<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:
<TABLE>
<S> <C>
[ ] 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] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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:
-----------------------------------------------------------------------
<PAGE> 2
American Health Properties, Inc.
6400 SOUTH FIDDLER'S GREEN CIRCLE, SUITE 1800
ENGLEWOOD, COLORADO 80111
---------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
JUNE 11, 1999
The 1999 Annual Meeting of Shareholders of American Health Properties,
Inc., a Delaware corporation (the "Company"), will be held at The Peninsula
Beverly Hills, 9882 Little Santa Monica Boulevard, Beverly Hills, California at
1:30 p.m. local time, on June 11, 1999, for the following purposes:
(1) To elect three Class III directors to a term of three years.
(2) To approve the adoption of the Company's 1999 Equity Incentive
Plan.
(3) 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, 1999.
(4) 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 15, 1999 (the "Record Date") are
entitled to notice of and, except as noted below, 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
.0699 of a vote per Depositary Share be cast by the Depositary. However, the
Company has announced that it will redeem the Depositary Shares on May 21, 1999.
If this occurs, the Depositary Shares will not be entitled to vote at the 1999
Annual Meeting or thereafter.
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.
IF HOLDERS OF DEPOSITARY SHARES ARE ENTITLED TO VOTE, 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 JUNE 10, 1999 BY
GIVING NOTICE TO THE DEPOSITARY OR BY FILING A LATER DATED INSTRUCTION CARD WITH
THE DEPOSITARY. IF HOLDERS OF DEPOSITARY SHARES ARE ENTITLED TO VOTE, 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 28, 1999
<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 May 3, 1999 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 June 11,
1999, and any adjournments thereof (the "Annual Meeting").
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
$6,000, 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 15, 1999 (the "Record Date") are entitled to
notice of and, except as noted below, 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"). In accordance with the Certificate of Designations governing the
Psychiatric Group Preferred Stock, the Company has called the Depositary Shares
and the underlying Psychiatric Group Preferred Stock for redemption effective as
of May 21, 1999 (the "Redemption Date"). If, as currently planned, the
Depositary Shares and underlying Psychiatric Group Preferred Stock are redeemed
on the Redemption Date, then neither the holders of the Depositary Shares nor
the holder of the Psychiatric Group Preferred Stock will be entitled to vote on
the matters presented at the Annual Meeting. If the Psychiatric Group Preferred
Stock is entitled to vote, 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, if any, by instructing the Depositary pursuant to the Instruction Card
enclosed with this proxy statement. In the absence of specific
<PAGE> 4
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 24,984,422 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. If the
Psychiatric Group Preferred Stock is entitled to vote, each full share of
Psychiatric Group Preferred Stock would be entitled to .699 of a vote on all
matters presented at the Annual Meeting; accordingly, each Depositary Share
would be entitled to instruct that .0699 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 outstanding and entitled
to vote (and, if entitled to vote, the Psychiatric Group Preferred Stock
outstanding, considered as a single class with the Common Stock), 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, if entitled to vote, the
Psychiatric Group Preferred Stock, considered as a single class with the Common
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.
It remains the Company's intention to redeem 100% of the Psychiatric Group
Preferred Stock and Depositary Shares effective as of the close of business on
the Redemption Date. From and after the Redemption Date, all shares of the
Psychiatric Group Preferred Stock and related Depositary Shares shall no longer
be deemed outstanding, all dividends will cease to be paid, and all rights with
respect to such securities, including without limitation all voting rights,
shall cease and terminate, except the right to receive the redemption price for
such shares on the Redemption Date, without interest. Accordingly, the Company
anticipates that neither the holders of the Depositary Shares nor the holder of
the Psychiatric Group Preferred Stock will have any right to vote on the matters
presented to shareholders at the Annual Meeting.
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.
2
<PAGE> 5
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 June 11, 1999 will be voted at the Annual Meeting.
INSTRUCTION CARD FOR DEPOSITARY SHARES
If holders of the Depositary Shares and Psychiatric Group Preferred Stock
are entitled to vote, holders of Depositary Shares may vote only by completing
the enclosed Instruction Card and returning the card to the Depositary. If
holders of the Depositary Shares and Psychiatric Group Preferred Stock are
entitled to vote, 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 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
June 10, 1999 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.
If the holders of the Depositary Shares and Psychiatric Group Preferred
Stock are entitled to vote 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 the holders of the Depositary Shares and
Psychiatric Group Preferred Stock are entitled to vote at the Annual Meeting and
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 June 10, 1999 will be utilized
by the Depositary to vote the Psychiatric Group Preferred Stock at the Annual
Meeting.
3
<PAGE> 6
ELECTION OF DIRECTORS
(PROPOSAL NO. 1)
There are currently seven 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 two directors who are serving a three-year
term expiring at the 2001 annual meeting of shareholders. Class III consists of
three directors who are serving a three-year term expiring at the Annual
Meeting. 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 terms of Messrs. King, Mamana and Rosso expire at the Annual Meeting.
The Compensation and Board Affairs Committee of the Board of Directors and the
entire Board of Directors has each nominated Sheldon S. King, John P. Mamana,
M.D. and Louis T. Rosso for election as Class III 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."
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, if entitled to vote, the
Psychiatric Group Preferred Stock, considered as a single class with the Common
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,
JOHN P. MAMANA, M.D. AND LOUIS T. ROSSO AS DIRECTORS OF THE COMPANY.
4
<PAGE> 7
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
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 currently serves on the UCLA Medical Center Board of
Advisors. 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 56 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 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., an international owner and operator of for-profit
hospitals, and is 44 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 43 years old.
5
<PAGE> 8
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 1983 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 40 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 67 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
has been a director of the Company since May 1997 and is 65 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 67 years old.
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). He has been a director of the
Company since April 1998 and is 53 years old.
Dr. Mamana is currently President, Chief Executive Officer and Chairman of
American Health Sciences. He was the founder, President, Chief Executive Officer
and Chairman of Virginia Medical Associates from 1978 until 1997. Dr. Mamana was
the Chief Medical Officer of Health Partners, Inc. from 1994 until its merger
with and into FPA Medical Management in 1997. Dr. Mamana was not involved in the
affairs of FPA Medical Management and did not participate in the affairs of
Virginia Medical Associates or Health Partners, Inc. after the acquisitions of
those entities by FPA Medical Management in October 1997. In July 1998, FPA
Medical Management filed a petition in bankruptcy, as did its subsidiary,
Virginia Medical Associates. Dr. Mamana was Chief of Internal Medicine at
Fairfax Hospital, Falls Church, Virginia, from 1977 until 1992. He has been a
Clinical Associate Professor of Medicine at Georgetown University School of
Medicine since 1987 and a director of Mid Atlantic Medical Services, Inc. since
1997. Dr. Mamana has been a director of the Company since May 1997 and is 56
years old.
6
<PAGE> 9
Mr. Rosso is Chairman Emeritus of Beckman Coulter, Inc. (Beckman), a
leading supplier of laboratory systems for life sciences and diagnostics. He was
Chairman of the Board of Directors of Beckman from 1989 until February 1999 and
served as its Chief Executive Officer from 1988 until September 1998. Mr. Rosso
is a member of the Board of Directors of Allergan, Inc. He has been a director
of the Company since May 1994 and is 65 years old.
BOARD COMMITTEES AND MEETINGS
The Board of Directors held 12 meetings during 1998. 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 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 sound financial and accounting practice and
government regulations. During 1998, the Audit Committee consisted of Messrs.
Rosso (chairman), Fishel, Kompaniez and Mamana. The Audit Committee met one time
during 1998.
The Finance Committee is charged with the responsibility of evaluating the
overall financial needs and financial strategy of the Company. The Finance
Committee met one time during 1998. During 1998, this Committee was composed of
Messrs. Fishel (chairman), King, Harper, Kompaniez and Sullivan.
The Compensation and Board Affairs Committee is composed solely of
directors who are not employees of the Company. During 1998, 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 six times during 1998.
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 16, 1999, 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 15, 1999, 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>
James L. Fishel.................... 500 55,000 55,500 0 3,000 3,000
James D. Harper, Jr. .............. 500 25,000 25,500 0 0 0
Sheldon S. King(2)................. 3,358 95,000 98,358 100 7,000 7,100
Peter K. Kompaniez(2).............. 1,941 10,000 11,941 0 0 0
Michael J. McGee................... 18,000 72,336 90,336 1,271 4,553 5,824
John P. Mamana, M.D. .............. 2,000 25,000 27,000 0 0 0
Steven A. Roseman.................. 1,000 15,481 16,481 0 0 0
Louis T. Rosso..................... 1,000 55,000 56,000 0 3,000 3,000
Thomas T. Schleck(3)............... 19,000 0 19,000 0 0 0
C. Gregory Schonert................ 12,784 84,292 97,076 1,228 6,681 7,909
Joseph P. Sullivan................. 34,000 274,887 308,887(4) 2,909 17,210 20,119
All Directors and Executive
Officers as a Group (11
persons)(5)...................... 94,083 711,996 806,079 5,508 41,444 46,952
</TABLE>
- ---------------
(1) Excludes shares issuable upon exercise of related dividend equivalent
rights.
(2) Beneficial ownership includes shares issuable to Messrs. King and Kompaniez
in lieu of director fees.
(3) Mr. Schleck resigned from the Company in July 1998.
(4) Represents 1.2% of the outstanding shares of Common Stock on April 15, 1999.
