<PAGE> 1
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
AMERICAN HOMEPATIENT, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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4) Date Filed:
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<PAGE> 2
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AT 9:00 A.M. CENTRAL DAYLIGHT TIME
ON MAY 28, 1998
LOCATION: OFFICES OF HARWELL HOWARD HYNE GABBERT & MANNER, P.C.
1800 FIRST AMERICAN CENTER
315 DEADERICK STREET
NASHVILLE, TENNESSEE 37238
To American HomePatient, Inc. Stockholders:
The Board of Directors of American HomePatient, Inc. invites you to the
Company's Annual Meeting of Stockholders next month. At the meeting, you and
other stockholders will be able to vote on the following matters:
1. Election of "Class 1" Directors to the Board of Directors. The Board has
nominated for re-election Henry T. Blackstock, Thomas A. Dattilo and Mark
Manner. The Directors elected will serve three (3) year terms and until
their successors are duly elected and qualified.
2. Any other business that properly comes before the Annual Meeting. The Board
does not know of any other business to be considered.
Only stockholders of record at the close of business on April 3, 1998 are
entitled to vote at the meeting.
The Board urges you to exercise your right to vote at the meeting, either
personally or by proxy. Whether or not you plan to attend the meeting, please
complete the enclosed proxy card promptly and return it in the enclosed,
self-addressed, stamped envelope to ensure that your shares will be represented
and voted at the meeting as you instruct. If you attend the meeting, you may
withdraw the proxy and vote your shares if you want.
The Proxy Statement accompanying this notice describes the matters to be
acted upon at the meeting. Please review it thoroughly.
By Order of the Board of Directors,
Mary Ellen Rodgers, Secretary
Brentwood, Tennessee
April 8, 1998
<PAGE> 3
AMERICAN HOMEPATIENT, INC.
5200 MARYLAND WAY, SUITE 400
BRENTWOOD, TENNESSEE 37027-5018
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 28, 1998
SOLICITATION OF PROXIES
The Board of Directors of American HomePatient, Inc. (the "Company") is
furnishing this Proxy Statement to you in connection with its solicitation of
proxies for the 1998 Annual Meeting of Stockholders, and any adjournment
thereof. The Annual Meeting will be held at the offices of Harwell Howard Hyne
Gabbert & Manner, P.C., 1800 First American Center, 315 Deaderick Street,
Nashville, Tennessee 37238 on Thursday, May 28, 1998, at 9:00 a.m. Central
Daylight Time. This Proxy Statement and the accompanying proxy card are being
mailed to you and the Company's other stockholders on or about April 8, 1998.
We encourage you to participate in voting at the Annual Meeting. You are
invited to attend the meeting and vote your shares directly by submitting a
ballot. Ballots will be provided at the meeting. You may instead vote by proxy,
which allows you to direct someone else to vote your shares at the meeting on
your behalf.
To vote by proxy, you must complete, execute and return the accompanying
proxy card before the Annual Meeting. Specific instructions are on the proxy
card. Proxies will be voted in accordance with instructions noted on the proxy
cards. If you do not complete the voting instructions, the persons named on the
proxy card will vote your shares FOR the election of all of the nominees
standing for re-election as Class 1 Directors. We do not know of any other
matters to be presented for action at the Annual Meeting. If any other matter
does properly come before the meeting, however, the persons named on the proxy
card will vote in accordance with their best judgment on the matter.
You may revoke your proxy at any time before it is exercised by doing one
of the following:
- Notifying the Company's secretary in writing;
- Submitting a new proxy bearing a later date;
- Attending the Annual Meeting and properly voting in person.
(Attendance alone will not revoke your proxy.)
The Company will pay for this proxy solicitation. It is expected that
proxies will be solicited by mail only. The Company will ask banks, brokers and
other custodians to forward this Proxy Statement, with attachments, to their
customers who beneficially own the Company's stock, and the Company will
reimburse such banks, brokers and custodians for their reasonable out-of-pocket
expenses in doing so.
1
<PAGE> 4
VOTING
The Annual Meeting will be held on Thursday, May 28, 1998 in Nashville,
Tennessee. A majority of the Company's Common Stock must be represented at the
Annual Meeting, either in person or by proxy, in order to transact business.
At the Annual Meeting of Stockholders, you and the Company's other
stockholders will be asked to vote on the re-election of three nominees to serve
as Class 1 Directors for a three (3) year term and until their successors are
duly elected and qualified (See Proposal: "Re-Election of Directors" starting on
page 3 of this Proxy Statement).
We know of no other matters to be brought before the 1998 Annual Meeting.
