<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
<TABLE>
<C> <S>
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
</TABLE>
For the quarterly period ended June 30, 1999
<TABLE>
<C> <S>
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________________ TO____________________
COMMISSION FILE NUMBER 1-9381
</TABLE>
American Health Properties, Inc.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 95-4084878
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6400 SOUTH FIDDLER'S GREEN CIRCLE 80111
SUITE 1800 (Zip Code)
ENGLEWOOD, CO
(Address of principal executive offices)
</TABLE>
(303) 796-9793
(Registrant's telephone number, including area code)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO ____
SHARES OF REGISTRANT'S COMMON STOCK, $.01 PAR VALUE PER SHARE,
OUTSTANDING AT AUGUST 6, 1999 -- 24,984,422
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<PAGE> 2
AMERICAN HEALTH PROPERTIES, INC.
JUNE 30, 1999
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION PAGE
<S> <C>
Item 1. Consolidated Condensed Financial Statements:
Balance sheets as of June 30, 1999 and December 31, 1998......................................... 2
Statements of operations for the three and six months ended June 30, 1999 and 1998............... 3
Statements of cash flows for the six months ended June 30, 1999 and 1998......................... 4
Notes to financial statements.................................................................... 5
Item 2. Management's Discussion and Analysis of Consolidated
Financial Condition and Results of Operations.................................................... 8
Item 3. Quantitative and Qualitative Disclosures About Market Risk ...................................... 13
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.............................................. 16
Item 5. Other Information................................................................................ 16
Item 6. Exhibits and Reports on Form 8-K................................................................. 16
</TABLE>
1
<PAGE> 3
AMERICAN HEALTH PROPERTIES, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
---------- ------------
<S> <C> <C>
ASSETS (Unaudited)
Real estate investments
Real property and mortgage note $ 784,245 $ 841,618
Construction in progress 21,656 14,247
Accumulated depreciation (113,044) (121,726)
---------- ----------
692,857 734,139
Other notes receivable and direct financing leases 3,940 3,638
Other assets 12,950 12,248
Cash and short-term investments 3,509 3,817
Funds held by intermediary for 1031 exchange 70,576 --
---------- ----------
$ 783,832 $ 753,842
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Bank loans payable $ 51,000 $ 69,000
Mortgage notes payable 24,484 20,772
Notes and bonds payable 219,219 219,164
Accounts payable and accrued liabilities 15,163 15,278
Dividends payable 14,833 15,031
Deferred income 3,330 3,732
---------- ----------
328,029 342,977
---------- ----------
Commitments and contingencies
Stockholders' equity
Preferred stock $.01 par value; 1,000 shares authorized;
8.60% Cumulative Redeemable Preferred Stock,
Series B; $2,500 liquidation value;
40 shares issued and outstanding 100,000 100,000
Psychiatric Group Preferred Stock;
0 and 208 shares issued and outstanding -- 2
Common stock $.01 par value; 100,000 shares authorized;
24,984 shares issued and outstanding 250 250
Additional paid-in capital 515,952 519,738
Cumulative net income 411,374 329,918
Cumulative dividends (571,773) (539,043)
---------- ----------
455,803 410,865
---------- ----------
$ 783,832 $ 753,842
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 4
AMERICAN HEALTH PROPERTIES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- --------------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUES
Rental income $ 22,397 $ 22,484 $ 46,585 $ 43,842
Mortgage interest income 116 1,655 233 3,308
Additional rental and interest income 3,028 3,400 6,367 6,820
Other property income 735 384 1,435 719
Other interest income 824 220 971 461
---------- ---------- ---------- ----------
27,100 28,143 55,591 55,150
---------- ---------- ---------- ----------
EXPENSES
Depreciation and amortization 5,301 5,159 10,918 10,033
Property operating 1,634 1,352 3,244 2,567
Interest expense 5,155 5,308 10,675 10,250
General and administrative 2,113 2,322 4,337 4,428
Impairment loss on notes receivable -- 2,730 -- 2,730
---------- ---------- ---------- ----------
14,203 16,871 29,174 30,008
---------- ---------- ---------- ----------
Minority interest 46 47 94 94
---------- ---------- ---------- ----------
INCOME BEFORE GAIN ON SALE OF PROPERTIES 12,851 11,225 26,323 25,048
GAIN ON SALE OF PROPERTIES 53,850 -- 55,133 --
---------- ---------- ---------- ----------
NET INCOME $ 66,701 $ 11,225 $ 81,456 $ 25,048
---------- ---------- ---------- ----------
SERIES B PREFERRED DIVIDEND REQUIREMENT $ (2,150) $ (2,150) $ (4,300) $ (4,300)
---------- ---------- ---------- ----------
ATTRIBUTABLE TO COMMON STOCK (NOTE 5) -
Income before gain on sale of property $ 10,716 $ 10,559 $ 21,928 $ 20,993
Gain on sale of property $ 53,850 $ -- $ 53,850 $ --
Net income $ 64,566 $ 10,559 $ 75,778 $ 20,993
Basic per share amounts -
Income before gain on sale of property $ 0.43 $ 0.44 $ 0.88 $ 0.88
Gain on sale of property $ 2.15 $ -- $ 2.15 $ --
Net income $ 2.58 $ 0.44 $ 3.03 $ 0.88
Weighted average common shares 24,988 24,055 24,988 23,887
Diluted per share amounts -
Income before gain on sale of property $ 0.43 $ 0.43 $ 0.87 $ 0.87
Gain on sale of property $ 2.13 $ -- $ 2.14 $ --
Net income $ 2.56 $ 0.43 $ 3.01 $ 0.87
Weighted average common shares and
dilutive potential common shares 25,193 24,314 25,180 24,154
Dividends declared per common share $ 0.565 $ 0.545 $ 1.130 $ 1.090
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 5
AMERICAN HEALTH PROPERTIES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Six Months Ended June 30,
--------------------------
1999 1998
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 81,456 $ 25,048
Depreciation, amortization and other non-cash items 12,178 11,319
Deferred income (296) 481
Gain on sale of properties (55,133) --
Impairment loss on notes receivable -- 2,730
Change in other assets (1,136) (388)
Change in accounts payable and accrued liabilities (221) 616
---------- ----------
36,848 39,806
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition and construction of real estate properties (16,227) (114,105)
Net proceeds from sale of properties 75,825 --
Net increase in funds held by intermediary for 1031 exchange (70,576) --
Mortgage note receivable fundings -- (179)
Principal payments on mortgage notes receivable -- 39
Other notes receivable (885) (1,236)
Direct financing leases 583 525
Administrative capital expenditures (20) (61)
---------- ----------
(11,300) (115,017)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings on bank loans payable 12,000 75,000
Principal payments on mortgage notes payable (309) (229)
Financing costs paid (53) (7)
Redemption of Psychiatric Group Stock (4,566) --
Proceeds from sale of common stock -- 9,475
Proceeds from exercise of stock options -- 2,653
Cash dividends paid (32,928) (32,880)
---------- ----------
(25,856) 54,012
---------- ----------
INCREASE (DECREASE) IN CASH AND SHORT-TERM INVESTMENTS (308) (21,199)
CASH AND SHORT-TERM INVESTMENTS, BEGINNING OF PERIOD 3,817 23,053
---------- ----------
CASH AND SHORT-TERM INVESTMENTS, END OF PERIOD $ 3,509 $ 1,854
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 6
AMERICAN HEALTH PROPERTIES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. GENERAL
American Health Properties, Inc., a Delaware corporation (the Company,
which term refers to the Company and its subsidiaries unless the context
otherwise requires), is a self-administered real estate investment trust (REIT)
that commenced operations in 1987. The Company has investments in health care
properties, including acute care, rehabilitation, long-term acute care and
psychiatric hospitals, skilled nursing, assisted living, Alzheimer's care and
medical office/clinic facilities.
Basis of Presentation The consolidated condensed financial statements
of the Company included herein have been prepared by the Company without audit
and include all normal, recurring adjustments which are, in the opinion of
management, necessary for a fair presentation of the results of operations
pursuant to the rules and regulations of the Securities and Exchange Commission.
These financial statements should be read in conjunction with those included in
the Company's annual report on Form 10-K for the year ended December 31, 1998.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
New Accounting Standards Statement of Financial Accounting Standards
(SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities",
establishes accounting and reporting standards requiring that every derivative
instrument be recorded in the balance sheet as either an asset or liability
measured at its fair value. It also requires that changes in the derivative's
fair value be recognized currently in earnings unless specific hedge accounting
criteria are met. SFAS No. 137, "Accounting for Derivative Instruments and
Hedging Activities - Deferral of the Effective Date of SFAS No. 133 - an
Amendment of SFAS No. 133", defers the effective date of SFAS No. 133 to all
fiscal quarters of all fiscal years beginning after June 15, 2000. The required
adoption of this statement is not expected to have a material impact on the
Company's financial statements.
Interest Paid Interest paid by the Company, net of interest
capitalized, was $10,157,000 and $9,311,000 for the six months ended June 30,
1999 and 1998, respectively. The Company had $761,000 and $294,000 of
capitalized interest for the six months ended June 30, 1999 and 1998,
respectively.
2. KENDALL DISPOSITION
On April 16, 1999, the Company completed the sale of Kendall Regional
Medical Center (Kendall) to an affiliate of Columbia/HCA Healthcare Corporation
(Columbia) for a gross purchase price of $105 million. As a result of the
Kendall sale, the Company recognized a gain for book purposes of $53,850,000 in
the second quarter of 1999. Kendall had been leased to a subsidiary of Columbia
and generated aggregate revenues of approximately $10.3 million in 1998, or 9%
of the Company's total revenues. The Kendall sale resulted from Columbia's
exercise of its option to purchase Kendall at fair market value pursuant to the
terms of the lease. To complete the Kendall sale, the purchaser paid $75 million
in cash, and assumed and paid $30 million of borrowings outstanding under the
Company's bank credit facility. Since the Company currently intends to effect a
"deferred like-kind" 1031 exchange for tax purposes, the net cash proceeds of
$73.65 million were delivered to a third-party intermediary, which is using such
proceeds to purchase and convey to the Company like-kind replacement property
selected by the Company. Pursuant to the requirements of
5
<PAGE> 7
AMERICAN HEALTH PROPERTIES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Section 1031 of the Internal Revenue Code, the Company identified approximately
$200 million of potential exchange properties prior to the close of business on
May 28, 1999. The Company must acquire all identified replacement properties it
will acquire as part of the 1031 exchange by October 13, 1999. As of August 6,
1999, approximately $48 million of like-kind replacement properties have been
acquired as part of the 1031 exchange. The Company also has approximately $35
million of additional properties under contract as of August 6, 1999 that will
likely be acquired as part of the 1031 exchange. If the Company is successful in
acquiring a sufficient amount of like-kind replacement properties within the
required time limits, the Company should not recognize current taxable gain and,
accordingly, should incur no tax liability as a result of the transaction.
Furthermore, in that event, there should be no impact on the Company's REIT
distribution requirements. If the Company does not complete the transaction as a
1031 exchange, the tax liability incurred and recognized by the Company for book
purposes, as well as the impact on the Company's REIT distribution requirements,
will depend on the tax position of the Company as a whole. Although the Company
believes that it has developed a sufficiently large pool of replacement
properties to allow the Company to complete the 1031 exchange, the Company
cannot be assured that total revenues generated by replacement properties
acquired to effect the 1031 exchange will equal annual revenues previously
generated by the Kendall investment, nor can the Company be certain that the
1031 exchange will be completed.
3. OTHER COMMITMENTS
As of June 30, 1999, the Company had funded $8,559,000 of a $9.5
million commitment to develop a skilled nursing facility in Las Vegas, Nevada to
be operated by an experienced operator of skilled nursing facilities. The
Company acquired the completed facility in July 1999, whereupon the lease
commenced. As of June 30, 1999, the Company had funded $8,500,000 of a $13.8
million commitment to develop two assisted living facilities to be managed by an
experienced operator of assisted living facilities. The Company has a $22.5
million forward funding commitment to develop up to nine Alzheimer's care
facilities to be operated by the same operator that currently operates two
existing Alzheimer's care facilities owned by the Company. As of June 30, 1999,
$2,650,000 was funded under this commitment for the development of two
facilities having a total development cost of approximately $5.6 million. The
Company has also funded $1,947,000 as of June 30, 1999 toward completion of a
$5.7 million medical office/clinic facility under development in Roseburg,
Oregon that is master-leased to the operator of the adjacent hospital.
4. STOCKHOLDERS' EQUITY
Stock Incentive Plans During the six months ended June 30, 1999,
options to purchase 358,000 shares of common stock at a weighted average
exercise price of $20.27 per share were issued pursuant to the Company's stock
incentive plans. Options to purchase 10,000 shares of common stock at a weighted
average exercise price of $23.18 per share and options to purchase 45,444
Psychiatric Group Depositary Shares at a weighted average exercise price of
$22.16 per share expired during the six months ended June 30, 1999. During the
six months ended June 30, 1999, 63,172 Psychiatric Group Depositary Shares were
issued for vested accumulated DERs.
Redemption of Psychiatric Group Stock On May 21, 1999, the Company
redeemed all outstanding Psychiatric Group Depositary Shares and the underlying
Psychiatric Group Preferred Stock represented thereby (collectively the
"Psychiatric Group Stock") at a redemption price of $2.08 per depositary share.
The total cost of redemption was $4,566,000.
6
<PAGE> 8
AMERICAN HEALTH PROPERTIES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
5. INCOME ATTRIBUTABLE TO COMMON STOCK AND EARNINGS PER SHARE
The following is a reconciliation of the income and share amounts used
in the basic and diluted per share computations of income before gain on sale of
property attributable to common stock:
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
--------------------------------------------- ----------------------------------------------
1999 1998 1999 1998
--------------------- -------------------- --------------------- ---------------------
(In thousands) Income Shares Income Shares Income Shares Income Shares
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income before gain on sale of
properties $ 12,851 -- $ 11,225 -- $ 26,323 -- $ 25,048 --
Less Series B preferred
dividend requirement (2,150) -- (2,150) -- (4,300) -- (4,300) --
Loss (income) attributed to
Psychiatric Group Stock 15 -- 1,484 -- (95) -- 245 --
Outstanding common shares -- 24,984 -- 24,054 -- 24,984 -- 23,886
Deferred common shares -- 4 -- 1 -- 4 -- 1
-------- -------- -------- -------- -------- -------- -------- --------
Basic EPS components 10,716 24,988 10,559 24,055 21,928 24,988 20,993 23,887
Effect of dilutive potential
common shares -
Stock options -- 10 -- 116 -- 7 -- 130
DERs -- 195 -- 143 -- 185 -- 137
Subordinated convertible
bonds payable -- -- -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- --------
Diluted EPS components $ 10,716 25,193 $ 10,559 24,314 $ 21,928 25,180 $ 20,993 24,154
======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
Prior to redemption of the Psychiatric Group Stock on May 21, 1999, a
portion of the Company's income (loss) was attributable to the Psychiatric Group
Stock. The income (loss) before gain on sale of properties attributable to the
Psychiatric Group Stock is shown in the table above. The gain on sale of
properties attributable to the Psychiatric Group Stock for the six months ended
June 30, 1999 was $1,283,000. There was no such gain on sale of properties
attributable to the Psychiatric Group Stock for the three months ended June 30,
1999 and 1998 or the six months ended June 30, 1998.
6. SUBSEQUENT EVENT - MERGER AGREEMENT
On August 4, 1999, the Company entered into a definitive agreement and
plan of merger with Health Care Property Investors, Inc. (HCPI) in which the
Company will merge with and into HCPI in a stock-for-stock transaction, with
HCPI being the surviving corporation. The common shareholders of the Company
will receive a fixed exchange ratio of 0.78 of a share of HCPI common stock for
each share of the Company's common stock. In addition, holders of the Company's
preferred stock will receive one share of substantially similar HCPI preferred
stock in exchange for each share of the Company's preferred stock. The
transaction is subject to, among other things, the approval of the shareholders
of both companies and the registration of the shares to be issued in connection
with the transaction. The transaction will be treated as a purchase for
financial accounting purposes, will be tax-free to the Company's shareholders
and is expected to close by the end of 1999.
7
<PAGE> 9
AMERICAN HEALTH PROPERTIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Following is a discussion of the consolidated financial condition and
results of operations of the Company, which should be read in conjunction with
the consolidated financial statements and accompanying notes of the Company.
Factors Regarding Future Results and Forward-Looking Statements This
report includes and incorporates by reference statements that are not purely
historical and are "forward-looking statements" within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended, including statements regarding the Company's
expectations, beliefs, intentions or strategies regarding the future. All
statements other than historical fact contained in this report, including
without limitation statements regarding rent or interest to be received from the
Company's operators and tenants, plans with respect to individual facilities,
expectations with respect to the specific terms of leases or sales of the
Company's facilities, the Company's anticipated dividends, the Company's
liquidity position, projected expenses associated with operating or maintaining
individual properties, the Company's ability to realize the recorded amounts of
its investments, the Company's ability to close on future investments, the
impact of market risk on the Company's financial instruments and financing
strategy, the potential effect of new or existing regulations on the operations
conducted at the Company's facilities and the completion of a merger with Health
Care Property Investors, Inc., are forward-looking statements. All
forward-looking statements included or incorporated by reference in this report
are based on information available to the Company on the date hereof, and the
Company assumes no obligation to update such forward-looking statements.
Although the Company believes that the assumptions and expectations reflected in
such forward-looking statements are reasonable, it can give no assurance that
such expectations will prove to have been correct or that the Company will take
any actions that may presently be planned.
Certain factors that could cause actual results to differ materially
from those expected include, among others: the financial success of the
operations conducted at the Company's facilities and the financial strength of
the operators and tenants of such facilities, the continuing ability of
operators and tenants to meet their obligations to the Company, changes in
operators or ownership of operators, the ability of operators and tenants to
access short and long-term capital at acceptable rates, the viability of
alternative uses for the Company's properties when necessary, changes in federal
and state government policies relating to the health care industry including
reductions in reimbursement levels under the Medicare and Medicaid programs,
operators' and tenants' continued eligibility to participate in the Medicare or
Medicaid programs, reductions in reimbursement by other third-party payors, the
impact of managed care pricing pressures, the requirement to provide care on a
fixed-price basis, lower occupancy levels at the Company's facilities, the
Company's ability to complete a successful 1031 exchange in connection with the
sale of Kendall Regional Medical Center (Kendall) in which the Company acquires
replacement properties providing a comparable rate of return, a downturn in
market lease rates for medical office space, disruptions caused by the failure
of the Company or its vendors, operators, lessees or borrowers, or the payors or
other third parties upon which they are dependent, to resolve any Year 2000
Issues affecting their respective operations, higher than expected costs
associated with the maintenance and operation of the Company's medical
office/clinic facilities, higher than expected turnover at the Company's medical
office/clinic facilities, a reduction in demand for the services provided at the
Company's facilities, the strength and financial resources of the Company's
competitors, the availability and cost of capital to the Company, the Company's
ability to make additional real estate investments at attractive yields, the
adoption of new accounting standards, changes in tax laws and regulations
affecting real estate investment trusts and the failure to complete a merger
with Health Care Property Investors, Inc. For a further discussion of such
factors, see "- Future Operating Results" herein.
8
<PAGE> 10
AMERICAN HEALTH PROPERTIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OPERATING RESULTS
Second Quarter and Year to Date 1999 Compared With 1998
For the second quarter of 1999, the Company reported income before gain
on sale of property attributable to common stock of $10,716,000, or $.43 per
share on a diluted basis, compared with $10,559,000, or $.43 per share on a
diluted basis, for the second quarter of 1998. For the second quarter of 1999,
the Company reported net income attributable to common stock of $64,566,000, or
$2.56 per share on a diluted basis, which included a gain on sale of property of
$53,850,000, or $2.13 per share on a diluted basis, compared with $10,559,000
for the second quarter of 1998, or $.43 per share on a diluted basis. For the
six months ended June 30, 1999, the Company reported income before gain on sale
of property attributable to common stock of $21,928,000, or $.87 per share on a
diluted basis, compared with $20,993,000, or $.87 per share on a diluted basis,
for the six months ended June 30, 1998. For the six months ended June 30, 1999,
the Company reported net income attributable to common stock of $75,778,000, or
$3.01 per share on a diluted basis, which included a gain on sale of property of
$53,850,000, or $2.13 per share on a diluted basis, compared with $20,993,000,
or $.87 per share on a diluted basis, for the six months ended June 30, 1998.
Rental income was $22,397,000 for the second quarter of 1999, a
decrease of $87,000 from $22,484,000 for the second quarter of 1998. This
decrease was primarily attributable to the sale of Kendall during the second
quarter of 1999. This decrease was partially offset by an increase in rental
income from new properties acquired subsequent to the first quarter of 1998.
Rental income was $46,585,000 for the six months ended June 30, 1999, an
increase of $2,743,000 or 6% from $43,842,000 for the six months ended June 30,
1998. This increase was primarily attributable to an increase in rental income
from new properties acquired subsequent to the first quarter of 1998, partially
offset by the sale of the Kendall facility during the second quarter of 1999.
The property additions subsequent to the first quarter of 1998, partially offset
by the sale of Kendall, also resulted in a net increase in depreciation and
amortization of $142,000 or 3% to $5,301,000 for the second quarter of 1999
compared with $5,159,000 for the second quarter of 1998 and a net increase of
$885,000 or 9% to $10,918,000 for the six months ended June 30, 1999 compared to
$10,033,000 for the six months ended June 30, 1998.
Mortgage interest income was $116,000 for the second quarter of 1999, a
decrease of $1,539,000 or 93% from $1,655,000 for the second quarter of 1998.
Mortgage interest income was $233,000 for the six months ended June 30, 1999, a
decrease of $3,075,000 or 93% from $3,308,000 for the six months ended June 30,
1998. On July 1, 1998, the Company received $35 million as payment in full of
two psychiatric mortgage loans resulting in a decrease in mortgage interest
income during the second quarter and first six months of 1999.
Additional rental and interest income was $3,028,000 for the second
quarter of 1999, a decrease of $372,000 or 11% from $3,400,000 for the second
quarter of 1998. Additional rental and interest income was $6,367,000 for the
six months ended June 30, 1999, a decrease of $453,000 or 7% from $6,820,000 for
the six months ended June 30, 1998. The decrease in additional rental and
interest income for the second quarter of 1999 was attributable to decreases in
additional rent/interest of $269,000 from psychiatric investments, $32,000 from
rehabilitation properties and $161,000 from acute care properties, partially
offset by an increase in additional rent of $90,000 from long-term care
properties. The decrease in additional rental and interest income for the six
months ended June 30, 1999 was attributable to decreases in additional
rent/interest of $534,000 from psychiatric properties and $108,000 from
rehabilitation properties, partially offset by increases in additional
rent/interest of $118,000 from long-term care properties and $71,000 from acute
care properties. The decrease in additional rent/interest from psychiatric
investments for the second quarter and first half of 1999 is due to the
disposition of three psychiatric investments since June 1998. The sale of the
Kendall
9
<PAGE> 11
AMERICAN HEALTH PROPERTIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
facility in April 1999 had a negative impact on the amount of additional rent
from acute care properties during the second quarter and first half of 1999.
Other property income was $735,000 for the second quarter of 1999, an
increase of $351,000 or 91% from $384,000 for the second quarter of 1998. Other
property income was $1,435,000 for the six months ended June 30, 1999, an
increase of $716,000 or 100% from $719,000 for the six months ended June 30,
1998. The second quarter and first six months of 1999 included other property
income for nine multi-tenant facilities, one of which was acquired during the
second quarter, compared to the second quarter and first six months of 1998
which included other property income for six multi-tenant facilities, three of
which were acquired during the first quarter of 1998.
Other interest income increased $604,000 to $824,000 for the second
quarter of 1999 from $220,000 for the second quarter of 1998. Other interest
income increased $510,000 to $971,000 for the six months ended June 30, 1999
from $461,000 for the six months ended June 30, 1998. This increase was due to
additional investable cash balances as a result of proceeds received from the
sale of the Kendall facility during the second quarter of 1999 and interest
income from a subordinated note receivable from the operator of the Company's
Alzheimer's care facilities, which was funded subsequent to the first quarter of
1998. This increase is partially offset by a lower average balance of direct
financing leases during 1999 compared to 1998. In addition, interest income
decreased as a result of the write-off, at the end of 1998, of the outstanding
borrowings under a revolving credit agreement provided to a psychiatric hospital
operator.
Property operating expense was $1,634,000 for the second quarter of
1999, an increase of $282,000 or 21% from $1,352,000 for the second quarter of
1998. Property operating expense was $3,244,000 for the six months ended June
30, 1999, an increase of $677,000 or 26% from $2,567,000 for the six months
ended June 30, 1998. The second quarter and first six months of 1999 included
other property operating expense for nine multi-tenant facilities, one of which
was acquired during the second quarter, compared to the second quarter and first
six months of 1998 which included property operating expense for six
multi-tenant facilities, three of which were acquired during the first quarter
of 1998. The increase in multi-tenant property operating expense for the second
quarter and first half of 1999 is partially offset by a reduction in psychiatric
property operating expenses during the same periods.
Interest expense was $5,155,000 for the second quarter of 1999, a
decrease of $153,000 or 3% from $5,308,000 for the second quarter of 1998. This
decrease is primarily attributable to a higher level of capitalized interest in
1999 compared to 1998 and a reduction in interest expense as a result of the
redemption of the Company's Convertible Dual Currency Subordinated Bonds on
December 30, 1998. This decrease was partially offset by a higher average
balance of bank credit facility borrowings and the assumption of a mortgage loan
in connection with the acquisition of a medical office/clinic facility
subsequent to the first quarter of 1998. Interest expense was $10,675,000 for
the six months ended June 30, 1999, an increase of $425,000 or 4% from
$10,250,000 for the six months ended June 30, 1998. This increase was primarily
attributable to a higher average balance of bank credit facility borrowings and
the assumption of a mortgage loan in connection with the acquisition of a
medical office/clinic facility subsequent to the first quarter of 1998. This
increase is partially offset by a higher level of capitalized interest in 1999
compared to 1998 and a reduction in interest expense as a result of the
redemption of the Company's Convertible Dual Currency Subordinated Bonds on
December 30, 1998.