(5) Total beneficially owned represents approximately 3.1% of the outstanding
shares of Common Stock and approximately 2.2% 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, 1998, 1997 and 1996, 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 1998 $531,000 $536,000 $ 0 37,616 $55,000
President and Chief 1997 513,300 473,700 0 40,792 61,100
Executive Officer 1996 492,600 446,000 89,400 43,191 46,400
C. Gregory Schonert 1998 198,300 140,000 0 10,596 34,100
Senior Vice President and 1997 179,600 120,000 0 10,693 32,800
Chief Development Officer 1996 174,600 89,800 0 11,492 33,900
Michael J. McGee 1998 198,300 140,000 0 10,596 30,600
Senior Vice President, 1997 178,800 120,000 0 10,693 30,600
Chief Financial Officer 1996 163,200 110,000 0 10,820 30,500
and Treasurer
Steven A. Roseman(4) 1998 188,800 130,000 0 10,066 124,400
Senior Vice President, 1997 84,900 55,000 0 10,448 44,000
General Counsel
and Secretary
Thomas T. Schleck(5) 1998 118,900 0 0 11,550 35,300
Former Senior Vice President and 1997 207,300 110,000 0 12,356 36,100
Chief Investment Officer 1996 142,200 74,000 0 26,148 126,900
</TABLE>
- ---------------
(1) Restricted stock awards are valued based on the fair market price of the
Company's Common Stock on the date of grant, which was $22.875 for the 3,910
shares of restricted stock awarded to Mr. Sullivan in 1996. Awards of
restricted stock vest ratably over two years and dividends are paid on
shares of restricted stock at the same rate as all other shares of Common
Stock. At December 31, 1998, there were no shares of restricted stock that
were held and remain restricted.
(2) Amounts included represent options to purchase Common Stock on the date of
grant. Stock options vest ratably over two years and are coupled with
dividend equivalent rights.
9
<PAGE> 12
(3) Includes amounts paid for 1998 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 $8,300 $5,900 $10,800 $ 0
C. Gregory Schonert 30,000 2,900 1,200 0 0
Michael J. McGee 30,000 0 600 0 0
Steven A. Roseman 30,000 0 2,300 0 92,100
Thomas T. Schleck(5) 30,000 2,000 3,300 0 0
</TABLE>
(4) Mr. Roseman commenced employment with the Company in July 1997.
(5) Mr. Schleck commenced employment with the Company in April 1996 and resigned
from the Company in July 1998.
OPTION GRANTS IN 1998
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, 1998:
<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 37,616 46.77% $28.3125 01/22/08 $66,600
C. Gregory Schonert 10,596 13.18% 28.3125 01/22/08 18,800
Michael J. McGee 10,596 13.18% 28.3125 01/22/08 18,800
Steven A. Roseman 10,066 12.51% 28.3125 01/22/08 17,800
Thomas T. Schleck(3) 11,550 14.36% 28.3125 01/22/08 20,500
</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 1998 were options to purchase Common
Stock. At December 31, 1998, the number of DER shares relating to options
for Common Stock granted in 1998 held by the Named Executive Officers were
as follows: Mr. Sullivan: 3,290; Mr. Schonert: 926; Mr. McGee: 926; Mr.
Roseman: 880 and Mr. Schleck: 0. The dollar value of all such DER shares at
December 31, 1998, based on the closing price of the Common Stock on
December 31, 1998, was $124,200.
(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
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<PAGE> 13
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 5.71%. 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.
(3) Mr. Schleck resigned from the Company in July 1998. All of Mr. Schleck's
unvested stock options and related DER shares were cancelled.
AGGREGATED OPTION EXERCISES IN 1998 AND OPTION VALUES AT DECEMBER 31, 1998
The following table sets forth certain information concerning the exercise
of stock options by the Named Executive Officers during the year ended December
31, 1998 and the value of stock options held as of December 31, 1998 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, 1998 DECEMBER 31, 1998(2)
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Joseph P. Sullivan
Common Stock 0 $ 0 235,683 58,012 $1,808,000 $0
Depositary Shares 0 0 17,210 0 73,600 0
C. Gregory Schonert
Common Stock 0 0 73,648 15,942 324,700 0
Depositary Shares 0 0 6,681 0 13,800 0
Michael J. McGee
Common Stock 0 0 61,692 15,942 270,100 0
Depositary Shares 0 0 4,553 0 11,200 0
Steven A. Roseman
Common Stock 0 0 5,224 15,290 0 0
Depositary Shares 0 0 0 0 0 0
Thomas T. Schleck(3)
Common Stock 38,638 292,200 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 fair market price
of the underlying shares on the date of exercise 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, 1998 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) Mr. Schleck resigned from the Company in July 1998. All of Mr. Schleck's
unvested stock options and related DER shares were cancelled.
EMPLOYMENT AGREEMENTS
Messrs. Sullivan, Schonert, McGee and Roseman are entitled to receive
minimum compensation under three-year employment agreements with the Company at
the rate of $549,500, $225,000, $212,000 and $201,000 per annum in 1999,
respectively. If the employment of any of Messrs. Sullivan, Schonert, McGee 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 three
times his average salary plus bonus for the three most recent years.
INCENTIVE BONUS PLAN
The Company's incentive bonus plan for fiscal 1998 covered a total of 17
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 1990
Stock Incentive Plan (the "1990 Plan"), the "Directors Option Plan" (as defined
below), and the 1994 Stock Incentive Plan (the "1994 Plan") (collectively, the
"Prior Plans"). The Board of Directors has approved the adoption of the 1999
Equity Incentive Plan (the "1999 Plan"), subject to the approval of the
Company's shareholders. The 1999 Plan will combine, replace and supersede the
Prior Plans. See "Approval of 1999 Equity Incentive Plan." A total of 1,000,000
shares of Common Stock will be reserved for issuance under the proposed 1999
Plan. In addition, approximately 315,000 shares of Common Stock remained
available for issuance under the Prior Plans as of April 15, 1999 and will be
issuable under the 1999 Plan. Of the Shares of Common Stock available under the
1999 Plan, not more than 500,000 Shares will be issuable in the form of
Restricted Stock or Performance Shares. 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 and 1999 Plan also provide for the
granting of
12
<PAGE> 15
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 Prior Plans to reflect the
distribution of one Depositary Share for every ten shares of Common Stock held
on July 14, 1995 (the "Distribution"). This adjustment resulted in the Company's
issuance pursuant to the Prior 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, prior to redemption,
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 422 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, 1998 are set forth above in "Aggregated Option
Exercises in 1998 and Option Values at December 31, 1998" and in the Notes to
the "Summary Compensation Table," respectively. As of December 31, 1998, 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 is in the process of adopting 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 receive a retainer fee
for their Board work in the amount of $24,000 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.
Stock Option Plans for Nonemployee Directors. 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. Shares of Common Stock that remain available for
issuance under the Directors Option Plan and the 1990 Plan are included in the
total shares of Common Stock that remain available for issuance under Prior
Plans as noted above. See "Compensation of Directors and Executive
Officers -- Stock Incentive Plans." In addition, the Board of Directors has
approved the adoption of the 1999 Plan, subject to the approval of the Company's
shareholders. If approved by the Company's shareholders, the 1999 Plan will
combine, replace and supersede the Prior Plans. See "Approval of 1999 Equity
Incentive Plan."
14
<PAGE> 17
The exercise price of the options granted under 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 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. Two nonemployee directors elected to have all or a portion of their
director's fees credited to their accounts pursuant to the Directors Option Plan
in 1998 and one nonemployee director made such an election for 1999.
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. Only three of the Company's
current nonemployee directors are eligible for the Director Retirement Plan. 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 1998.
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
15
<PAGE> 18
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 lapsed 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, prior
to redemption, 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 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 20.
COMPENSATION MIX
The Company's executive compensation is based on three components designed
in each case to accomplish the Company's compensation philosophy.
16
<PAGE> 19
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 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 1998, executive officers of the Company received cash bonuses ranging
from 97% to 100% of their maximum potential awards under the performance
schedule adopted by the Committee at the beginning of 1998. The Committee noted
that the Company achieved or exceeded each of its operational, financial and
strategic objectives for the year. These objectives included further
diversifying the Company's investment portfolio, continuing the methodical and
gradual liquidation of the Company's Psychiatric Group assets so as to maximize
value for the holders of the Psychiatric Group's Depositary Shares, retaining
liquidity to enable the Company to make profitable investments, renewing leases
of facilities set to expire in February 1999, negotiating the sale upon
expiration of one facility lease, generating approximately 9.0% of the Company's
1998 revenues, at a substantial gain to the Company, and otherwise strengthening
Company operations.
The Company successfully renewed leases for four of its acute care
hospitals, operated by Tenet Healthcare Corporation for an extended term ending
February 19, 2004. Those four leases generated approximately $25.5 million of
revenue for the Company's Core Group in 1998, representing approximately 24% of
total 1998 Core Group operating revenues. The four leases were renewed on
substantially the same terms and conditions. In addition, the Company negotiated
the sale of the Kendall Regional Medical Center to Columbia/HCA Healthcare
Corporation for a purchase price of $105 million, representing a gain of over
$50 million to the Company.
The Company accepted payment of $35 million as payment in full of
approximately $37.7 million of net book value obligations owed to the Company by
the operator of the two New York Four Winds psychiatric facilities. The proceeds
of that payment enabled the Psychiatric Group to repay the entire $11.2 million
of loans owed to the Core Group and pay a special dividend of 0.4 shares of Core
Group Common Stock per Psychiatric Group Depositary Share to Psychiatric Group
Depositary Share holders.
The Company retained significant liquidity despite an overall contraction
in the availability of capital to REITs. This has allowed the Company to
continue to respond to investment opportunities as they arise. The Company
invested in approximately $140 million of health care real property assets
during 1998.
17
<PAGE> 20
The Company continued to increase the diversity of its tenants with the
acquisition of multi-tenant medical office facilities including Morristown
Professional Plaza in Morristown, New Jersey, the Murfreesboro Medical Clinic in
Murfreesboro, Tennessee, Woodlake Medical Center in West Hills, California,
Emerson Surgery Center and Medical Office Building in Jacksonville, Florida and
others in 1998.
The Company also continued its historical role in financing single tenant
facilities operated by quality health care operators. The Company invested over
$75 million in Alzheimer's care, limited long-term care and assisted living
health care facilities, including facilities such as the Silver Hills Health
Care Center in Las Vegas, Nevada which were completed in 1998 and others which
are now completing construction. The Company also began to develop multi-tenant
office buildings for its own account with the construction of a 100% pre-leased
office building on the campus of Mercy Medical Center, a Catholic Healthcare
Initiatives-West acute care hospital in Roseburg, Oregon.
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 1998 in order to retain and motivate
executives to improve long-term shareholder value.
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.
In addition, in January 1999, the Committee elected to issue a total of
163,500 additional options without dividend equivalent rights to the executive
officers and other employees of the Company. These additional grants are
consistent with the Company's compensation philosophy of providing long-term
incentives for growth in shareholder value.
