<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 [ ]
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 sec. 240.14a-11(c) or sec. 240.14a-12
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] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) 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:
- --------------------------------------------------------------------------------
[ ] 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 or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
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<PAGE> 2
American Health Properties, Inc.
6400 SOUTH FIDDLER'S GREEN CIRCLE, SUITE 1800
ENGLEWOOD, COLORADO 80111
---------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 22, 1998
The 1998 Annual Meeting of Shareholders of American Health Properties,
Inc., a Delaware corporation (the "Company"), will be held at the Peninsula
Beverly Hills Hotel, 9882 Little Santa Monica Boulevard, Beverly Hills,
California at 1:30 p.m. local time, on May 22, 1998, for the following purposes:
(1) To elect two Class II 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, 1998.
(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 April 2, 1998 (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 ChaseMellon 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 .6490 of a vote per
Depositary Share be cast by the Depositary.
YOUR VOTE IS IMPORTANT. PLEASE COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED
PROXY/INSTRUCTION CARD 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 21, 1998 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/ STEVEN A. ROSEMAN
Steven A. Roseman
Corporate Secretary
April 16, 1998
<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/Instruction Card are first
being mailed on or about April 21, 1998 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 22,
1998, 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
$5,000, 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 April 2, 1998 (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 ChaseMellon
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 23,965,255 shares of Common
Stock as well as 2,083,931 Depositary Shares representing approximately 208,393
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 6.490 votes on all
matters presented at the Annual Meeting; accordingly, each
<PAGE> 4
Depositary Share is entitled to instruct that .6490 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 22, 1998 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 21, 1998 by written notice to the Depositary or by
filing a later dated Instruction Card with the Depositary. Holders of Depositary
Shares cannot vote such shares in person at the Annual Meeting.
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 21, 1998 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 2000 annual meeting
of shareholders. Class II consists of three directors who are serving a
three-year term expiring at the Annual Meeting. Class III consists of three
directors who are serving 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.
In April 1998, the Board of Directors elected Peter K. Kompaniez as a Class
II Director to fill a vacancy in the Board of Directors. The terms of Messrs.
Diener, Kompaniez and Sullivan expire at the Annual Meeting. Mr. Diener has
elected not to stand for re-election as a director, and his term as a director
will expire at the Annual Meeting. Upon Mr. Diener's departure from the Board of
Directors, the Company will decrease the size of the Board of Directors to seven
members. The Board of Directors has nominated Peter K. Kompaniez and Joseph P.
Sullivan for election as Class II directors. 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."
3
<PAGE> 6
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 PETER K. KOMPANIEZ
AND JOSEPH P. SULLIVAN AS DIRECTORS OF THE COMPANY.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the names and titles of the executive
officers and current members of the Board of Directors of the Company.
<TABLE>
<CAPTION>
NAME POSITION
---- --------
<S> <C>
Joseph P. Sullivan................... Chairman of the Board of Directors of the Company,
President and Chief Executive Officer, 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 and
Treasurer of the Company
Steven A. Roseman.................... Senior Vice President, General Counsel and
Secretary of the Company
Thomas T. Schleck.................... Senior Vice President and Chief Investment Officer
of the Company
Royce Diener......................... Class II Director
James L. Fishel...................... Class I Director
Peter K. Kompaniez................... Class II Director
Sheldon S. King...................... Class III Director
James D. Harper, Jr.................. Class I Director
John P. Mamana, M.D.................. Class III Director
Louis T. Rosso....................... Class III Director
</TABLE>
Mr. Sullivan has been the President and Chief Executive Officer of the
Company since February 1993 and Chairman of the Board since November 1996. 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. Mr. Sullivan was elected to the UCLA Medical Center Board of
Advisors in 1998. He was a member of the Board of Governors of the National
Association of Real Estate Investment Trusts (NAREIT) from September 1994 to
September 1997. He has been a director of the Company since February 1993 and is
55 years old.
4
<PAGE> 7
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 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 43 years old.
Mr. McGee has been the Senior Vice President and Chief Financial Officer of
the Company since January 1996, has served as Treasurer of the Company since
August 1995 and served as Controller of the Company from November 1989 to
February 1998. Mr. McGee was a certified public accountant with Arthur Andersen
LLP from May 1977 to November 1989 and is 42 years old.
