
(Signature)
PLEASE SIGN EXACTLY AS NAMES ARE
SHOWN. WHEN SHARES ARE HELD BY JOINT
TENANTS, BOTH SHOULD SIGN. WHEN
SIGNING AS AN ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN,
PLEASE GIVE FULL TITLE AS SUCH. IF A
CORPORATION, PLEASE SIGN IN FULL
CORPORATION NAME BY PRESIDENT OR
OTHER AUTHORIZED OFFICER. IF A
PARTNERSHIP, PLEASE SIGN IN
PARTNERSHIP NAME BY AUTHORIZED
PERSON.
PLEASE MARK, SIGN, DATE AND RETURN THIS INSTRUCTION CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
IN ORDER FOR THE DEPOSITARY TO VOTE, THIS INSTRUCTION CARD MUST BE SIGNED,
DATED AND RECEIVED BY THE DEPOSITARY ON OR BEFORE 5:00 P.M. PDT ON MAY 22, 1996.
- --------------------------------------------------------------------------------
<PAGE> 28
THIS PROXY/INSTRUCTION CARD IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
[X] PLEASE MARK
YOUR VOTES
AS THIS
Proposal Number 1 - ELECTION OF DIRECTORS: To elect as Class III Directors for a
three-year term expiring at the 1999 Annual Meeting the following nominees:
Sheldon S. King, Walter J. McNerney and Louis T. Rosso
WITHHOLD
FOR AUTHORITY
[ ] [ ]
INSTRUCTIONS: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.
______________________________________________________________________________
Proposal Number 2 - To approve the appointment of Arthur Andersen LLP as
auditors and independent public accountants for the Company's 1996 fiscal year.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Proposal Number 3 - In their discretion, the proxies and Depositary are
authorized to vote upon such other business as may properly come before the
meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE PROPOSALS. WHEN THIS
PROXY/INSTRUCTION CARD IS PROPERLY EXECUTED, THE PROXIES WILL VOTE ALL SHARES
OF COMMON STOCK HELD OF RECORD BY THE UNDERSIGNED AND THE DEPOSITARY WILL VOTE
ALL PSYCHIATRIC GROUP PREFERRED STOCK UNDERLYING THE DEPOSITARY SHARES HELD OF
RECORD BY THE UNDERSIGNED IN THE MANNER INSTRUCTED HEREIN BY THE UNDERSIGNED.
IF NO INSTRUCTION IS GIVEN, THE PROXIES WILL VOTE SUCH COMMON STOCK FOR EACH OF
THE PROPOSALS, AND THE DEPOSITARY WILL ABSTAIN FROM VOTING SUCH PSYCHIATRIC
GROUP PREFERRED STOCK.
The undersigned hereby ratifies and confirms all that said attorneys and
proxies, or any of them, or their substitutes, and that said Depositary, or any
of its nominee(s) or their substitutes, shall lawfully do or cause to be done
by virtue hereof, and hereby revokes any and all proxies and instructions
heretofore given by the undersigned to vote at said meeting. The undersigned
acknowledges receipt of the notice of said annual meeting and proxy statement
accompanying said notice.
________________________________________________________________________________
(Signature)
________________________________________________________________________________
(Signature)
Dated ____________________, 1996
Please sign exactly as names are shown. When shares are held by joint tenants,
both should sign. When signing as attorney, executor, administrator, trustee
or guardian, please give full title as such. If a corporation, please sign in
full corporation name by president or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
================================================================================
FOLD AND DETACH HERE
AMERICAN HEALTH PROPERTIES, INC.
6400 South Fiddler's Green Circle, Suite 1800,
Englewood, Colorado 80111
YOUR VOTE IS IMPORTANT TO THE COMPANY
PLEASE SIGN AND RETURN YOUR PROXY/INSTRUCTION CARD BY
TEARING OFF THE TOP PORTION OF THIS SHEET
AND RETURNING IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
IN ORDER FOR THE DEPOSITARY TO VOTE, THIS INSTRUCTION CARD MUST BE SIGNED,
DATED AND RECEIVED BY THE DEPOSITARY ON OR BEFORE 5:00 P.M. PDT ON MAY 22, 1996.
<PAGE> 29
PROXY/ PROXY/
INSTRUCTION INSTRUCTION
CARD AMERICAN HEALTH PROPERTIES, INC. CARD
6400 SOUTH FIDDLER'S GREEN CIRCLE, SUITE 1800, ENGLEWOOD, COLORADO 80111
The undersigned hereby (i) nominates and appoints Joseph P. Sullivan,
Michael J. Mcgee, and each of them, as attorneys, agents and proxies of the
undersigned, with full powers of substitution to each, and hereby authorizes
them to represent and to vote, as designated below, all shares of Common Stock
of AMERICAN HEALTH PROPERTIES, INC. (the "Company") held of record by the
undersigned as of the close of business on March 29, 1996 at the Annual Meeting
of Shareholders to be held on May 23, 1996 or any adjournment thereof, and (ii)
authorizes and directs the Depositary, through its nominee(s), to vote or
execute proxies to vote as instructed below, all Psychiatric Group Preferred
Stock underlying the Depositary Shares held of record by the undersigned as of
the close of business on March 29, 1996 at the Annual Meeting of Shareholders
to be held on May 23, 1996 or any adjournment thereof.
IMPORTANT: SIGNATURE REQUIRED ON REVERSE SIDE