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
18
<PAGE> 21
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 and Mr. Sullivan's salary for 1998 was
increased from its previous level by 3.4% to $532,500. For 1999, Mr. Sullivan's
salary was increased to $549,500, an increase of approximately 3.2%. Mr.
Sullivan is not guaranteed any minimum bonus award or stock option grant.
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
1998. These accomplishments include: successfully renewing the four leases with
Tenet Healthcare Corporation, managing the Company's liquidity to permit it to
continue making investments despite the contraction in REIT values and access of
REITs generally to the capital markets, performing the role of Chairman of the
Board and continuing the implementation of the Company's investment activities
in multi-tenant medical office/physician clinic facilities. For 1998, Mr.
Sullivan received a cash bonus of $536,000, or 100% of the maximum potential
award under the performance schedule adopted by the Committee at the beginning
of 1998. In January 1999, he received 77,000 stock options with dividend
equivalent rights and 20,000 stock options without dividend equivalent rights,
which, based on data presented to the Committee by the outside consultant,
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.
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<PAGE> 22
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, 1993 to December 31, 1998 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, 1998)
<TABLE>
<CAPTION>
MEASUREMENT PERIOD AHP
(FISCAL YEAR AHP DEPOSITARY
COVERED) COMPOSITE NAREIT S&P 500 AHP SHARES
<S> <C> <C> <C> <C> <C>
12/93 100.00 100.00 100.00
3/94 102.25 103.40 96.19
6/94 100.33 105.31 96.58
9/94 100.72 103.15 101.33
12/94 87.21 103.17 101.31
3/95 91.79 103.00 111.17
6/95 99.53 109.05 121.72
7/25/95 105.35 110.93 125.77 95.81 9.55
9/95 110.92 114.19 131.40 103.00 7.92
12/95 112.62 118.92 139.23 104.89 7.73
3/96 121.10 121.63 146.70 112.14 8.95
6/96 121.50 127.04 153.28 112.85 8.65
9/96 122.51 135.35 158.02 114.12 8.38
12/96 137.30 160.86 171.19 127.45 9.86
3/97 146.30 161.98 175.78 134.13 12.17
6/97 152.09 170.04 206.47 139.74 12.34
9/97 150.11 190.13 221.94 139.19 10.92
12/97 170.69 193.45 228.32 159.79 10.90
3/98 168.77 192.55 260.16 155.85 12.93
6/98 163.30 183.72 268.77 150.66 12.64
9/98 154.46 164.39 242.03 144.87 9.59
12/98 139.45 159.59 293.57 130.11 9.34
</TABLE>
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<PAGE> 23
PRINCIPAL SHAREHOLDERS OF THE COMPANY
The following table sets forth, as of February 16, 1999, 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)................................. 2,357,991
777 Mariners Island Blvd.
San Mateo, California 94404
</TABLE>
- ---------------
(1) Represents 9.4% of the outstanding Common Stock on April 15, 1999. Includes
beneficial ownership of (i) 2,060,300 shares of Common Stock owned directly
by Templeton Global Advisors Limited, (ii) 235,682 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) 3,009 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, 1999 and delivered to the Company.
APPROVAL OF 1999 EQUITY INCENTIVE PLAN
(PROPOSAL NO. 2)
The Board of Directors has adopted, and submits for shareholder approval,
the American Health Properties, Inc. 1999 Equity Incentive Plan (the "1999
Plan"). The 1999 Plan combines, supersedes and replaces all of the Prior Plans.
The 1999 Plan was developed and reviewed with Frederic W. Cook & Co., Inc.,
a nationally-recognized executive compensation consultant. The 1999 Plan is
intended to be consistent with current business practice for similar equity
incentive plans of similar companies. The summary of the 1999 Plan that appears
below is qualified by reference to the full text of the 1999 Plan. A copy of the
1999 Plan is attached as Appendix A to this Proxy Statement. All capitalized
terms used in the following summary shall have the meaning stated in the 1999
Plan, except as provided to the contrary.
PURPOSE
The purpose of the 1999 Plan is to provide a means by which selected
employees, directors and consultants of the Company may be given an opportunity
to benefit from increases in value of the stock of the Company through the
granting of stock-based compensation. The Company, by means of the 1999 Plan,
seeks to retain the services of persons who are now employees or directors of,
or consultants to, the Company, to
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<PAGE> 24
secure and retain the services of new employees, directors and consultants, and
to provide incentives to such persons to exert maximum efforts for the success
of the Company.
PLAN PROVISIONS
Effective Date. The effective date of the 1999 Plan shall be the day
following the date on which the 1999 Plan is approved by the Company's
shareholders (the "Effective Date").
Administration. The 1999 Plan will be administered by the Board of
Directors unless and until the Board of Directors delegates administration to a
committee consisting of two or more members of the Board of Directors who
qualify as "non-employee directors" under Rule 16b-3(d)(1) under the Securities
Exchange Act of 1934, as amended, and as "outside directors" for purposes of
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Committee"). Members of the Committee shall be appointed from time to time by
the Board of Directors, shall serve at the pleasure of the Board of Directors,
and may resign at any time upon written notice to the Board of Directors. The
Board of Directors currently contemplates delegating the administration of the
1999 Plan to its Compensation and Board Affairs Committee. If the 1999 Plan is
administered by the Board of Directors all references herein to the Committee
shall be deemed to refer to the Board of Directors.
Participants. Awards may be granted to employees, directors and consultants
of the Company ("Participants") selected by the Committee in its sole
discretion, except as otherwise set forth in the 1999 Plan. The Committee will
determine the form of each Award, the amount of each Award and any other terms
and conditions of each Award as the Committee may deem necessary or desirable
and consistent with the terms of the 1999 Plan. The Committee will also
determine the form or forms of the agreements with Participants that shall
evidence the particular provisions, terms, conditions, rights and duties of the
Company and the Participants with respect to Awards granted pursuant to the 1999
Plan, which provisions need not be identical.
Awards Generally. The 1999 Plan provides for the award of benefits of
various types (collectively, "Awards"), including stock options ("Options"),
restricted shares of Common Stock and restricted stock units ("Restricted Stock
Awards"), performance based awards of Common Stock ("Performance Shares"),
performance based cash awards ("Performance Units"), stock appreciation rights
("Stock Appreciation Rights"), and dividend and dividend equivalent rights
("Dividend Equivalent Rights"). The maximum number of shares of Common Stock
that may be issued under the 1999 Plan shall be equal to the sum of (a)
1,000,000, (b) any shares of Common Stock available for future awards under any
of the Prior Plans as of the Effective Date, and (c) any shares of Common Stock
that are represented by awards granted under any Prior Plans that are forfeited,
expire or are canceled without delivery of the Common Stock or that result in
the forfeiture of Common Stock back to the Company.
No more than 1,000,000 shares of Common Stock shall be cumulatively
available for the grant of incentive stock options under the 1999 Plan. No
Participant shall be granted Awards to acquire or entitling the Participant to
the appreciation in value of more than 500,000 shares of Common Stock, in the
aggregate, in any three consecutive years. In addition, no more than one-third
of the shares of Common Stock authorized for issuance under the 1999 Plan may be
granted as Restricted Stock Awards, and no more than one-third of the shares of
Common Stock authorized for issuance under the 1999 Plan may be granted as
Performance
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<PAGE> 25
Shares. Furthermore, in no event may a Participant receive payments with respect
to Performance Units in excess of three million dollars in the aggregate in any
three consecutive years.
Unused Shares. Any shares of Common Stock covered by an Award (or portion
of an Award) granted under the 1999 Plan that is forfeited or canceled, expires
or is settled in cash, including the settlement of tax withholding obligations
using shares, shall be deemed not to have been delivered for purposes of
determining the maximum number of shares of Common Stock available for delivery
under the 1999 Plan. Likewise if any Option is exercised by tendering Shares of
Common Stock to the Company as full or partial payment in connection with the
exercise of an Option under the Plan or any Prior Plan, only the number of
shares of Common Stock issued net of the shares tendered shall be deemed
delivered for purposes of determining the maximum number of shares of Common
Stock available for delivery under the 1999 Plan.
Adjustments for Stock Split, Stock Dividend, Etc. If the Company increases
or decreases the number of its outstanding shares of Common Stock, or changes in
any way the rights and privileges of such shares by means of the payment of a
stock dividend or any other distribution upon such shares payable in Common
Stock, or through a stock split, subdivision, consolidation, combination,
reclassification or recapitalization involving the Common Stock, then the
numbers, rights and privileges of the following may be increased, decreased or
changed in like manner as if they had been issued and outstanding, fully paid
and nonassessable at the time of such occurrence: (i) the shares of Common Stock
as to which Awards may be granted under the 1999 Plan; (ii) the shares of Common
Stock then included in each Award granted under the 1999 Plan; and (iii) the
terms on which the Awards may be exercised.
Adjustments for Corporate Transactions. The Committee may determine that a
corporate transaction has affected the price per Share such that an adjustment
or adjustments to outstanding Awards are required to preserve (or prevent
enlargement of) the benefits or potential benefits intended at the times the
Awards were granted. For this purpose a corporate transaction will include, but
is not limited to, any extraordinary cash dividend, merger, split-up, spin-off
or other similar occurrence. In the event of such a corporate transaction, the
Committee may, in such manner as the Committee deems equitable, adjust (i) the
number and kind of shares that may be delivered under the 1999 Plan; (ii) the
number and kind of shares subject to outstanding Awards; and (iii) the exercise
price of outstanding Awards.
Dividend Payable in Stock of Another Corporation, Etc. If the Company pays
or makes any dividend or other distribution upon the Common Stock payable in
securities of another corporation or other property (except money or Common
Stock), a proportionate part of such securities or other property shall be set
aside for delivery to any Participant then holding an Award, upon exercise or
vesting of such Award, as applicable. Prior to the time that any such securities
or other property are delivered to a Participant in accordance with the
foregoing, the Company shall be the owner of such securities or other property
and shall have the right to vote the securities, receive any dividends payable
on such securities, and in all other respects shall be treated as the owner. In
the event the Participant's Award is not exercised or otherwise vested, the
securities or other property that have been set aside by the Company in
accordance with the foregoing shall not be delivered to the Participant, shall
remain the property of the Company and shall be dealt with by the Company as it
shall determine in its sole discretion.