Mr. Roseman has been Senior Vice President, General Counsel and Secretary
of the Company since July 1997. Prior to that Mr. Roseman had established his
own legal practice, and from April 1995 to August 1996 he was Vice President
Business Affairs Worldwide Pay Television for Paramount Pictures Corporation.
From September 1993 to April 1995 he was with the law firm of Ervin, Cohen &
Jessup, Beverly Hills, California and was a partner in that firm's tax and real
estate department. Mr. Roseman is 39 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 50 years old.
Mr. Diener has been a director of the Company since its organization in
1986. Mr. Diener has elected not to stand for re-election as a director, and his
term as a director will expire at the Annual Meeting, at which time he will be
appointed as Founding Director Emeritus in recognition of his many years of
exemplary service to the Company.
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 66 years old.
Mr. Harper is the owner of JDH Realty Co., a real estate sales and
development company located in Miami, Florida and has been its President since
1982. Mr. Harper also is the principal partner in AH Development, S.E. and AH HA
Investments, S.E., real estate development partnerships in Puerto Rico. He has
been a Trustee of the Urban Land Institute and a Trustee of Equity Residential
Properties Trust since 1993. Mr. Harper has been a member of the Board of
Directors of Burnham Pacific Properties, Inc. and a Trustee of Equity Office
Properties Trust since 1997. From 1971 until 1985, he worked for Continental
Illinois Corporation, serving as its Executive Vice President in charge of all
domestic and international real estate services beginning in 1974. Mr. Harper is
64 years old.
Mr. King has been the Executive Vice President of Salick Health Care, Inc.
since February 1994. He was formerly the President of Cedars-Sinai Medical
Center, Los Angeles, California from 1989 to January 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 66 years old.
5
<PAGE> 8
Mr. Kompaniez was elected as a director of the Company in April 1998 to
fill an existing vacancy on the Board of Directors. Mr. Kompaniez has been Vice
Chairman and a director of Apartment Investment and Management Company, a real
estate investment trust with investments in apartment units since July 1994 and
has been its President since July 1997. Since September 1993, Mr. Kompaniez has
owned 75% of PDI Realty Enterprises, Inc., and serves as its President and Chief
Executive Officer. From 1986 to 1993, he served as President and Chief Executive
Officer of Heron Financial Corporation, a United States holding company for
Heron International, N.V.'s real estate and related assets. Prior to joining
HFC, Mr. Kompaniez was a senior partner with the law firm of Loeb and Loeb where
he had extensive real estate and REIT experience. Mr. Kompaniez received a B.A.
from Yale College and a J.D. from the University of California (Boalt Hall). Mr.
Kompaniez is 52 years old.
Dr. Mamana is currently President, Chief Executive officer and Chairman of
American Health Sciences. Dr. Mamana was the founder of Virginia Medical
Associates, P.C., a multi-specialty group medical practice and was its
President, Chief Executive Officer and Chairman from 1978 until 1998. Since
August 1994, he has been the Chief Executive Officer and Chairman of Gateway
Physician Services. L.P., and was the Chief Medical Officer of Health Partners,
Inc., a physician practice company jointly funded by Oxford Health Plans and
Wellpoint Health Network, from 1994 until January 1998. Dr. Mamana has been a
Clinical Associate Professor of Medicine at Georgetown University Medical School
since 1987. Dr. Mamana has been a director of Mid Atlantic Medical Services,
Inc. since 1997 and is 55 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 64 years old.
BOARD COMMITTEES AND MEETINGS
The Board of Directors held 12 meetings during 1997. Except for Mr. Rosso,
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 and
Compensation and Board Affairs Committees. The Company's entire Board of
Directors acted as the Company's Investment Committee during 1997.
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.
During 1997, the Audit Committee consisted of Messrs. Rosso (chairman), Diener,
Fishel and Mamana. The Audit Committee met one time during 1997.
The Finance Committee is charged with the responsibility of evaluating the
overall financial needs and financial strategy of the Company. There were no
meetings of the Finance Committee during 1997. During 1997, this Committee was
composed of Messrs. Fishel (chairman), King, Diener, Harper and Sullivan.