If any other matter is duly presented for action, the persons named on the
enclosed proxy card to vote on such matter will vote in accordance with their
best judgment, unless you direct them to do otherwise on the proxy card.
All stockholders of record on April 3, 1998 will be entitled to vote at the
Annual Meeting. There were 14,959,659 shares of the Company's common stock, par
value $.01 per share (the "Common Stock"), outstanding on April 3, 1998. You are
entitled to one vote for each share of Common Stock you own of record at the
close of business on April 3, 1998. The Company has no other classes of voting
stock issued. Although the Company has the authority to issue shares of
preferred stock in one or more series, it has not designated or issued any
series of preferred stock.
The Director nominees will be elected by a plurality of the votes of the
shares of Common Stock present or represented by proxy and entitled to vote at
the Annual Meeting. There are no cumulative voting rights. Any other matters
which may be properly submitted to the stockholders will be approved by the
affirmative vote of a majority of shares of Common Stock present or represented
by proxy and entitled to vote at the Annual Meeting.
Abstentions and broker non-votes will not be counted as affirmative votes,
but will be counted for purposes of determining whether there is a quorum.
Otherwise, abstentions and broker non-votes have no legal effect on the election
of Directors. On any matters requiring majority vote for approval, abstentions
would have the effect of negative votes.
MISCELLANEOUS MATTERS CONCERNING
THE ANNUAL MEETING
INDEPENDENT PUBLIC ACCOUNTANTS
The Board appointed the accounting firm of Arthur Andersen LLP to serve as
the Company's independent public accountants for the 1997 fiscal year, and
Arthur Andersen LLP is currently serving as the Company's independent auditor
for the 1998 fiscal year. A representative of Arthur Andersen LLP will attend
the Annual Meeting, will have the opportunity to make a statement if he so
desires, and will be available to respond to appropriate questions.
DEADLINE FOR SUBMITTING STOCKHOLDER PROPOSALS FOR THE 1999 ANNUAL MEETING
There were no stockholder proposals submitted for this Annual Meeting. We
must receive stockholder proposals for the 1999 Annual Meeting at the Company's
principal executive offices (5200 Maryland Way, Suite 400, Brentwood, Tennessee
37027-5018) no later than December 9, 1998 in order
2
<PAGE> 5
for the proposals to be eligible for inclusion in the Company's proxy materials
for the 1999 Annual Meeting.
1997 ANNUAL REPORT
Along with this Proxy Statement, we are mailing to you and our other
stockholders a copy of the Company's 1997 Annual Report on Form 10-K.
PROPOSAL: RE-ELECTION OF DIRECTORS
The Company's Board of Directors consists of eight members and is divided
into three classes (Class 1, Class 2 and Class 3), as nearly equal in number as
possible. All Directors generally hold office for three-year terms and then
until their successors have been duly elected and qualified. The term of the
Class 1 Directors, Henry T. Blackstock, Thomas A. Dattilo and Mark Manner, is
set to expire at this Annual Meeting of Stockholders.
The Board has nominated Messrs. Blackstock, Dattilo and Manner for
re-election as Class 1 Directors to serve for a three (3) year term expiring at
the 2001 Annual Meeting, or until their successors are duly elected and
qualified. If any nominee becomes unable to accept nomination or re-election,
which is not anticipated, the persons named on the proxy card intend to vote for
the election of such other person as the Board may nominate, unless otherwise
specifically instructed in the proxy.
A plurality of the votes of the shares of Common Stock present or
represented by proxy at the Annual Meeting and entitled to vote is required to
elect the three nominees as Directors of the Company. AHOM Holdings, Inc., an
indirect, wholly-owned subsidiary of Counsel Corporation, intends to vote all of
its shares in favor of the re-election of the nominees. (See "Stock Ownership of
Directors, Executive Officers and Principal Holders" appearing on page 9 of this
Proxy Statement.) The persons named on the proxy card intend to vote all valid
proxies they receive in accordance with the instructions of the stockholders
giving the proxies and, in the absence of instructions, for the re-election of
the nominees. THE BOARD RECOMMENDS THAT ALL STOCKHOLDERS VOTE IN FAVOR OF THE
REELECTION OF THE NOMINEES AS CLASS 1 DIRECTORS.
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<PAGE> 6
NOMINEES FOR RE-ELECTION AS CLASS 1 DIRECTORS
The following table provides biographical information of the nominees for
re-election to the Company's Board.