Other Changes in Stock. In the event there shall be any change in the
number or kind of outstanding shares of Common Stock or of any stock or other
securities into which the Common Stock shall be changed or
23
<PAGE> 26
for which it shall have been exchanged, and if the Committee, in its sole
discretion, determines that such change equitably requires an adjustment in the
terms of an Award or in the number or kind of shares of Common Stock subject to
outstanding Awards or that have been reserved for issuance pursuant to the 1999
Plan but are not then subject to an Award, then such adjustments shall be made
by the Committee and shall be effective for all purposes of the 1999 Plan and on
each outstanding Award that involves the particular type of stock for which a
change was effected.
Rights to Subscribe. If the Company shall at any time grant to the holders
of its Common Stock rights to subscribe pro rata for additional shares thereof
or for any other securities of the Company or of any other corporation, there
shall be reserved with respect to the shares of Common Stock then subject to an
Award held by any Participant of the particular class of Common Stock involved,
the Common Stock or other securities that the Participant would have been
entitled to subscribe for if, immediately prior to such grant, the Participant
had exercised his entire Award, or otherwise had vested in his entire Award. If,
upon exercise or vesting of any Award, the Participant subscribes for the
additional Common Stock or other securities, the Participant shall pay to the
Company the price that is payable by the Participant for such Common Stock or
other securities.
Change in Control. The Committee may, in its discretion, provide for
adjustments to any Award in the event of a change of control, merger,
acquisition or other corporate reorganization, including, but not limited to,
the acceleration of the vesting of any Award.
Stock Options. Options may be either incentive stock options ("ISOs") or
non-statutory stock options ("NSOs"). The Committee in its sole discretion shall
designate whether an Option is to be considered an ISO or an NSO. The exercise
price of Options granted under the 1999 Plan will be no less than the Fair
Market Value of the Common Stock on the date the Option is granted. The other
terms of the Options will be determined by the Committee, and, in case of
Options intended to qualify as ISOs, will meet all the requirements of Section
422 of the Internal Revenue Code.
Re-Load Option. The Committee shall have the discretion to include as part
of any Option Agreement a provision entitling the Optionee to a Re-Load Option.
A Re-Load Option is a new Option that is granted in the event an Optionee
exercises an Option evidenced by an Option Agreement, in whole or in part, by
surrendering other shares of Common Stock upon such exercise, all in accordance
with the 1999 Plan and the terms and conditions of the Option Agreement. The new
Option shall be equal to the shares surrendered in connection with the exercise
of the original Option (including any shares which may be withheld for taxes
upon such exercise), shall be granted at Fair Market Value on the exercise date
and shall not extend beyond the remaining term of the original Option. Any
Re-Load Option shall be subject to the availability of sufficient shares under
the 1999 Plan and shall be subject to such other terms and conditions as the
Committee may determine in its discretion that are not inconsistent with the
express provisions of the 1999 Plan regarding the terms of Options.
Method of Payment for Options. The shares of Common Stock covered by an
Option may be purchased by means of a cash payment or other such means as the
Committee may from time to time permit, including, but not limited to, any one
or any combination of the following: (a) tendering shares valued using the Fair
Market Value at the time of exercise; (b) authorizing a third party to sell
shares of Common Stock (or a sufficient portion thereof) acquired upon exercise
of an Option and to remit to the Company a sufficient
24
<PAGE> 27
portion of the sale proceeds to pay for all the shares of Common Stock acquired
through such exercise and any tax withholding obligations resulting from such
exercise; (c) crediting towards the purchase price amounts from individual's
deferred compensation account balances, including accrued dividend equivalent
balances; or (d) obtaining a full-recourse loan from the Company.
Restricted Stock Award. A Participant's right to retain a Restricted Stock
Award granted to him or her under the 1999 Plan shall be subject to such
restrictions, including, but not limited to, the Participant's continuous
employment by the Company, for a restriction period specified by the Committee,
or the attainment of specified performance goals and objectives, as may be
established by the Committee with respect to such Award. The Committee may in
its sole discretion require different periods of employment or different
performance goals and objectives with respect to different Participants, to
different Restricted Stock Awards, or to separate designated portions of the
shares of Common Stock constituting a Restricted Stock Award.
Performance Shares, Performance Units and Performance Targets. Performance
Shares and Performance Units are the contingent right to receive Common Stock,
cash equal to the fair market value of Common Stock, or a combination thereof at
a future date. Performance Shares are Awards denominated in terms of shares of
Common Stock. Performance Units are Awards denominated in terms of cash-value
units. Generally, such Awards will be earned upon attainment of one or more
pre-established performance targets. The Committee shall establish maximum and
minimum performance targets to be achieved during specified periods of time.
Performance targets established by the Committee shall relate to corporate,
group, business unit or individual performance and shall be established in terms
of earnings, growth in earnings, profit returns or margins, revenues, costs,
cash flow, funds from operations, portfolio value or shareholder returns.
Multiple performance targets may be used and the components of multiple
performance targets may be given the same or different weighting in determining
the amount of an Award earned, and may relate to absolute performance or
relative performance measured against other companies, groups, business units,
indices, individuals or entities.
Stock Appreciation Rights. Stock Appreciation Rights are the right to
receive an amount equal to the appreciation in value of one share of Common
Stock from the time the Stock Appreciation Right is awarded until the time the
grantee elects to receive payment. Except in cases where Stock Appreciation
Rights are used to substitute for an in-the-money Option (in which case the
Stock Appreciation Right may be issued on terms equivalent to the Option), the
base price for a Stock Appreciation Right shall be no less than the Fair Market
Value of the Common Stock on the date the Award is granted. Three types of Stock
Appreciation Rights are authorized for issuance under the 1999 Plan. Tandem
Stock Appreciation Rights may be granted appurtenant to an Option, and generally
will be subject to the same terms and conditions applicable to the particular
Option grant to which it pertains. Concurrent Stock Appreciation Rights may be
granted appurtenant to an Option and may apply to all or any portion of the
shares of Common Stock subject to an underlying Option and generally will be
subject to the same terms and conditions applicable to the particular Option
grant to which it pertains. Independent Stock Appreciation Rights may be granted
independently of any Option.
Dividend and Dividend Equivalent Rights. Any grant of an Award may provide
for the payment to the Participant of dividends or dividend equivalents thereon
in cash or shares on a current, deferred or contingent basis, or the Committee
may provide that any dividend equivalents shall be credited against the purchase
25
<PAGE> 28
price, if any, relating to the Award. Any grant of dividend or dividend
equivalent rights may be subject to such conditions, restrictions and
contingencies as the Committee shall establish. Awards of dividends and dividend
equivalent rights are subject to, and count towards, the limitations on the
maximum amounts of Awards that may be granted to Participants in a three-year
period. See "-- Awards Generally."
Amendment of Plan. The Board of Directors may terminate, amend or modify
the 1999 Plan at any time. Each such amendment or modification will become
effective without approval of the amendment or modification by the stockholders
of the Company unless and except if stockholder approval of the amendment or
modification is required by any applicable listing, statutory or regulatory
requirements.
Amendment of Awards. Except as may be provided in an applicable agreement,
the Board of Directors at any time, and from time to time, may amend the terms
of any one or more Awards. However, no such amendment may impair the rights of a
Participant without his or her written consent.
Duration of the 1999 Plan. The 1999 Plan shall terminate at such time as
may be determined by the Board of Directors, and no Award shall be granted after
such termination. If the Plan is approved by the shareholders at the Annual
Meeting and is not sooner terminated, the 1999 Plan shall fully cease and expire
at midnight on June 11, 2009. Awards outstanding at the time of the 1999 Plan
termination may continue to be exercised or earned in accordance with their
terms. The Board of Directors reserves the right to suspend the 1999 Plan at any
time.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain federal income tax consequences of
the 1999 Plan.
Withholding. Any time a distribution is made under the 1999 Plan, whether
in cash or in shares, the Company may withhold from such payment any amount
necessary to satisfy federal, state and local income tax and other tax
withholding requirements with respect to the distribution, except in the case of
Options, such withholding amount shall be limited to the minimum statutory
amounts. The Company's obligation to deliver shares of Common Stock upon the
exercise or vesting of any Award is subject to the Participant's satisfaction of
all applicable federal, state and local income tax and other tax withholding
requirements. The Committee may, in its sole discretion, allow the Participant
to pay all or any amounts of withholding by transferring shares to the Company
or having the Company withhold shares of Common Stock otherwise issuable to the
Participant.
Deductibility of Benefits. Section 162(m) of the Code generally limits the
Company's deduction for non-performance based compensation to $1 million per
year per employee for the Company's CEO and its other four most highly
compensated officers. Section 162(m) was adopted in 1993 and the IRS issued
final regulations thereunder in 1995. The 1999 Plan is intended to allow awards
of benefits that are exempt from Section 162(m) because they are performance
based.
Incentive Stock Options. An optionee does not recognize income on the grant
of an ISO. If an optionee exercises an ISO in accordance with the terms of the
Option, the optionee will not realize any income by reason of the exercise
(except for alternative minimum tax ("AMT") purposes, discussed below), and the
Company will be allowed no deduction by reason of the grant or exercise. The
optionee's basis in the shares acquired upon exercise will be the amount paid
upon exercise. Provided the optionee holds the shares as a
26
<PAGE> 29
capital asset at the time of sale or other disposition of the shares and does
not dispose of the shares acquired within two years from the date of the grant
of the Option or within one year from the date of exercise, his gain or loss, if
any, recognized on the sale or other disposition will be capital gain or loss.
The amount of his gain or loss will be the difference between the amount
realized on the disposition of the shares and his basis in the shares.
If an optionee disposes of the shares within two years from the date of
grant of the Option or within one year from the date of exercise ("Early
Disposition"), the optionee will realize ordinary income at the time of such
Early Disposition which will equal the excess, if any, of the lesser of (i) the
amount realized on the Early Disposition, or (ii) the fair market value of the
shares on the date of exercise, over the optionee's basis in the shares. The
Company will be entitled to a deduction in an amount equal to such income. The
excess, if any, of the amount realized on the Early Disposition of such shares
over the fair market value of the shares on the date of exercise will be
long-term or short-term capital gain, depending upon the holding period of the
shares. If an optionee disposes of such shares for less than the optionee's
basis in the shares, the difference between the amount realized and the
optionee's basis will be a long-term or short-term capital loss, depending upon
the holding period of the shares.