6
<PAGE> 9
During 1997, the members of the Compensation and Board Affairs Committee
were Messrs. King (chairman), Harper, Mamana 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 two times during 1997.
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 17, 1998, all of the
Company's directors, executive officers and 10% beneficial owners had complied
with all applicable Section 16(a) filing requirements.
7
<PAGE> 10
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of April 16, 1998, 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 such persons 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. Except as noted, 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(1) OWNED OF RECORD DAYS(1) OWNED
---------------- --------- ----------- ------------ --------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Royce Diener(2)........................... 4,500 60,000 64,500 750 7,000 7,750
James L. Fishel........................... 500 45,000 45,500 0 3,000 3,000
James D. Harper, Jr....................... 500 10,000 10,500 0 0 0
Sheldon S. King(3)........................ 2,110 85,000 87,110 100 7,000 7,100
Peter K. Kompaniez(4)..................... 700 0 700 0 0 0
Michael J. McGee.......................... 13,500 61,692 75,192 1,271 4,553 5,824
John P. Mamana, M.D....................... 2,000 10,000 12,000 0 0 0
Steven A. Roseman......................... 0 5,224 5,224 0 0 0
Louis T. Rosso............................ 1,000 45,000 46,000 0 3,000 3,000
Thomas T. Schleck......................... 0 32,326 32,326 0 0 0
C. Gregory Schonert....................... 12,294 73,648 85,942 1,228 6,931 8,159
Joseph P. Sullivan........................ 31,000 235,683 266,683(5) 2,909 17,210 20,119
All Directors and Executive Officers as a
Group (12 persons)(6)................... 68,104 663,573 731,677 6,258 48,694 54,952
</TABLE>
- ---------------
(1) Excludes shares issuable upon exercise of related dividend equivalent
rights.
(2) Mr. Diener disclaims beneficial ownership of 300 Depositary Shares that are
owned by his wife.
(3) Beneficial ownership includes shares issuable to Mr. King in lieu of
director fees.
(4) Pursuant to the Company's Nonqualified Stock Option Plan for Nonemployee
Directors, an option to purchase 20,000 shares of Common Stock will be
granted to Mr. Kompaniez on May 1, 1998.
(5) Represents 1.1% of the outstanding shares of Common Stock on April 16, 1998.
(6) Total beneficially owned represents approximately 3.0% of the outstanding
shares of Common Stock and approximately 2.6% of the outstanding Depositary
Shares.
8
<PAGE> 11
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table sets forth compensation paid or earned for services
rendered during the fiscal years ended December 31, 1997, 1996 and 1995, to or
by the Company's Chief Executive Officer and the four other executive officers
of the Company (collectively, the "Named Executive Officers"):
<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 1997 $513,300 $473,700 $ 0 40,792 $61,100
President and Chief 1996 492,600 446,000 89,400 43,191 46,400
Executive Officer 1995 477,000 384,700 143,100 53,193 68,400
C. Gregory Schonert 1997 179,600 120,000 0 10,693 32,800
Senior Vice President and 1996 174,600 89,800 0 11,492 33,900
Chief Development Officer 1995 167,200 100,000 27,100 13,509 34,000
Michael J. McGee 1997 178,800 120,000 0 10,693 30,600
Senior Vice President, 1996 163,200 110,000 0 10,820 30,500
Chief Financial Officer 1995 142,900 85,500 25,100(4) 10,258(4) 30,600
and Treasurer
Thomas T. Schleck(5) 1997 207,300 110,000 0 12,356 36,100
Senior Vice President and 1996 142,200 74,000 0 26,148 126,900
Chief Investment Officer
Steven A. Roseman(6) 1997 84,900 55,000 0 10,448 44,000
Senior Vice President,
General Counsel
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
1995 and 1996 were $20.625 and $22.875. 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 1995 and 1996 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.
9
<PAGE> 12
The table below shows the aggregate shares of restricted stock that were
held and remain restricted at December 31, 1997, the value of such shares
on December 31, 1997 and the number of shares granted in 1995, 1996 and
1997.