General and administrative expenses were $2,113,000 for the second
quarter of 1999, a decrease of $209,000 or 9% from $2,322,000 for the second
quarter of 1998. General and administrative expenses were $4,337,000 for the six
months ended June 30, 1999, a decrease of $91,000 or 2% from $4,428,000 for the
six
10
<PAGE> 12
AMERICAN HEALTH PROPERTIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
months ended June 30, 1998. This variation was primarily attributable to
reductions in consulting and travel expenses, partially offset by increases in
compensation and benefits expense and other fees and license costs.
Future Operating Results
The operators and tenants of most of the Company's facilities derive a
substantial percentage of their total revenues from federal and state health
care programs such as Medicare and Medicaid and from other third-party payors
such as private insurance companies, self-insured employers and health
maintenance organizations. Such operators and tenants also are subject to
extensive federal, state and local government regulation relating to their
operations, and most of the Company's facilities are subject to periodic
inspection by governmental and other authorities to assure continued compliance
with mandated procedures, licensure requirements under state law and
certification standards under the Medicare and Medicaid programs. A reduction in
reimbursement levels under the Medicare or Medicaid programs, a reduction in
reimbursement by other third-party payors or an operator's or tenant's failure
to maintain its certification under Medicare or Medicaid programs could
adversely affect revenues of the Company's operators and tenants.
The nature of health care delivery in the United States continues to
undergo change and further review at both the national and state levels.
Generally accepted goals of reform continue to include controlling costs and
improving access to medical care. Various plans to decrease the growth in
Medicare spending have been proposed and passed by both Houses of Congress.
These plans generally include revisions to and limits on Medicare and federal
programs providing Medicaid reimbursement to state health care programs and have
had and potentially would have an adverse impact on the level of funds available
in the future to health care facilities. The Balanced Budget Act of 1997
contains extensive changes to the Medicare and Medicaid programs intended to
significantly reduce the projected amount of increase in Medicare spending. In
addition, the Budget Act repealed certain limits on states' ability to reduce
their Medicaid reimbursement levels. The Budget Act has the potential to
significantly reduce federal spending on health care services provided at each
of the Company's facilities and provided by the physician tenants of the
Company's medical office/clinic facilities, and to affect revenues of the
Company's operators and tenants adversely. In particular, the Budget Act's
limitations on reimbursable costs and reductions in payment incentives and
capital related payments, as well as the change toward a prospective payment
system, may have a material adverse effect on operator revenues at the Company's
rehabilitation, long-term acute care, and psychiatric hospitals. The Budget
Act's freeze on acute care hospital reimbursement rates may also have an adverse
effect on the operator revenues at the Company's acute care hospitals. In
addition, the prospective payment system imposed by the Budget Act is having a
material adverse effect on some operators in the skilled nursing industry and
may have a material adverse effect on the operators of the Company's skilled
nursing facilities if the operators are unable to effectively respond to the
financial incentives provided by the prospective payment system. The Company
cannot be assured that the changes effected by the Budget Act will not have a
material adverse effect on the Company's financial condition or results of
operation.
The Company's Board and management are monitoring the effect of the
Budget Act and other regulatory activities on the Company's facilities and
potential changes to reimbursement programs closely. The Company believes that
the changes effected by the Budget Act and changes proposed at the federal and
state level may pose risks for certain institutions and physician groups that
are unwilling or unable to respond. At the same time, the Company believes that
this changing health care environment will provide it with new opportunities for
investment.
The ongoing changes in the health care industry include trends toward
shorter lengths of hospital stay, increased use of outpatient services,
increased federal, state and third-party oversight of health care company
operations and business practices, and increased demand for discounted or
capitated health care services
11
<PAGE> 13
AMERICAN HEALTH PROPERTIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(delivery of services at a fixed price per capita basis to a defined group of
covered parties). Furthermore, federal, state and third-party payors continue to
propose and adopt various cost containment measures that restrict the scope of
reimbursable health care services and limit increases in reimbursement rates for
such services. Payors also are continuing to enforce compliance with program
requirements aggressively and to pursue providers that they believe have not
complied with such requirements. Outpatient business is expected to increase as
advances in medical technologies allow more procedures to be performed on an
outpatient basis and as payors continue to direct more patients from inpatient
care to outpatient care. In addition, the entrance of insurance companies into
managed care programs is accelerating the introduction of managed care in new
localities, and states and insurance companies continue to negotiate actively
the amounts they will pay for services. Moreover, the percentage of health care
services that are reimbursed under the Medicare and Medicaid programs continues
to increase as the population ages. States are also expanding their Medicaid
programs. Continued eligibility to participate in these programs is crucial to a
provider's financial strength. As a result of the foregoing, revenues and
margins of the Company's operators and tenants may decrease.
Notwithstanding the potential for increasing government regulation, the
Company believes that health care will continue to be delivered on a local and
regional basis and that well-managed, high-quality, cost-controlled facilities
will continue to be an integral part of local and regional health care delivery
systems. The Company also believes that certain acute care hospitals will need
to reconfigure or expand existing facilities or to affiliate themselves with
other providers so as to become part of comprehensive and cost-effective health
care systems. Such systems likely will include lower cost treatment settings,
such as ambulatory care clinics, outpatient surgery centers, long-term acute
care hospitals, skilled nursing facilities, assisted living and Alzheimer's care
facilities and medical office/clinic facilities. In general, the Company's
facilities are part of local or regional health care delivery systems or are in
the process of becoming integrated into such systems.
The Company's future operating results could be affected by the
operating performance of the Company's lessees and borrowers. In addition, new
Alzheimer's care and assisted living facilities are subject to, among other
things, fill-up and working capital risks. The rental and interest obligations
of the Company's facility operators are primarily supported by the
facility-specific operating cash flow. Real estate investments in the Company's
portfolio are generally further supported by one or more credit enhancements
that take the form of cross-default provisions, letters of credit, corporate and
personal guarantees, security interests in cash reserve funds, accounts
receivable or other personal property and requirements to maintain specified
financial ratios.
On April 16, 1999, the Company completed the sale of Kendall Regional
Medical Center to an affiliate of Columbia/HCA Healthcare Corporation (Columbia)
for a gross purchase price of $105 million. As a result of the Kendall sale, the
Company recognized a gain for book purposes of $53,850,000 in the second quarter
of 1999. Kendall had been leased to a subsidiary of Columbia and generated
aggregate revenues of approximately $10.3 million in 1998, or 9% of the
Company's total revenues. The Kendall sale resulted from Columbia's exercise of
its option to purchase Kendall at fair market value pursuant to the terms of the
lease. To complete the Kendall sale, the purchaser paid $75 million in cash, and
assumed and paid $30 million of borrowings outstanding under the Company's bank
credit facility. Since the Company currently intends to effect a "deferred
like-kind" 1031 exchange for tax purposes, the net cash proceeds of $73.65
million were delivered to a third-party intermediary, which is using such
proceeds to purchase and convey to the Company like-kind replacement property
selected by the Company. Pursuant to the requirements of Section 1031 of the
Internal Revenue Code, the Company identified approximately $200 million of
potential exchange properties prior to the close of business on May 28, 1999.
The Company must acquire all identified replacement properties it will acquire
as part of the 1031 exchange by October 13, 1999. As of August 6, 1999,
approximately $48 million of like-kind replacement properties have been acquired
as part of the 1031 exchange. The Company also has approximately $35 million of
additional properties under contract as of
12
<PAGE> 14
AMERICAN HEALTH PROPERTIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
August 6, 1999 that will likely be acquired as part of the 1031 exchange. If the
Company is successful in acquiring a sufficient amount of like-kind replacement
properties within the required time limits, the Company should not recognize
current taxable gain and, accordingly, should incur no tax liability as a result
of the transaction. Furthermore, in that event, there should be no impact on the
Company's REIT distribution requirements. If the Company does not complete the
transaction as a 1031 exchange, the tax liability incurred and recognized by the
Company for book purposes, as well as the impact on the Company's REIT
distribution requirements, will depend on the tax position of the Company as a
whole. Although the Company believes that it has developed a sufficiently large
pool of replacement properties to allow the Company to complete the 1031
exchange, the Company cannot be assured that total revenues generated by
replacement properties acquired to effect the 1031 exchange will equal annual
revenues previously generated by the Kendall investment, nor can the Company be
certain that the 1031 exchange will be completed.
Quantitative and Qualitative Disclosures About Market Risk The future
operating results of the Company will be affected by additional factors
including the amount, timing and yield of additional real estate investments and
the competition for such investments. Operating results also will be affected by
the availability and terms of the Company's future equity and debt financing.
The Company's financing strategy to facilitate future growth includes
initiatives intended to reduce its cost of capital over time and enhance its
liquidity and financial flexibility. The Company's future earnings, cash flows
and fair values relevant to financial instruments are dependent upon prevailing
market rates. Market risk is the risk of loss from adverse changes in market
prices and interest rates. The Company manages its market risk by matching
projected cash inflows from operating properties, financing activities and
investing activities with projected cash outflows to fund debt payments,
acquisitions, capital expenditures, distributions and other cash requirements.
Although in the past the Company has occasionally utilized derivative financial
instruments for hedging purposes, and may do so in the future in certain
circumstances, generally the Company does not utilize derivative financial
instruments for hedging purposes and does not use such instruments for trading
purposes. The Company utilizes debt and equity financing primarily for the
purpose of making additional investments in health care facilities.
Historically, the Company has used short-term variable rate borrowings under its
unsecured revolving credit agreement to initially fund its acquisitions until
market conditions were appropriate, based on management's judgement, to issue
equity or fixed rate debt to provide long-term financing. Changes in interest
rates on fixed rate debt generally affect fair market value, but not earnings or
cash flows. The Company's ability to prepay fixed rate debt prior to maturity is
generally limited, therefore, interest rate risk and changes in fair market
value should not have a significant impact on the fixed rate debt until the
maturity of such debt. The Company's earnings and cash flows are affected by
changes in interest rates affecting its variable rate borrowings under its bank
credit facility. At June 30, 1999, the Company had $51 million of such variable
rate borrowings outstanding at a weighted average interest rate of 5.6%.
Assuming this balance were to remain constant, each one percentage point
increase or decrease in the weighted average interest rate on such variable rate
borrowings would result in a corresponding increase or decrease in annual
interest expense of approximately $510,000.
The following table provides information about the Company's material
financial instruments that are sensitive to changes in interest rates. The table
presents the principal cash flows and related weighted average interest rates
for such financial instruments by expected maturity date. The duration of
borrowings under the Company's unsecured revolving credit agreement is generally
less than 90 days at variable pricing indicative of current short-term borrowing
rates. Accordingly, the carrying amount of Company's bank loans payable is a
reasonable estimate of fair value. The fair value of the Company's senior notes
payable is based on the quoted market price of the notes as traded
over-the-counter. The carrying amount of the mortgage notes payable is a
reasonable estimate of fair value, as the pricing and terms of the notes are
indicative of current rates and credit terms.
13
<PAGE> 15
AMERICAN HEALTH PROPERTIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
Maturity
----------------------------------------------------------------------------------------
(dollars in thousands) 1999 2000 2001 2002 2003 Thereafter Total Fair Value
-------- -------- -------- -------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Variable rate debt:
Bank loans payable $ -- $51,000 $ -- $ -- $ -- $ -- $ 51,000 $ 51,000
Weighted average interest rate 5.60% 5.60%
Fixed rate debt:
Senior notes payable $ -- $ -- $ -- $100,000 $ -- $120,000 $220,000 $203,000
Weighted average interest rate 7.34% 7.74% 7.56%
Mortgage notes payable $ 3,488 $ 606 $ 656 $ 712 $ 773 $ 18,249 $ 24,484 $ 24,500
Weighted average interest rate 7.10% 8.18% 8.18% 8.18% 8.18% 8.17% 8.02%
</TABLE>
Year 2000 Readiness Disclosure. Many existing information systems
currently record years in a two-digit format and will be unable to properly
interpret dates beyond the year 1999, which could lead to business disruptions
(the Year 2000 Issue). The Company has a four-phase program to assess the impact
upon the Company of the Year 2000 Issue and to remediate those Year 2000 Issues
that may be discovered. The Company monitors its progress in achieving the
target completion dates established for each phase of the program. The first
phase, a comprehensive inventory of the Company's internal information systems,
office equipment and the embedded building control systems in the Company's
multi-tenant properties, has been completed. The second phase, assessing the
impact of the Year 2000 Issue with respect to the Company's internal information
systems, office equipment and the embedded building control systems in the
Company's multi-tenant properties, is essentially complete. The third phase,
remediation of Year 2000 Issues identified, is expected to be completed during
the third quarter of 1999. The fourth and final phase, development of
contingency plans to address Year 2000 Issues that cannot be remediated, will be
accomplished in the fourth quarter of 1999 if such a plan is deemed necessary.
The Company does not expect the costs to remediate its internal Year 2000 Issues
to be material and does not expect the Company's internal Year 2000 Issues to
have a material impact on the Company's future operations or financial results.
Vendors that provide payroll, banking, communications and property
management services to the Company and the Company's operators, lessees and
borrowers will also likely be affected by the Year 2000 Issue. The future
operations of the Company could be disrupted and/or its financial results could
be negatively impacted by the Year 2000 Issue if the Company's vendors or its
operators, lessees or borrowers do not adequately address their Year 2000
Issues. As health care providers, the Company's operators, lessees and borrowers
generally rely extensively on information systems, including systems for
capturing patient and cost information and for billing and collecting
reimbursement for health care services provided. In addition, the delivery of
patient care by providers requires utilization of critical clinical systems,
medical devices and equipment that could be impacted by the Year 2000 Issue.
Furthermore, the Company's operators, lessees and borrowers likewise are
dependent on a variety of third parties, including but not limited to, insurance
companies, HMO's and other private payors, governmental agencies, fiscal
intermediaries that process claims and make payments for the Medicare and
Medicaid programs, utilities that provide electricity, water, natural gas and
communications services and vendors of medical supplies, pharmaceuticals,
clinical systems, medical devices and equipment used in patient care, all of
whom must also adequately address the Year 2000 Issue. The Company is reviewing
publicly filed information of, sending questionnaires to and/or contacting its
vendors, operators, lessees and borrowers regarding their state of readiness
with respect to identifying and remediating their Year 2000 Issues. However, it
is not possible for the Company to determine or be assured that adequate
remediation of the Year 2000 Issue will be accomplished by such vendors,
operators, lessees and borrowers. Furthermore, it is not possible for the
Company to determine or be assured that third parties upon
14
<PAGE> 16
AMERICAN HEALTH PROPERTIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
which the Company's vendors, operators, lessees and borrowers are dependent will
accomplish adequate remediation of their Year 2000 Issues. If the Company's
operators, lessees and borrowers fail to adequately address their Year 2000
Issues, including Year 2000 Issues relating to third-party payors, they may
experience cash flow difficulties that could impact their ability to meet their
obligations to the Company.
Although the Company believes that the impact of the Year 2000 Issue,
as it relates to its internal information systems, office equipment and the
embedded building control systems in its multi-tenant properties, will not be
material, the Company cannot be assured that the Year 2000 Issues of its vendors
or its operators, lessees and borrowers and the third parties upon which they
are dependent will not have a material impact on the future operations and/or
financial results of the Company.
Merger Agreement On August 4, 1999, the Company entered into a
definitive agreement and plan of merger with Health Care Property Investors,
Inc. (HCPI) in which the Company will merge with and into HCPI in a
stock-for-stock transaction, with HCPI being the surviving corporation. The
common shareholders of the Company will receive a fixed exchange ratio of 0.78
of a share of HCPI common stock for each share of the Company's common stock. In
addition, holders of the Company's preferred stock will receive one share of
substantially similar HCPI preferred stock in exchange for each share of the
Company's preferred stock. The transaction is subject, among other things, to
the approval of the shareholders of both companies and the registration of the
shares to be issued in connection with the transaction. The transaction will be
treated as a purchase for financial accounting purposes, will be tax-free to the
Company's shareholders and is expected to close by the end of 1999.
LIQUIDITY AND CAPITAL RESOURCES
As of August 6, 1999, the Company's remaining commitment to fund the
development of two assisted living facilities was approximately $4.3 million.
The Company has a $22.5 million forward funding commitment to develop up to nine
Alzheimer's care facilities to be operated by the same operator that currently
operates two existing Alzheimer's care facilities owned by the Company. As of
August 6, 1999, $3.0 million was funded under this commitment for the
development of two facilities having total development costs of approximately
$5.6 million. The Company's expected future funding to complete development of a
medical office/clinic facility was $3.2 million as of August 6, 1999. The
Company also has approximately $35 million of properties under contract as of
August 6, 1999 that will likely be acquired as part of the 1031 exchange.
Acquisition of these properties will include the assumption of approximately $11
million of existing mortgage indebtedness.
As of August 6, 1999, the Company had $40.5 million of outstanding
borrowings under its $250 million bank credit facility and had $50.3 million in
cash and short-term investments, including funds held by an intermediary to
complete a 1031 exchange. The Company's total indebtedness as of August 6, 1999
was $299.2 million. The Company expects to utilize its bank credit facility to
fund future property acquisitions and other commitments. Subject to the terms of
the merger agreement, the Company may incur additional indebtedness or refinance
existing indebtedness if the Company determines that opportunities to pursue
such transactions would be attractive. The Company currently believes it has
sufficient capital to meet its commitments and that its cash flow and liquidity
will continue to be sufficient to fund current operations and to provide for the
payment of dividends to stockholders in compliance with the applicable sections
of the Internal Revenue Code governing real estate investment trusts.
15
<PAGE> 17
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Annual Meeting of Shareholders of American Health Properties, Inc. was
held on June 11, 1999 ("Annual Meeting").
(b) Not applicable.
(c) (i) At the Annual Meeting, Sheldon S. King, John P. Mamana and Louis T.
Rosso were elected as Class III directors to serve for a three-year term
until the 2002 Annual Meeting of Shareholders. Voting results for these
directors are summarized as follows:
<TABLE>
<S> <C>
Sheldon S. King Votes For--23,229,024; Votes Withheld--204,545
John P. Mamana Votes For--23,225,176; Votes Withheld--208,393
Louis T. Rosso Votes For--23,243,546; Votes Withheld--190,023
</TABLE>
Class I directors whose term of office continues until the 2000 Annual
Meeting of Shareholders include James L. Fishel and James D. Harper, Jr..
Class II directors whose term of office continues until the 2001 Annual
Meeting of Shareholders include Peter K. Kompaniez and Joseph P. Sullivan.
(ii) At the Annual Meeting, shareholders approved the appointment of the
accounting firm of Arthur Andersen LLP as the auditors and as independent
public accountants for the Company for the fiscal year ending December 31,
1999. Votes For--23,004,208; Votes Against--81,487; Votes
Abstained--347,874.
(iii) At the Annual Meeting, shareholders approved the Company's 1999
Equity Incentive Plan. Votes For--6,746,255; Votes Against--4,992,373;
Votes Abstained--537,976; Broker Non-Votes--11,156,965.
(d) Not Applicable.
ITEM 5. OTHER INFORMATION
On July 16, 1999, the Company entered into amended and restated executive
employment agreements with Joseph P. Sullivan, Michael J. McGee, C. Gregory
Schonert and Steven A. Roseman. These employment agreements were each
amended by the first amendment thereto on August 4, 1999. See Exhibits
10.3, 10.4, 10.5, and 10.6. On July 16, 1999, the Company executed a
supplemental executive retirement plan for Joseph P. Sullivan. See Exhibit
10.10. On June 12, 1999, the Company's 1999 Equity Incentive Plan became
effective. See Exhibit 10.11.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.3 Amended and Restated Executive Employment Agreement between American
Health Properties, Inc. and Joseph P. Sullivan and First Amendment
thereto.
10.4 Amended and Restated Executive Employment Agreement between American
Health Properties, Inc. and Michael J. McGee and First Amendment
thereto.
10.5 Amended and Restated Executive Employment Agreement between American
Health Properties, Inc. and C. Gregory Schonert and First Amendment
thereto.
16
<PAGE> 18
(a) Exhibits (continued)
10.6 Amended and Restated Executive Employment Agreement between American
Health Properties, Inc. and Steven A. Roseman and First Amendment
thereto.
10.10 Supplemental Executive Retirement Plan for Joseph P. Sullivan.
10.11 American Health Properties, Inc. 1999 Equity Incentive Plan
27 Financial Data Schedule
(b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K dated August 4, 1999
reporting the signing of a definitive merger agreement between Health Care
Property Investors, Inc. and the Company.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: August 6, 1999
AMERICAN HEALTH PROPERTIES, INC.
By: /s/ JOSEPH P. SULLIVAN By: /s/ MICHAEL J. MCGEE
-------------------------------- ----------------------------------
Joseph P. Sullivan Michael J. McGee
Chairman of the Board, President & Senior Vice President &
Chief Executive Officer Chief Financial Officer
(Principal Executive Officer) (Principal Financial and
Accounting Officer)
<PAGE> 19
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<S> <C>
10.3 Amended and Restated Executive Employment Agreement between
American Health Properties, Inc. and Joseph P. Sullivan and
First Amendment thereto.
10.4 Amended and Restated Executive Employment Agreement between
American Health Properties, Inc. and Michael J. McGee and
First Amendment thereto.
10.5 Amended and Restated Executive Employment Agreement between
American Health Properties, Inc. and C. Gregory Schonert and
First Amendment thereto.
10.6 Amended and Restated Executive Employment Agreement between
American Health Properties, Inc. and Steven A. Roseman and
First Amendment thereto.
10.10 Supplemental Executive Retirement Plan for Joseph P. Sullivan.
10.11 American Health Properties, Inc. 1999 Equity Incentive Plan
27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 10.3
AMERICAN HEALTH PROPERTIES, INC.
AMENDED AND RESTATED
EXECUTIVE EMPLOYMENT AGREEMENT
WITH
JOSEPH P. SULLIVAN
This Amended and Restated Executive Employment Agreement (the
"Agreement") is entered into as of July 16, 1999, between AMERICAN HEALTH
PROPERTIES, INC., a Delaware corporation (the "Company"), and JOSEPH P.
SULLIVAN, an individual ("Executive").
1. EMPLOYMENT AND TERM
The Company agrees to employ Executive for the period commencing on the
day and the year first written above and ending on the earlier of: (a) the date
of termination of Executive's employment in accordance with Section 4(a)-(c)
below or (b) the date that is three (3) years from the date the Company provides
Executive with written notice of termination of Executive's employment. The
Board of Directors of the Company (the "Board") shall review the terms of
Executive's employment on an annual basis and shall make such modifications to
the terms as the Board in its discretion shall deem appropriate and as Executive
shall consent.
2. DUTIES
(a) Executive shall serve in the capacity of President and Chief
Executive Officer. Executive shall perform such services and duties as are
usually associated with such positions as well as those decided upon by the
Board.
(b) Executive shall devote his full business time and energy to the
business and affairs of the Company and shall use his best efforts and abilities
faithfully and diligently to promote the business interests of the Company and
its subsidiaries as directed by and to the reasonable satisfaction of the Board.
(c) Executive's services shall be rendered in accordance with such
policies as the Company may establish for the conduct of its officers and
employees.
(d) Provided such services or investments do not violate any applicable
law, regulation or order or interfere in any way with the faithful and diligent
performance by Executive of services to the Company otherwise required or
contemplated by this Agreement or requested by the Board, Executive may:
(i) Serve as a director, trustee, or in any other similar capacity
of any business enterprise or any civic, educational, charitable or
trade organization if the Board has been informed of such service and
the Board has not expressly requested Executive to refuse, or to
discontinue, such service, and
<PAGE> 2
(ii) Make and manage personal business investments of Executive's
choice that are consistent with the conflict-of-interest policies of
the Company.
3. COMPENSATION
Commencing as of February 1, 1999, the Company shall compensate
Executive as follows:
(a) Base Salary. Executive shall receive a Base Salary at the rate of
Five Hundred Forty-nine Thousand and Five Hundred Dollars ($549,500) per annum
which shall be payable in semi-monthly installments in conformity with the
Company's policy relating to its employees generally as in effect from time to
time. Executive's Base Salary shall be reviewed periodically by the Board and
may be increased by action of the Board upon such review, but Executive's salary
shall not be decreased except as provided in Sections 4 and 5.
(b) Incentive Compensation. The Board may, in its discretion, award an
annual bonus in addition to base compensation. Such bonus, if any, shall be paid
in such amount and based upon such criteria as are from time to time adopted by
the Board.
(c) Club Membership. During the term of this Agreement, Executive shall
also be entitled to receive the use of a membership in one or more club(s)
approved by the Chairman of the Compensation and Board Affairs Committee of the
Board, suitable for promoting the business interests of the Company.
(d) Automobile. During the term of this Agreement, Executive shall also
be entitled to receive the use of a Company automobile, to be used primarily by
Executive, or in lieu thereof, at Executive's election, receive an automobile
allowance of $10,800 per annum which shall be payable in semi-monthly
installments.
(e) Certain Travel. During the term of this Agreement, Executive shall
be entitled to receive reimbursement for the reasonable expense of commercial
air travel of Executive or his spouse, for up to three trips per month total,
between the Company's principal executive office and Los Angeles, California.