The exercise of an ISO may result in tax liability under the AMT. The AMT
provides for additional tax equal to the excess, if any, of (a) 26% to 28% of
"alternative minimum taxable income" in excess of a certain exemption amount,
over (b) regular tax for the taxable year. Alternative minimum taxable income
includes the excess, if any, of the fair market value of the shares acquired
under an ISO at the time of the exercise (or up to six months later if the
option is subject to Section 16(b) of the Securities Exchange Act of 1934) over
the exercise price for the optioned shares.
Non-Statutory Stock Options. An optionee does not recognize income at the
time of the grant of an NSO. The optionee recognizes ordinary income upon the
exercise (or up to 6 months later if the optionee is subject to Section 16(b) of
the Securities Exchange Act of 1934) of an NSO in an amount equal to the excess,
if any, of the fair market value of the stock on the date of exercise (or up to
6 months later if the optionee is subject to Section 16(b)) of the Option over
the amount of cash paid for the stock. As a result of the optionee's exercise of
an NSO, the Company will be entitled to deduct as compensation an amount equal
to the amount equal to the amount included in the optionee's gross income. The
Company's deduction will be taken in the Company's taxable year in which the
optionee recognizes income with respect to the exercise.
Stock Appreciation Rights. Recipients of Stock Appreciation Rights do not
recognize income upon the grant of such rights. When a Participant elects to
receive payment of a Stock Appreciation Right, the Participant recognizes
ordinary income in an amount equal to the cash and fair market value of shares
of Common Stock received, and the Company is entitled to a deduction equal to
such amount.
Restricted Stock and Performance Shares. Grantees of Restricted Stock do
not recognize income at the time of the grant of such stock if such Restricted
Stock is nontransferable and subject to a substantial risk of forfeiture.
However, when shares of Restricted Stock are no longer subject to a substantial
risk of forfeiture or become transferable (or up to six months later if the
Restricted Stock is subject to Section 16(b) of the Securities Exchange Act of
1934), grantees recognize ordinary income in an amount equal to the fair market
value of the stock less the amount paid, if any, for the stock. Alternatively,
the grantee of Restricted Stock may elect to recognize income upon the grant of
the stock and not at the time the restrictions lapse. The
27
<PAGE> 30
Company is entitled to deduct an amount equal to the fair market value of the
stock at the time the grantee recognizes income related to the grant.
A grantee of Performance Shares recognizes ordinary income only when shares
are received with respect to Performance Shares. At that time, the grantee
recognizes ordinary income in an amount equal to the fair market value of the
Shares.
Cash Awards, Dividends, and Dividend Equivalents. Cash awards, dividends
and dividend equivalent payments are taxable as ordinary income when paid in
cash or, if paid in shares, when the shares vest. In some cases, the Company may
be entitled to deduct the amount of a cash award, dividends on Restricted Stock
and dividend equivalent payments when such amounts are taxable to the recipient.
Change in Control. If there is an acceleration of the vesting or payment of
benefits and/or an acceleration of the exercisability of Options upon a Change
in Control, all or a portion of the accelerated benefits may constitute "Excess
Parachute Payments" under Section 280G of the Code. An employee receiving an
Excess Parachute Payment generally incurs a non-deductible excise tax of 20% of
the amount of the payment in excess of the employee's average annual
compensation over the five calendar years preceding the year of the Change in
Control and the Company is not entitled to a deduction for such excess amount.
The foregoing summary of the federal income tax consequences of the 1999
Plan is based upon the Company's understanding of present federal tax law and
regulations. The summary does not purport to be complete or applicable to every
specific situation.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The affirmative vote of a majority of the total number of votes represented
by the shares of Common Stock (and, if entitled to vote, the Psychiatric Group
Preferred Stock considered as a single class with the Common Stock) represented
and voted at the Annual Meeting, assuming a quorum is present, is necessary for
the approval of the 1999 Equity Incentive Plan. The Board of Directors believes
that the approval of the 1999 Equity Incentive Plan is in the best interests of
the Company and the shareholders because the 1999 Equity Incentive Plan will
enable the Company to provide competitive equity incentives to key employees,
directors and consultants to enhance the profitability of the Company and
increase shareholder value.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE 1999 EQUITY
INCENTIVE PLAN.
SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
(PROPOSAL NO. 3)
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.
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<PAGE> 31
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,
1999.
The affirmative vote of a majority of the total number of votes represented
by the shares of Common Stock (and, if entitled to vote, the Psychiatric Group
Preferred Stock considered as a single class with the Common 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,
1999.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF
THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS AUDITORS FOR 1999.
ANNUAL REPORT TO SHAREHOLDERS
The Company's Annual Report to Shareholders of the Company for the fiscal
year ended December 31, 1998 (the "Annual Report"), which includes financial
statements for the year ended December 31, 1998, 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 February 25, 2000 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 28, 1999
29
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APPENDIX A
AMERICAN HEALTH PROPERTIES, INC.
1999 EQUITY INCENTIVE PLAN
<PAGE> 33
AMERICAN HEALTH PROPERTIES, INC.
1999 EQUITY INCENTIVE PLAN
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
1. Introduction................................................ A-1
2. Definitions................................................. A-1
3. Plan Administration......................................... A-4
4. Stock Subject to the Plan................................... A-4
5. Participation............................................... A-6
6. Stock Options............................................... A-7
7. Restricted Stock............................................ A-8
8. Performance Shares and Performance Units.................... A-8
9. Stock Appreciation Rights................................... A-9
10. Awards under Other Plans of the Company..................... A-10
11. Dividend and Dividend Equivalent Rights..................... A-10
12. Stockholder Privileges...................................... A-10
13. Rights of Employees......................................... A-10
14. General Restrictions........................................ A-11
15. Other Employee Benefits..................................... A-11
16. Plan Amendment, Modification and Termination................ A-11
17. Withholding................................................. A-12
18. Brokerage Arrangements...................................... A-12
19. Nonexclusivity of the Plan.................................. A-13
20. Requirements of Law......................................... A-13
21. Duration of the Plan........................................ A-14
</TABLE>
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AMERICAN HEALTH PROPERTIES, INC.
1999 EQUITY INCENTIVE PLAN
Adopted by the Board: April 15, 1999
Approved by the Stockholders: , 1999
---------------------
ARTICLE 1
INTRODUCTION
1.1 Establishment. American Health Properties, Inc., a Delaware
corporation, hereby establishes the American Health Properties, Inc. 1999 Equity
Incentive Plan (the "Plan") for certain key employees, directors and consultants
of the Company. The Plan supersedes and replaces all other Prior Plans of the
Company.
1.2 Purposes. The purpose of the Plan is to provide a means by which
selected Employees, Directors and Consultants of the Company may be given an
opportunity to benefit from increases in value of the stock of the Company
through the granting of stock-based compensation. The Company, by means of the
Plan, seeks to retain the services of persons who are now Employees or Directors
of, or Consultants to, the Company, to secure and retain the services of new
Employees, Directors and Consultants, and to provide incentives to such persons
to exert maximum efforts for the success of the Company.
ARTICLE 2
DEFINITIONS
2.1 Definitions. The following terms shall have the meanings set forth
below:
(a) "Affiliated Company" means any corporation or other entity
(including but not limited to a partnership) that is affiliated with
American Health Properties, Inc. through stock ownership or otherwise and
is treated as a common employer under the provisions of Sections 414(b) and
(c) of the Internal Revenue Code.
(b) "Award" means a grant made under this Plan.
(c) "Board" means the Board of Directors of the Company.
(d) "Committee" means a committee consisting of at least two members
of the Board who are empowered hereunder to take actions in the
administration of the Plan. The Committee shall be comprised of two or more
Eligible Directors. Members of the Committee shall be appointed from time
to time by the Board, shall serve at the pleasure of the Board, and may
resign at any time upon written notice to the Board.
(e) "Company" means, except where the context otherwise requires,
American Health Properties, Inc. together with its Affiliated Companies.
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(f) "Consultant" means any person, including an advisor, engaged by
the Company to render consulting services and who is compensated for such
services, provided that the term "Consultant" shall not include Directors
who are paid only a director's fee by the Company or who are not
compensated by the Company for their services as Directors.
(g) "Director" means an employee or non-employee member of the Board.
(h) "Dividend Equivalent Right" means an Award made pursuant to
Article 11 of a dividend or dividend equivalent right.
(i) "Effective Date" means the effective date of the Plan, [June 12,]
1999, such date being the day following the date on which the Plan is
approved by the Company's shareholders.
(j) "Eligible Director" means a member of the Board who qualifies as a
"non-employee director" under Rule 16b-3(d)(1) promulgated under the
Exchange Act, as such may be amended from time to time, and as an "outside
director" as defined in Treas. Reg. sec. 1.162-27 under the Internal
Revenue Code.
(k) "Employee" means any full-time employee (including, without
limitation, officers and directors who are also employees) of the Company
or any Affiliated Company or any division thereof, whose judgment,
initiative and efforts are, or will be, important to the successful conduct
of the Company's business. Neither service as a Director nor payment of a
director's fee by the Company shall be sufficient to constitute employment
by the Company.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(m) "Fair Market Value" means, for valuing an Award, the closing sale
price of the Stock as quoted on The New York Stock Exchange on the day of
the Award and, for valuation for any other purpose, on the day of
determination.
(n) "Incentive Stock Option" means any Option designated as such and
granted in accordance with the requirements of Section 422 of the Internal
Revenue Code and the regulations promulgated thereunder, or any successor
provision providing for substantially similar taxation of the grant and
exercise of employee stock options.
(o) "Internal Revenue Code" means the Internal Revenue Code of 1986,
as it may be amended from time to time.
(p) "Non-Statutory Option" means any Option other than an Incentive
Stock Option.
(q) "Option" means a right to purchase Stock at a stated price for a
specified period of time pursuant to the Plan.
(r) "Option Agreement" means a written agreement between the Company
and Optionee evidencing the terms and conditions of an individual Option
grant.
(s) "Optionee" means a Participant who holds an outstanding Option.