<TABLE>
<CAPTION>
AGGREGATE VALUE OF
RESTRICTED AGGREGATE GRANTS
STOCK HELD RESTRICTED -----------------------
AT DECEMBER 31, 1997 STOCK 1995 1996 1997
-------------------- ---------- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Joseph P. Sullivan
Common Stock 0 $ 0 6,938 3,910 0
Depositary Shares 0 0
C. Gregory Schonert
Common Stock 0 0 1,313 0 0
Depositary Shares 0 0
Michael J. McGee(4)
Common Stock 1,372(7) 37,800(7) 1,219 0 0
Depositary Shares 137(7) 2,000(7)
Thomas T. Schleck(5)
Common Stock 0 0 0 0 0
Depositary Shares 0 0
Steven A. Roseman(6)
Common Stock 0 0 0 0 0
Depositary Shares 0 0
</TABLE>
(2) Amounts included represent options to purchase Common Stock on the date of
grant. Grants shown for 1995 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 1997 under the Company's Money Purchase Retirement
Plan and Executive Medical and Financial Planning Reimbursement Plan, and
for life insurance policies, auto allowances and relocation expenses as
follows:
<TABLE>
<CAPTION>
MEDICAL AND
FINANCIAL LIFE AUTO RELOCATION
RETIREMENT PLANNING INSURANCE ALLOWANCES EXPENSES
---------- ----------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Joseph P. Sullivan $30,000 $14,400 $5,900 $10,800 $ 0
C. Gregory Schonert 30,000 1,600 1,200 0 0
Michael J. McGee 30,000 0 600 0 0
Thomas T. Schleck 30,000 2,800 3,300 0 0
Steven A. Roseman 20,500 0 0 0 23,500
</TABLE>
(4) Pursuant to an election made by Mr. McGee, in lieu of $28,300 of the amount
of his 1994 bonus, in 1995 he received 1,372 shares of restricted stock and
options to purchase 1,372 shares of Common Stock (together with dividend
equivalent rights) at the fair market value thereof on the date the bonus
was awarded. Such restricted stock and options were included as bonus in
1994 and not as a grant of restricted stock or options in 1995.
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<PAGE> 13
(5) Mr. Schleck commenced employment with the Company in April 1996.
(6) Mr. Roseman commenced employment with the Company in July 1997.
(7) Includes restricted stock received by Mr. McGee, at his election, in lieu of
a portion of Mr. McGee's 1994 bonus, as set forth in Note 4 above.
OPTION GRANTS IN 1997
The following table sets forth certain information concerning individual
grants of options to purchase Common Stock made to each of the Named Executive
Officers during the year ended December 31, 1997:
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF
SECURITIES TOTAL STOCK AVERAGE
UNDERLYING OPTIONS EXERCISE
OPTIONS GRANTED TO PRICE EXPIRATION PRESENT VALUE ON
NAME GRANTED(1) EMPLOYEES ($/SH)(1) DATE DATE OF GRANT(2)
---- ----------- ------------- --------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Joseph P. Sullivan 40,792 48.00% $ 25.25 01/24/07 $79,300
C. Gregory Schonert 10,693 12.58% 25.25 01/24/07 20,800
Michael J. McGee 10,693 12.58% 25.25 01/24/07 20,800
Thomas T. Schleck 12,356 14.54% 25.25 01/24/07 24,000
Steven A. Roseman 10,448 12.30% 25.125 07/07/07 18,900
</TABLE>
- ---------------
(1) Stock options were granted in tandem with dividend equivalent rights
("DERs") at the fair market price of the Company's Common Stock on the date
of grant. All stock options granted in 1997 were options to purchase Common
Stock. At December 31, 1997, the number of DER shares relating to options
for Common Stock granted in 1997 held by the Named Executive Officers were
as follows: Mr. Sullivan: 3,557; Mr. Schonert: 932; Mr. McGee: 932; Mr.
Schleck: 1,078; and Mr. Roseman: 437. The dollar value of all such DER
shares at December 31, 1997, based on the closing price of the Common Stock
on December 31, 1997, was $191,200.
(2) Estimated present values as of the dates of grant 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 15%, and is based on the historical volatility of the
Common Stock. The future dividend yield assumed in valuing the options is
7.5%. The options are valued assuming they have an expected life of 8 years.