(f) Additional Benefits. Executive also shall be entitled to receive
all benefits for which he is eligible under the terms of any stock incentive
plan, pension plan, SERP, life, medical, dental, vision and disability insurance
and reimbursement programs, and any other plans or arrangements, which the
Company may provide for executive officers from time to time ("Additional
Benefits"). Additional Benefits shall in all respects be paid in accordance with
the then-existing plans, or policies, programs, or arrangements establishing or
governing such Additional Benefits. The Company reserves the right to add,
terminate, or amend any existing plans, policies, programs, or arrangements
during the term of this Agreement and at all other times.
(g) Vacation. Vacation, at full pay, of four (4) weeks per calendar
year. Vacation not used during any calendar year may not be carried over to the
following year.
All compensation paid to Executive shall be subject to withholding for
taxes and subject to payroll and other taxes as required by applicable law and
in conformity with the Company's policies relating thereto as in effect from
time to time.
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4. TERMINATION OF EMPLOYMENT BY THE COMPANY
The compensation provided for in Section 3 of this Agreement and
Executive's employment by the Company may be terminated by the Company prior to
expiration of the term set forth in Section 1(b) as provided for below:
(a) Disability. If Executive becomes either partially or totally unable
to perform his duties after the making of reasonable accommodations because of
any physical or mental disability during the term of his employment hereunder
for three (3) consecutive calendar months or for shorter periods aggregating 90
or more business days in any 12-month period, Executive's employment may be
terminated by the Company at any time during the continuance of such disability.
Upon termination as described in this Section 4(a), Executive shall be entitled
to receive the Base Salary provided for in Section 3(a) of this Agreement for a
period of 90 days after such termination. The Company shall offset against such
Base Salary payments any payments received by Executive as a result of such
illness or injury pursuant to any federal or state program or any salary
continuation or similar program or disability insurance established by the
Company.
Upon termination as described in this Section 4(a), Executive shall
resign from his offices as an officer and director of the Company and its
subsidiaries and the Company shall continue Executive's coverage under any and
all life, medical, dental, vision and disability insurance plans for a period of
120 days after such termination at the expense of the Company. Other Additional
Benefits shall be made available to Executive as required by applicable laws,
including the health coverage continuation provisions of the Consolidated
Omnibus Budget Reconciliation Act, 29 U.S.C. ss.ss. 1161-1168 ("COBRA"), and by
the terms of the Additional Benefit plans, policies, programs, and arrangements
in effect at the time of termination. Executive's period of coverage under COBRA
(29 U.S.C. ss. 1162(2)), shall begin on the date of the termination of his
employment under this Section 4(a). Executive agrees to execute such documents
as may be requested by the Company in order to comply with its obligations under
this Section 4(a) and under COBRA and other applicable laws. The Company shall
provide Executive with the health coverage continuation benefits specified by
COBRA whether or not the Company is obligated under COBRA to do so.
(b) Death. If Executive dies during the term of this Agreement,
Executive's Beneficiary or Beneficiaries, as defined in Section 7 of this
Agreement, shall be entitled to receive the Base Salary provided for in Section
3(a) of this Agreement for a period of 90 days after the date such death occurs.
Additional Benefits shall be made available to the Beneficiaries of Executive
under the life, medical, dental, vision and other Additional Benefit plans,
policies, programs, and arrangements, as required by applicable laws, including
COBRA, and by the terms of the Additional Benefit plans, policies, programs, and
arrangements in effect at the time of Executive's death. The Company shall
provide Executive's Beneficiaries with the health coverage continuation benefits
specified by COBRA whether or not the Company is obligated under COBRA to do so.
(c) For Cause. The Company may upon 14 days' notice to Executive
terminate this Agreement and all of its obligations hereunder to Executive
accruing after the date of such termination if the termination is for "cause." A
termination for cause is a termination effected by the Board on one or more of
the following grounds: (i) that Executive has been declared of unsound
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mind by a court, (ii) that Executive has been convicted of a felony, (iii) that
Executive has been convicted of a misdemeanor involving moral turpitude, or (iv)
that Executive has repeatedly committed a material breach of this Agreement
(provided that Executive has been notified of the prior breach).
Except as expressly required by applicable laws, including COBRA if
applicable, and by the terms of the Additional Benefits plans, policies,
programs, and arrangements then in effect, upon such termination, Executive's
rights under Section 3 of this Agreement shall terminate on the date of the
termination of his employment under this Section 4(c). Executive's period of
coverage under COBRA (29 U.S.C. ss. 1162(2)), if any, shall begin on the date of
the termination of his employment under this Section 4(c). Upon termination as
described in this Section 4(c), Executive shall resign from his offices as an
officer and director of the Company and its subsidiaries. Executive agrees to
execute all documents as may be requested by the Company in order to comply with
its obligations under this Section 4(c) and under COBRA, if applicable, and any
other applicable laws.
(d) Other Termination. The Company may by notice to Executive terminate
Executive's employment for reasons other than those specified in Sections 4(a)
through (c) above. In the event notice of termination of Executive's employment
is given by the Company for reasons other than those specified in Sections 4(a)
through (c), and provided that the provisions of Section 5 do not apply, from
the date of such notice of termination Executive shall be entitled to receive
only the compensation specifically provided below:
(i) The Executive's annual Base Salary in effect at the time of
termination until the expiration of the employment period as provided
in Section 1(b) of this Agreement.
(ii) Additional Benefits under any life, medical, dental, vision
and disability insurance and reimbursement programs in which Executive
was participating at the time of notice of termination of Executive's
employment, which benefits shall be continued until the earlier to
occur of the expiration of Executive's employment period as provided in
Section 1(b) or Executive's acceptance of comparable employment.
Additional Benefits under the terms of any stock incentive plan,
pension plan and SERP will not be continued except as expressly
required by applicable laws or by the terms of the Additional Benefits
plans, policies, programs, and arrangements then in effect.
(iii) Immediate acceleration of vesting of stock options and
acceleration of the lapse of restrictions of any restricted stock
awards held by Executive that would have vested or lapsed during the
period between notice of termination of Executive's employment and the
expiration of Executive's employment period as provided in Section
1(b).
Upon termination of Executive's employment as described in this Section
4(d), Executive shall resign from his offices as an officer and director of the
Company and its subsidiaries and the Company shall, at the option of Executive,
(i) continue installment payments to Executive on the periodic basis described
in Section 3(a) at the rate and for the duration of the employment period
specified in Section 4(d)(i); or (ii) make a lump sum payment to Executive equal
to seventy-five percent (75%) of the amounts due Executive under Section 4(d)(i)
for the duration of the employment period specified therein. A lump sum payment
in accordance with this paragraph shall be made within ten (10) working days of
Executive's election.
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Upon termination of Executive's employment as described in this Section
4(d), Additional Benefits shall be made available to Executive as required by
applicable laws, including COBRA. Executive's period of coverage under COBRA (29
U.S.C. ss. 1162(2)), for purposes of this Section 4(d) shall begin on the date
of the termination of the benefits to which Executive is entitled pursuant to
Section 4(d)(ii). Executive agrees to execute such documents as may be requested
by the Company in order to comply with its obligations under this Section 4(d)
and under COBRA and any other applicable laws. The Company shall provide
Executive with the health coverage continuation benefits specified by COBRA
whether or not the Company is obligated under COBRA to do so.
(e) Constructive Termination. The occurrence of any of the following
events shall be deemed a termination of Executive's employment under Section
4(d) above:
(i) Failure to elect or reelect or otherwise to maintain Executive
in the office or the position, or a substantially equivalent office or
position, with the Company which Executive holds as of the date of this
agreement (or which may be increased from time to time).
(ii) A significant adverse change in the nature or scope of the
authorities, powers, functions, responsibilities or duties attached to
Executive's position with the Company, a reduction in Executive's Base
Salary, as increased from time to time, or the termination or denial of
Executive's rights to a substantial amount of Additional Benefits as
herein provided, any of which is not remedied within 10 calendar days
after receipt by the Company of written notice from Executive of such
change, reduction or termination, as the case may be.
(iii) Without limiting the generality or effect of the foregoing,
any material breach of this Agreement by the Company or any successor
thereto.
The determination by Executive in good faith that any of the events described in
clauses (i) through (iii) above has occurred shall be conclusive.
5. TERMINATION RELATING TO CHANGE OF CONTROL
(a) Any of the following events shall constitute a "Change of Control"
hereunder:
(i) any "person" (as such term is used in Section 13(d) and 14(d)
of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")), is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly of securities of the
Company representing 20% or more of the combined voting power of the
Company's then outstanding securities; or
(ii) during any period of two consecutive years (not including any
period prior to the execution of this Agreement) individuals who at the
beginning of such period constitute the Board of Directors of the
Company and any new director whose election by the Board of Directors
or nomination for election by the Company's shareholders was approved
by a vote of at least two-thirds (2/3) of the directors then still in
office who either were directors at the beginning of the period or
whose election or nomination for election was previously so approved,
cease for any reason to constitute a majority thereof; or
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(iii) the consummation of a merger, consolidation, statutory share
exchange or similar form of corporate transaction involving the Company
or any of its subsidiaries that requires the approval of the Company's
stockholders, whether for such transaction or the issuance of
securities in the transaction (a "Reorganization"), or sale or other
disposition of all or substantially all of the Company's assets to an
entity that is not wholly owned by the Company (a "Sale"), unless
immediately following such Reorganization or Sale, more than 80% of the
total voting power (in respect of the election of directors, or similar
officials in the case of an entity other than a corporation) of either
(x) the surviving corporation or entity resulting from such
Reorganization or the entity which has acquired all or substantially
all of the assets of the Company (in either case, the "Surviving
Entity"), or (y) if applicable, the ultimate parent entity that
directly or indirectly has beneficial ownership of 50% or more of the
total voting power (in respect of the election of directors, or similar
officials in the case of an entity other than a corporation) of the
Surviving Entity (the "Parent Entity"), is represented by Company
voting securities that were outstanding immediately prior to such
Reorganization or Sale (or, if applicable, is represented by shares
into which such Company voting securities were converted pursuant to
such Reorganization or Sale), and such voting power among the holders
thereof is in substantially the same proportion as the voting power of
such Company voting securities among the holders thereof immediately
prior to the Reorganization or Sale; or
(iv) the stockholders of the Company approve a plan of complete
liquidation or dissolution of the Company.
(b) Effective upon or within 180 days of a Change of Control, Executive
may terminate employment with the Company by delivering written notice of such
termination to the Company, accompanied by Executive's resignation from his
offices, if any, as an officer and director of the Company and its subsidiaries.
Upon Executive's termination of employment or tendering of resignation as
specified in the preceding sentence, or if the Company (or any successor)
terminates (whether by Constructive Termination, within the meaning of Section
4(e), or otherwise) Executive's employment for any reason within 180 days of a
Change of Control, Executive shall be entitled to receive:
(i) A lump sum payment (the "Severance Payment") equal to three
(3) times Executive's Compensation Level. "Compensation Level" shall
mean the sum of (A) the greater of (1) Executive's annual base salary
in effect on the date of termination or (2) Executive's annual base
salary in effect immediately prior to the Change of Control, plus (B)
an amount (the "Bonus Amount") equal to the greater of (1) Executive's
maximum bonus opportunity under the Company's annual bonus plan
("Maximum Bonus") in respect of the year of Executive's termination of
employment determined as of Executive's date of termination or (2)
112.5% of the amount determined under clause (A) of this sentence. Such
lump sum payment shall be paid by the Company on the date (the "Payment
Date") that is no later than two (2) business days immediately prior to
the Anticipated COC Date or, in the case of a Change of Control in
respect of which an Anticipated COC Date is not applicable, no later
than ten (10) working days following any termination of employment
covered by this Section 5. For purposes of this Agreement, the
"Anticipated COC Date" is the date
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reasonably determined in good faith by the Chief Executive Officer of
the Company to be the date on which an anticipated Change of Control
is expected to occur.
(ii) Additional Benefits (for Executive, his spouse and
dependents) under any and all life, medical, dental, vision and
disability insurance and reimbursement programs in which Executive was
participating at the earlier of (A) the date immediately prior to the
Change of Control and (B) the time of notice of termination of
Executive's employment, which benefits shall be continued until the
earlier to occur of the expiration of three (3) years following
Executive's date of termination of employment or Executive's acceptance
of comparable employment; provided, however, that medical benefits (for
Executive, his spouse and dependents) shall continue until the date on
which Executive and his spouse are eligible to be covered by Medicare;
provided, further, that upon Executive's acceptance of comparable
employment, Additional Benefits under plans and programs of the Company
(or any successor) shall be secondary to the benefits available, if
any, for Executive, his spouse and dependents from the benefit plans
maintained by Executive's new employer. Additional Benefits under the
terms of any stock incentive plan, pension plan and SERP will not be
continued except as expressly required by applicable laws or by the
terms of the Additional Benefits plans, policies, programs, and
arrangements then in effect.
(iii) As of the Payment Date, immediate acceleration of vesting of
all stock options and dividend equivalent rights and immediate lapse of
restrictions on all restricted stock awards held by Executive.
(iv) A lump sum payment equal to the product of (A) the Bonus
Amount and (B) a fraction, the numerator of which is the number of
weeks elapsed (with a full week credited for any partial week elapsed)
during the year of termination through the date of termination, and the
denominator of which is 52. Such lump sum payment shall be paid by the
Company on the Payment Date.
(v) A lump sum payment equal to the present value of the excess of
(A) the amount payable to Executive pursuant to the Company's
Supplemental Executive Retirement Plan ("SERP") determined as if
Executive had been credited with three (3) additional years of age and
service (with annual compensation during such three-year period equal
to the Compensation Level), over (B) the amount actually payable to
Executive pursuant to the SERP. For purposes of this paragraph (v), the
amount in each of clauses (A) and (B) shall be determined as actuarial
equivalent lump sum amounts (determined in accordance with the lump sum
and actuarial equivalent payment provisions of the SERP). Such lump sum
payment shall be paid by the Company on the Payment Date.
(c) On the Payment Date, the Company shall pay to Executive, with
respect to each outstanding stock option held by Executive that provides for the
grant of dividend equivalent rights, a lump sum payment equal to the product of
(i) and (ii), where (i) is the sum of (A) an amount equal to the accumulated
dividend equivalents in respect of such stock options credited as of the Change
of Control, plus (B) an amount equal to the sum of the projected additional
dividend equivalents that would have been credited in respect of such stock
options during the period commencing on the Change of Control through the fifth
anniversary of the date of grant of such stock options, assuming the Company had
continued to declare dividends with the same frequency as dividends were
declared
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immediately prior to the Change of Control, and using a dividend equivalent
crediting rate equal to the rate used for crediting dividend equivalents in
respect of the most recent dividend actually paid by the Company immediately
prior to first public announcement of the anticipated Change of Control (i.e.,
based on the amount of such actual dividend paid by the Company and the closing
price per share of the Company's common stock on the declaration date of such
dividend), and (ii) is the greater of (A) the closing price per share of the
Company's common stock on the most recent trading day immediately prior to the
Payment Date and (B) if applicable, the final value per share paid to holders of
the Company's common stock in the transaction giving rise to the Change of
Control (provided, that if holders of the Company's common stock receive
publicly traded shares or securities in such transaction, the value per share
shall be determined under this clause (ii)(B) with reference to the closing
price of such shares or securities on the most recent trading day immediately
prior to the Payment Date).
(d) In connection with any termination of employment pursuant to this
Section 5, the Company shall provide Executive with (i) outplacement services
from an outplacement firm of Executive's choice up to a maximum cost of $10,000,
(ii) continuation for a period of three (3) years following Executive's date of
termination of the benefits provided in Sections 3(c) and 3(d), and (iii)
continuation for a period of three (3) years following Executive's date of
termination of the executive medical/financial counseling services provided by
the Company to Executive at the level in effect on Executive's date of
termination (or, if greater, in effect immediately prior to the Change of
Control); provided that the Executive may elect to receive the cash value of the
benefits provided under this Section 5(d), in which case such amount shall be
paid by the Company on the Payment Date.
(e) If any dispute arises between the Company and Executive regarding
Executive's rights under this Section 5, Executive shall be entitled to recover,
on an as-incurred basis, his attorneys' fees and costs incurred in connection
with such dispute, notwithstanding the provisions of Section 19 hereof.
(f) If the expected Surviving Entity of any Change of Control timely
provides the Consulting Notice to Executive, Executive agrees that, following
the termination of Executive's employment pursuant to this Section 5, Executive
shall serve as a consultant to the Surviving Entity until the first anniversary
of Executive's date of termination (the "Consulting Period"). For purposes of
this Agreement, the "Consulting Notice" is a written notice delivered by the
expected surviving entity of such Change of Control to Executive no later than
30 days prior to the Anticipated COC Date (or, if there is no Anticipated COC
Date, no later than 10 days following Executive's termination of employment)
pursuant to which such expected Surviving Entity irrevocably elects and
covenants to retain Executive as a consultant to the Company, on the terms set
forth below in this Section 5(f), for the entirety of the one-year Consulting
Period, and agrees to pay Executive the fully-earned consulting fee required
under this Section 5(f), which fee shall be fully earned by Executive upon
delivery of the Consulting Notice without regard to whether the Company or such
expected Surviving Entity uses some, all or none of the consulting services
agreed to be provided by Executive. During the Consulting Period, Executive
shall be reasonably available for up to 200 hours of consultation with the
Company by telephone or in person at the Company's principal executive office,
and Executive shall provide consulting services substantially similar to the
services performed by Executive immediately prior to the earlier of the Payment
Date or Executive's date of termination of employment. Performance of consulting
services shall be scheduled on reasonable
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notice and in such a manner so as not to interfere significantly with other
business activities of Executive. During the Consulting Period, the Company
shall pay, in accordance with its normal payroll practices (but no less
frequently than monthly), Executive the fully-earned consulting fee in an amount
equal to the greater of (A) Executive's annual base salary in effect on the date
of termination or (B) Executive's annual base salary in effect immediately prior
to the Change of Control, and shall reimburse Executive for business and travel
expenses associated with such consulting services reasonably and necessarily
incurred by Executive during the Consulting Period.
(g) Anything in this Agreement to the contrary notwithstanding, in the
event it shall be determined by the Accounting Firm (as defined below) that any
payment, award, benefit or distribution (or any acceleration of any payment,
award, benefit or distribution) by the Company (or any of its affiliated
entities) or any entity which effectuates a Change of Control (or any of its
affiliated entities) to or for the benefit of Executive (whether pursuant to the
terms of this Agreement or otherwise, but determined without regard to any
additional payments required under this Section 5(g)) (the "Payments") would be
subject to the excise tax imposed by Section 4999 of the Internal Revenue Code
of 1986, as amended (the "Code"), or any interest or penalties are incurred by
Executive with respect to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Company shall, on the Payment Date, pay to Executive an
additional payment (a "Gross-Up Payment") in an amount such that after payment
by Executive of all taxes and net of any deductions which are disallowed to
Executive by reason of Executive's receipt of the Gross-Up Payment and net of
any benefits that result from the deductibility by Executive of such taxes
(including, in each case, any interest or penalties imposed with respect to such
taxes), including, without limitation, any federal, state, and local income
taxes (and any interest and penalties imposed with respect thereto) and Excise
Tax imposed upon the Gross-Up Payment, Executive retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Payments.
Subject to the foregoing provisions of this Section 5(g), all
determinations required to be made under this Section 5(g), including whether a
Gross-Up Payment is required, the amount of such Gross-Up Payment, and the
assumptions to be utilized in arriving at such determinations, shall be made by
the public accounting firm that is retained by the Company as of the date
immediately prior to the Change of Control (the "Accounting Firm") which shall
provide detailed supporting calculations both to the Company and Executive
within fifteen (15) business days of the receipt of notice from the Company or
the Executive that there has been or will be a Payment, or such earlier time as
is requested by the Company (collectively, the "Determination"). In the event
that the Accounting Firm is serving as accountant or auditor for the individual,
entity or group effecting the Change of Control, Executive may appoint another
nationally recognized public accounting firm (or, alternatively, may specify the
office and personnel of the public accounting firm retained by the Company as of
the date immediately prior to the Change of Control) to make the determinations
required hereunder (which accounting firm shall then be referred to as the
Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall
be borne solely by the Company and the Company shall enter into any agreement
requested by the Accounting Firm in connection with the performance of the
services hereunder. If the Accounting Firm determines that no Excise Tax is
payable by Executive, it shall furnish Executive with a written opinion to such
effect, and to the effect that failure to report the Excise Tax, if any, on
Executive's applicable federal income tax return will not result in the
imposition of a negligence or similar penalty. The Determination by the
Accounting Firm shall be binding upon the Company and Executive. As a result of
the uncertainty in
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the application of Section 4999 of the Code at the time of the Determination, it
is possible that Gross-Up Payments which will not have been made by the Company
should have been made ("Underpayment") or Gross-Up Payments are made by the
Company which should not have been made ("Overpayment"), consistent with the
calculations required to be made hereunder. In the event that the Executive
thereafter is required to make payment of any Excise Tax or additional Excise
Tax, the Accounting Firm shall determine the amount of the Underpayment that has
occurred and any such Underpayment (together with interest at the rate provided
in Section 1274(b)(2)(B) of the Code) shall be promptly paid by the Company to
or for the benefit of Executive. In the event the amount of the Gross-Up Payment
exceeds the amount necessary to reimburse the Executive for his Excise Tax, the
Accounting Firm shall determine the amount of the Overpayment that has been made
and any such Overpayment (together with interest at the rate provided in Section
1274(b)(2) of the Code) shall be promptly paid by Executive (to the extent he
has received a refund if the applicable Excise Tax has been paid to the Internal
Revenue Service) to or for the benefit of the Company. Executive shall
cooperate, to the extent his expenses are reimbursed by the Company, with any
reasonable requests by the Company in connection with any contests or disputes
with the Internal Revenue Service in connection with the Excise Tax.
(h) Executive agrees that in the event that payments are made by the
Company to Executive on a Payment Date (or thereafter) in advance of an expected
Change of Control, and such Change of Control does not occur within 10 business
days following the Anticipated COC Date, Executive shall be obligated to, and
shall, repay to the Company, within 2 business days following written notice by
the Company to Executive that such Change of Control has not occurred during
such period, all such amounts paid pursuant to this Section 5; provided that the
return of such payments shall not prejudice Executive's rights under this
Section 5 with respect to any Change in Control.
(i) Any payments by the Company under this Section 5 (after taking into
account any amounts repaid to the Company pursuant to Section 5(h)) shall be in
lieu of any payments under Section 4(d).
6. TERMINATION OF EMPLOYMENT BY EXECUTIVE
(a) In addition to his rights under Section 5 hereof, Executive may
terminate employment with the Company without cause as of a specified date not
less than 30 days after delivering written notice of such termination to the
Company. Upon the effective date of such termination, Executive's right to
receive the compensation provided for in Section 3 of this Agreement shall
terminate. The Company may at any time in its sole discretion waive all or part
of the notice period and specify any day in such period that has not yet
occurred as the date of termination for purposes of this Section 6(a); in the
event of such occurrence, the Company shall pay Executive the amount of the
compensation provided for in Section 3 of this Agreement for the remainder of
the notice period given by Executive.
(b) Upon termination as described in Section 6(a), Additional Benefits
will be made available to Executive as required by applicable laws, including
COBRA, if applicable, and by the terms of the Additional Benefit plans,
policies, programs, and arrangements in effect at the time of termination.
Executive's period of coverage under COBRA (29 U.S.C. ss. 1162(2)), if any,
shall
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begin on the date of the termination of his employment under Section 6(a).
Executive agrees to execute such documents as may be requested by the Company in
order to comply with its obligations under this Section 6(b) and under COBRA, if
applicable, and any other applicable laws.
7. DESIGNATION OF BENEFICIARY
Executive may designate one or more persons or entities (including a
trust or trusts or his estate) to receive any compensation payable to him under
Section 4(b) ("Beneficiaries"). If Executive shall designate more than one
Beneficiary, he shall set forth the proportion in which each is to receive such
compensation; any such designation which fails to set forth such proportion
shall be an invalid designation as to all those so designated. Executive also
may designate one or more successor Beneficiaries who shall succeed to the
rights of the Beneficiaries originally designated, in case the latter should die
prior to the receipt of full payment. Executive may from time to time change any
designation so made, and that last designation shall be controlling. If
Executive designates a person other than, or in addition to, his spouse, his
spouse shall specifically approve his designation and authorize the Company to
pay his compensation as designated. In the absence of a valid designation by
Executive meeting the requirements of this Section 7, or in the event of the
death of a Beneficiary for whom no successor Beneficiary has been validly
designated, Executive's compensation, or the portion of such compensation then
payable to such deceased Beneficiary, shall be paid to the administrator or
executor of Executive's estate for the benefit of Executive's estate, who shall
in that event be deemed a Beneficiary under this Section 7.
Executive's designation and his spouse's approval and authorization, if
necessary, must be in the form of a signed writing witnessed by two adult
persons (other than any designated Beneficiary) and must have been delivered to
the Company prior to Executive's death.
8. REIMBURSEMENT OF EXPENDITURES
During the term of this Agreement, the Company shall reimburse
Executive for business expenses reasonably and necessarily incurred by him on
its behalf in accordance with its business-expense reimbursement policies as in
effect from time to time and subject to Executive's furnishing such
substantiation of such expenses as the Company may require.
9. RELOCATION
If the Company shall relocate its principal executive offices to a
location which is in excess of 25 miles from its current location in Denver,
Colorado, Executive shall be entitled to receive all of the benefits of the
Company's relocation policy in effect in connection with such move. Such
benefits shall, at a minimum, include (i) the Company's guarantee to purchase
Executive's Denver residence at its then current appraised market value or
Executive's purchase cost plus remodeling costs, whichever is greater, if
Executive has been unable to sell the residence after marketing it for a minimum
of 90 days; (ii) reimbursement of any sales commission, and (iii) reimbursement
of direct moving costs. In the event of a relocation of the Company's principal
executive offices from Denver, Colorado in connection with a "Change of Control"
as defined in Section 5(a) hereof, Executive may elect to designate his
residence in Los Angeles, California as his residence for purposes of the
relocation benefits to which he is entitled hereunder.