(t) "Option Price" means the price at which shares of Stock subject to
an Option may be purchased.
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(u) "Participant" means an Employee, Director or Consultant to the
Company designated by the Committee from time to time during the term of
the Plan to receive one or more Awards under the Plan.
(v) "Performance Cycle" means the period of time as specified by the
Committee over which Performance Shares or Performance Units are to be
earned.
(w) "Performance Shares" means an Award denominated in Shares made
pursuant to Article 8 that entitles a Participant to receive Shares, their
cash equivalent or a combination thereof based on the achievement of
performance targets during a Performance Cycle.
(x) "Performance Units" means an Award denominated in cash-value units
made pursuant to Article 8 that entitles a Participant to receive cash,
Stock or a combination thereof based on the achievement of performance
targets during a Performance Cycle.
(y) "Plan" means this 1999 Equity Incentive Plan.
(z) "Prior Plans" means, collectively, the Company's (a) 1990 Stock
Incentive Plan, (b) 1994 Stock Incentive Plan, and (c) Nonqualified Stock
Option Plan for Nonemployee Directors.
(aa) "Re-Load Option" means a new Option in the event an Optionee
exercises an Option evidenced by an Option Agreement, in whole or in part,
by surrendering other shares of Stock upon such exercise, all in accordance
with this Plan and the terms and conditions of the Option Agreement. The
new Option shall be equal to the shares surrendered in connection with the
exercise of the original Option (including any shares which may be withheld
for taxes upon such exercise), shall be granted at Fair Market Value on the
exercise date and shall not extend beyond the remaining term of the
original Option.
(bb) "Restricted Stock" means Stock granted under Article 7 that is
subject to restrictions imposed by the Committee.
(cc) "Restricted Stock Award" means an Award of Restricted Stock or a
right to receive Restricted Stock that entitles a Participant to receive
cash, Stock or a combination thereof based on the fulfillment of such
conditions, restrictions and contingencies as the Committee shall
determine.
(dd) "Share" means a share of Stock.
(ee) "Stock" means the common stock, $.01 par value, of the Company.
(ff) "Stock Appreciation Right" means any of the various types of
rights that may be granted under Article 9 of the Plan.
2.2 Gender and Number. Except when otherwise indicated by the context, the
masculine gender shall also include the feminine gender, and the definition of
any term herein in the singular shall also include the plural.
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ARTICLE 3
PLAN ADMINISTRATION
3.1 Administration by Board or Committee. The Plan shall be administered
by the Board unless and until the Board delegates administration to the
Committee. If the Plan is administered by the Board, all references herein to
the Committee shall be deemed to refer to the Board. In accordance with the
provisions of the Plan, the Committee shall, in its sole discretion, and except
as specifically set forth herein, select Participants to whom Awards will be
granted from among the Employees, Directors and Consultants, the form of each
Award, the amount of each Award and any other terms and conditions of each Award
as the Committee may deem necessary or desirable and consistent with the terms
of the Plan. The Committee shall determine the form or forms of the agreements
with Participants that shall evidence the particular provisions, terms,
conditions, rights and duties of the Company and the Participants with respect
to Awards granted pursuant to the Plan, which provisions need not be identical
except as may be provided herein.
3.2 Rules and Regulations. The Committee may from time to time adopt such
rules and regulations for carrying out the purposes of the Plan as it may deem
proper and in the best interests of the Company.
3.3 Power to Correct. The Committee may correct any defect, supply any
omission or reconcile any inconsistency in the Plan or in any agreement entered
into hereunder in the manner and to the extent it shall deem expedient, and it
shall be the sole and final judge of such expediency.
3.4 No Liability for Good Faith Act. No member of the Committee shall be
liable for any action or determination made in good faith, and all members of
the Committee shall, in addition to their rights as Directors, be fully
protected by the Company with respect to any such action, determination or
interpretation.
3.5 Interpretation and Construction. The determination, interpretations
and other actions of the Committee pursuant to the provisions of the Plan shall
be binding and conclusive for all purposes and on all persons. The Committee
shall have the power to construe and interpret the Plan and the Awards granted
under it. The Committee may exercise all powers and perform all acts that it
deems necessary or expedient to promote the best interests of the Company and
that are not in conflict with the terms of the Plan.
3.6 Abolishment of Committee. The Board may abolish or revoke the
authority of the Committee at any time and revest in the Board the
administration of the Plan.
ARTICLE 4
STOCK SUBJECT TO THE PLAN
4.1 Number of Shares. The maximum number of Shares that may be delivered
to Participants and their beneficiaries under the Plan shall be equal to the sum
of (a) 1,000,000, (b) any Shares available for future awards under any of the
Prior Plans as of the Effective Date, and (c) any Shares that are represented by
awards granted under any Prior Plan that are forfeited, expire or are canceled
without the delivery of Shares or that result in the forfeiture of Shares back
to the Company. In addition, any Shares granted under the Plan that are
forfeited back to the Company because of the failure to meet an award
contingency or condition, shall again be available for delivery pursuant to new
Awards granted under the Plan. Any Shares covered by an Award (or portion of an
Award) granted under the Plan that is forfeited or canceled, expires or is
settled in
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cash, including the settlement of tax withholding obligations using Shares,
shall be deemed not to have been delivered for purposes of determining the
maximum number of Shares available for delivery under the Plan. Likewise if any
Option is exercised by tendering Shares, either actually or by attestation, to
the Company as full or partial payment in connection with the exercise of an
Option under this Plan, only the number of Shares issued net of the Shares
tendered shall be deemed delivered for purposes of determining the maximum
number of Shares available for delivery under the Plan. Notwithstanding the
forgoing, no more than 1,000,000 shares shall be cumulatively available for the
grant of Incentive Stock Options under the Plan. No Participant shall be granted
Awards to acquire or entitling the Participant to the appreciation in value of
more than 500,000 shares in the aggregate in any three consecutive years. Up to
one-third of the Shares authorized for issuance under the Plan may be granted as
Restricted Stock Awards, and up to one-third of the Shares authorized for
issuance under the Plan may be granted as Performance Shares. Stock deliverable
under the Plan may be unissued Shares or reacquired Shares, bought on the market
or otherwise. Notwithstanding any provision contained herein to the contrary,
the foregoing limitations on the number of Shares available for issuance shall
not be affected by outstanding grants of options or stock of any entities
acquired by the Company.
4.2 Adjustments for Stock Split, Stock Dividend, Etc. If the Company shall
at any time increase or decrease the number of its outstanding Shares of Stock
or change in any way the rights and privileges of such Shares by means of the
payment of a stock dividend or any other distribution upon such Shares payable
in Stock, or through a stock split, subdivision, consolidation, combination,
reclassification or recapitalization involving the Stock, then in relation to
the Stock that is affected by one or more of the above events, the numbers,
rights and privileges of the following shall be increased, decreased or changed
in like manner as if they had been issued and outstanding, fully paid and
nonassessable at the time of such occurrence: (i) the shares of Stock as to
which Awards may be granted under the Plan; (ii) the Shares of Stock then
included in each Award granted hereunder; and (iii) the terms on which the
Awards may be exercised.
4.3 Adjustments for Corporate Transactions. The Committee may determine
that a corporate transaction has affected the price per Share such that an
adjustment or adjustments to outstanding Awards are required to preserve (or
prevent enlargement of) the benefits or potential benefits intended at the times
the Awards were granted. For this purpose a corporate transaction will include,
but is not limited to, any extraordinary cash dividend, merger, split-up,
spin-off or other similar occurrence. In the event of such a corporate
transaction, the Committee may, in such manner as the Committee deems equitable,
adjust (i) the number and kind of shares that may be delivered under the Plan
pursuant to Section 4.1; (ii) the number and kind of Shares subject to
outstanding Awards; and (iii) the exercise price of outstanding Awards.
4.4 Dividend Payable in Stock of Another Corporation, Etc. If the Company
shall at any time pay or make any dividend or other distribution upon the Stock
payable in securities of another corporation or other property (except money or
Stock), a proportionate part of such securities or other property shall be set
aside for delivery to each Participant then holding an Award upon exercise or
vesting thereof, as applicable. Prior to the time that any such securities or
other property are delivered to a Participant in accordance with the foregoing,
the Company shall be the owner of such securities or other property and shall
have the right to vote the securities, receive any dividends payable on such
securities, and in all other respects shall be treated as the owner. If
securities or other property that have been set aside by the Company in
accordance with this Section are not delivered to a Participant because an Award
is not exercised or otherwise vested, then such securities
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or other property shall remain the property of the Company and shall be dealt
with by the Company as it shall determine in its sole discretion.
4.5 Other Changes in Stock. In the event there shall be any change, other
than as specified in Sections 4.2, 4.3 and 4.4, in the number or kind of
outstanding shares of Stock or of any stock or other securities into which the
Stock shall be changed or for which it shall have been exchanged, and if the
Committee shall in its discretion determine that such change equitably requires
an adjustment in the terms of the Award or in the number or kind of Shares
subject to outstanding Awards or that have been reserved for issuance pursuant
to the Plan but are not then subject to an Award, then such adjustments shall be
made by the Committee and shall be effective for all purposes of the Plan and on
each outstanding Award that involves the particular type of stock for which a
change was effected.
4.6 Rights to Subscribe. If the Company shall at any time grant to the
holders of its Stock rights to subscribe pro rata for additional shares thereof
or for any other securities of the Company or of any other corporation, there
shall be reserved with respect to the Shares then subject to an Award held by
any Participant of the particular class of Stock involved, the Stock or other
securities that the Participant would have been entitled to subscribe for if,
immediately prior to such grant, the Participant had exercised his entire Award,
or otherwise had vested in his entire Award. If, upon exercise or vesting of any
Award, the Participant subscribes for the additional Stock or other securities,
the Participant shall pay to the Company the price that is payable by the
Participant for such Stock or other securities.
4.7 Change of Control Provisions. The Committee may, in its discretion,
provide for adjustments to any Award in the event of a change of control,
merger, acquisition or other corporate reorganization, including, but not
limited to, the acceleration of the vesting of any Award.