The weighted average risk-free rate of return used in valuing the options is
6.59%. This weighted average risk-free rate of return was determined based
upon the quoted yields for U.S. Treasury Strips (principal only securities)
with a term equivalent to the expected life of the options at the
approximate date the options were granted. Estimated present values do not
include DERs.
11
<PAGE> 14
AGGREGATED OPTION EXERCISES IN 1997 AND OPTION VALUES AT DECEMBER 31, 1997
The following table sets forth certain information concerning the exercise
of stock options by the Named Executive Officers during the year ended December
31, 1997 and the value of stock options held as of December 31, 1997 by each of
the Named Executive Officers:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES DECEMBER 31, 1997 DECEMBER 31, 1997(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 $ 0 193,692 62,387 $3,197,300 $406,700
Depositary Shares 0 0 17,210 0 62,500 0
C. Gregory Schonert
Common Stock 0 0 62,555 16,439 688,200 107,400
Depositary Shares 0 0 6,931 0 9,200 0
Michael J. McGee(3)
Common Stock 0 0 49,563 17,475 539,200 128,300
Depositary Shares 0 0 4,416 137 7,000 700
Thomas T. Schleck
Common Stock 0 0 13,074 25,430 140,100 198,400
Depositary Shares 0 0 0 0 0 0
Steven A. Roseman
Common Stock 0 0 0 10,448 0 37,500
Depositary Shares 0 0 0 0 0 0
</TABLE>
- ---------------
(1) Value realized at exercise is the difference between the sales price of the
underlying shares less the exercise price per share of Common Stock,
multiplied by the number of shares acquired upon exercise.
(2) Calculated based on the closing prices of the Common Stock and the
Depositary Shares at December 31, 1997 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 (5,807) and McGee (1,372), at
their election, in lieu of a portion of their 1993 and 1994 bonuses,
respectively.
EMPLOYMENT AGREEMENTS
Joseph P. Sullivan is entitled to receive minimum compensation under a
three-year employment agreement with the Company at a rate of $532,500 per annum
in 1998. Messrs. Schonert, McGee, Schleck and Roseman are entitled to receive
minimum compensation under two-year employment agreements with the Company at
the rate of $200,000, $200,000, $218,000 and $190,000 per annum in 1998,
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
12
<PAGE> 15
three most recent years. If the employment of either Messrs. Schonert, McGee,
Schleck or Roseman 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 1997 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 Core Group funds from operations 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 Core Group's
actual funds from operations per share versus the goals set at the start of the
year, (b) growth in the current year's Core Group funds from operations 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 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
13
<PAGE> 16
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, 1997 are set forth above in "Aggregated Option
Exercises in 1997 and Option Values at December 31, 1997" and in the Notes to
the "Summary Compensation Table," respectively. As of December 31, 1997, 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.
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.
14
<PAGE> 17
DIRECTOR COMPENSATION AND DIRECTOR STOCK OPTION PLANS
Cash Compensation. Outside directors of the Company (other than outside
directors who may serve as the Chairman) receive a retainer fee for their Board
work in the amount of $24,000 per year. An outside director who serves as 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 in-person meeting attended of any Committee on which they serve (except for
the Chairman of the Committee, who receives $1,500 for each Committee in-person
meeting attended). Outside directors receive an additional $500 payment for
their participation in each telephonic meeting of the Board or a Committee that
exceeds one-half hour.
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 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 all or a portion of his director's
fees credited to his account pursuant to the Directors Option Plan in 1997 and
1998.
15
<PAGE> 18
Directors Retirement Plan. The Retirement Plan for Outside Directors (the
"Director Retirement Plan") provides that nonemployee directors elected to the
Board prior to January 1997 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 1997.
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.
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.
16
<PAGE> 19
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 entirely of nonemployee directors. 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 & 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 and supports the Company's business objectives and compensation
philosophy.
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. Other comparably sized REITs in health care and
related areas are used for competitive comparisons including certain of those
covered by the NAREIT Equity REIT Index in the graph shown on page 21.
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 targeted at the competitive median
and 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.
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
17
<PAGE> 20
Company's Core Group funds from operations per share versus the goals set at the
start of the year, (b) growth in the fiscal year's Core Group funds from
operations per share and (c) a judgmental review by the Committee of the
Company's overall operational and strategic performance.