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10. CONFIDENTIAL INFORMATION
During the term of this Agreement and the period specified in Section
17 of this Agreement, Executive shall not disclose to any persons (other than
another employee of the Company) any confidential information relating to the
business of the Company obtained by him while in the employ of the Company,
without the consent of the Board, except as necessary or appropriate in the
discharge of his obligations to the Company and its shareholders.
11. NONASSIGNMENT OF EXECUTIVE'S OBLIGATIONS AND DUTIES
The obligations and duties of Executive hereunder shall be personal and
not assignable.
12. AGREEMENT BINDING UPON SUCCESSORS AND ASSIGNS
This Agreement shall inure to the benefit of and shall be binding upon
the Company and its respective successors and assigns, including any purchaser
of all or substantially all of its assets, and shall be binding upon Executive's
assigns, executors, administrators, Beneficiaries, or their legal
representatives. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the business
and/or assets of the Company, by operation of law, or otherwise.
13. NOTICES
Any notices provided for in this Agreement shall be sent to the Company
at American Health Properties, Inc., 6400 S. Fiddler's Green Circle, Suite 1800,
Englewood, Colorado 80111, Attention: Chairman, Compensation Committee, or at
such other address as the Company may from time to time in writing designate,
and to Executive at 6400 S. Fiddler's Green Circle, Suite 1800, Englewood,
Colorado 80111, or at such other address as he may from time to time in writing
designate. All notices will be deemed to have been delivered (i) as of the first
to occur of actual receipt or two (2) business days after being sent by
certified mail, return receipt requested, postage paid and properly addressed to
the designated address of the party to whom addressed or (ii) if notice is given
in any other manner, when actually received.
14. ENTIRE AGREEMENT
This instrument contains the entire agreement between the Company and
Executive relating to the subject of Executive's employment by the Company,
except to the extent that the terms and provisions of Additional Benefits,
expense reimbursement policies and Company policies governing executives and
employees generally are (as referred to herein) set forth in other documents.
This Agreement supersedes all prior and contemporaneous oral and written
agreements, understandings, and representations, among the parties with respect
to the subject matter hereof, including without limitation that certain amended
and restated executive employment agreement between the Company and Executive,
dated as of March 15, 1999.
12
<PAGE> 13
15. UNIQUE SERVICES
Executive recognizes that the services to be rendered by him pursuant
to this Agreement are of a character giving them peculiar value, the loss of
which cannot be adequately compensated for in damages, and in the event of a
breach of this Agreement by Executive, the Company shall be entitled to
equitable relief by way of injunction in addition to any other legal or
equitable remedies available to it.
16. TERMINATION OF AGREEMENT
This Agreement shall terminate at the end of the period of Executive's
employment, as described in Section 1 of this Agreement (or at the end of any
different period specifically set forth herein for the termination of
Executive's employment), and may be continued thereafter only upon the execution
of a writing to that effect signed by the Company and Executive. If Executive's
employment continues after the termination of this Agreement for any period
during which no such writing is in effect, Executive shall be deemed to be
employed at the will of the Company and his employment may be terminated at any
time with or without notice and with or without cause and without obligation of
any party to any other party.
17. TRADE SECRETS; COMPETITION; SOLICITATION; NONDISPARAGEMENT
In addition to the other provisions hereof, during the term of this
Agreement, and (a) for a period of one year after Executive's employment with
the Company terminates (or three years, in the event of Executive's termination
of employment pursuant to Section 5) or for so long as the Company continues to
engage in business as a real estate investment trust, whichever period is
shorter, Executive agrees not to, directly or indirectly: (1) disclose or
utilize any trade secrets or confidential information of the Company or
otherwise compete with the Company in respect of any business then carried on by
the Company, (2) hire, cause or encourage any other person to hire, any employee
of the Company or form any business enterprise with any such employee or in any
way persuade or encourage any such employee to terminate or alter his or her
employment with the Company, (3) communicate with any customer or vendor of the
Company or any employee thereof regarding the business of the Company or such
customer's, vendor's, or employee's business relationship with the Company, or
(4) make any public statement or instigate, assist or participate in the making
of any public statement, which would libel, slander or disparage (whether or not
such disparagement legally constitutes libel or slander) the Company, its
subsidiaries and publicly known affiliates, and their past or present officers,
directors and management employees; and (b) for a period of one year after
Executive's employment with the Company terminates (or two years, in the event
of Executive's termination of employment pursuant to Section 5) or for so long
as the Company continues to engage in business as a real estate investment
trust, whichever period is shorter, Executive agrees not to, directly or
indirectly, serve as an employee, officer or director of, or consult with or
otherwise assist or act in the service of, any real estate investment trust
which does business in the United States of America and at least 67% of the
value of whose portfolio is comprised of property leased or used by
healthcare-related enterprises and institutions (other than the Company as
contemplated hereby).
18. WAIVERS
The waiver or breach of any term or condition of this Agreement will
not be deemed to constitute the waiver of any other breach of the same or any
other term or condition.
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<PAGE> 14
19. GOVERNING LAW
This Agreement will be governed by and construed in accordance with the
laws of Colorado.
20. SEVERABILITY
If any provision or clause of any provision of this Agreement is held
invalid or unenforceable, the remainder of this Agreement shall nevertheless
remain in full force and effect.
21. COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original and all of which together shall be deemed to
be one and the same instrument.
22. NO CONFLICT WITH PRIOR AGREEMENTS AND RIGHTS
Executive hereby represents and warrants to the Company that neither
the execution of this Agreement nor performance by Executive of his obligations
hereunder conflicts with any contractual commitment on his part to any third
party or violates or interferes with any right of any third party.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
"Executive" "Company"
AMERICAN HEALTH PROPERTIES, INC.
/s/ Joseph P. Sullivan By /s/ Michael J. McGee
- ------------------------------------ --------------------------------------
Joseph P. Sullivan Michael J. McGee
Senior Vice President
By /s/ Steven A. Roseman
--------------------------------------
Steven A. Roseman
Secretary
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<PAGE> 15
THE FOREGOING AMENDED AND
RESTATED EXECUTIVE EMPLOYMENT
AGREEMENT BETWEEN AMERICAN
HEALTH PROPERTIES, INC. AND
JOSEPH P. SULLIVAN IS HEREBY
CONFIRMED AND AUTHORIZED:
/s/ SHELDON S. KING
- ------------------------------------
SHELDON S. KING, Chairman, Compensation and
Board Affairs Committee of the Board of Directors
of American Health Properties, Inc.
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<PAGE> 16
FIRST AMENDMENT TO
AMERICAN HEALTH PROPERTIES, INC.
AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT
WITH
JOSEPH P. SULLIVAN
THIS FIRST AMENDMENT to the Amended and Restated Executive Employment Agreement
(this "Amendment") dated as of July 16, 1999 (the "Restated Agreement") is
entered on this 4th day of August 1999 to be effective as of July 16, 1999
between AMERICAN HEALTH PROPERTIES, INC., a Delaware corporation (the
"Company"), and JOSEPH P. SULLIVAN, an individual ("Executive").
1. AMENDMENT TO RESTATED AGREEMENT
The Company and Executive agree that Section 5(c) of the Restated
Agreement is hereby amended to clarify that the payment to be made by the
Company to Executive pursuant to Section 5(c) shall be in respect of the
cancellation of Executive's dividend equivalent rights with respect to each
outstanding stock option held by Executive, and that, upon such payment by the
Company to Executive, any and all of Executive's dividend equivalent rights with
respect to outstanding stock options held by Executive shall terminate;
provided, that if Executive becomes obligated under Section 5(h) to repay such
payment to the Company, Executive's dividend equivalent rights shall be restored
as of the date of the purported cancellation of such rights.
2. EFFECT ON RESTATED AGREEMENT
Except as provided in paragraph 2, the Restated Agreement shall remain
in full force and effect in accordance with its terms and conditions.
3. COUNTERPARTS
This Amendment may be executed in several counterparts, each of which
shall be deemed to be an original but all of which together will constitute one
and the same instrument.
IN WITNESS WHEREOF, the parties have executed this First Amendment to
be effective as of the date written above.
"Company" "Executive"
AMERICAN HEALTH PROPERTIES, INC.
a Delaware corporation
By: /s/ Michael J. McGee /s/ JOSEPH P. SULLIVAN
--------------------------------------- -----------------------------------
Michael J. McGee, Senior Vice President JOSEPH P. SULLIVAN
By: /s/ Steven A. Roseman
---------------------------------------
Steven A. Roseman, Secretary
<PAGE> 1
EXHIBIT 10.4
AMERICAN HEALTH PROPERTIES, INC.
AMENDED AND RESTATED
EXECUTIVE EMPLOYMENT AGREEMENT
WITH
Michael J. McGee
This Amended and Restated Executive Employment Agreement (the
"Agreement") is entered into as of July 16, 1999, between AMERICAN HEALTH
PROPERTIES, INC., a Delaware corporation (the "Company") and Michael J. McGee,
an individual ("Executive").
1. EMPLOYMENT AND TERM
The Company agrees to employ Executive for the period commencing on the
day and the year first written above and ending on the earlier of: (a) the date
of termination of Executive's employment in accordance with Section 4(a)-(c)
below or (b) the date that is three (3) years from the date the Company provides
Executive with written notice of termination of Executive's employment. The
Board of Directors of the Company (the "Board") shall review the terms of
Executive's employment on an annual basis and shall make such modifications to
the terms as the Board in its discretion shall deem appropriate and as Executive
shall consent.
2. DUTIES
(a) Executive shall serve in the capacity of Senior Vice President,
Chief Financial Officer and Treasurer. Executive shall perform such services and
duties as are usually associated with such positions as well as those decided
upon by the President and the Board.
(b) Executive shall devote his full business time and energy to the
business and affairs of the Company and shall use his best efforts and abilities
faithfully and diligently to promote the business interests of the Company and
its subsidiaries as directed by and to the reasonable satisfaction of the
President and the Board.
(c) Executive's services shall be rendered in accordance with such
policies as the Company may establish for the conduct of its officers and
employees.
(d) Provided such services or investments do not violate any applicable
law, regulation or order or interfere in any way with the faithful and diligent
performance by Executive of services to the Company otherwise required or
contemplated by this Agreement or requested by the Board, Executive may:
(i) Serve as a director, trustee, or in any other similar capacity
of any business enterprise or any civic, educational, charitable or
trade organization if the Board has been
<PAGE> 2
informed of such service and the Board has not expressly requested
Executive to refuse, or to discontinue, such service, and
(ii) Make and manage personal business investments of Executive's
choice that are consistent with the conflict-of-interest policies of
the Company.
3. COMPENSATION
Commencing as of February 1, 1999, the Company shall compensate
Executive as follows:
(a) Base Salary. Executive shall receive a Base Salary at the rate of
Two Hundred Twelve Thousand Dollars ($212,000) per annum which shall be payable
in semi-monthly installments in conformity with the Company's policy relating to
its employees generally as in effect from time to time. Executive's Base Salary
shall be reviewed periodically by the Board and may be increased by action of
the Board upon such review, but Executive's salary shall not be decreased except
as provided in Sections 4 and 5.
(b) Incentive Compensation. The Board may, in its discretion, award an
annual bonus in addition to base compensation. Such bonus, if any, shall be paid
in such amount and based upon such criteria as are from time to time adopted by
the Board.
(c) Additional Benefits. Executive also shall be entitled to receive
all benefits for which he is eligible under the terms of any stock incentive
plan, pension plan, SERP, life, medical, dental, vision and disability insurance
and reimbursement programs, and any other plans or arrangements, which the
Company may provide for executive officers from time to time ("Additional
Benefits"). Additional Benefits shall in all respects be paid in accordance with
the then-existing plans, or policies, programs, or arrangements establishing or
governing such Additional Benefits. The Company reserves the right to add,
terminate, or amend any existing plans, policies, programs, or arrangements
during the term of this Agreement and at all other times.
(d) Vacation. Vacation, at full pay, of four (4) weeks per calendar
year. Vacation not used during any calendar year may not be carried over to the
following year.
All compensation paid to Executive shall be subject to withholding for
taxes and subject to payroll and other taxes as required by applicable law and
in conformity with the Company's policies relating thereto as in effect from
time to time.
4. TERMINATION OF EMPLOYMENT BY THE COMPANY
The compensation provided for in Section 3 of this Agreement and
Executive's employment by the Company may be terminated by the Company prior to
expiration of the term set forth in Section 1(b) as provided for below:
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<PAGE> 3
(a) Disability. If Executive becomes either partially or totally unable
to perform his duties after the making of reasonable accommodations because of
any physical or mental disability during the term of his employment hereunder
for three (3) consecutive calendar months or for shorter periods aggregating 90
or more business days in any 12-month period, Executive's employment may be
terminated by the Company at any time during the continuance of such disability.
Upon termination as described in this Section 4(a), Executive shall be entitled
to receive the Base Salary provided for in Section 3(a) of this Agreement for a
period of 90 days after such termination. The Company shall offset against such
Base Salary payments any payments received by Executive as a result of such
illness or injury pursuant to any federal or state program or any salary
continuation or similar program or disability insurance established by the
Company.
Upon termination as described in this Section 4(a), Executive shall
resign from his offices as an officer of the Company and its subsidiaries and
the Company shall continue Executive's coverage under any and all life, medical,
dental, vision and disability insurance plans for a period of 120 days after
such termination at the expense of the Company. Other Additional Benefits shall
be made available to Executive as required by applicable laws, including the
health coverage continuation provisions of the Consolidated Omnibus Budget
Reconciliation Act, 29 U.S.C. ss.ss. 1161-1168 ("COBRA"), and by the terms of
the Additional Benefit plans, policies, programs, and arrangements in effect at
the time of termination. Executive's period of coverage under COBRA (29 U.S.C.
ss. 1162(2)), shall begin on the date of the termination of his employment under
this Section 4(a). Executive agrees to execute such documents as may be
requested by the Company in order to comply with its obligations under this
Section 4(a) and under COBRA and other applicable laws. The Company shall
provide Executive with the health coverage continuation benefits specified by
COBRA whether or not the Company is obligated under COBRA to do so.
(b) Death. If Executive dies during the term of this Agreement,
Executive's Beneficiary or Beneficiaries, as defined in Section 7 of this
Agreement, shall be entitled to receive the Base Salary provided for in Section
3(a) of this Agreement for a period of 90 days after the date such death occurs.
Additional Benefits shall be made available to the Beneficiaries of Executive
under the life, medical, dental, vision and other Additional Benefit plans,
policies, programs, and arrangements, as required by applicable laws, including
COBRA, and by the terms of the Additional Benefit plans, policies, programs, and
arrangements in effect at the time of Executive's death. The Company shall
provide Executive's Beneficiaries with the health coverage continuation benefits
specified by COBRA whether or not the Company is obligated under COBRA to do so.
(c) For Cause. The Company may upon 14 days' notice to Executive
terminate this Agreement and all of its obligations hereunder to Executive
accruing after the date of such termination if the termination is for "cause." A
termination for cause is a termination effected by the Board on one or more of
the following grounds: (i) that Executive has been declared of unsound mind by a
court, (ii) that Executive has been convicted of a felony, (iii) that Executive
has been convicted of a misdemeanor involving moral turpitude, or (iv) that
Executive has repeatedly committed a material breach of this Agreement (provided
that Executive has been notified of the prior breach).
3
<PAGE> 4
Except as expressly required by applicable laws, including COBRA if
applicable, and by the terms of the Additional Benefits plans, policies,
programs, and arrangements then in effect, upon such termination, Executive's
rights under Section 3 of this Agreement shall terminate on the date of the
termination of his employment under this Section 4(c). Executive's period of
coverage under COBRA (29 U.S.C. ss. 1162(2)), if any, shall begin on the date of
the termination of his employment under this Section 4(c). Upon termination as
described in this Section 4(c), Executive shall resign from his offices as an
officer of the Company and its subsidiaries. Executive agrees to execute all
documents as may be requested by the Company in order to comply with its
obligations under this Section 4(c) and under COBRA, if applicable, and any
other applicable laws.
(d) Other Termination. The Company may by notice to Executive terminate
Executive's employment for reasons other than those specified in Sections 4(a)
through (c) above. In the event notice of termination of Executive's employment
is given by the Company for reasons other than those specified in Sections 4(a)
through (c), and provided that the provisions of Section 5 do not apply, from
the date of such notice of termination Executive shall be entitled to receive
only the compensation specifically provided below:
(i) The Executive's annual Base Salary in effect at the time of
termination until the expiration of the employment period as provided
in Section 1(b) of this Agreement.
(ii) Additional Benefits under any life, medical, dental, vision
and disability insurance and reimbursement programs in which Executive
was participating at the time of notice of termination of Executive's
employment, which benefits shall be continued until the earlier to
occur of the expiration of Executive's employment period as provided in
Section 1(b) or Executive's acceptance of comparable employment.
Additional Benefits under the terms of any stock incentive plan,
pension plan and SERP will not be continued except as expressly
required by applicable laws or by the terms of the Additional Benefits
plans, policies, programs, and arrangements then in effect.
(iii) Immediate acceleration of vesting of stock options and
acceleration of the lapse of restrictions of any restricted stock
awards held by Executive that would have vested or lapsed during the
period between notice of termination of Executive's employment and the
expiration of Executive's employment period as provided in Section
1(b).
Upon termination of Executive's employment as described in this Section
4(d), Executive shall resign from his offices as an officer of the Company and
its subsidiaries and the Company shall, at the option of Executive, (i) continue
installment payments to Executive on the periodic basis described in Section
3(a) at the rate and for the duration of the employment period specified in
Section 4(d)(i); or (ii) make a lump sum payment to Executive equal to
seventy-five percent (75%) of the amounts due Executive under Section 4(d)(i)
for the duration of the employment period specified therein. A lump sum payment
in accordance with this paragraph shall be made within ten (10) working days of
Executive's election.
4
<PAGE> 5
Upon termination of Executive's employment as described in this Section
4(d), Additional Benefits shall be made available to Executive as required by
applicable laws, including COBRA. Executive's period of coverage under COBRA (29
U.S.C. ss. 1162(2)), for purposes of this Section 4(d) shall begin on the date
of the termination of the benefits to which Executive is entitled pursuant to
Section 4(d)(ii). Executive agrees to execute such documents as may be requested
by the Company in order to comply with its obligations under this Section 4(d)
and under COBRA and any other applicable laws. The Company shall provide
Executive with the health coverage continuation benefits specified by COBRA
whether or not the Company is obligated under COBRA to do so.
(e) Constructive Termination. The occurrence of any of the following
events shall be deemed a termination of Executive's employment under Section
4(d) above:
(i) Failure to elect or reelect or otherwise to maintain Executive
in the office or the position, or a substantially equivalent office or
position, with the Company which Executive holds as of the date of this
agreement (or which may be increased from time to time).
(ii) A significant adverse change in the nature or scope of the
authorities, powers, functions, responsibilities or duties attached to
Executive's position with the Company, a reduction in Executive's Base
Salary, as increased from time to time, or the termination or denial of
Executive's rights to a substantial amount of Additional Benefits as
herein provided, any of which is not remedied within 10 calendar days
after receipt by the Company of written notice from Executive of such
change, reduction or termination, as the case may be.
(iii) The Company shall relocate its principal executive offices,
or require Executive to have his principal location of work changed, to
any location that is in excess of 25 miles from its present location.
(iv) Without limiting the generality or effect of the foregoing,
any material breach of this Agreement by the Company or any successor
thereto.
The determination by Executive in good faith that any of the events described in
clauses (i) through (iv) above has occurred shall be conclusive.
5. TERMINATION RELATING TO CHANGE OF CONTROL
(a) Any of the following events shall constitute a "Change of Control"
hereunder:
(i) any "person" (as such term is used in Section 13(d) and 14(d)
of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")), is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly of securities of the
Company representing 20% or more of the combined voting power of the
Company's then outstanding securities; or
5
<PAGE> 6
(ii) during any period of two consecutive years (not including any
period prior to the execution of this Agreement) individuals who at the
beginning of such period constitute the Board of Directors of the
Company and any new director whose election by the Board of Directors
or nomination for election by the Company's shareholders was approved
by a vote of at least two-thirds (2/3) of the directors then still in
office who either were directors at the beginning of the period or
whose election or nomination for election was previously so approved,
cease for any reason to constitute a majority thereof; or
(iii) the consummation of a merger, consolidation, statutory share
exchange or similar form of corporate transaction involving the Company
or any of its subsidiaries that requires the approval of the Company's
stockholders, whether for such transaction or the issuance of
securities in the transaction (a "Reorganization"), or sale or other
disposition of all or substantially all of the Company's assets to an
entity that is not wholly owned by the Company (a "Sale"), unless
immediately following such Reorganization or Sale, more than 80% of the
total voting power (in respect of the election of directors, or similar
officials in the case of an entity other than a corporation) of either
(x) the surviving corporation or entity resulting from such
Reorganization or the entity which has acquired all or substantially
all of the assets of the Company (in either case, the "Surviving
Entity"), or (y) if applicable, the ultimate parent entity that
directly or indirectly has beneficial ownership of 50% or more of the
total voting power (in respect of the election of directors, or similar
officials in the case of an entity other than a corporation) of the
Surviving Entity (the "Parent Entity"), is represented by Company
voting securities that were outstanding immediately prior to such
Reorganization or Sale (or, if applicable, is represented by shares
into which such Company voting securities were converted pursuant to
such Reorganization or Sale), and such voting power among the holders
thereof is in substantially the same proportion as the voting power of
such Company voting securities among the holders thereof immediately
prior to the Reorganization or Sale; or
(iv) the stockholders of the Company approve a plan of complete
liquidation or dissolution of the Company.
(b) Effective upon or within 180 days of a Change of Control, Executive
may terminate employment with the Company by delivering written notice of such
termination to the Company, accompanied by Executive's resignation from his
offices, if any, as an officer of the Company and its subsidiaries. Upon
Executive's termination of employment or tendering of resignation as specified
in the preceding sentence, or if the Company (or any successor) terminates
(whether by Constructive Termination, within the meaning of Section 4(e), or
otherwise) Executive's employment for any reason upon or within 180 days of a
Change of Control, Executive shall be entitled to receive:
(i) A lump sum payment (the "Severance Payment") equal to three
(3) times Executive's Compensation Level. "Compensation Level" shall
mean the sum of (A)
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<PAGE> 7
the greater of (1) Executive's annual base salary in effect on the date
of termination or (2) Executive's annual base salary in effect
immediately prior to the Change of Control, plus (B) an amount (the
"Bonus Amount") equal to the greater of (1) Executive's maximum bonus
opportunity under the Company's annual bonus plan in respect of the
year of Executive's termination of employment determined as of
Executive's date of termination or (2) 78.75% of the amount determined
under clause (A) of this sentence. Such lump sum payment shall be paid
by the Company on the date (the "Payment Date") that is no later than
two (2) business days immediately prior to the Anticipated COC Date or,
in the case of a Change of Control in respect of which an Anticipated
COC Date is not applicable, no later than ten (10) working days
following any termination of employment covered by this Section 5. For
purposes of this Agreement, the "Anticipated COC Date" is the date
reasonably determined in good faith by the Chief Executive Officer of
the Company to be the date on which an anticipated Change of Control is
expected to occur.
(ii) Additional Benefits (for Executive, his spouse and
dependents) under any and all life, medical, dental, vision and
disability insurance and reimbursement programs in which Executive was
participating at the earlier of (A) the date immediately prior to the
Change of Control and (B) the time of notice of termination of
Executive's employment, which benefits shall be continued until the
earlier to occur of the expiration of three (3) years following
Executive's date of termination of employment or Executive's acceptance
of comparable employment; provided, however, that upon Executive's
acceptance of comparable employment, Additional Benefits under plans
and programs of the Company (or any successor) shall be secondary to
the benefits available, if any, from the benefit plans maintained by
Executive's new employer. Additional Benefits under the terms of any
stock incentive plan, pension plan and SERP will not be continued
except as expressly required by applicable laws or by the terms of the
Additional Benefits plans, policies, programs, and arrangements then in
effect.
(iii) As of the Payment Date, immediate acceleration of vesting of
all stock options and dividend equivalent rights and immediate lapse of
restrictions on all restricted stock awards held by Executive.
(iv) A lump sum payment equal to the product of (A) the Bonus
Amount and (B) a fraction, the numerator of which is the number of
weeks elapsed (with a full week credited for any partial week elapsed)
during the year of termination through the date of termination, and the
denominator of which is 52. Such lump sum payment shall be paid by the
Company on the Payment Date.
(v) A lump sum payment equal to three years' additional
contributions to the Company's Money Purchase Pension Plan (determined
as if Executive had earned annual compensation during such three year
period equal to the Compensation Level). Such lump sum payment shall be
paid by the Company on the Payment Date.
(c) On the Payment Date, the Company shall also pay to Executive, with
respect to each outstanding stock option held by Executive that provides for the
grant of dividend equivalent
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<PAGE> 8
rights, a lump sum payment equal to the product of (i) and (ii), where (i) is
the sum of (A) an amount equal to the accumulated dividend equivalents in
respect of such stock options credited as of the Change of Control, plus (B) an
amount equal to the sum of the projected additional dividend equivalents that
would have been credited in respect of such stock options during the period
commencing on the Change of Control through the fifth anniversary of the date of
grant of such stock options, assuming the Company had continued to declare
dividends with the same frequency as dividends were declared immediately prior
to the Change of Control, and using a dividend equivalent crediting rate equal
to the rate used for crediting dividend equivalents in respect of the most
recent dividend actually paid by the Company immediately prior to first public
announcement of the anticipated Change of Control (i.e., based on the amount of
such actual dividend paid by the Company and the closing price per share of the
Company's common stock on the declaration date of such dividend), and (ii) is
the greater of (A) the closing price per share of the Company's common stock on
the most recent trading day immediately prior to the Payment Date and (B) if
applicable, the final value per share paid to holders of the Company's common
stock in the transaction giving rise to the Change of Control (provided, that if
holders of the Company's common stock receive publicly traded shares or
securities in such transaction, the value per share shall be determined under
this clause (ii)(B) with reference to the closing price of such shares or
securities on the most recent trading day immediately prior to the Payment
Date).