4.8 General Adjustment Rules. If any adjustment or substitution provided
for in this Article 4 shall result in the creation of a fractional Share under
any Award, the Company shall, in lieu of selling or otherwise issuing such
fractional Share, pay to the Participant a cash sum in an amount equal to the
product of such fraction multiplied by the Fair Market Value of a Share on the
date the fractional Share would otherwise have been issued. In the case of any
such substitution or adjustment affecting an Award, the total purchase price for
the shares of Stock then subject to an Award shall remain unchanged but the
purchase price per share under each such Award shall be equitably adjusted by
the Committee to reflect the greater or lesser number of shares of Stock or
other securities into which the Stock subject to the Award may have been
changed.
4.9 Determination by Committee, Etc. Adjustments under this Article 4
shall be made by the Committee, whose determinations with regard thereto shall
be final and binding upon all parties thereto.
ARTICLE 5
PARTICIPATION
Participants in the Plan shall be those Employees, Directors or Consultants
who, in the judgment of the Committee, are performing, or during the term of
their incentive arrangement will perform, important services in the management,
operation and development of the Company, and significantly contribute, or are
expected to significantly contribute, to the achievement of long-term corporate
economic objectives. Participants may be granted from time to time one or more
Awards; provided, however, that the grant of each such Award shall
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be separately approved by the Committee, and receipt of one such Award shall not
result in automatic receipt of any other Award. Upon the grant of an Award,
written notice shall be given to the Participant specifying the terms,
conditions, rights and duties related thereto. Each Participant shall enter into
an agreement with the Company, in such form as the Committee shall determine and
which form shall be consistent with the provisions of the Plan, specifying the
terms and conditions of the Award and the rights and duties of the Participant.
Awards shall be deemed to be granted as of the date specified in the grant
resolution of the Committee. In the event of any inconsistency between the
provisions of the Plan and any such agreement entered into hereunder, the
provisions of the Plan shall govern.
ARTICLE 6
STOCK OPTIONS
6.1 Discretionary Grant of Options. A Participant may be granted one or
more Options. The Committee in its sole discretion shall designate whether an
Option is to be considered an Incentive Stock Option or a Non-Statutory Option.
Incentive Stock Options may be granted only to Employees. The Committee may
grant both an Incentive Stock Option and a Non-Statutory Option to the same
Participant at the same time or at different times. Incentive Stock Options and
Non-Statutory Options, whether granted at the same or different times, shall be
deemed to have been awarded in separate grants, shall be clearly identified, and
in no event shall the exercise of one Option affect the right to exercise any
other Option or affect the number of Shares for which any other Option may be
exercised. The exercise price of any Option shall be no less than the Fair
Market Value of the Stock.
6.2 Re-Load Options. Without in any way limiting the authority of the
Committee to make or not to make grants of Options hereunder, the Committee
shall have the authority (but not an obligation) to include as part of any
Option Agreement a provision entitling the Optionee to a Re-Load Option. Any
Re-Load Option shall be subject to the availability of sufficient shares under
the Plan and shall be subject to such other terms and conditions as the
Committee may determine in its discretion that are not inconsistent with the
express provisions of the Plan regarding the terms of Options. Any such Re-Load
Option shall be a Non-Statutory Option.
6.3 Method of Payment. The Shares covered by an Option may be purchased by
means of a cash payment or other such means as the Committee may from time to
time permit, including, but not limited to, any one or any combination of the
following:
(a) Tendering (either actually or by attestation) Shares valued using
the Fair Market Value at the time of exercise;
(b) Authorizing a third party to sell Shares (or a sufficient portion
thereof) acquired upon exercise of an Option and to remit to the Company a
sufficient portion of the sale proceeds to pay for all the Shares acquired
through such exercise and any tax withholding obligations resulting from
such exercise;
(c) Crediting towards the purchase price amounts from an individual's
deferred compensation account balances, including accrued dividend
equivalent balances; or
(d) Obtaining a full-recourse loan from the Company.
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ARTICLE 7
RESTRICTED STOCK
7.1 Awards Granted by Committee. Coincident with or following designation
for participation in the Plan, a Participant may be granted one or more
Restricted Stock Awards consisting of Shares or rights to receive Shares. The
number of Shares granted as a Restricted Stock Award shall be determined by the
Committee.
7.2 Restrictions. A Participant's right to retain a Restricted Stock Award
granted to him under Section 7.1 shall be subject to such restrictions,
including but not limited to his continuous employment by the Company, for a
restriction period specified by the Committee, or the attainment of specified
performance goals and objectives, as may be established by the Committee with
respect to such award. The Committee may in its sole discretion require
different periods of employment or different performance goals and objectives
with respect to different Participants, to different Restricted Stock Awards, or
to separate designated portions of the Shares constituting a Restricted Stock
Award.
7.3 Purchase Price; Form of Consideration. The purchase price, if any,
under each Restricted Stock Award shall be such amount as the Committee shall
determine and designate in the agreement. The purchase price, if any, of Stock
acquired pursuant to an agreement hereunder shall be paid in any form of legal
consideration that may be acceptable to the Committee in its discretion.
Notwithstanding the foregoing, the Committee may award Stock pursuant to a stock
bonus agreement in consideration for past services actually rendered to the
Company or for its benefit.
ARTICLE 8
PERFORMANCE SHARES AND PERFORMANCE UNITS
8.1 Awards Granted by Committee. Coincident with or following designation
for participation in the Plan, a Participant may be granted Performance Shares
or Performance Units.
8.2 Amount of Award. The Committee shall establish a maximum amount of a
Participant's Award, which amount shall be denominated in Shares in the case of
Performance Shares or in dollars in the case of Performance Units. In no event,
however, may a Participant receive payments with respect to Performance Units in
excess of three million dollars in the aggregate in any three consecutive years.
8.3 Amount of Award Payable. The Committee shall establish maximum and
minimum performance targets to be achieved during the applicable Performance
Cycle. Performance targets established by the Committee shall relate to
corporate, group, business unit or individual performance and shall be
established in terms of earnings, growth in earnings, profit returns or margins,
revenues, costs, cash flow, funds from operations, portfolio value or
shareholder returns. Multiple performance targets may be used and the components
of multiple performance targets may be given the same or different weighting in
determining the amount of an Award earned, and may relate to absolute
performance or relative performance measured against other companies, groups,
business units, indices, individuals or entities. Achievement of the maximum
performance target shall entitle the Participant to payment (subject to Section
8.4) at the full or maximum amount specified with respect to the Award;
provided, however, that notwithstanding any other provisions of
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this Plan, in the case of an Award of Performance Shares the Committee in its
discretion may establish an upper limit on the amount payable (whether in cash
or Stock) as a result of the achievement of the maximum performance target. The
Committee may also establish that a portion of a full or maximum amount of a
Participant's Award will be paid (subject to Section 8.4) for performance that
exceeds the minimum performance target but falls below the maximum performance
target applicable to such Award.
8.4 Payments of Awards. Following the conclusion of each Performance
Cycle, the Committee shall determine the extent to which performance targets
have been attained, and the satisfaction of any other terms and conditions with
respect to an Award relating to such Performance Cycle. The Committee shall
determine what, if any, payment is due with respect to an Award and whether such
payment shall be made in cash, Stock or some combination thereof. Payment shall
be made in a lump sum or installments, as determined by the Committee,
commencing as promptly as practicable following the end of the applicable
Performance Cycle, subject to such terms and conditions and in such form as may
be prescribed by the Committee.
ARTICLE 9
STOCK APPRECIATION RIGHTS
9.1 Awards Granted by Committee. The Committee shall have full power and
authority, exercisable in its sole discretion, to grant Stock Appreciation
Rights under the Plan to Employees, Directors or Consultants. The base price of
any Stock Appreciation Right shall be no less than the Fair Market Value of the
Stock unless used to substitute an outstanding in-the-money Option, in which
case it shall be issued on terms equivalent to those of the Option.
9.2 Types of Stock Appreciation Rights. Three types of Stock Appreciation
Rights shall be authorized for issuance under the Plan in addition to, or
appurtenant to, the grant of an Option, as the Committee shall determine:
(a) Tandem Stock Appreciation Rights. Tandem Stock Appreciation Rights
may be granted appurtenant to an Option, and shall, except as specifically
set forth in this Article 9, be subject to the same terms and conditions
applicable to the particular Option grant to which it pertains. Tandem
Stock Appreciation Rights will require the holder to elect between the
exercise of the underlying Option for Shares of Stock and the surrender, in
whole or in part, of such Option for an appreciation distribution set forth
in the Option Agreement.
(b) Concurrent Stock Appreciation Rights. Concurrent Stock
Appreciation Rights may be granted appurtenant to an Option and may apply
to all or any portion of the Shares of Stock subject to an underlying
Option and shall, except as specifically set forth in this Article 9, be
subject to the same terms and conditions applicable to the particular
Option grant to which it pertains. A Concurrent Stock Appreciation Right
shall be exercised automatically at the same time the underlying Option is
exercised with respect to the particular Shares of Stock to which the
Concurrent Stock Appreciation Right pertains. The appreciation distribution
payable on an exercised Concurrent Stock Appreciation Right shall be set
forth in the Option Agreement.
(c) Independent Stock Appreciation Rights. Independent Stock
Appreciation Rights may be granted independently of any Option. Independent
Stock Appreciation Rights shall be denominated in
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Share equivalents. The appreciation distribution payable on the exercised
Independent Stock Appreciation Right shall be set forth in a written
agreement between the Company and the Participant.
ARTICLE 10
AWARDS UNDER OTHER PLANS OF THE COMPANY
In its discretion, the Committee may make an Award of Stock as an
alternative to or replacement of an existing Award or as the form of payment for
grants, rights or other compensation earned or due under other compensation
plans or arrangements of the Company.
ARTICLE 11
DIVIDEND AND DIVIDEND EQUIVALENT RIGHTS
Any grant of an Award may provide for the payment to the Participant of
dividends or dividend equivalents thereon in cash or Shares on a current,
deferred or contingent basis, or the Committee may provide that any dividend
equivalents shall be credited against the purchase price, if any, relating to
the Award. Any grant of dividend or dividend equivalent rights may be subject to
such conditions, restrictions and contingencies as the Committee shall
establish; provided that payments of dividends and dividend equivalent rights
shall be subject to, and shall count towards, the limitations on the maximum
amounts of Awards that may be granted in any consecutive three-year period as
set forth in Sections 4.1 and 8.2.