For 1997, executive officers of the Company received cash bonuses ranging
from 71% to 89% of their maximum potential awards under the performance schedule
adopted by the Committee at the beginning of 1997. The Committee noted that the
Company achieved or exceeded each of its operational, financial and strategic
objectives for the year. These objectives included reducing the Company's cost
of capital, expanding the Company's access to debt and equity capital,
increasing the Company's liquidity, further diversifying the Company's
investment portfolio, continuing the careful monitoring of the Company's
psychiatric facilities and otherwise strengthening Company operations.
The Company reduced its cost of capital by approximately two percent. This
reduction was accomplished by (a) replacing $152 million of 11.03% private
placement debt with new public debt (the Company's first public debt issuance)
having an average effective interest rate of 7.56%, (b) replacing its former
$150 million bank line with a new, three-year $250 million bank line having
pricing and terms more favorable to the Company and (c) issuing $100 million of
perpetual preferred stock (a new addition to the Company's capital structure).
The foregoing transactions also greatly increased the Company's liquidity,
thereby allowing the Company to respond quickly to investment opportunities. The
Company developed and implemented a systematic process for evaluation and
investment in multi-tenant and other medical office/physician clinic facilities,
which resulted in acquisition by the Company of more than $100 million of such
assets during 1997. To take advantage of these enhanced opportunities for
investment, the Company added real estate and legal expertise to management and
the Board. The acquisition trend continued in the first quarter of 1998.
The Company increased the diversity of its tenants with the acquisition of
multi-tenant medical office facilities including Northpark Professional Building
in North Miami Beach, Florida and Park Plaza Professional Building in Houston,
Texas during 1997 and Morristown Professional Plaza in Morristown, New Jersey
and Woodlake Medical Center in West Hills, California in early 1998. Further
portfolio diversification was also accomplished with investments in
single-tenant medical office buildings master-leased to tenants such as
Columbia/HCA Healthcare Corporation and to major physician provider groups
managed by national physician practice management companies such as PhyCor, Inc.
The Company also continued its historical role in financing single tenant
facilities operated by quality health care operators. The Company continued
investing in Alzheimer's care, long-term acute care hospital (LTAC) and other
long-term health care facilities.
The Committee also considered that total return for the Company's Core
Group shareholders, assuming reinvestment of all dividends, was approximately
25% in 1997 and more than 50% over the past two years. Total return in 1997 for
the Psychiatric Group shareholders, assuming reinvestment of all dividends, was
approximately 10.5% and more than 40% over the past two years.
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 1997 in order to retain and motivate
executives to improve long-term shareholder value.
18
<PAGE> 21
Options to purchase Common Stock are granted with an exercise price equal
to the fair market value of the Common Stock at the time of grant. Stock option
awards vest in equal annual installments 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 and
other factors 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 continues 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 median of long-term incentive compensation for
comparable companies, taking into account the value of the corresponding
dividend equivalent rights.
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. No action has been taken by the Committee to
date to exempt annual bonuses from the Section 162(m) deduction limits because
the Committee believes that such action would not have a material economic
impact on the Company while potentially decreasing the Company's flexibility to
administer its compensation program in the best interest of its shareholders.
CHIEF EXECUTIVE COMPENSATION
The Company has entered into an employment agreement with Joseph P.
Sullivan, Chairman, 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 provided for a
base salary of $515,000 for 1997. Mr. Sullivan is not guaranteed any minimum
bonus award or stock option grant. Mr. Sullivan's salary for 1998 was increased
from its previous level by 3.4% to $532,500.
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
1997. These accomplishments include: raising approximately $600 million of new
funding for the Company; establishing a financial strategy enabling the Company
to reduce its cost of capital significantly while maintaining investment grade
debt ratings from Moody's, Standard & Poor's and Duff & Phelps; strengthening
operations and realigning management responsibilities by the addition of a new
General
19
<PAGE> 22
Counsel and, early in 1998 a new portfolio management officer; successfully
performing the role of Chairman of the Board; expanding the Company's investment
activities into multi-tenant medical office/physician clinic facilities; and
remaining active on the Board of Governors of NAREIT. For 1997, Mr. Sullivan
received a cash bonus of $473,700, or 86% of the maximum potential award under
the performance schedule adopted by the Committee at the beginning of 1997. In
January 1998, he received 37,616 stock options with dividend equivalent rights,
which, based on data presented to the Committee by the outside consultants,
represents approximately the median grant value as compared to similar
organizations.