(d) In connection with any termination of employment pursuant to this
Section 5, the Company shall provide Executive with (i) outplacement services
from an outplacement firm of Executive's choice up to a maximum cost of $10,000
and (ii) continuation for a period of three (3) years following Executive's date
of termination of the club memberships and executive medical/financial
counseling services provided by the Company to Executive at the level in effect
on Executive's date of termination (or, if greater, in effect immediately prior
to the Change of Control); provided that the Executive may elect to receive the
cash value of the benefits provided under this Section 5(d), in which case such
amount shall be paid by the Company on the Payment Date.
(e) If any dispute arises between the Company and Executive regarding
Executive's rights under this Section 5, Executive shall be entitled to recover,
on an as-incurred basis, his attorneys' fees and costs incurred in connection
with such dispute.
(f) If the expected Surviving Entity of any Change of Control timely
provides the Consulting Notice to Executive, Executive agrees that, following
the termination of Executive's employment pursuant to this Section 5, Executive
shall serve as a consultant to the Surviving Entity until the first anniversary
of Executive's date of termination (the "Consulting Period"). For purposes of
this Agreement, the "Consulting Notice" is a written notice delivered by the
expected Surviving Entity of such Change of Control to Executive no later than
30 days prior to the Anticipated COC Date (or, if there is no Anticipated COC
Date, no later than 10 days following Executive's termination of employment)
pursuant to which such expected surviving entity irrevocably elects and
covenants to retain Executive as a consultant to the Company, on the terms set
forth below in this Section 5(f), for the entirety of the one-year Consulting
Period, and agrees to pay Executive the fully-earned consulting fee required
under this Section 5(f), which fee shall be fully earned by Executive upon
delivery of the Consulting Notice, without regard to whether
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<PAGE> 9
the Company or expected Surviving Entity uses some, all or none of the
consulting services agreed to be provided by Executive. During the Consulting
Period, Executive shall be reasonably available for up to 200 hours of
consultation with the Company by telephone or in person at the Company's
principal executive office, and Executive shall provide consulting services
substantially similar to the services performed by Executive immediately prior
to the earlier of the Payment Date or Executive's date of termination of
employment. Performance of consulting services shall be scheduled on reasonable
notice and in such a manner so as not to interfere significantly with other
business activities of Executive. During the Consulting Period, the Company
shall pay, in accordance with its normal payroll practices (but no less
frequently than monthly), Executive the fully-earned consulting fee in an amount
equal to the greater of (A) Executive's annual base salary in effect on the date
of termination or (B) Executive's annual base salary in effect immediately prior
to the Change of Control, and shall reimburse Executive for business and travel
expenses associated with such consulting services reasonably and necessarily
incurred by Executive during the Consulting Period.
(g) Anything in this Agreement to the contrary notwithstanding, in the
event it shall be determined by the Accounting Firm (as defined below) that any
payment, award, benefit or distribution (or any acceleration of any payment,
award, benefit or distribution) by the Company (or any of its affiliated
entities) or any entity which effectuates a Change of Control (or any of its
affiliated entities) to or for the benefit of Executive (whether pursuant to the
terms of this Agreement or otherwise, but determined without regard to any
additional payments required under this Section 5(g)) (the "Payments") would be
subject to the excise tax imposed by Section 4999 of the Internal Revenue Code
of 1986, as amended (the "Code"), or any interest or penalties are incurred by
Executive with respect to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Company shall, on the Payment Date, pay to Executive an
additional payment (a "Gross-Up Payment") in an amount such that after payment
by Executive of all taxes and net of any deductions which are disallowed to
Executive by reason of Executive's receipt of the Gross-Up Payment and net of
any benefits that result from the deductibility by Executive of such taxes
(including, in each case, any interest or penalties imposed with respect to such
taxes), including, without limitation, any federal, state, and local income
taxes (and any interest and penalties imposed with respect thereto) and Excise
Tax imposed upon the Gross-Up Payment, Executive retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Payments.
Subject to the foregoing provisions of this Section 5(g), all
determinations required to be made under this Section 5(g), including whether a
Gross-Up Payment is required, the amount of such Gross-Up Payment, and the
assumptions to be utilized in arriving at such determinations, shall be made by
the public accounting firm that is retained by the Company as of the date
immediately prior to the Change of Control (the "Accounting Firm") which shall
provide detailed supporting calculations both to the Company and Executive
within fifteen (15) business days of the receipt of notice from the Company or
the Executive that there has been or will be a Payment, or such earlier time as
is requested by the Company (collectively, the "Determination"). In the event
that the Accounting Firm is serving as accountant or auditor for the individual,
entity or group effecting the Change of Control, Executive may appoint another
nationally recognized public accounting firm (or, alternatively, may specify the
office and personnel of the public
9
<PAGE> 10
accounting firm retained by the Company as of the date immediately prior to the
Change of Control) to make the determinations required hereunder (which
accounting firm shall then be referred to as the Accounting Firm hereunder). All
fees and expenses of the Accounting Firm shall be borne solely by the Company
and the Company shall enter into any agreement requested by the Accounting Firm
in connection with the performance of the services hereunder. If the Accounting
Firm determines that no Excise Tax is payable by Executive, it shall furnish
Executive with a written opinion to such effect, and to the effect that failure
to report the Excise Tax, if any, on Executive's applicable federal income tax
return will not result in the imposition of a negligence or similar penalty. The
Determination by the Accounting Firm shall be binding upon the Company and
Executive. As a result of the uncertainty in the application of Section 4999 of
the Code at the time of the Determination, it is possible that Gross-Up Payments
which will not have been made by the Company should have been made
("Underpayment") or Gross-Up Payments are made by the Company which should not
have been made ("Overpayment"), consistent with the calculations required to be
made hereunder. In the event that the Executive thereafter is required to make
payment of any Excise Tax or additional Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and any such
Underpayment (together with interest at the rate provided in Section
1274(b)(2)(B) of the Code) shall be promptly paid by the Company to or for the
benefit of Executive. In the event the amount of the Gross-Up Payment exceeds
the amount necessary to reimburse the Executive for his Excise Tax, the
Accounting Firm shall determine the amount of the Overpayment that has been made
and any such Overpayment (together with interest at the rate provided in Section
1274(b)(2) of the Code) shall be promptly paid by Executive (to the extent he
has received a refund if the applicable Excise Tax has been paid to the Internal
Revenue Service) to or for the benefit of the Company. Executive shall
cooperate, to the extent his expenses are reimbursed by the Company, with any
reasonable requests by the Company in connection with any contests or disputes
with the Internal Revenue Service in connection with the Excise Tax.
(h) Executive agrees that in the event that payments are made by the
Company to Executive on a Payment Date (or thereafter) in advance of an expected
Change of Control, and such Change of Control does not occur within 10 business
days following the Anticipated COC Date, Executive shall be obligated to, and
shall, repay to the Company, within 2 business days following written notice by
the Company to Executive that such Change of Control has not occurred during
such period, all such amounts paid pursuant to this Section 5; provided that the
return of such payments shall not prejudice Executive's rights under this
Section 5 with respect to any Change in Control.
(i) Any payments by the Company under this Section 5 (after taking into
account any amounts repaid to the Company pursuant to Section 5(h)) shall be in
lieu of any payments under Section 4(d).
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<PAGE> 11
6. TERMINATION OF EMPLOYMENT BY EXECUTIVE.
(a) In addition to his rights under Section 5 hereof, Executive may
terminate employment with the Company without cause as of a specified date not
less than 30 days and not more than 90 days after delivering written notice of
such termination to the Company. Upon the effective date of such termination,
Executive's right to receive the compensation provided for in Section 3 of this
Agreement shall terminate. The Company may at any time in its sole discretion
waive all or part of the notice period and specify any day in such period that
has not yet occurred as the date of termination for purposes of this Section
6(a); in the event of such occurrence, the Company shall pay Executive the
amount of the compensation provided for in Section 3 of this Agreement for the
remainder of the notice period given by Executive.
(b) Upon termination as described in Section 6(a), Additional Benefits
will be made available to Executive as required by applicable laws, including
COBRA, if applicable, and by the terms of the Additional Benefit plans,
policies, programs, and arrangements in effect at the time of termination.
Executive's period of coverage under COBRA (29 U.S.C. ss. 1162(2)), if any,
shall begin on the date of the termination of his employment under Section 6(a).
Executive agrees to execute such documents as may be requested by the Company in
order to comply with its obligations under this Section 6(b) and under COBRA, if
applicable, and any other applicable laws.
7. DESIGNATION OF BENEFICIARY
Executive may designate one or more persons or entities (including a
trust or trusts or his estate) to receive any compensation payable to him under
Section 4(b) ("Beneficiaries"). If Executive shall designate more than one
Beneficiary, he shall set forth the proportion in which each is to receive such
compensation; any such designation which fails to set forth such proportion
shall be an invalid designation as to all those so designated. Executive also
may designate one or more successor Beneficiaries who shall succeed to the
rights of the Beneficiaries originally designated, in case the latter should die
prior to the receipt of full payment. Executive may from time to time change any
designation so made, and that last designation shall be controlling. If
Executive designates a person other than, or in addition to, his spouse, his
spouse shall specifically approve his designation and authorize the Company to
pay his compensation as designated. In the absence of a valid designation by
Executive meeting the requirements of this Section 7, or in the event of the
death of a Beneficiary for whom no successor Beneficiary has been validly
designated, Executive's compensation, or the portion of such compensation then
payable to such deceased Beneficiary, shall be paid to the administrator or
executor of Executive's estate for the benefit of Executive's estate, who shall
in that event be deemed a Beneficiary under this Section 7.
Executive's designation and his spouse's approval and authorization, if
necessary, must be in the form of a signed writing witnessed by two adult
persons (other than any designated Beneficiary) and must have been delivered to
the Company prior to Executive's death.
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<PAGE> 12
8. REIMBURSEMENT OF EXPENDITURES
During the term of this Agreement, the Company shall reimburse
Executive for business expenses reasonably and necessarily incurred by him on
its behalf in accordance with its business-expense reimbursement policies as in
effect from time to time and subject to Executive's furnishing such
substantiation of such expenses as the Company may require.
9. CONFIDENTIAL INFORMATION
During the term of this Agreement and the period specified in Section
15 of this Agreement, Executive shall not disclose to any persons (other than
another employee of the Company) any confidential information relating to the
business of the Company obtained by him while in the employ of the Company,
without the consent of the Board, except as necessary or appropriate in the
discharge of his obligations to the Company and its shareholders.
10. NONASSIGNMENT OF EXECUTIVE'S OBLIGATIONS AND DUTIES
The obligations and duties of Executive hereunder shall be personal and
not assignable.
11. AGREEMENT BINDING UPON SUCCESSORS AND ASSIGNS
This Agreement shall inure to the benefit of and shall be binding upon
the Company and its respective successors and assigns, including any purchaser
of all or substantially all of its assets, and shall be binding upon Executive's
assigns, executors, administrators, Beneficiaries, or their legal
representatives. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the business
and/or assets of the Company, by operation of law, or otherwise.
12. NOTICES
Any notices provided for in this Agreement shall be sent to the Company
at American Health Properties, Inc., 6400 S. Fiddlers Green Circle, Suite 1800,
Englewood, Colorado 80111, Attention: Chairman, Compensation Committee, or at
such other address as the Company may from time to time in writing designate,
and to Executive at 6400 S. Fiddlers Green Circle, Suite 1800, Englewood,
Colorado 80111, or at such other address as he may from time to time in writing
designate. All notices will be deemed to have been delivered (i) as of the first
to occur of actual receipt or two (2) business days after being sent by
certified mail, return receipt requested, postage paid and properly addressed to
the designated address of the party to whom addressed or (ii) if notice is given
in any other manner, when actually received.
13. ENTIRE AGREEMENT
This instrument contains the entire agreement between the Company and
Executive relating to the subject of Executive's employment by the Company,
except to the extent that the terms and provisions of Additional Benefits,
expense reimbursement policies and Company policies governing executives and
employees generally are (as referred to herein) set forth in other
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<PAGE> 13
documents. This Agreement supersedes all prior and contemporaneous oral and
written agreements, understandings, and representations, among the parties, with
respect to the subject matter hereof, including without limitation that certain
amended and restated executive employment agreement between the Company and
Executive, dated as of March 15, 1999.
14. TERMINATION OF AGREEMENT
This Agreement shall terminate at the end of the period of Executive's
employment, as described in Section 1 of this Agreement (or at the end of any
different period specifically set forth herein for the termination of
Executive's employment), and may be continued thereafter only upon the execution
of a writing to that effect signed by the Company and Executive. If Executive's
employment continues after the termination of this Agreement for any period
during which no such writing is in effect, Executive shall be deemed to be
employed at the will of the Company and his employment may be terminated at any
time with or without notice and with or without cause and without obligation of
any party to any other party.
15. TRADE SECRETS; SOLICITATION; NONDISPARAGEMENT
If Executive's employment is terminated pursuant to section 5, for a
period of 3 years thereafter Executive agrees not to, directly or indirectly,
(1) disclose or utilize any trade secrets or confidential information of the
Company; (2) hire, cause or encourage any other person to hire, any employee of
the Company or form any business enterprise with any such employee or in any way
persuade or encourage any such employee to terminate or alter his or her
employment with the Company; (3) communicate with any customer or vendor of the
Company or any employee thereof regarding the business of the Company or such
customer's, vendor's or employee's business relationship with the Company; or
(4) make any public statement or instigate, assist or participate in the making
of any public statement, which would libel, slander or disparage (whether or not
such disparagement legally constitutes libel or slander) the Company, its
subsidiaries and publicly known affiliates, and their past or present officers,
directors and management employees.
16. WAIVERS
The waiver or breach of any term or condition of this Agreement will
not be deemed to constitute the waiver of any other breach of the same or any
other term or condition.
17. GOVERNING LAW
This Agreement will be governed by and construed in accordance with the
laws of Colorado.
18. SEVERABILITY
If any provision or clause of any provision of this Agreement is held
invalid or unenforceable, the remainder of this Agreement shall nevertheless
remain in full force and effect.
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19. COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original and all of which together shall be deemed to
be one and the same instrument.
20. NO CONFLICT WITH PRIOR AGREEMENTS AND RIGHTS
Executive hereby represents and warrants to the Company that neither
the execution of this Agreement nor performance by Executive of his obligations
hereunder conflicts with any contractual commitment on his part to any third
party or violates or interferes with any right of any third party.
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<PAGE> 15
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
"Company"
AMERICAN HEALTH PROPERTIES, INC.
By /s/ Joseph P. Sullivan
-----------------------------------------
Joseph P. Sullivan
Chief Executive Officer
By /s/ Steven A. Roseman
-----------------------------------------
Steven A. Roseman
Secretary
"Executive"
/s/ Michael J.McGee
- ------------------------------------
Michael J.McGee
<PAGE> 16
FIRST AMENDMENT TO
AMERICAN HEALTH PROPERTIES, INC.
AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT
WITH
MICHAEL J. MCGEE
THIS FIRST AMENDMENT to the Amended and Restated Executive Employment Agreement
(this "Amendment") dated as of July 16, 1999 (the "Restated Agreement") is
entered on this 4th day of August 1999 to be effective as of July 16, 1999
between AMERICAN HEALTH PROPERTIES, INC., a Delaware corporation (the
"Company"), and MICHAEL J. MCGEE, an individual ("Executive").
1. AMENDMENT TO RESTATED AGREEMENT
The Company and Executive agree that Section 5(c) of the Restated
Agreement is hereby amended to clarify that the payment to be made by the
Company to Executive pursuant to Section 5(c) shall be in respect of the
cancellation of Executive's dividend equivalent rights with respect to each
outstanding stock option held by Executive, and that, upon such payment by the
Company to Executive, any and all of Executive's dividend equivalent rights with
respect to outstanding stock options held by Executive shall terminate;
provided, that if Executive becomes obligated under Section 5(h) to repay such
payment to the Company, Executive's dividend equivalent rights shall be restored
as of the date of the purported cancellation of such rights.
2. EFFECT ON RESTATED AGREEMENT
Except as provided in paragraph 2, the Restated Agreement shall remain
in full force and effect in accordance with its terms and conditions.
3. COUNTERPARTS
This Amendment may be executed in several counterparts, each of which
shall be deemed to be an original but all of which together will constitute one
and the same instrument.
IN WITNESS WHEREOF, the parties have executed this First Amendment to
be effective as of the date written above.
"Company" "Executive
AMERICAN HEALTH PROPERTIES, INC.
a Delaware corporation
By: /s/ Michael J. McGee /s/ MICHAEL J. MCGEE
--------------------------------------- -----------------------------------
Michael J. McGee, Senior Vice President MICHAEL J. MCGEE
By: /s/ Steven A. Roseman
---------------------------------------
Steven A. Roseman, Secretary
<PAGE> 1
EXHIBIT 10.5
AMERICAN HEALTH PROPERTIES, INC.
AMENDED AND RESTATED
EXECUTIVE EMPLOYMENT AGREEMENT
WITH
C. GREGORY SCHONERT
This Amended and Restated Executive Employment Agreement (the
"Agreement") is entered into as of July 16, 1999, between AMERICAN HEALTH
PROPERTIES, INC., a Delaware corporation (the "Company") and C. Gregory
Schonert, an individual ("Executive").
1. EMPLOYMENT AND TERM
The Company agrees to employ Executive for the period commencing on the
day and the year first written above and ending on the earlier of: (a) the date
of termination of Executive's employment in accordance with Section 4(a)-(c)
below or (b) the date that is three (3) years from the date the Company provides
Executive with written notice of termination of Executive's employment. The
Board of Directors of the Company (the "Board") shall review the terms of
Executive's employment on an annual basis and shall make such modifications to
the terms as the Board in its discretion shall deem appropriate and as Executive
shall consent.
2. DUTIES
(a) Executive shall serve in the capacity of Senior Vice President, and
Chief Development Officer. Executive shall perform such services and duties as
are usually associated with such positions as well as those decided upon by the
President and the Board.
(b) Executive shall devote his full business time and energy to the
business and affairs of the Company and shall use his best efforts and abilities
faithfully and diligently to promote the business interests of the Company and
its subsidiaries as directed by and to the reasonable satisfaction of the
President and the Board.
(c) Executive's services shall be rendered in accordance with such
policies as the Company may establish for the conduct of its officers and
employees.
(d) Provided such services or investments do not violate any applicable
law, regulation or order or interfere in any way with the faithful and diligent
performance by Executive of services to the Company otherwise required or
contemplated by this Agreement or requested by the Board, Executive may:
(i) Serve as a director, trustee, or in any other similar capacity
of any business enterprise or any civic, educational, charitable or
trade organization if the Board has been
<PAGE> 2
informed of such service and the Board has not expressly requested
Executive to refuse, or to discontinue, such service, and
(ii) Make and manage personal business investments of Executive's
choice that are consistent with the conflict-of-interest policies of
the Company.
3. COMPENSATION
Commencing as of February 1, 1999, the Company shall compensate
Executive as follows:
(a) Base Salary. Executive shall receive a Base Salary at the rate of
Two Hundred Twenty Five Thousand Dollars ($225,000) per annum which shall be
payable in semi-monthly installments in conformity with the Company's policy
relating to its employees generally as in effect from time to time. Executive's
Base Salary shall be reviewed periodically by the Board and may be increased by
action of the Board upon such review, but Executive's salary shall not be
decreased except as provided in Sections 4 and 5.
(b) Incentive Compensation. The Board may, in its discretion, award an
annual bonus in addition to base compensation. Such bonus, if any, shall be paid
in such amount and based upon such criteria as are from time to time adopted by
the Board.
(c) Additional Benefits. Executive also shall be entitled to receive
all benefits for which he is eligible under the terms of any stock incentive
plan, pension plan, SERP, life, medical, dental, vision and disability insurance
and reimbursement programs, and any other plans or arrangements, which the
Company may provide for executive officers from time to time ("Additional
Benefits"). Additional Benefits shall in all respects be paid in accordance with
the then-existing plans, or policies, programs, or arrangements establishing or
governing such Additional Benefits. The Company reserves the right to add,
terminate, or amend any existing plans, policies, programs, or arrangements
during the term of this Agreement and at all other times.
(d) Vacation. Vacation, at full pay, of four (4) weeks per calendar
year. Vacation not used during any calendar year may not be carried over to the
following year.
All compensation paid to Executive shall be subject to withholding for
taxes and subject to payroll and other taxes as required by applicable law and
in conformity with the Company's policies relating thereto as in effect from
time to time.
4. TERMINATION OF EMPLOYMENT BY THE COMPANY
The compensation provided for in Section 3 of this Agreement and
Executive's employment by the Company may be terminated by the Company prior to
expiration of the term set forth in Section 1(b) as provided for below:
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<PAGE> 3
(a) Disability. If Executive becomes either partially or totally unable
to perform his duties after the making of reasonable accommodations because of
any physical or mental disability during the term of his employment hereunder
for three (3) consecutive calendar months or for shorter periods aggregating 90
or more business days in any 12-month period, Executive's employment may be
terminated by the Company at any time during the continuance of such disability.
Upon termination as described in this Section 4(a), Executive shall be entitled
to receive the Base Salary provided for in Section 3(a) of this Agreement for a
period of 90 days after such termination. The Company shall offset against such
Base Salary payments any payments received by Executive as a result of such
illness or injury pursuant to any federal or state program or any salary
continuation or similar program or disability insurance established by the
Company.
Upon termination as described in this Section 4(a), Executive shall
resign from his offices as an officer of the Company and its subsidiaries and
the Company shall continue Executive's coverage under any and all life, medical,
dental, vision and disability insurance plans for a period of 120 days after
such termination at the expense of the Company. Other Additional Benefits shall
be made available to Executive as required by applicable laws, including the
health coverage continuation provisions of the Consolidated Omnibus Budget
Reconciliation Act, 29 U.S.C. ss.ss. 1161-1168 ("COBRA"), and by the terms of
the Additional Benefit plans, policies, programs, and arrangements in effect at
the time of termination. Executive's period of coverage under COBRA (29 U.S.C.
ss. 1162(2)), shall begin on the date of the termination of his employment under
this Section 4(a). Executive agrees to execute such documents as may be
requested by the Company in order to comply with its obligations under this
Section 4(a) and under COBRA and other applicable laws. The Company shall
provide Executive with the health coverage continuation benefits specified by
COBRA whether or not the Company is obligated under COBRA to do so.
(b) Death. If Executive dies during the term of this Agreement,
Executive's Beneficiary or Beneficiaries, as defined in Section 7 of this
Agreement, shall be entitled to receive the Base Salary provided for in Section
3(a) of this Agreement for a period of 90 days after the date such death occurs.
Additional Benefits shall be made available to the Beneficiaries of Executive
under the life, medical, dental, vision and other Additional Benefit plans,
policies, programs, and arrangements, as required by applicable laws, including
COBRA, and by the terms of the Additional Benefit plans, policies, programs, and
arrangements in effect at the time of Executive's death. The Company shall
provide Executive's Beneficiaries with the health coverage continuation benefits
specified by COBRA whether or not the Company is obligated under COBRA to do so.
(c) For Cause. The Company may upon 14 days' notice to Executive
terminate this Agreement and all of its obligations hereunder to Executive
accruing after the date of such termination if the termination is for "cause." A
termination for cause is a termination effected by the Board on one or more of
the following grounds: (i) that Executive has been declared of unsound mind by a
court, (ii) that Executive has been convicted of a felony, (iii) that Executive
has been convicted of a misdemeanor involving moral turpitude, or (iv) that
Executive has repeatedly committed a material breach of this Agreement (provided
that Executive has been notified of the prior breach).
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<PAGE> 4
Except as expressly required by applicable laws, including COBRA if
applicable, and by the terms of the Additional Benefits plans, policies,
programs, and arrangements then in effect, upon such termination, Executive's
rights under Section 3 of this Agreement shall terminate on the date of the
termination of his employment under this Section 4(c). Executive's period of
coverage under COBRA (29 U.S.C. ss. 1162(2)), if any, shall begin on the date of
the termination of his employment under this Section 4(c). Upon termination as
described in this Section 4(c), Executive shall resign from his offices as an
officer of the Company and its subsidiaries. Executive agrees to execute all
documents as may be requested by the Company in order to comply with its
obligations under this Section 4(c) and under COBRA, if applicable, and any
other applicable laws.
(d) Other Termination. The Company may by notice to Executive terminate
Executive's employment for reasons other than those specified in Sections 4(a)
through (c) above. In the event notice of termination of Executive's employment
is given by the Company for reasons other than those specified in Sections 4(a)
through (c), and provided that the provisions of Section 5 do not apply, from
the date of such notice of termination Executive shall be entitled to receive
only the compensation specifically provided below:
(i) The Executive's annual Base Salary in effect at the time of
termination until the expiration of the employment period as provided
in Section 1(b) of this Agreement.
(ii) Additional Benefits under any life, medical, dental, vision
and disability insurance and reimbursement programs in which Executive
was participating at the time of notice of termination of Executive's
employment, which benefits shall be continued until the earlier to
occur of the expiration of Executive's employment period as provided in
Section 1(b) or Executive's acceptance of comparable employment.
Additional Benefits under the terms of any stock incentive plan,
pension plan and SERP will not be continued except as expressly
required by applicable laws or by the terms of the Additional Benefits
plans, policies, programs, and arrangements then in effect.