<TABLE>
<CAPTION>
HIS PRINCIPAL OCCUPATIONS
NOMINEE'S NAME HIS AGE DURING THE LAST FIVE YEARS
- -------------- ------- --------------------------------------------------------
<S> <C> <C>
Henry T. Blackstock (1)(2)(3) 54 Mr. Blackstock has served as a Director of the Company
since September 1991. He has been Chairman and Chief
Executive Officer of Tucker Management Group, a hedge
fund management firm, since July 1989.
Thomas A. Dattilo (1) 46 Mr. Dattilo has served as a Director of the Company
since June 1994. He has been Vice President of Dana
Corporation-Sealing and Distribution Worldwide since
January 1998. From January 1993 to January 1998, he
was President of Dana Corporation, Victor Products
Division, a manufacturer and distributor of sealing and
other products. From March 1990 to March 1993, he
was President and Director of Hayes-Dana, Inc., a
manufacturer of automobile parts.
Mark Manner 46 Mr. Manner has served as a Director of the Company
since May 1995. He has been a shareholder of the
Nashville-based law firm Harwell Howard Hyne Gabbert
& Manner, P.C. ("Harwell Howard") since February
1988.
</TABLE>
- ---------------------
Some of the nominees are currently members of the Board's standing
committees, which are described more fully later on page 8 of this Proxy
Statement. The footnotes indicate committee membership as follows:
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
(3) Member of the Disinterested Stock Option Committee
Mark Manner, a Director of the Company nominated for re-election at
this Annual Meeting, is a shareholder of the law firm Harwell Howard. The
Company engaged Harwell Howard during 1997 to give legal advice in a variety of
activities, for which the firm was paid legal fees (exclusive of expenses) of
approximately $1.37 million. Harwell Howard continues to give legal advice to
the Company and has, during 1998, been paid legal fees (exclusive of expenses)
in excess of $330,000. Board members not affiliated with Mr. Manner review and
approve the terms of Harwell Howard's engagement by the Company.
4
<PAGE> 7
CONTINUING CLASS 2 AND 3 DIRECTORS
The Class 2 and Class 3 Directors will continue to serve on the
Company's Board following the 1998 Annual Meeting. The term of the Class 2
Directors will expire at the 1999 Annual Meeting, and the term of the Class 3
Directors will expire at the 2000 Annual Meeting. The following table contains
biographical information of the continuing Directors.
<TABLE>
<CAPTION>
HIS PRINCIPAL OCCUPATIONS
DIRECTOR'S NAME HIS AGE DURING THE LAST FIVE YEARS
- --------------- ------- -------------------------------------------------
<S> <C> <C>
Morris A. Perlis(1)(3) 49 Mr. Perlis has served as Chairman of the Board of
Directors of the Company since May 1994 and as a
Director of the Company since March 1993. He has
served as President of Counsel Corporation since
January 1994 and as director of and consultant to
Counsel Corporation since September 1992. Mr. Perlis
has served as a director of PharMerica, Inc., formerly
known as Capstone Pharmacy Services, Inc.
("Capstone"), an institutional pharmacy company, since
December 1994. He has served as Chief Executive Officer
and Secretary of Stadtlander Drug Co., Inc.
("Stadtlander"), a mail order pharmacy company, since
September 1996, as a director of Stadtlander since June
1996 and as President since November 1997.
Mr.Perlis served as Vice Chairman of Capstone from
May 1995 to December 1997. He served as a director
of Advocat Inc., a long term care company, from March
1994 to May 1995 and as interim Chief Executive
Officer of Capstone from December 1994 to May 1995.
From September 1992 to January 1994, he served as
President of Morris A. Perlis & Assoc., an executive
management consulting firm. From September 1993 to
July 1996, he served as a Director of NOMA, Inc., a
manufacturer of consumer wire and cable.
Joseph F. Furlong, III (1)(5) 49 Mr. Furlong has served as a Director of the Company
since June 1994. He has served as President of
Adirondack Capital Advisors, LLC, a financial advisory
firm, since May 1996. Since June 1996, he has served
as a director of Healthy Planet Products, Inc., an
environmentally friendly manufacturer of greeting
cards.
Mr. Furlong was a partner of Colman Furlong & Co., a
merchant banking firm, from February 1991 to May
1996. He served as a director of Capstone from
December 1994 until December 1997.
</TABLE>
5
<PAGE> 8
<TABLE>
<CAPTION>
HIS PRINCIPAL OCCUPATIONS
DIRECTOR'S NAME HIS AGE DURING THE LAST FIVE YEARS
- --------------- ------- -------------------------------------------------
<S> <C> <C>
Allan C. Silber (2)(3)(4) 49 Mr. Silber has served as a Director of the Company
since September 1991 and was its Chairman of the
Board from September 1991 to May 1994. He has
served as Chairman, Chief Executive Officer and a
director of Counsel Corporation since August 1979 and
was its President from August 1979 to January 1994.