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.
SHELDON S. KING LOUIS T. ROSSO JAMES D. HARPER, JR. JOHN P. MAMANA, M.D.
20
<PAGE> 23
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, 1992 to December 31, 1997 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, 1997)
<TABLE>
<CAPTION>
MEASUREMENT PERIOD AHP
(FISCAL YEAR AHP AHP DEPOSITARY
COVERED) COMPOSITE NAREIT S&P 500 COMMON SHARES
------------------ --------- ------ ------- ------ -----------
<S> <C> <C> <C> <C> <C>
12/92 100.00 100.00 100.00
3/93 128.65 121.64 104.28
6/93 133.41 118.15 104.82
9/93 154.00 129.19 107.50
12/93 139.14 119.65 109.99
3/94 142.26 123.73 105.79
6/94 139.59 126.01 106.23
9/94 140.14 123.43 111.46
12/94 121.34 123.45 111.43
3/95 127.72 123.24 122.28
6/95 138.49 130.49 133.88
7/25/95 146.58 133.56 139.20 133.30 13.28
9/95 154.33 136.63 144.52 143.31 11.02
12/95 156.70 142.30 153.15 145.95 10.75
3/96 168.49 145.53 161.35 156.03 12.46
6/96 169.06 152.00 168.60 157.02 12.04
9/96 170.45 161.95 173.81 158.78 11.67
12/96 191.04 192.48 188.29 177.33 13.71
3/97 203.56 193.82 193.34 186.63 16.93
6/97 211.61 203.46 227.10 194.43 17.17
9/97 208.86 227.50 244.11 193.66 15.20
12/97 237.49 231.47 251.13 222.33 15.16
</TABLE>
21
<PAGE> 24
PRINCIPAL SHAREHOLDERS OF THE COMPANY
The following table sets forth, as of February 17, 1998, 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)................................. 1,817,342
777 Mariners Island Blvd.
San Mateo, California 94404
</TABLE>
- ---------------
(1) Represents 7.6% of the outstanding Common Stock on April 15, 1998. Includes
beneficial ownership of (i) 1,482,500 shares of Common Stock owned directly
by Templeton Global Advisors Limited, (ii) 272,842 shares of Common Stock
owned directly by Templeton/Franklin Investment Services, Inc., (iii) 59,000
shares of Common Stock owned directly by Templeton Investment Management
Limited and (iv) 3,000 shares of Common Stock owned directly by Franklin
Management, Inc. Franklin Resources, Inc. ("FRI") is the parent holding
company of Templeton Global Advisors Limited, Templeton/Franklin Investment
Services, Inc., Templeton Investment Management Limited, and Franklin
Management, Inc. Charles B. Johnson and Rupert H. Johnson, Jr. (the
"Principal Shareholders") each own in excess of 10% of the outstanding
common stock of FRI and are the principal shareholders of FRI. FRI and the
Principal Shareholders may be deemed to be beneficial owners of such shares;
however, FRI and the Principal Shareholders disclaim beneficial ownership of
these shares. 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 January 26, 1998 and delivered to the Company.
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,
1998.
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,
1998.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE APPOINTMENT OF
ARTHUR ANDERSEN LLP AS AUDITORS FOR 1998.
22
<PAGE> 25
ANNUAL REPORT TO SHAREHOLDERS
The Company's Annual Report to Shareholders of the Company for the fiscal
year ended December 31, 1997 (the "Annual Report"), which includes financial
statements for the year ended December 31, 1997, accompanies this proxy
statement. Requests for additional copies of such report should be directed to
Investor Relations, American Health Properties, Inc., 6400 South Fiddler's Green
Circle, Suite 1800, 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 26, 1999 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/ STEVEN A. ROSEMAN
Steven A. Roseman
Corporate Secretary
April 16, 1998
23
<PAGE> 26
- --------------------------------------------------------------------------------
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 April 2, 1998 at the Annual Meeting
of Shareholders to be held on May 22, 1998 or any adjournment thereof.