(iii) Immediate acceleration of vesting of stock options and
acceleration of the lapse of restrictions of any restricted stock
awards held by Executive that would have vested or lapsed during the
period between notice of termination of Executive's employment and the
expiration of Executive's employment period as provided in Section
1(b).
Upon termination of Executive's employment as described in this Section
4(d), Executive shall resign from his offices as an officer of the Company and
its subsidiaries and the Company shall, at the option of Executive, (i) continue
installment payments to Executive on the periodic basis described in Section
3(a) at the rate and for the duration of the employment period specified in
Section 4(d)(i); or (ii) make a lump sum payment to Executive equal to
seventy-five percent (75%) of the amounts due Executive under Section 4(d)(i)
for the duration of the employment period specified therein. A lump sum payment
in accordance with this paragraph shall be made within ten (10) working days of
Executive's election.
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<PAGE> 5
Upon termination of Executive's employment as described in this Section
4(d), Additional Benefits shall be made available to Executive as required by
applicable laws, including COBRA. Executive's period of coverage under COBRA (29
U.S.C. ss. 1162(2)), for purposes of this Section 4(d) shall begin on the date
of the termination of the benefits to which Executive is entitled pursuant to
Section 4(d)(ii). Executive agrees to execute such documents as may be requested
by the Company in order to comply with its obligations under this Section 4(d)
and under COBRA and any other applicable laws. The Company shall provide
Executive with the health coverage continuation benefits specified by COBRA
whether or not the Company is obligated under COBRA to do so.
(e) Constructive Termination. The occurrence of any of the following
events shall be deemed a termination of Executive's employment under Section
4(d) above:
(i) Failure to elect or reelect or otherwise to maintain Executive
in the office or the position, or a substantially equivalent office or
position, with the Company which Executive holds as of the date of this
agreement (or which may be increased from time to time).
(ii) A significant adverse change in the nature or scope of the
authorities, powers, functions, responsibilities or duties attached to
Executive's position with the Company, a reduction in Executive's Base
Salary, as increased from time to time, or the termination or denial of
Executive's rights to a substantial amount of Additional Benefits as
herein provided, any of which is not remedied within 10 calendar days
after receipt by the Company of written notice from Executive of such
change, reduction or termination, as the case may be.
(iii) The Company shall relocate its principal executive offices,
or require Executive to have his principal location of work changed, to
any location that is in excess of 25 miles from its present location.
(iv) Without limiting the generality or effect of the foregoing,
any material breach of this Agreement by the Company or any successor
thereto.
The determination by Executive in good faith that any of the events described in
clauses (i) through (iv) above has occurred shall be conclusive.
5. TERMINATION RELATING TO CHANGE OF CONTROL
(a) Any of the following events shall constitute a "Change of Control"
hereunder:
(i) any "person" (as such term is used in Section 13(d) and 14(d)
of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")), is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly of securities of the
Company representing 20% or more of the combined voting power of the
Company's then outstanding securities; or
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<PAGE> 6
(ii) during any period of two consecutive years (not including any
period prior to the execution of this Agreement) individuals who at the
beginning of such period constitute the Board of Directors of the
Company and any new director whose election by the Board of Directors
or nomination for election by the Company's shareholders was approved
by a vote of at least two-thirds (2/3) of the directors then still in
office who either were directors at the beginning of the period or
whose election or nomination for election was previously so approved,
cease for any reason to constitute a majority thereof; or
(iii) the consummation of a merger, consolidation, statutory share
exchange or similar form of corporate transaction involving the Company
or any of its subsidiaries that requires the approval of the Company's
stockholders, whether for such transaction or the issuance of
securities in the transaction (a "Reorganization"), or sale or other
disposition of all or substantially all of the Company's assets to an
entity that is not wholly owned by the Company (a "Sale"), unless
immediately following such Reorganization or Sale, more than 80% of the
total voting power (in respect of the election of directors, or similar
officials in the case of an entity other than a corporation) of either
(x) the surviving corporation or entity resulting from such
Reorganization or the entity which has acquired all or substantially
all of the assets of the Company (in either case, the "Surviving
Entity"), or (y) if applicable, the ultimate parent entity that
directly or indirectly has beneficial ownership of 50% or more of the
total voting power (in respect of the election of directors, or similar
officials in the case of an entity other than a corporation) of the
Surviving Entity (the "Parent Entity"), is represented by Company
voting securities that were outstanding immediately prior to such
Reorganization or Sale (or, if applicable, is represented by shares
into which such Company voting securities were converted pursuant to
such Reorganization or Sale), and such voting power among the holders
thereof is in substantially the same proportion as the voting power of
such Company voting securities among the holders thereof immediately
prior to the Reorganization or Sale; or
(iv) the stockholders of the Company approve a plan of complete
liquidation or dissolution of the Company.
(b) Effective upon or within 180 days of a Change of Control, Executive
may terminate employment with the Company by delivering written notice of such
termination to the Company, accompanied by Executive's resignation from his
offices, if any, as an officer of the Company and its subsidiaries. Upon
Executive's termination of employment or tendering of resignation as specified
in the preceding sentence, or if the Company (or any successor) terminates
(whether by Constructive Termination, within the meaning of Section 4(e), or
otherwise) Executive's employment for any reason upon or within 180 days of a
Change of Control, Executive shall be entitled to receive:
(i) A lump sum payment (the "Severance Payment") equal to three
(3) times Executive's Compensation Level. "Compensation Level" shall
mean the sum of (A) the
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<PAGE> 7
greater of (1) Executive's annual base salary in effect on the date of
termination or (2) Executive's annual base salary in effect immediately
prior to the Change of Control, plus (B) an amount (the "Bonus Amount")
equal to the greater of (1) Executive's maximum bonus opportunity under
the Company's annual bonus plan in respect of the year of Executive's
termination of employment determined as of Executive's date of
termination or (2) 78.75% of the amount determined under clause (A) of
this sentence. Such lump sum payment shall be paid by the Company on
the date (the "Payment Date") that is no later than two (2) business
days immediately prior to the Anticipated COC Date or, in the case of a
Change of Control in respect of which an Anticipated COC Date is not
applicable, no later than ten (10) working days following any
termination of employment covered by this Section 5. For purposes of
this Agreement, the "Anticipated COC Date" is the date reasonably
determined in good faith by the Chief Executive Officer of the Company
to be the date on which an anticipated Change of Control is expected to
occur.
(ii) Additional Benefits (for Executive, his spouse and
dependents) under any and all life, medical, dental, vision and
disability insurance and reimbursement programs in which Executive was
participating at the earlier of (A) the date immediately prior to the
Change of Control and (B) the time of notice of termination of
Executive's employment, which benefits shall be continued until the
earlier to occur of the expiration of three (3) years following
Executive's date of termination of employment or Executive's acceptance
of comparable employment; provided, however, that upon Executive's
acceptance of comparable employment, Additional Benefits under plans
and programs of the Company (or any successor) shall be secondary to
the benefits available, if any, from the benefit plans maintained by
Executive's new employer. Additional Benefits under the terms of any
stock incentive plan, pension plan and SERP will not be continued
except as expressly required by applicable laws or by the terms of the
Additional Benefits plans, policies, programs, and arrangements then in
effect.
(iii) As of the Payment Date, immediate acceleration of vesting of
all stock options and dividend equivalent rights and immediate lapse of
restrictions on all restricted stock awards held by Executive.
(iv) A lump sum payment equal to the product of (A) the Bonus
Amount and (B) a fraction, the numerator of which is the number of
weeks elapsed (with a full week credited for any partial week elapsed)
during the year of termination through the date of termination, and the
denominator of which is 52. Such lump sum payment shall be paid by the
Company on the Payment Date.
(v) A lump sum payment equal to three years' additional
contributions to the Company's Money Purchase Pension Plan (determined
as if Executive had earned annual compensation during such three year
period equal to the Compensation Level). Such lump sum payment shall be
paid by the Company on the Payment Date.
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<PAGE> 8
(c) On the Payment Date, the Company shall also pay to Executive, with
respect to each outstanding stock option held by Executive that provides for the
grant of dividend equivalent rights, a lump sum payment equal to the product of
(i) and (ii), where (i) is the sum of (A) an amount equal to the accumulated
dividend equivalents in respect of such stock options credited as of the Change
of Control, plus (B) an amount equal to the sum of the projected additional
dividend equivalents that would have been credited in respect of such stock
options during the period commencing on the Change of Control through the fifth
anniversary of the date of grant of such stock options, assuming the Company had
continued to declare dividends with the same frequency as dividends were
declared immediately prior to the Change of Control, and using a dividend
equivalent crediting rate equal to the rate used for crediting dividend
equivalents in respect of the most recent dividend actually paid by the Company
immediately prior to first public announcement of the anticipated Change of
Control (i.e., based on the amount of such actual dividend paid by the Company
and the closing price per share of the Company's common stock on the declaration
date of such dividend), and (ii) is the greater of (A) the closing price per
share of the Company's common stock on the most recent trading day immediately
prior to the Payment Date and (B) if applicable, the final value per share paid
to holders of the Company's common stock in the transaction giving rise to the
Change of Control (provided, that if holders of the Company's common stock
receive publicly traded shares or securities in such transaction, the value per
share shall be determined under this clause (ii)(B) with reference to the
closing price of such shares or securities on the most recent trading day
immediately prior to the Payment Date).
(d) In connection with any termination of employment pursuant to this
Section 5, the Company shall provide Executive with (i) outplacement services
from an outplacement firm of Executive's choice up to a maximum cost of $10,000
and (ii) continuation for a period of three (3) years following Executive's date
of termination of the club memberships and executive medical/financial
counseling services provided by the Company to Executive at the level in effect
on Executive's date of termination (or, if greater, in effect immediately prior
to the Change of Control); provided that the Executive may elect to receive the
cash value of the benefits provided under this Section 5(d), in which case such
amount shall be paid by the Company on the Payment Date.
(e) If any dispute arises between the Company and Executive regarding
Executive's rights under this Section 5, Executive shall be entitled to recover,
on an as-incurred basis, his attorneys' fees and costs incurred in connection
with such dispute.
(f) If the expected Surviving Entity of any Change of Control timely
provides the Consulting Notice to Executive, Executive agrees that, following
the termination of Executive's employment pursuant to this Section 5, Executive
shall serve as a consultant to the Surviving Entity until the first anniversary
of Executive's date of termination (the "Consulting Period"). For purposes of
this Agreement, the "Consulting Notice" is a written notice delivered by the
expected Surviving Entity of such Change of Control to Executive no later than
30 days prior to the Anticipated COC Date (or, if there is no Anticipated COC
Date, no later than 10 days following Executive's termination of employment)
pursuant to which such expected surviving entity irrevocably elects and
covenants to retain Executive as a consultant to the Company, on the terms set
forth below in this Section 5(f), for the entirety of the one-year Consulting
Period, and agrees
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<PAGE> 9
to pay Executive the fully-earned consulting fee required under this Section
5(f), which fee shall be fully earned by Executive upon delivery of the
Consulting Notice, without regard to whether the Company or expected Surviving
Entity uses some, all or none of the consulting services agreed to be provided
by Executive. During the Consulting Period, Executive shall be reasonably
available for up to 200 hours of consultation with the Company by telephone or
in person at the Company's principal executive office, and Executive shall
provide consulting services substantially similar to the services performed by
Executive immediately prior to the earlier of the Payment Date or Executive's
date of termination of employment. Performance of consulting services shall be
scheduled on reasonable notice and in such a manner so as not to interfere
significantly with other business activities of Executive. During the Consulting
Period, the Company shall pay, in accordance with its normal payroll practices
(but no less frequently than monthly), Executive the fully-earned consulting fee
in an amount equal to the greater of (A) Executive's annual base salary in
effect on the date of termination or (B) Executive's annual base salary in
effect immediately prior to the Change of Control, and shall reimburse Executive
for business and travel expenses associated with such consulting services
reasonably and necessarily incurred by Executive during the Consulting Period.
(g) Anything in this Agreement to the contrary notwithstanding, in the
event it shall be determined by the Accounting Firm (as defined below) that any
payment, award, benefit or distribution (or any acceleration of any payment,
award, benefit or distribution) by the Company (or any of its affiliated
entities) or any entity which effectuates a Change of Control (or any of its
affiliated entities) to or for the benefit of Executive (whether pursuant to the
terms of this Agreement or otherwise, but determined without regard to any
additional payments required under this Section 5(g)) (the "Payments") would be
subject to the excise tax imposed by Section 4999 of the Internal Revenue Code
of 1986, as amended (the "Code"), or any interest or penalties are incurred by
Executive with respect to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Company shall, on the Payment Date, pay to Executive an
additional payment (a "Gross-Up Payment") in an amount such that after payment
by Executive of all taxes and net of any deductions which are disallowed to
Executive by reason of Executive's receipt of the Gross-Up Payment and net of
any benefits that result from the deductibility by Executive of such taxes
(including, in each case, any interest or penalties imposed with respect to such
taxes), including, without limitation, any federal, state, and local income
taxes (and any interest and penalties imposed with respect thereto) and Excise
Tax imposed upon the Gross-Up Payment, Executive retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Payments.
Subject to the foregoing provisions of this Section 5(g), all
determinations required to be made under this Section 5(g), including whether a
Gross-Up Payment is required, the amount of such Gross-Up Payment, and the
assumptions to be utilized in arriving at such determinations, shall be made by
the public accounting firm that is retained by the Company as of the date
immediately prior to the Change of Control (the "Accounting Firm") which shall
provide detailed supporting calculations both to the Company and Executive
within fifteen (15) business days of the receipt of notice from the Company or
the Executive that there has been or will be a Payment, or such earlier time as
is requested by the Company (collectively, the "Determination"). In the event
that the Accounting Firm is serving as accountant or auditor for the individual,
entity
9
<PAGE> 10
or group effecting the Change of Control, Executive may appoint another
nationally recognized public accounting firm (or, alternatively, may specify the
office and personnel of the public accounting firm retained by the Company as of
the date immediately prior to the Change of Control) to make the determinations
required hereunder (which accounting firm shall then be referred to as the
Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall
be borne solely by the Company and the Company shall enter into any agreement
requested by the Accounting Firm in connection with the performance of the
services hereunder. If the Accounting Firm determines that no Excise Tax is
payable by Executive, it shall furnish Executive with a written opinion to such
effect, and to the effect that failure to report the Excise Tax, if any, on
Executive's applicable federal income tax return will not result in the
imposition of a negligence or similar penalty. The Determination by the
Accounting Firm shall be binding upon the Company and Executive. As a result of
the uncertainty in the application of Section 4999 of the Code at the time of
the Determination, it is possible that Gross-Up Payments which will not have
been made by the Company should have been made ("Underpayment") or Gross-Up
Payments are made by the Company which should not have been made
("Overpayment"), consistent with the calculations required to be made hereunder.
In the event that the Executive thereafter is required to make payment of any
Excise Tax or additional Excise Tax, the Accounting Firm shall determine the
amount of the Underpayment that has occurred and any such Underpayment (together
with interest at the rate provided in Section 1274(b)(2)(B) of the Code) shall
be promptly paid by the Company to or for the benefit of Executive. In the event
the amount of the Gross-Up Payment exceeds the amount necessary to reimburse the
Executive for his Excise Tax, the Accounting Firm shall determine the amount of
the Overpayment that has been made and any such Overpayment (together with
interest at the rate provided in Section 1274(b)(2) of the Code) shall be
promptly paid by Executive (to the extent he has received a refund if the
applicable Excise Tax has been paid to the Internal Revenue Service) to or for
the benefit of the Company. Executive shall cooperate, to the extent his
expenses are reimbursed by the Company, with any reasonable requests by the
Company in connection with any contests or disputes with the Internal Revenue
Service in connection with the Excise Tax.
(h) Executive agrees that in the event that payments are made by the
Company to Executive on a Payment Date (or thereafter) in advance of an expected
Change of Control, and such Change of Control does not occur within 10 business
days following the Anticipated COC Date, Executive shall be obligated to, and
shall, repay to the Company, within 2 business days following written notice by
the Company to Executive that such Change of Control has not occurred during
such period, all such amounts paid pursuant to this Section 5; provided that the
return of such payments shall not prejudice Executive's rights under this
Section 5 with respect to any Change in Control.
(i) Any payments by the Company under this Section 5 (after taking into
account any amounts repaid to the Company pursuant to Section 5(h)) shall be in
lieu of any payments under Section 4(d).
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<PAGE> 11
6. TERMINATION OF EMPLOYMENT BY EXECUTIVE.
(a) In addition to his rights under Section 5 hereof, Executive may
terminate employment with the Company without cause as of a specified date not
less than 30 days and not more than 90 days after delivering written notice of
such termination to the Company. Upon the effective date of such termination,
Executive's right to receive the compensation provided for in Section 3 of this
Agreement shall terminate. The Company may at any time in its sole discretion
waive all or part of the notice period and specify any day in such period that
has not yet occurred as the date of termination for purposes of this Section
6(a); in the event of such occurrence, the Company shall pay Executive the
amount of the compensation provided for in Section 3 of this Agreement for the
remainder of the notice period given by Executive.
(b) Upon termination as described in Section 6(a), Additional Benefits
will be made available to Executive as required by applicable laws, including
COBRA, if applicable, and by the terms of the Additional Benefit plans,
policies, programs, and arrangements in effect at the time of termination.
Executive's period of coverage under COBRA (29 U.S.C. ss. 1162(2)), if any,
shall begin on the date of the termination of his employment under Section 6(a).
Executive agrees to execute such documents as may be requested by the Company in
order to comply with its obligations under this Section 6(b) and under COBRA, if
applicable, and any other applicable laws.
7. DESIGNATION OF BENEFICIARY
Executive may designate one or more persons or entities (including a
trust or trusts or his estate) to receive any compensation payable to him under
Section 4(b) ("Beneficiaries"). If Executive shall designate more than one
Beneficiary, he shall set forth the proportion in which each is to receive such
compensation; any such designation which fails to set forth such proportion
shall be an invalid designation as to all those so designated. Executive also
may designate one or more successor Beneficiaries who shall succeed to the
rights of the Beneficiaries originally designated, in case the latter should die
prior to the receipt of full payment. Executive may from time to time change any
designation so made, and that last designation shall be controlling. If
Executive designates a person other than, or in addition to, his spouse, his
spouse shall specifically approve his designation and authorize the Company to
pay his compensation as designated. In the absence of a valid designation by
Executive meeting the requirements of this Section 7, or in the event of the
death of a Beneficiary for whom no successor Beneficiary has been validly
designated, Executive's compensation, or the portion of such compensation then
payable to such deceased Beneficiary, shall be paid to the administrator or
executor of Executive's estate for the benefit of Executive's estate, who shall
in that event be deemed a Beneficiary under this Section 7.
Executive's designation and his spouse's approval and authorization, if
necessary, must be in the form of a signed writing witnessed by two adult
persons (other than any designated Beneficiary) and must have been delivered to
the Company prior to Executive's death.
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8. REIMBURSEMENT OF EXPENDITURES
During the term of this Agreement, the Company shall reimburse
Executive for business expenses reasonably and necessarily incurred by him on
its behalf in accordance with its business-expense reimbursement policies as in
effect from time to time and subject to Executive's furnishing such
substantiation of such expenses as the Company may require.
9. CONFIDENTIAL INFORMATION
During the term of this Agreement and the period specified in Section
15 of this Agreement, Executive shall not disclose to any persons (other than
another employee of the Company) any confidential information relating to the
business of the Company obtained by him while in the employ of the Company,
without the consent of the Board, except as necessary or appropriate in the
discharge of his obligations to the Company and its shareholders.
10. NONASSIGNMENT OF EXECUTIVE'S OBLIGATIONS AND DUTIES
The obligations and duties of Executive hereunder shall be personal and
not assignable.
11. AGREEMENT BINDING UPON SUCCESSORS AND ASSIGNS
This Agreement shall inure to the benefit of and shall be binding upon
the Company and its respective successors and assigns, including any purchaser
of all or substantially all of its assets, and shall be binding upon Executive's
assigns, executors, administrators, Beneficiaries, or their legal
representatives. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the business
and/or assets of the Company, by operation of law, or otherwise.
12. NOTICES
Any notices provided for in this Agreement shall be sent to the Company
at American Health Properties, Inc., 6400 S. Fiddlers Green Circle, Suite 1800,
Englewood, Colorado 80111, Attention: Chairman, Compensation Committee, or at
such other address as the Company may from time to time in writing designate,
and to Executive at 6400 S. Fiddlers Green Circle, Suite 1800, Englewood,
Colorado 80111, or at such other address as he may from time to time in writing
designate. All notices will be deemed to have been delivered (i) as of the first
to occur of actual receipt or two (2) business days after being sent by
certified mail, return receipt requested, postage paid and properly addressed to
the designated address of the party to whom addressed or (ii) if notice is given
in any other manner, when actually received.
13. ENTIRE AGREEMENT
This instrument contains the entire agreement between the Company and
Executive relating to the subject of Executive's employment by the Company,
except to the extent that the terms and provisions of Additional Benefits,
expense reimbursement policies and Company policies governing executives and
employees generally are (as referred to herein) set forth in other
12
<PAGE> 13
documents. This Agreement supersedes all prior and contemporaneous oral and
written agreements, understandings, and representations, among the parties, with
respect to the subject matter hereof, including without limitation that certain
amended and restated executive employment agreement between the Company and
Executive, dated as of March 15, 1999.
14. TERMINATION OF AGREEMENT
This Agreement shall terminate at the end of the period of Executive's
employment, as described in Section 1 of this Agreement (or at the end of any
different period specifically set forth herein for the termination of
Executive's employment), and may be continued thereafter only upon the execution
of a writing to that effect signed by the Company and Executive. If Executive's
employment continues after the termination of this Agreement for any period
during which no such writing is in effect, Executive shall be deemed to be
employed at the will of the Company and his employment may be terminated at any
time with or without notice and with or without cause and without obligation of
any party to any other party.
15. TRADE SECRETS; SOLICITATION; NONDISPARAGEMENT
If Executive's employment is terminated pursuant to section 5, for a
period of 3 years thereafter Executive agrees not to, directly or indirectly,
(1) disclose or utilize any trade secrets or confidential information of the
Company; (2) hire, cause or encourage any other person to hire, any employee of
the Company or form any business enterprise with any such employee or in any way
persuade or encourage any such employee to terminate or alter his or her
employment with the Company; (3) communicate with any customer or vendor of the
Company or any employee thereof regarding the business of the Company or such
customer's, vendor's or employee's business relationship with the Company; or
(4) make any public statement or instigate, assist or participate in the making
of any public statement, which would libel, slander or disparage (whether or not
such disparagement legally constitutes libel or slander) the Company, its
subsidiaries and publicly known affiliates, and their past or present officers,
directors and management employees.
16. WAIVERS
The waiver or breach of any term or condition of this Agreement will
not be deemed to constitute the waiver of any other breach of the same or any
other term or condition.
17. GOVERNING LAW
This Agreement will be governed by and construed in accordance with the
laws of Colorado.
18. SEVERABILITY
If any provision or clause of any provision of this Agreement is held
invalid or unenforceable, the remainder of this Agreement shall nevertheless
remain in full force and effect.
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19. COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original and all of which together shall be deemed to
be one and the same instrument.
20. NO CONFLICT WITH PRIOR AGREEMENTS AND RIGHTS
Executive hereby represents and warrants to the Company that neither
the execution of this Agreement nor performance by Executive of his obligations
hereunder conflicts with any contractual commitment on his part to any third
party or violates or interferes with any right of any third party.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
"Company"
AMERICAN HEALTH PROPERTIES, INC.
By /s/ Joseph P. Sullivan
----------------------------------------
Joseph P. Sullivan
Chief Executive Officer
By /s/ Steven A. Roseman
----------------------------------------
Steven A. Roseman
Secretary
"Executive"
/s/ C. GREGORY SCHONERT
- ------------------------------------
C. GREGORY SCHONERT
<PAGE> 16
FIRST AMENDMENT TO
AMERICAN HEALTH PROPERTIES, INC.
AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT
WITH
C. GREGORY SCHONERT
THIS FIRST AMENDMENT to the Amended and Restated Executive Employment Agreement
(this "Amendment") dated as of July 16, 1999 (the "Restated Agreement") is
entered on this 4th day of August 1999 to be effective as of July 16, 1999
between AMERICAN HEALTH PROPERTIES, INC., a Delaware corporation (the
"Company"), and C. GREGORY SCHONERT, an individual ("Executive").
1. AMENDMENT TO RESTATED AGREEMENT
The Company and Executive agree that Section 5(c) of the Restated
Agreement is hereby amended to clarify that the payment to be made by the
Company to Executive pursuant to Section 5(c) shall be in respect of the
cancellation of Executive's dividend equivalent rights with respect to each
outstanding stock option held by Executive, and that, upon such payment by the
Company to Executive, any and all of Executive's dividend equivalent rights with
respect to outstanding stock options held by Executive shall terminate;
provided, that if Executive becomes obligated under Section 5(h) to repay such
payment to the Company, Executive's dividend equivalent rights shall be restored
as of the date of the purported cancellation of such rights.
2. EFFECT ON RESTATED AGREEMENT
Except as provided in paragraph 2, the Restated Agreement shall remain
in full force and effect in accordance with its terms and conditions.
3. COUNTERPARTS
This Amendment may be executed in several counterparts, each of which
shall be deemed to be an original but all of which together will constitute one
and the same instrument.
IN WITNESS WHEREOF, the parties have executed this First Amendment to
be effective as of the date written above.