ARTICLE 12
STOCKHOLDER PRIVILEGES
No Participant shall have any rights as a stockholder with respect to any
Shares covered by an Award until the Participant becomes the holder of record of
such Stock, and no adjustments shall be made for dividends or other
distributions or other rights as to which there is a record date preceding the
date such Participant becomes the holder of record of such Stock, except as
provided in Article 11.
ARTICLE 13
RIGHTS OF EMPLOYEES
Nothing contained in the Plan or in any Award granted under the Plan shall
confer upon any Participant any right with respect to the continuation of his or
her employment by the Company or tenure as a Director of the Company, or
interfere in any way with the right of the Company, subject to the terms of any
separate employment agreement to the contrary, at any time to terminate such
employment or to increase or decrease the compensation of the Participant from
the rate in existence at the time of the grant of an Award. Whether an
authorized leave of absence, or absence in military or government service, shall
constitute a termination of employment shall be determined by the Committee at
the time. Nothing in this Plan shall interfere in any way with the right of the
stockholders of the Company to remove a Participant Director from the Board
pursuant to the Delaware General Corporation Law and the Company's Certificate
of Incorporation and Bylaws.
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ARTICLE 14
GENERAL RESTRICTIONS
14.1 Investment Representations. The Company may require any person to
whom an Award is granted, as a condition of exercising or receiving the Award,
to give written assurances in substance and form satisfactory to the Company and
its counsel to the effect that such person is acquiring the Stock subject to the
Award for his own account for investment and not with any present intention of
selling or otherwise distributing the same, and to such other effects as the
Company deems necessary or appropriate in order to comply with federal and
applicable state securities laws. Legends evidencing such restrictions may be
placed on the certificates evidencing the Stock underlying the Award.
14.2 Compliance with Securities Laws. Each Award shall be subject to the
requirement that, if at any time counsel to the Company shall determine that the
listing, registration or qualification of the Shares subject to such Award upon
any securities exchange or under any state or federal law, or the consent or
approval of any governmental or regulatory body or the stockholders of the
Company, is necessary as a condition of, or in connection with, the issuance or
purchase of Shares thereunder, such Award may not be accepted or exercised in
whole or in part unless such listing, registration, qualification, consent or
approval shall have been effected or obtained on conditions acceptable to the
Committee. Nothing herein shall be deemed to require the Company to apply for or
to obtain such listing, registration or qualification.
ARTICLE 15
OTHER EMPLOYEE BENEFITS
The amount of any compensation deemed to be received by a Participant as a
result of the exercise, grant or vesting of any Award shall not constitute
"earnings" with respect to which any other employee benefits of such employee
are determined, including without limitation benefits under any pension, profit
sharing, life insurance or salary continuation plan.
ARTICLE 16
PLAN AMENDMENT, MODIFICATION AND TERMINATION
16.1 Termination and Amendment. The Board may at any time terminate, and
from time-to-time may amend or modify, the Plan. Each such amendment or
modification shall become effective without approval of the amendment or
modification by the stockholders of the Company unless and except if stockholder
approval of the amendment or modification is required by any applicable listing,
statutory or regulatory requirements.
16.2 Effect of Termination and Amendment on Awards. No amendment,
modification or termination of the Plan shall in any manner adversely affect any
Awards theretofore granted under the Plan, without the consent of the
Participant holding such Awards.
16.3 Other Amendments. The Board may in its sole discretion submit any
amendment to the Plan for stockholder approval, including, but not limited to,
amendments to the Plan intended to satisfy the requirements of Section 162(m) of
the Code and the regulations promulgated thereunder regarding the
A-11
<PAGE> 45
exclusion of performance-based compensation from the limit on corporate
deductibility of compensation paid to certain executive officers. The Board
shall have authority to amend the Plan to take into account changes in law and
tax and accounting rules, as well as other developments, and to grant Awards
that qualify for beneficial treatment under such rules, without stockholder
approval. Notwithstanding anything in the Plan to the contrary, if any right
under this Plan would cause a transaction to be ineligible for pooling of
interest accounting that would, but for such right, be eligible for such
accounting treatment, the Committee may modify or adjust such right so that
pooling of interest accounting is available. The Board, in its sole discretion,
may amend the Plan to redefine the Committee should there be a change in the law
or listing requirement that redefines the qualifications of an Eligible Director
or that otherwise modifies or eliminates requirements for the use of Eligible
Directors in making grants under the type of equity plan represented by the
Plan.
16.4 Amendment to Awards. The Board at any time, and from time to time,
may amend the terms of any one or more Award; provided, however, that the rights
and obligations under any Award shall not be impaired by any such amendment
unless (i) the Company requests the consent of the person to whom the Award was
granted and (ii) such person consents in writing.
ARTICLE 17
WITHHOLDING
The Company's obligations to deliver Shares upon the exercise or vesting of
any Award, shall be subject to the Participant's satisfaction of all applicable
federal, state and local income and other tax withholding requirements. The
Committee may, in its sole discretion, grant the Participant an election to pay
all such amounts of tax withholding, or any part thereof, by electing to
transfer to the Company, or to have the Company withhold from Shares otherwise
issuable to the Participant, Shares having a value equal to the amount required
to be withheld or such lesser amount as may be elected by the Participant. In no
event shall Shares withheld on the exercise of an Option exceed the minimum
statutory withholding rates.
ARTICLE 18
BROKERAGE ARRANGEMENTS
The Committee, in its discretion, may enter into arrangements with one or
more banks, brokers or other financial institutions to facilitate the
disposition of shares acquired upon exercise of Options, including, without
limitation, arrangements for the simultaneous exercise of Options and sale of
the Shares acquired upon such exercise.
A-12
<PAGE> 46
ARTICLE 19
NONEXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan by the Board nor the submission of the
Plan to stockholders of the Company for approval shall be construed as creating
any limitations on the power or authority of the Board to adopt such other or
additional incentive or other compensation arrangements of whatever nature as
the Board may deem necessary or desirable or preclude or limit the continuation
of any other plan, practice or arrangement for the payment of compensation or
fringe benefits to employees generally, or to any class or group of employees,
that the Company or any Affiliated Company now has lawfully put into effect,
including, without limitation, any retirement, pension, savings and stock
purchase plan, insurance, death and disability benefits and executive short-term
incentives.
ARTICLE 20
REQUIREMENTS OF LAW
20.1 Requirements of Law. The issuance of Stock and the payment of cash
pursuant to the Plan shall be subject to all applicable laws, rules and
regulations.
20.2 Federal Securities Law Requirements. If a Participant is an executive
officer or director of the Company within the meaning of Section 16 of the
Exchange Act, Awards granted hereunder shall be subject to all conditions
required under Rule 16b-3, or any successor rule promulgated under the Exchange
Act, to qualify the Award for any exception to or exemption from the provisions
of Section 16(b) of the Exchange Act available under that rule. Such conditions
are hereby incorporated herein by reference and shall be set forth in the
agreement with the Participant that describes the Award.
20.3 Governing Law. The Plan and all agreements hereunder shall be
construed in accordance with and governed by the laws of the State of Delaware.
A-13
<PAGE> 47
ARTICLE 21
DURATION OF THE PLAN
The Plan shall terminate at such time as may be determined by the Board of
Directors, and no Award shall be granted after such termination. If not sooner
terminated under the preceding sentence, the Plan shall fully cease and expire
at midnight on [June 11,] 2009, such date being the day prior to the tenth
anniversary of the Effective Date. Awards outstanding at the time of the Plan
termination may continue to be exercised or earned in accordance with their
terms. The Board reserves the right to suspend the Plan at any time.
AMERICAN HEALTH PROPERTIES, INC.
By /s/ Joseph P. Sullivan
-----------------------------------
Its President and Chief Executive
Officer
A-14
<PAGE> 48
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 15, 1999 at the Annual Meeting
of Shareholders to be held on June 11, 1999 or any adjournment thereof.
1. ELECTION OF DIRECTORS
To elect as Class III Directors for a three-year term expiring at the 2002
Annual Meeting the following nominees: Sheldon S. King, John P. Mamana, M.D.
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 adoption of the 1999 Equity Incentive Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To approve the appointment of Arthur Andersen LLP as auditors and independent
public accountants for the Company's 1999 fiscal year.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. 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> 49
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
------------------------------------ ,
1999
------------------------------------
(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> 50
--------------------------------------------
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 15, 1999 at the Annual Meeting of Shareholders to be held on June 11,
1999 or any adjournment thereof.
1. ELECTION OF DIRECTORS
To elect as Class III Directors for a three-year term expiring at the 2002
Annual Meeting the following nominees: Sheldon S. King, John P. Mamana, M.D.
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 adoption of the 1999 Equity Incentive Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To approve the appointment of Arthur Andersen LLP as auditors and independent
public accountants for the Company's 1999 fiscal year.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. 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> 51
--------------------------------------------
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
------------------------------------ ,
1999
------------------------------------
(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 JUNE 10,
1999.
--------------------------------------------
<PAGE> 52
- --------------------------------------------------------------------------------
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 15, 1999 at the Annual Meeting
of Shareholders to be held on June 11, 1999 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 15, 1999 at the Annual Meeting of Shareholders to
be held on June 11, 1999 or any adjournments thereof.
IMPORTANT: SIGNATURE REQUIRED ON REVERSE SIDE
- --------------------------------------------------------------------------------
<PAGE> 53
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>
WITHHOLD
FOR AUTHORITY
<S> <C> <C>
Proposal Number 1 - ELECTION OF DIRECTORS: To elect as Class [ ] [ ]
III Directors for a three-year term expiring at the 2002
Annual Meeting the following nominees: Sheldon S. King, John
P. Mamana, M.D. and Louis T. Rosso
</TABLE>
INSTRUCTIONS: To withhold authority to vote for any individual nominee, write
the nominee's name in the space provided below.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C>
Proposal Number 2 - To approve the adoption of the 1999 [ ] [ ] [ ]
Equity Incentive Plan.
Proposal Number 3 - To approve the appointment of Arthur [ ] [ ] [ ]
Andersen LLP as auditors and independent public accountants
for the Company's 1999 fiscal year.
Proposal Number 4 - 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:_______________________, 1999
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 JUNE 10, 1999.