1. ELECTION OF DIRECTORS
To elect as Class II Directors for a three-year term expiring at the 2001
Annual Meeting the following nominees: Peter K. Kompaniez and Joseph P.
Sullivan
<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 1998 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> 27
- --------------------------------------------------------------------------------
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 ,1998
------------------------
------------------------------------
(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> 28
- --------------------------------------------------------------------------------
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 of
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 April 2, 1998 at the Annual Meeting of Shareholders to be held on May 22,
1998 or any adjournment thereof.
1. ELECTION OF DIRECTORS
To elect as Class II Directors for a three-year term expiring at the 2001
Annual Meeting the following nominees: Peter K. Kompaniez and Joseph P.
Sullivan
<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 1998 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> 29
- --------------------------------------------------------------------------------
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 , 1998
------------------------
------------------------------------
(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 21, 1998.
- --------------------------------------------------------------------------------
<PAGE> 30
PROXY/ PROXY/
INSTRUCTION INSTRUCTION
CARD CARD
AMERICAN HEALTH PROPERTIES, INC.
6400 South Fiddler's Green Circle,Suite 1800, Englewood, Colorado 80111
The undersigned hereby (i) nominates and appoints Joseph P. Sullivan and
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 April 2, 1998 at the Annual Meeting
of Shareholders to be held on May 22, 1998 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 April 2, 1998 at the Annual Meeting of Shareholders to
be held on May 22, 1998 or any adjournments thereof.
IMPORTANT: SIGNATURE REQUIRED ON REVERSE SIDE
<PAGE> 31
PLEASE MARK
YOUR VOTES AS [ X ]
INDICATED IN
THIS EXAMPLE
THIS PROXY/INSTRUCTION CARD IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
<TABLE>
<CAPTION>
FOR WITHHOLD
AUTHORITY
<S> <C> <C>
Proposal Number 1 - ELECTION OF DIRECTORS: To elect as
Class II Directors for a three-year term expiring at the 2001 [ ] [ ]
Annual Meeting the following nominees:
Peter K. Kompariez and Joseph P. Sullivan
INSTRUCTIONS: To withhold authority to vote for any individual nominee, write the nominee's
name in the space provided below.
Proposal Number 2 - To approve the appointment of FOR AGAINST ABSTAIN
Arthur Anderson LLP as auditors and independent
public accountants for the Company's 1998 fiscal [ ] [ ] [ ]
year.
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.
</TABLE>
- -----------------------------------------
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: _______________________, 1998
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 21, 1998.
<PAGE> 32
American Health Properties, Inc.
6400 SOUTH FIDDLER'S GREEN CIRCLE, SUITE 1800
ENGLEWOOD, COLORADO 80111
---------------------
INSTRUCTIONS TO BROKERS
Enclosed please find proxy materials for the 1998 Annual Meeting of
Shareholders of American Health Properties, Inc., which materials include a
Notice of Annual Meeting of Shareholders, a Proxy Statement, a blue Proxy and a
yellow Instruction Card. The Notice and Proxy Statement should be sent to each
holder of American Health Properties, Inc. Common Stock (NYSE: AHE) and to each
holder of American Health Properties, Inc. Psychiatric Group Depositary Shares
(NASDAQ: AHEPZ). Proxy materials sent to holders of Common Stock should also
include a blue Proxy, which is used solely to vote the Common Stock. Proxy
materials sent to holders of Psychiatric Group Depositary Shares should also
include a yellow Instruction Card, which is used solely to instruct the
Depositary to vote the American Health Properties, Inc. Psychiatric Group
Preferred Stock underlying the Psychiatric Group Depositary Shares.
Please note that the Instruction Cards must be returned to the Depositary
no later than 5:00 p.m. Pacific Daylight Time on May 21, 1998. To ensure that
this deadline is met, please send all voting instructions by facsimile to
ChaseMellon Shareholder Services, L.L.C., which acts as the Depositary for the
Psychiatric Group Depositary Shares, at (201) 296-4142 or to Corporate Investor
Communications, Inc. at (201) 804-8693 no later than 5:00 p.m. Eastern Daylight
Time on May 21, 1998.