"Company" "Executive"
AMERICAN HEALTH PROPERTIES, INC.
a Delaware corporation
By: /s/ Michael J. McGee /s/ C. GREGORY SCHONERT
--------------------------------------- -----------------------------------
Michael J. McGee, Senior Vice President C. GREGORY SCHONERT
By: /s/ Steven A. Roseman
---------------------------------------
Steven A. Roseman, Secretary
<PAGE> 1
EXHIBIT 10.6
AMERICAN HEALTH PROPERTIES, INC.
AMENDED AND RESTATED
EXECUTIVE EMPLOYMENT AGREEMENT
WITH
STEVEN A. ROSEMAN
This Amended and Restated Executive Employment Agreement (the
"Agreement") is entered into as of July 16, 1999, between AMERICAN HEALTH
PROPERTIES, INC., a Delaware corporation (the "Company") and Steven A. Roseman,
an individual ("Executive").
1. EMPLOYMENT AND TERM
The Company agrees to employ Executive for the period commencing on the
day and the year first written above and ending on the earlier of: (a) the date
of termination of Executive's employment in accordance with Section 4(a)-(c)
below or (b) the date that is three (3) years from the date the Company provides
Executive with written notice of termination of Executive's employment. The
Board of Directors of the Company (the "Board") shall review the terms of
Executive's employment on an annual basis and shall make such modifications to
the terms as the Board in its discretion shall deem appropriate and as Executive
shall consent.
2. DUTIES
(a) Executive shall serve in the capacity of Senior Vice President,
Secretary and General Counsel. Executive shall perform such services and duties
as are usually associated with such positions as well as those decided upon by
the President and the Board.
(b) Executive shall devote his full business time and energy to the
business and affairs of the Company and shall use his best efforts and abilities
faithfully and diligently to promote the business interests of the Company and
its subsidiaries as directed by and to the reasonable satisfaction of the
President and the Board.
(c) Executive's services shall be rendered in accordance with such
policies as the Company may establish for the conduct of its officers and
employees.
(d) Provided such services or investments do not violate any applicable
law, regulation or order or interfere in any way with the faithful and diligent
performance by Executive of services to the Company otherwise required or
contemplated by this Agreement or requested by the Board, Executive may:
(i) Serve as a director, trustee, or in any other similar capacity
of any business enterprise or any civic, educational, charitable or
trade organization if the Board has been
<PAGE> 2
informed of such service and the Board has not expressly requested
Executive to refuse, or to discontinue, such service, and
(ii) Make and manage personal business investments of Executive's
choice that are consistent with the conflict-of-interest policies of
the Company.
3. COMPENSATION
Commencing as of February 1, 1999, the Company shall compensate
Executive as follows:
(a) Base Salary. Executive shall receive a Base Salary at the rate of
Two Hundred One Thousand Dollars ($201,000) per annum which shall be payable in
semi-monthly installments in conformity with the Company's policy relating to
its employees generally as in effect from time to time. Executive's Base Salary
shall be reviewed periodically by the Board and may be increased by action of
the Board upon such review, but Executive's salary shall not be decreased except
as provided in Sections 4 and 5.
(b) Incentive Compensation. The Board may, in its discretion, award an
annual bonus in addition to base compensation. Such bonus, if any, shall be paid
in such amount and based upon such criteria as are from time to time adopted by
the Board.
(c) Additional Benefits. Executive also shall be entitled to receive
all benefits for which he is eligible under the terms of any stock incentive
plan, pension plan, SERP, life, medical, dental, vision and disability insurance
and reimbursement programs, and any other plans or arrangements, which the
Company may provide for executive officers from time to time ("Additional
Benefits"). Additional Benefits shall in all respects be paid in accordance with
the then-existing plans, or policies, programs, or arrangements establishing or
governing such Additional Benefits. The Company reserves the right to add,
terminate, or amend any existing plans, policies, programs, or arrangements
during the term of this Agreement and at all other times.
(d) Vacation. Vacation, at full pay, of four (4) weeks per calendar
year. Vacation not used during any calendar year may not be carried over to the
following year.
All compensation paid to Executive shall be subject to withholding for
taxes and subject to payroll and other taxes as required by applicable law and
in conformity with the Company's policies relating thereto as in effect from
time to time.
4. TERMINATION OF EMPLOYMENT BY THE COMPANY
The compensation provided for in Section 3 of this Agreement and
Executive's employment by the Company may be terminated by the Company prior to
expiration of the term set forth in Section 1(b) as provided for below:
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<PAGE> 3
(a) Disability. If Executive becomes either partially or totally unable
to perform his duties after the making of reasonable accommodations because of
any physical or mental disability during the term of his employment hereunder
for three (3) consecutive calendar months or for shorter periods aggregating 90
or more business days in any 12-month period, Executive's employment may be
terminated by the Company at any time during the continuance of such disability.
Upon termination as described in this Section 4(a), Executive shall be entitled
to receive the Base Salary provided for in Section 3(a) of this Agreement for a
period of 90 days after such termination. The Company shall offset against such
Base Salary payments any payments received by Executive as a result of such
illness or injury pursuant to any federal or state program or any salary
continuation or similar program or disability insurance established by the
Company.
Upon termination as described in this Section 4(a), Executive shall
resign from his offices as an officer of the Company and its subsidiaries and
the Company shall continue Executive's coverage under any and all life, medical,
dental, vision and disability insurance plans for a period of 120 days after
such termination at the expense of the Company. Other Additional Benefits shall
be made available to Executive as required by applicable laws, including the
health coverage continuation provisions of the Consolidated Omnibus Budget
Reconciliation Act, 29 U.S.C. ss.ss. 1161-1168 ("COBRA"), and by the terms of
the Additional Benefit plans, policies, programs, and arrangements in effect at
the time of termination. Executive's period of coverage under COBRA (29 U.S.C.
ss. 1162(2)), shall begin on the date of the termination of his employment under
this Section 4(a). Executive agrees to execute such documents as may be
requested by the Company in order to comply with its obligations under this
Section 4(a) and under COBRA and other applicable laws. The Company shall
provide Executive with the health coverage continuation benefits specified by
COBRA whether or not the Company is obligated under COBRA to do so.
(b) Death. If Executive dies during the term of this Agreement,
Executive's Beneficiary or Beneficiaries, as defined in Section 7 of this
Agreement, shall be entitled to receive the Base Salary provided for in Section
3(a) of this Agreement for a period of 90 days after the date such death occurs.
Additional Benefits shall be made available to the Beneficiaries of Executive
under the life, medical, dental, vision and other Additional Benefit plans,
policies, programs, and arrangements, as required by applicable laws, including
COBRA, and by the terms of the Additional Benefit plans, policies, programs, and
arrangements in effect at the time of Executive's death. The Company shall
provide Executive's Beneficiaries with the health coverage continuation benefits
specified by COBRA whether or not the Company is obligated under COBRA to do so.
(c) For Cause. The Company may upon 14 days' notice to Executive
terminate this Agreement and all of its obligations hereunder to Executive
accruing after the date of such termination if the termination is for "cause." A
termination for cause is a termination effected by the Board on one or more of
the following grounds: (i) that Executive has been declared of unsound mind by a
court, (ii) that Executive has been convicted of a felony, (iii) that Executive
has been convicted of a misdemeanor involving moral turpitude, or (iv) that
Executive has repeatedly committed a material breach of this Agreement (provided
that Executive has been notified of the prior breach).
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Except as expressly required by applicable laws, including COBRA if
applicable, and by the terms of the Additional Benefits plans, policies,
programs, and arrangements then in effect, upon such termination, Executive's
rights under Section 3 of this Agreement shall terminate on the date of the
termination of his employment under this Section 4(c). Executive's period of
coverage under COBRA (29 U.S.C. ss. 1162(2)), if any, shall begin on the date of
the termination of his employment under this Section 4(c). Upon termination as
described in this Section 4(c), Executive shall resign from his offices as an
officer of the Company and its subsidiaries. Executive agrees to execute all
documents as may be requested by the Company in order to comply with its
obligations under this Section 4(c) and under COBRA, if applicable, and any
other applicable laws.
(d) Other Termination. The Company may by notice to Executive terminate
Executive's employment for reasons other than those specified in Sections 4(a)
through (c) above. In the event notice of termination of Executive's employment
is given by the Company for reasons other than those specified in Sections 4(a)
through (c), and provided that the provisions of Section 5 do not apply, from
the date of such notice of termination Executive shall be entitled to receive
only the compensation specifically provided below:
(i) The Executive's annual Base Salary in effect at the time of
termination until the expiration of the employment period as provided
in Section 1(b) of this Agreement.
(ii) Additional Benefits under any life, medical, dental, vision
and disability insurance and reimbursement programs in which Executive
was participating at the time of notice of termination of Executive's
employment, which benefits shall be continued until the earlier to
occur of the expiration of Executive's employment period as provided in
Section 1(b) or Executive's acceptance of comparable employment.
Additional Benefits under the terms of any stock incentive plan,
pension plan and SERP will not be continued except as expressly
required by applicable laws or by the terms of the Additional Benefits
plans, policies, programs, and arrangements then in effect.
(iii) Immediate acceleration of vesting of stock options and
acceleration of the lapse of restrictions of any restricted stock
awards held by Executive that would have vested or lapsed during the
period between notice of termination of Executive's employment and the
expiration of Executive's employment period as provided in Section
1(b).
Upon termination of Executive's employment as described in this Section
4(d), Executive shall resign from his offices as an officer of the Company and
its subsidiaries and the Company shall, at the option of Executive, (i) continue
installment payments to Executive on the periodic basis described in Section
3(a) at the rate and for the duration of the employment period specified in
Section 4(d)(i); or (ii) make a lump sum payment to Executive equal to
seventy-five percent (75%) of the amounts due Executive under Section 4(d)(i)
for the duration of the employment period specified therein. A lump sum payment
in accordance with this paragraph shall be made within ten (10) working days of
Executive's election.
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Upon termination of Executive's employment as described in this Section
4(d), Additional Benefits shall be made available to Executive as required by
applicable laws, including COBRA. Executive's period of coverage under COBRA (29
U.S.C. ss. 1162(2)), for purposes of this Section 4(d) shall begin on the date
of the termination of the benefits to which Executive is entitled pursuant to
Section 4(d)(ii). Executive agrees to execute such documents as may be requested
by the Company in order to comply with its obligations under this Section 4(d)
and under COBRA and any other applicable laws. The Company shall provide
Executive with the health coverage continuation benefits specified by COBRA
whether or not the Company is obligated under COBRA to do so.
(e) Constructive Termination. The occurrence of any of the following
events shall be deemed a termination of Executive's employment under Section
4(d) above:
(i) Failure to elect or reelect or otherwise to maintain Executive
in the office or the position, or a substantially equivalent office or
position, with the Company which Executive holds as of the date of this
agreement (or which may be increased from time to time).
(ii) A significant adverse change in the nature or scope of the
authorities, powers, functions, responsibilities or duties attached to
Executive's position with the Company, a reduction in Executive's Base
Salary, as increased from time to time, or the termination or denial of
Executive's rights to a substantial amount of Additional Benefits as
herein provided, any of which is not remedied within 10 calendar days
after receipt by the Company of written notice from Executive of such
change, reduction or termination, as the case may be.
(iii) The Company shall relocate its principal executive offices,
or require Executive to have his principal location of work changed, to
any location that is in excess of 25 miles from its present location.
(iv) Without limiting the generality or effect of the foregoing,
any material breach of this Agreement by the Company or any successor
thereto.
The determination by Executive in good faith that any of the events described in
clauses (i) through (iv) above has occurred shall be conclusive.
5. TERMINATION RELATING TO CHANGE OF CONTROL
(a) Any of the following events shall constitute a "Change of Control"
hereunder:
(i) any "person" (as such term is used in Section 13(d) and 14(d)
of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")), is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly of securities of the
Company representing 20% or more of the combined voting power of the
Company's then outstanding securities; or
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(ii) during any period of two consecutive years (not including any
period prior to the execution of this Agreement) individuals who at the
beginning of such period constitute the Board of Directors of the
Company and any new director whose election by the Board of Directors
or nomination for election by the Company's shareholders was approved
by a vote of at least two-thirds (2/3) of the directors then still in
office who either were directors at the beginning of the period or
whose election or nomination for election was previously so approved,
cease for any reason to constitute a majority thereof; or
(iii) the consummation of a merger, consolidation, statutory share
exchange or similar form of corporate transaction involving the Company
or any of its subsidiaries that requires the approval of the Company's
stockholders, whether for such transaction or the issuance of
securities in the transaction (a "Reorganization"), or sale or other
disposition of all or substantially all of the Company's assets to an
entity that is not wholly owned by the Company (a "Sale"), unless
immediately following such Reorganization or Sale, more than 80% of the
total voting power (in respect of the election of directors, or similar
officials in the case of an entity other than a corporation) of either
(x) the surviving corporation or entity resulting from such
Reorganization or the entity which has acquired all or substantially
all of the assets of the Company (in either case, the "Surviving
Entity"), or (y) if applicable, the ultimate parent entity that
directly or indirectly has beneficial ownership of 50% or more of the
total voting power (in respect of the election of directors, or similar
officials in the case of an entity other than a corporation) of the
Surviving Entity (the "Parent Entity"), is represented by Company
voting securities that were outstanding immediately prior to such
Reorganization or Sale (or, if applicable, is represented by shares
into which such Company voting securities were converted pursuant to
such Reorganization or Sale), and such voting power among the holders
thereof is in substantially the same proportion as the voting power of
such Company voting securities among the holders thereof immediately
prior to the Reorganization or Sale; or
(iv) the stockholders of the Company approve a plan of complete
liquidation or dissolution of the Company.
(b) Effective upon or within 180 days of a Change of Control, Executive
may terminate employment with the Company by delivering written notice of such
termination to the Company, accompanied by Executive's resignation from his
offices, if any, as an officer of the Company and its subsidiaries. Upon
Executive's termination of employment or tendering of resignation as specified
in the preceding sentence, or if the Company (or any successor) terminates
(whether by Constructive Termination, within the meaning of Section 4(e), or
otherwise) Executive's employment for any reason upon or within 180 days of a
Change of Control, Executive shall be entitled to receive:
(i) A lump sum payment (the "Severance Payment") equal to three
(3) times Executive's Compensation Level. "Compensation Level" shall
mean the sum of (A) the
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greater of (1) Executive's annual base salary in effect on the date of
termination or (2) Executive's annual base salary in effect immediately
prior to the Change of Control, plus (B) an amount (the "Bonus Amount")
equal to the greater of (1) Executive's maximum bonus opportunity under
the Company's annual bonus plan in respect of the year of Executive's
termination of employment determined as of Executive's date of
termination or (2) 78.75% of the amount determined under clause (A) of
this sentence. Such lump sum payment shall be paid by the Company on
the date (the "Payment Date") that is no later than two (2) business
days immediately prior to the Anticipated COC Date or, in the case of a
Change of Control in respect of which an Anticipated COC Date is not
applicable, no later than ten (10) working days following any
termination of employment covered by this Section 5. For purposes of
this Agreement, the "Anticipated COC Date" is the date reasonably
determined in good faith by the Chief Executive Officer of the Company
to be the date on which an anticipated Change of Control is expected to
occur.
(ii) Additional Benefits (for Executive, his spouse and
dependents) under any and all life, medical, dental, vision and
disability insurance and reimbursement programs in which Executive was
participating at the earlier of (A) the date immediately prior to the
Change of Control and (B) the time of notice of termination of
Executive's employment, which benefits shall be continued until the
earlier to occur of the expiration of three (3) years following
Executive's date of termination of employment or Executive's acceptance
of comparable employment; provided, however, that upon Executive's
acceptance of comparable employment, Additional Benefits under plans
and programs of the Company (or any successor) shall be secondary to
the benefits available, if any, from the benefit plans maintained by
Executive's new employer. Additional Benefits under the terms of any
stock incentive plan, pension plan and SERP will not be continued
except as expressly required by applicable laws or by the terms of the
Additional Benefits plans, policies, programs, and arrangements then in
effect.
(iii) As of the Payment Date, immediate acceleration of vesting of
all stock options and dividend equivalent rights and immediate lapse of
restrictions on all restricted stock awards held by Executive.
(iv) A lump sum payment equal to the product of (A) the Bonus
Amount and (B) a fraction, the numerator of which is the number of
weeks elapsed (with a full week credited for any partial week elapsed)
during the year of termination through the date of termination, and the
denominator of which is 52. Such lump sum payment shall be paid by the
Company on the Payment Date.
(v) A lump sum payment equal to three years' additional
contributions to the Company's Money Purchase Pension Plan (determined
as if Executive had earned annual compensation during such three year
period equal to the Compensation Level). Such lump sum payment shall be
paid by the Company on the Payment Date.
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(c) On the Payment Date, the Company shall also pay to Executive, with
respect to each outstanding stock option held by Executive that provides for the
grant of dividend equivalent rights, a lump sum payment equal to the product of
(i) and (ii), where (i) is the sum of (A) an amount equal to the accumulated
dividend equivalents in respect of such stock options credited as of the Change
of Control, plus (B) an amount equal to the sum of the projected additional
dividend equivalents that would have been credited in respect of such stock
options during the period commencing on the Change of Control through the fifth
anniversary of the date of grant of such stock options, assuming the Company had
continued to declare dividends with the same frequency as dividends were
declared immediately prior to the Change of Control, and using a dividend
equivalent crediting rate equal to the rate used for crediting dividend
equivalents in respect of the most recent dividend actually paid by the Company
immediately prior to first public announcement of the anticipated Change of
Control (i.e., based on the amount of such actual dividend paid by the Company
and the closing price per share of the Company's common stock on the declaration
date of such dividend), and (ii) is the greater of (A) the closing price per
share of the Company's common stock on the most recent trading day immediately
prior to the Payment Date and (B) if applicable, the final value per share paid
to holders of the Company's common stock in the transaction giving rise to the
Change of Control (provided, that if holders of the Company's common stock
receive publicly traded shares or securities in such transaction, the value per
share shall be determined under this clause (ii)(B) with reference to the
closing price of such shares or securities on the most recent trading day
immediately prior to the Payment Date).
(d) In connection with any termination of employment pursuant to this
Section 5, the Company shall provide Executive with (i) outplacement services
from an outplacement firm of Executive's choice up to a maximum cost of $10,000
and (ii) continuation for a period of three (3) years following Executive's date
of termination of the club memberships and executive medical/financial
counseling services provided by the Company to Executive at the level in effect
on Executive's date of termination (or, if greater, in effect immediately prior
to the Change of Control); provided that the Executive may elect to receive the
cash value of the benefits provided under this Section 5(d), in which case such
amount shall be paid by the Company on the Payment Date.
(e) If any dispute arises between the Company and Executive regarding
Executive's rights under this Section 5, Executive shall be entitled to recover,
on an as-incurred basis, his attorneys' fees and costs incurred in connection
with such dispute.
(f) If the expected Surviving Entity of any Change of Control timely
provides the Consulting Notice to Executive, Executive agrees that, following
the termination of Executive's employment pursuant to this Section 5, Executive
shall serve as a consultant to the Surviving Entity until the first anniversary
of Executive's date of termination (the "Consulting Period"). For purposes of
this Agreement, the "Consulting Notice" is a written notice delivered by the
expected Surviving Entity of such Change of Control to Executive no later than
30 days prior to the Anticipated COC Date (or, if there is no Anticipated COC
Date, no later than 10 days following Executive's termination of employment)
pursuant to which such expected surviving entity irrevocably elects and
covenants to retain Executive as a consultant to the Company, on the terms set
forth below in this Section 5(f), for the entirety of the one-year Consulting
Period, and agrees
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to pay Executive the fully-earned consulting fee required under this Section
5(f), which fee shall be fully earned by Executive upon delivery of the
Consulting Notice, without regard to whether the Company or expected Surviving
Entity uses some, all or none of the consulting services agreed to be provided
by Executive. During the Consulting Period, Executive shall be reasonably
available for up to 200 hours of consultation with the Company by telephone or
in person at the Company's principal executive office, and Executive shall
provide consulting services substantially similar to the services performed by
Executive immediately prior to the earlier of the Payment Date or Executive's
date of termination of employment. Performance of consulting services shall be
scheduled on reasonable notice and in such a manner so as not to interfere
significantly with other business activities of Executive. During the Consulting
Period, the Company shall pay, in accordance with its normal payroll practices
(but no less frequently than monthly), Executive the fully-earned consulting fee
in an amount equal to the greater of (A) Executive's annual base salary in
effect on the date of termination or (B) Executive's annual base salary in
effect immediately prior to the Change of Control, and shall reimburse Executive
for business and travel expenses associated with such consulting services
reasonably and necessarily incurred by Executive during the Consulting Period.
(g) Anything in this Agreement to the contrary notwithstanding, in the
event it shall be determined by the Accounting Firm (as defined below) that any
payment, award, benefit or distribution (or any acceleration of any payment,
award, benefit or distribution) by the Company (or any of its affiliated
entities) or any entity which effectuates a Change of Control (or any of its
affiliated entities) to or for the benefit of Executive (whether pursuant to the
terms of this Agreement or otherwise, but determined without regard to any
additional payments required under this Section 5(g)) (the "Payments") would be
subject to the excise tax imposed by Section 4999 of the Internal Revenue Code
of 1986, as amended (the "Code"), or any interest or penalties are incurred by
Executive with respect to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Company shall, on the Payment Date, pay to Executive an
additional payment (a "Gross-Up Payment") in an amount such that after payment
by Executive of all taxes and net of any deductions which are disallowed to
Executive by reason of Executive's receipt of the Gross-Up Payment and net of
any benefits that result from the deductibility by Executive of such taxes
(including, in each case, any interest or penalties imposed with respect to such
taxes), including, without limitation, any federal, state, and local income
taxes (and any interest and penalties imposed with respect thereto) and Excise
Tax imposed upon the Gross-Up Payment, Executive retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Payments.
Subject to the foregoing provisions of this Section 5(g), all
determinations required to be made under this Section 5(g), including whether a
Gross-Up Payment is required, the amount of such Gross-Up Payment, and the
assumptions to be utilized in arriving at such determinations, shall be made by
the public accounting firm that is retained by the Company as of the date
immediately prior to the Change of Control (the "Accounting Firm") which shall
provide detailed supporting calculations both to the Company and Executive
within fifteen (15) business days of the receipt of notice from the Company or
the Executive that there has been or will be a Payment, or such earlier time as
is requested by the Company (collectively, the "Determination"). In the event
that the Accounting Firm is serving as accountant or auditor for the individual,
entity
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or group effecting the Change of Control, Executive may appoint another
nationally recognized public accounting firm (or, alternatively, may specify the
office and personnel of the public accounting firm retained by the Company as of
the date immediately prior to the Change of Control) to make the determinations
required hereunder (which accounting firm shall then be referred to as the
Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall
be borne solely by the Company and the Company shall enter into any agreement
requested by the Accounting Firm in connection with the performance of the
services hereunder. If the Accounting Firm determines that no Excise Tax is
payable by Executive, it shall furnish Executive with a written opinion to such
effect, and to the effect that failure to report the Excise Tax, if any, on
Executive's applicable federal income tax return will not result in the
imposition of a negligence or similar penalty. The Determination by the
Accounting Firm shall be binding upon the Company and Executive. As a result of
the uncertainty in the application of Section 4999 of the Code at the time of
the Determination, it is possible that Gross-Up Payments which will not have
been made by the Company should have been made ("Underpayment") or Gross-Up
Payments are made by the Company which should not have been made
("Overpayment"), consistent with the calculations required to be made hereunder.
In the event that the Executive thereafter is required to make payment of any
Excise Tax or additional Excise Tax, the Accounting Firm shall determine the
amount of the Underpayment that has occurred and any such Underpayment (together
with interest at the rate provided in Section 1274(b)(2)(B) of the Code) shall
be promptly paid by the Company to or for the benefit of Executive. In the event
the amount of the Gross-Up Payment exceeds the amount necessary to reimburse the
Executive for his Excise Tax, the Accounting Firm shall determine the amount of
the Overpayment that has been made and any such Overpayment (together with
interest at the rate provided in Section 1274(b)(2) of the Code) shall be
promptly paid by Executive (to the extent he has received a refund if the
applicable Excise Tax has been paid to the Internal Revenue Service) to or for
the benefit of the Company. Executive shall cooperate, to the extent his
expenses are reimbursed by the Company, with any reasonable requests by the
Company in connection with any contests or disputes with the Internal Revenue
Service in connection with the Excise Tax.
(h) Executive agrees that in the event that payments are made by the
Company to Executive on a Payment Date (or thereafter) in advance of an expected
Change of Control, and such Change of Control does not occur within 10 business
days following the Anticipated COC Date, Executive shall be obligated to, and
shall, repay to the Company, within 2 business days following written notice by
the Company to Executive that such Change of Control has not occurred during
such period, all such amounts paid pursuant to this Section 5; provided that the
return of such payments shall not prejudice Executive's rights under this
Section 5 with respect to any Change in Control.
(i) Any payments by the Company under this Section 5 (after taking into
account any amounts repaid to the Company pursuant to Section 5(h)) shall be in
lieu of any payments under Section 4(d).
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6. TERMINATION OF EMPLOYMENT BY EXECUTIVE.
(a) In addition to his rights under Section 5 hereof, Executive may
terminate employment with the Company without cause as of a specified date not
less than 30 days and not more than 90 days after delivering written notice of
such termination to the Company. Upon the effective date of such termination,
Executive's right to receive the compensation provided for in Section 3 of this
Agreement shall terminate. The Company may at any time in its sole discretion
waive all or part of the notice period and specify any day in such period that
has not yet occurred as the date of termination for purposes of this Section
6(a); in the event of such occurrence, the Company shall pay Executive the
amount of the compensation provided for in Section 3 of this Agreement for the
remainder of the notice period given by Executive.
(b) Upon termination as described in Section 6(a), Additional Benefits
will be made available to Executive as required by applicable laws, including
COBRA, if applicable, and by the terms of the Additional Benefit plans,
policies, programs, and arrangements in effect at the time of termination.
Executive's period of coverage under COBRA (29 U.S.C. ss. 1162(2)), if any,
shall begin on the date of the termination of his employment under Section 6(a).
Executive agrees to execute such documents as may be requested by the Company in
order to comply with its obligations under this Section 6(b) and under COBRA, if
applicable, and any other applicable laws.
7. DESIGNATION OF BENEFICIARY
Executive may designate one or more persons or entities (including a
trust or trusts or his estate) to receive any compensation payable to him under
Section 4(b) ("Beneficiaries"). If Executive shall designate more than one
Beneficiary, he shall set forth the proportion in which each is to receive such
compensation; any such designation which fails to set forth such proportion
shall be an invalid designation as to all those so designated. Executive also
may designate one or more successor Beneficiaries who shall succeed to the
rights of the Beneficiaries originally designated, in case the latter should die
prior to the receipt of full payment. Executive may from time to time change any
designation so made, and that last designation shall be controlling. If
Executive designates a person other than, or in addition to, his spouse, his
spouse shall specifically approve his designation and authorize the Company to
pay his compensation as designated. In the absence of a valid designation by
Executive meeting the requirements of this Section 7, or in the event of the
death of a Beneficiary for whom no successor Beneficiary has been validly
designated, Executive's compensation, or the portion of such compensation then
payable to such deceased Beneficiary, shall be paid to the administrator or
executor of Executive's estate for the benefit of Executive's estate, who shall
in that event be deemed a Beneficiary under this Section 7.
Executive's designation and his spouse's approval and authorization, if
necessary, must be in the form of a signed writing witnessed by two adult
persons (other than any designated Beneficiary) and must have been delivered to
the Company prior to Executive's death.
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8. REIMBURSEMENT OF EXPENDITURES
During the term of this Agreement, the Company shall reimburse
Executive for business expenses reasonably and necessarily incurred by him on
its behalf in accordance with its business-expense reimbursement policies as in
effect from time to time and subject to Executive's furnishing such
substantiation of such expenses as the Company may require.
9. CONFIDENTIAL INFORMATION
During the term of this Agreement and the period specified in Section
15 of this Agreement, Executive shall not disclose to any persons (other than
another employee of the Company) any confidential information relating to the
business of the Company obtained by him while in the employ of the Company,
without the consent of the Board, except as necessary or appropriate in the
discharge of his obligations to the Company and its shareholders.
10. NONASSIGNMENT OF EXECUTIVE'S OBLIGATIONS AND DUTIES
The obligations and duties of Executive hereunder shall be personal and
not assignable.
11. AGREEMENT BINDING UPON SUCCESSORS AND ASSIGNS
This Agreement shall inure to the benefit of and shall be binding upon
the Company and its respective successors and assigns, including any purchaser
of all or substantially all of its assets, and shall be binding upon Executive's
assigns, executors, administrators, Beneficiaries, or their legal
representatives. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the business
and/or assets of the Company, by operation of law, or otherwise.
12. NOTICES
Any notices provided for in this Agreement shall be sent to the Company
at American Health Properties, Inc., 6400 S. Fiddlers Green Circle, Suite 1800,
Englewood, Colorado 80111, Attention: Chairman, Compensation Committee, or at
such other address as the Company may from time to time in writing designate,
and to Executive at 6400 S. Fiddlers Green Circle, Suite 1800, Englewood,
Colorado 80111, or at such other address as he may from time to time in writing
designate. All notices will be deemed to have been delivered (i) as of the first
to occur of actual receipt or two (2) business days after being sent by
certified mail, return receipt requested, postage paid and properly addressed to
the designated address of the party to whom addressed or (ii) if notice is given
in any other manner, when actually received.
13. ENTIRE AGREEMENT
This instrument contains the entire agreement between the Company and
Executive relating to the subject of Executive's employment by the Company,
except to the extent that the terms and provisions of Additional Benefits,
expense reimbursement policies and Company policies governing executives and
employees generally are (as referred to herein) set forth in other
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documents. This Agreement supersedes all prior and contemporaneous oral and
written agreements, understandings, and representations, among the parties, with
respect to the subject matter hereof, including without limitation that certain
amended and restated executive employment agreement between the Company and
Executive, dated as of March 15, 1999.
14. TERMINATION OF AGREEMENT
This Agreement shall terminate at the end of the period of Executive's
employment, as described in Section 1 of this Agreement (or at the end of any
different period specifically set forth herein for the termination of
Executive's employment), and may be continued thereafter only upon the execution
of a writing to that effect signed by the Company and Executive. If Executive's
employment continues after the termination of this Agreement for any period
during which no such writing is in effect, Executive shall be deemed to be
employed at the will of the Company and his employment may be terminated at any
time with or without notice and with or without cause and without obligation of
any party to any other party.
15. TRADE SECRETS; SOLICITATION; NONDISPARAGEMENT
If Executive's employment is terminated pursuant to section 5, for a
period of 3 years thereafter Executive agrees not to, directly or indirectly,
(1) disclose or utilize any trade secrets or confidential information of the
Company; (2) hire, cause or encourage any other person to hire, any employee of
the Company or form any business enterprise with any such employee or in any way
persuade or encourage any such employee to terminate or alter his or her
employment with the Company; (3) communicate with any customer or vendor of the
Company or any employee thereof regarding the business of the Company or such
customer's, vendor's or employee's business relationship with the Company; or
(4) make any public statement or instigate, assist or participate in the making
of any public statement, which would libel, slander or disparage (whether or not
such disparagement legally constitutes libel or slander) the Company, its
subsidiaries and publicly known affiliates, and their past or present officers,
directors and management employees.
16. WAIVERS
The waiver or breach of any term or condition of this Agreement will
not be deemed to constitute the waiver of any other breach of the same or any
other term or condition.
17. GOVERNING LAW
This Agreement will be governed by and construed in accordance with the
laws of Colorado.
18. SEVERABILITY
If any provision or clause of any provision of this Agreement is held
invalid or unenforceable, the remainder of this Agreement shall nevertheless
remain in full force and effect.
13
<PAGE> 14
19. COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original and all of which together shall be deemed to
be one and the same instrument.
20. NO CONFLICT WITH PRIOR AGREEMENTS AND RIGHTS
Executive hereby represents and warrants to the Company that neither
the execution of this Agreement nor performance by Executive of his obligations
hereunder conflicts with any contractual commitment on his part to any third
party or violates or interferes with any right of any third party.
14
<PAGE> 15
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
"Company"
AMERICAN HEALTH PROPERTIES, INC.
By /s/ Joseph P. Sullivan
-----------------------------------------
Joseph P. Sullivan
Chief Executive Officer
By /s/ Michael J. McGee
-----------------------------------------
Michael J. McGee
Assistant Secretary
"Executive"
/s/ STEVEN A. ROSEMAN
- ------------------------------------
STEVEN A. ROSEMAN
<PAGE> 16
FIRST AMENDMENT TO
AMERICAN HEALTH PROPERTIES, INC.
AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT
WITH
STEVEN A. ROSEMAN
THIS FIRST AMENDMENT to the Amended and Restated Executive Employment Agreement
(this "Amendment") dated as of July 16, 1999 (the "Restated Agreement") is
entered on this 4th day of August 1999 to be effective as of July 16, 1999
between AMERICAN HEALTH PROPERTIES, INC., a Delaware corporation (the
"Company"), and STEVEN A. ROSEMAN, an individual ("Executive").
1. AMENDMENT TO RESTATED AGREEMENT
The Company and Executive agree that Section 5(c) of the Restated
Agreement is hereby amended to clarify that the payment to be made by the
Company to Executive pursuant to Section 5(c) shall be in respect of the
cancellation of Executive's dividend equivalent rights with respect to each
outstanding stock option held by Executive, and that, upon such payment by the
Company to Executive, any and all of Executive's dividend equivalent rights with
respect to outstanding stock options held by Executive shall terminate;
provided, that if Executive becomes obligated under Section 5(h) to repay such
payment to the Company, Executive's dividend equivalent rights shall be restored
as of the date of the purported cancellation of such rights.
2. EFFECT ON RESTATED AGREEMENT
Except as provided in paragraph 2, the Restated Agreement shall remain
in full force and effect in accordance with its terms and conditions.
3. COUNTERPARTS
This Amendment may be executed in several counterparts, each of which
shall be deemed to be an original but all of which together will constitute one
and the same instrument.
IN WITNESS WHEREOF, the parties have executed this First Amendment to
be effective as of the date written above.
"Company" "Executive"
AMERICAN HEALTH PROPERTIES, INC.
a Delaware corporation
By: /s/ Michael J. McGee /s/ STEVEN A. ROSEMAN
--------------------------------------- ---------------------------------
Michael J. McGee, Senior Vice President STEVEN A. ROSEMAN
By: /s/ Steven A. Roseman
---------------------------------------
Steven A. Roseman, Secretary
<PAGE> 1
EXHIBIT 10.10
AMERICAN HEALTH PROPERTIES, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
1. Purpose and Nature of Plan; Effective Date.
The purposes of the American Health Properties, Inc. Supplemental
Executive Retirement Plan ("Plan") are to retain the services of, and provide a
competitive level of retirement income to, the Chief Executive Officer of
American Health Properties, Inc.
The effective date of the Plan is January 1, 1996.
2. Definitions.
(a) Actuarial Assumptions means (i) a discount rate equal to the annual
rate of interest on United States Treasury Securities with a 30-year maturity,
as specified by the Secretary of the Treasury (or his or her delegate) for the
last month of the calendar quarter immediately preceding the valuation date, and
(ii) mortality factors based on the 1983 Group Annuity Mortality table (blended
50% male and 50% female).
(b) Actuarial Equivalent means, with respect to the amount of a benefit
payable in a specified form (the "base benefit"), the amount of a benefit
payable in another form that provides the same present value as the base benefit
as of a specific reference date based on the Actuarial Assumptions.
(c) Beneficiary means the person or entity designated by the
Participant, in accordance with procedures established by the Board, to receive
all or part of the amounts to be paid under the Plan in the event of the
Participant's death or, if none, the Participant's estate. A designation of a
Beneficiary may be replaced by a new designation or may be revoked by the
Participant at any time in accordance with procedures established by the Board.
If the Participant is married, the designation of any person or entity (other
than the Participant's spouse) as a Beneficiary shall not be valid without the
written consent of such spouse.
(d) Board of Directors means the Board of Directors of the Company.
(e) Cause means (i) a material breach by the Participant of his
employment agreement with the Company, if any, (ii) the Participant has been
convicted of a felony, or (iii) the Participant has been convicted of a
misdemeanor involving moral turpitude.
(f) Change in Control means the occurrence of any of the following
events:
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<PAGE> 2
(i) any "person" (as such term is used in Section 13(d) and 14(d)
of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or
indirectly of securities of the Company representing 20% or
more of the combined voting power of the Company's then
outstanding securities; or
(ii) during any period of two consecutive years (not including any
period prior to the effective date of this Plan) individuals
who at the beginning of such period constitute the Board and
any new director whose election by the Board or nomination
for election by the Company's shareholders was approved by a
vote of at least two-thirds (2/3) of the directors then still
in office who either were directors at the beginning of the
period or whose election or nomination for election was
previously so approved, cease for any reason to constitute a
majority thereof; or
(iii) the consummation of a merger, consolidation, statutory share
exchange or similar form of corporate transaction involving
the Company or any of its subsidiaries that requires the
approval of the Company's stockholders, whether for such
transaction or the issuance of securities in the transaction
(a "Reorganization"), or sale or other disposition of all or
substantially all of the Company's assets to an entity that
is not wholly owned by the Company (a "Sale"), unless
immediately following such Reorganization or Sale, more than
80% of the total voting power (in respect of the election of
directors, or similar officials in the case of an entity
other than a corporation) of either (x) the surviving
corporation or entity resulting from such Reorganization or
the entity which has acquired all or substantially all of the
assets of the Company (in either case, the "Surviving
Entity"), or (y) if applicable, the ultimate parent entity
that directly or indirectly has beneficial ownership of 50%
or more of the total voting power (in respect of the election
of directors, or similar officials in the case of an entity
other than a corporation) of the Surviving Entity (the
"Parent Entity"), is represented by Company voting securities
that were outstanding immediately prior to such
Reorganization or Sale (or, if applicable, is represented by
shares into which such Company voting securities were
converted pursuant to such Reorganization or Sale), and such
voting power among the holders thereof is in substantially
the same proportion as the voting power of such Company
voting securities among the holders thereof immediately prior
to the Reorganization or Sale; or
(iv) the stockholders of the Company approve a plan of complete
liquidation or dissolution of the Company.
-2-
<PAGE> 3
(g) Company means American Health Properties, Inc., or any successor
thereto.
(h) Early Retirement Benefit means an annual benefit in an amount equal
to the product of (i) the Normal Retirement Benefit, (ii) the Vesting Percentage
and (iii) the Early Retirement Factor.
(i) Early Retirement Factor means the applicable factor from the
following table (interpolated as provided below), based upon the Participant's
age on the date of commencement of benefits under the Plan:
Age at Commencement Early Retirement Factor
------------------- -----------------------
65-62 1.00
less than 62 Actuarial Equivalent factor to convert
benefit from a benefit commencing at
age 62, based on Actuarial Assumptions
and actual age at commencement of
benefits
(j) Final Compensation means the sum of (i) the Participant's annual
base salary in effect on the Participant's date of termination of employment,
plus (ii) the Participant's maximum bonus opportunity under the Company's annual
bonus plan ("Maximum Bonus") in respect of the year of the Participant's
termination of employment determined as of the Participant's date of termination
of employment. Notwithstanding the foregoing, in the event of a Change in
Control, the term "Final Compensation" shall mean the sum of (A) the greater of
(1) the Participant's annual base salary in effect on the Participant's date of
termination of employment or (2) the Participant's annual base salary in effect
immediately prior to the Change in Control, plus (B) the greater of (1) the
Participant's Maximum Bonus in respect of the year of the Participant's
termination of employment determined as of the Participant's date of termination
of employment or (2) 112.5% of the amount determined under clause (A) of this
sentence.
(k) MPPP Offset means the Participant's account balance under the
Pension Plan as of the date of commencement of benefit payments under the Plan;
provided, however, that if the Participant elects under Section 4(e) to receive
a benefit under this Plan in a form other than a lump sum payment, the MPPP
Offset shall be the Actuarial Equivalent of the account balance under the
Pension Plan.
(l) Normal Retirement Benefit means an annual benefit in an amount
equal to 25% of the Participant's Final Compensation.
-3-
<PAGE> 4
(m) Participant means Joseph P. Sullivan, the chief executive officer
of the Company on the effective date of this Plan.
(n) Pension Plan means the American Health Properties, Inc. Money
Purchase Pension Plan.
(o) Vesting Percentage means the applicable percentage from the
following table (interpolated as provided below), based upon the date on which
the Participant's employment with the Company is terminated:
Date of Termination Vesting Percentage
------------------- ------------------
9/1/2007 or later 100.000%
9/1/2006 91.667%
9/1/2005 83.333%
9/1/2004 75.000%
9/1/2003 66.667%
9/1/2002 58.333%
9/1/2001 50.000%
9/1/2000 41.667%
9/1/1999 33.333%
9/1/1998 25.000%
9/1/1997 16.667%
9/1/1996 8.333%
9/1/95 or before 0.000%
The vesting percentage shall be linearly interpolated to reflect dates of
termination that fall between entries in the above table.
3. Eligibility and Participation.
The Participant has been designated for participation by the Board and
is eligible to participate in the Plan. Unless otherwise provided by the Board
from time to time, the Participant is the only employee of the Company eligible
to participate in this Plan.
4. Benefits.
(a) Normal Retirement Benefit. Except as provided in Section 4(c), upon
the Participant's termination of employment on or after age 65, the Participant
shall be entitled to
-4-
<PAGE> 5
receive an amount equal to the Normal Retirement Benefit, reduced by the MPPP
Offset. Except as provided in Section 4(e)(iii), the amount payable under this
Section 4(a) shall be payable as of the first of the month following such
termination of employment.
(b) Early Retirement Benefit. Except as provided in Section 4(c), upon
the Participant's termination of employment on or after age 55 but prior to age
65, the Participant shall be entitled to receive an amount equal to the Early
Retirement Benefit, reduced by the MPPP Offset. Except as provided in Section
4(e)(iii), the amount payable under this Section 4(b) shall be payable as of the
first of the month following age 65, or at such earlier date as selected by the
Participant.
(c) Termination for Cause. Notwithstanding anything to the contrary in
the Plan, no benefits shall be payable to the Participant (or his Beneficiary)
under the Plan in the event the Participant's employment is terminated by the
Company for Cause.
(d) Death Benefit. Upon the death of the Participant while employed by
the Company, the Participant shall be deemed to have (i) terminated employment
on the day before the Participant's death, (ii) elected to commence receipt of
the Early Retirement Benefit (or Normal Retirement Benefit, if applicable) at
the earliest possible commencement date, and (iii) died before receiving any
payments. The amount payable under this Section 4(d) shall be payable to the
Participant's Beneficiary as soon as practicable following the Participant's
death in an amount equal to the lump sum Actuarial Equivalent of the Early
Retirement Benefit (or Normal Retirement Benefit, if applicable) determined in
accordance with the preceding sentence, reduced by the MPPP Offset.
(e) Form of Benefit.
(i) Normal Form. Unless the Participant has elected an optional
form of benefit under Section 4(e)(ii), the benefits under
Section 4(a) or 4(b) shall be payable in a single lump sum
payment ,no later than ten (10) working days following the
Participant's date of termination of employment, in an amount
that is the Actuarial Equivalent of a single life annuity
with 10 years certain.
(ii) Optional Forms. The Participant may elect to receive the
benefits under Section 4(a) or (b) in any of the following
optional forms: single life annuity, single life annuity with
10 years certain, joint and 50% survivor annuity, joint and
75% survivor annuity or joint and 100% survivor annuity;
provided, however, that such election shall not be valid
unless made at least one year prior to the Participant's
termination of employment. The amount payable under this
Section 4(e)(ii)
-5-
<PAGE> 6
shall be the Actuarial Equivalent of the amount otherwise
payable under Section 4(e)(i).
(iii) Change in Control. Notwithstanding anything in the Plan to
the contrary, in the event that the Participant's employment
terminates effective on or within 180 days following a Change
in Control, the benefits payable to the Participant hereunder
shall be payable (notwithstanding any previous election by
the Participant to the contrary) in a single lump sum payment
on the date (the "Payment Date") that is no later than two
(2) business days immediately prior to the Anticipated CIC
Date (if the Participant has tendered his resignation in
advance of the Anticipated CIC Date to be effective on or
following the Anticipated CIC Date) or, in the case of a
Change in Control in respect of which an Anticipated CIC Date
is not applicable (or if the Participant has not tendered his
resignation in advance of the Anticipated CIC Date to be
effective on or following the Anticipated CIC Date), no later
than ten (10) working days following such termination of
employment. For purposes of the Plan, the "Anticipated CIC
Date" is the date reasonably determined in good faith by the
Chairman of the Board Compensation and Board Affairs
Committee or a Director designated by such Chairman to be the
date on which an anticipated Change in Control is expected to
occur.
5. Administration of the Plan.
The Plan shall be administered by the Board. The Board shall have the
exclusive right and full discretion to interpret the Plan and to decide any and
all matters arising hereunder (including the right to remedy possible
ambiguities, inconsistencies or omissions), to make, amend and rescind such
rules as it deems necessary for the proper administration of the Plan and to
make all other determinations necessary or advisable for the administration of
the Plan, including determinations regarding eligibility for benefits under the
Plan and determinations of the amount of benefits payable under the Plan. All
interpretations of the Board with respect to any matter hereunder shall be
final, conclusive and binding on all persons affected thereby. No Participant
who is a member of the Board shall vote on any matter or otherwise take part in
the administration of the Plan.
6. Amendment and Termination of the Plan.
The Board may at any time amend or terminate the Plan; provided,
however, that without the Participant's consent, no such amendment or
termination shall adversely affect the rights and benefits (including the terms
and conditions of payment of benefits) of the Participant under the Plan.
-6-
<PAGE> 7
7. Successors.
(a) This Plan shall not be terminated by any merger, consolidation,
share exchange or similar event involving the Company whereby the Company is or
is not the surviving or resulting entity. In the event of any merger,
consolidation, share exchange or similar event, the provisions of this Plan
shall be binding upon the surviving or resulting corporation or the person or
entity to which the Company's assets are transferred. As used in this Plan,
"Company" shall mean the Company as hereinbefore defined and any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the Company, by
operation of law, or otherwise.
(b) Concurrently with any merger, consolidation, share exchange or
sale, lease or transfer of all or substantially all of its assets, the Company
will cause any successor or transferee unconditionally to assume all of the
obligations of the Company hereunder.
(c) This Plan shall inure to the benefit of and be enforceable by each
Participant's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Participant shall
die while any amounts are payable to the Participant hereunder, all such amounts
shall be paid in accordance with the terms of this Plan to the Participant's
Beneficiary.
8. No Mitigation; Offset.
The obligation of the Company to provide the benefits specified under
the Plan and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim, right
or action which the Company may have against the Participant or others. In no
event shall the Participant be obligated to seek other employment or take other
action by way of mitigation of the amounts payable to such Participant under any
of the provisions of this Plan and such amounts shall not be reduced whether or
not such Participant obtains other employment.
9. Governing Law; Validity.
(a) The interpretation, construction and performance of this Plan,
unless pre-empted by the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), shall be governed by and construed and enforced in accordance
with the laws of the State of Colorado without regard to the principle of
conflicts of laws.
(b) The invalidity or unenforceability of any provision of this Plan
shall not affect the validity or enforceability of any other provision of this
Plan, which other provisions shall remain in full force and effect.
-7-
<PAGE> 8
10. Miscellaneous.
(a) This Plan is an unfunded plan maintained by the Company primarily
for the purpose of providing deferred compensation to the Participant, a member
of a select group of management or highly compensated employees. To the extent
that any person acquires a right to receive payments from the Company under this
Plan, such right shall be no greater than the right of any unsecured general
creditor of the Company. The Company shall not be required to fund or otherwise
segregate assets to be used for the payment of any benefits under the Plan. The
Company shall make such payments only out of its general corporate funds, and
therefore its obligation to make such payments shall be subject to any claims of
its other creditors having priority as to its assets.
(b) This Plan does not constitute a contract of employment or impose on
the Company any obligation to retain such Participant as an employee, to change
the status of such Participant's employment, or to change the policies of the
Company regarding termination of employment.
(c) No rights of any Participant (or Beneficiary) to payments of any
amounts under the Plan shall be sold, exchanged, transferred, assigned, pledged,
hypothecated or otherwise disposed of other than by will or by the laws of
descent and distribution, and any such purported sale, exchange, transfer,
assignment, pledge, hypothecation or disposition shall be void. The Company
shall not recognize any purported sale, exchange, transfer, assignment, pledge,
hypothecation, or disposition by any Participant of all or part of his interest
hereunder, and such interest shall not be subject in any manner to transfer by
operation of law, and shall be exempt from the claims of creditors or other
claimants from all orders, decrees, levies, garnishment and/or executions and
other legal or equitable process or proceedings against the Participant to the
fullest extent which may be permitted by law.
(d) Unless the Company specifically provides otherwise, any benefits
payable under this Plan shall not be taken into account for purposes of
determining benefits payable to the Participant under any other benefit plan or
program.
[REMAINDER OF THIS PAGE INTENTIONALLY BLANK]
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<PAGE> 9
IN WITNESS WHEREOF, and as evidence of the adoption of this Plan effective as of
January 1, 1996 by the Company, it has caused the same to be signed by its duly
authorized officer as of this 16th day of July, 1999.
AMERICAN HEALTH PROPERTIES, INC.
By: /s/ Michael J. McGee
---------------------------------------
Michael J. McGee, Senior Vice President
By: /s/ Steven A. Roseman
---------------------------------------
Steven A. Roseman, Secretary
-9-
<PAGE> 1
EXHIBIT 10.11
AMERICAN HEALTH PROPERTIES, INC.
1999 EQUITY INCENTIVE PLAN
<PAGE> 2
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>
A-i
<PAGE> 3
AMERICAN HEALTH PROPERTIES, INC.
1999 EQUITY INCENTIVE PLAN
Adopted by the Board: April 15, 1999
Approved by the Stockholders: June 11, 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.
A-1
<PAGE> 4
(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.
A-2
<PAGE> 5
(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.
A-3
<PAGE> 6
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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<PAGE> 7
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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<PAGE> 8
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
A-6
<PAGE> 9
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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<PAGE> 10
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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<PAGE> 12
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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<PAGE> 13
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> 14
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> 15
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.
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<PAGE> 16
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
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 74,085
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> (113,044)
<TOTAL-ASSETS> 783,832
<CURRENT-LIABILITIES> 0
<BONDS> 243,703
250
0
<COMMON> 100,000
<OTHER-SE> 355,553
<TOTAL-LIABILITY-AND-EQUITY> 783,832
<SALES> 0
<TOTAL-REVENUES> 55,591
<CGS> 0
<TOTAL-COSTS> 14,162
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,675
<INCOME-PRETAX> 26,323
<INCOME-TAX> 0
<INCOME-CONTINUING> 26,323
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 81,456
<EPS-BASIC> 0<F1>
<EPS-DILUTED> 0<F2>
<FN>
<F1>(1) BASIC EARNINGS PER SHARE ATTRIBUTABLE TO-
COMMON STOCK
Income before gain on sale of property $ 0.88
Gain on sale of property $ 2.15
Net Income $ 3.03
<F2>(2) DILUTED EARNINGS PER SHARE ATTRIBUTABLE TO-
COMMON STOCK
Income before gain on sale of property $ 0.87
Gain on sale of property $ 2.14
Net income $ 3.01
</FN>
</TABLE>