He has served as Chairman of DCAmerica Inc. and other
subsidiaries of Counsel Corporation since October
1988. Mr. Silber has been President of DCAmerica Inc.
since May 1994. He has served as a director of
PharMerica, Inc. since December 1994 and its
Chairman of the Board since February 1995, as a
director of Stadtlander since July 1996 and as
Stadtlander's Chairman of the Board since September
1996. Since December 1993, he has been a member of
the Advisory Committee of RioCan Real Estate
Investment Trust, a Canadian real estate company
("RioCan").
Mr. Silber was a director of Advocat Inc. from March
1994 to November 1996. He served as a director of
O&Y Properties, Inc., a retail and office property
management company, from November 1995 to
November 1996.
Edward Sonshine (2)(5)(6) 51 Mr. Sonshine has served as a Director of the Company
since October 1991. He has served as Vice Chairman of
Counsel Corporation since January 1995 and as one of
its directors since August 1979. He has served as Chief
Executive Officer of Counsel Management Services,
Inc., an affiliate of Counsel Corporation, since January
1992. He has served as a director of Stadtlander since
July 1996, and as a director of PharMerica, Inc. since
December 1994. He has served as President and Chief
Executive Officer of RioCan since July 1995.
Mr. Sonshine served as Executive Vice President of
Counsel Corporation from February 1987 to January
1994. He served as a director of O&Y Properties, Inc.
from November 1995 to November 1996. From May
1995 until November 1996, he served as a director of
Advocat Inc. From January 1987 until September 1993,
he served as President and Chief Executive Officer of
Icarus Realty Corporation.
</TABLE>
6
<PAGE> 9
<TABLE>
<CAPTION>
HIS PRINCIPAL OCCUPATIONS
DIRECTOR'S NAME HIS AGE DURING THE LAST FIVE YEARS
- --------------- ------- -------------------------------------------------
<S> <C> <C>
Edward K. Wissing (2)(3) 60 Mr. Wissing has been the President and Chief Executive
Officer of the Company since May 1994 and has been
the President and Chief Executive Officer of American
HomePatient, Inc., a Tennessee corporation and
wholly owned subsidiary of the Company ("AHPT"), since
February 1983. From October 1991 to May 1994,
he was Executive Vice President of Diversicare Inc. Since
August 1997 he has been a director of Psychiatric
Solutions, Inc.
</TABLE>
- ----------------------
(1) Class 2 Director
(2) Class 3 Director
Each Class 2 and Class 3 Director is a member of at least one of the
Board's standing committees:
(3) Member of the Executive Committee
(4) Member of the Compensation Committee
(5) Member of the Audit Committee
(6) Member of the Disinterested Stock Option Committee
DIRECTOR COMPENSATION
The Company pays Directors who are not its officers or employees
(currently Directors Blackstock, Dattilo, Furlong, Sonshine and Manner) the
following fees: (i) an annual director's fee of $10,000.00, (ii) a fee of
$500.00 for each Board or Board committee meeting attended by telephone, and
(iii) a fee of $1,000.00 for each Board or Board committee meeting attended in
person. The Company, however, pays no fees for attendance at a Committee meeting
occurring on the same day as a meeting of the Board. In addition, the Company
reimburses all Directors for actual expenses incurred in connection with
attendance at Board or Committee meetings.
In 1995 the Company adopted a nonqualified stock option plan for
Directors (the "1995 Director Plan"). Under the 1995 Director Plan, a Director
receives an option to acquire 7,500 shares of Common Stock upon initial election
to the Board. Each Director also receives an additional option to acquire 3,000
shares of Common Stock on December 31 of each year following the year he was
first elected to the Board so long as he served as a Director for at least six
(6) months during that year. In all cases, the per share exercise price of the
options equals the closing market price of the Common Stock on the day
immediately before the date of grant.
Since June 1, 1994, the Company has paid Director Perlis a monthly fee
of $8,500.00 for serving as Chairman of the Board. The Company pays Director
Silber compensation pursuant to a Consulting Agreement. See "Compensation
Committee Interlocks and Insider Participation" on page 21 of this Proxy
Statement. The Company pays the law firm of which Director Manner is a
shareholder fees for rendering legal advice, as more fully described above under
"Nominees for Re-Election as Class 1 Directors."
7
<PAGE> 10
AFFILIATIONS
Director Sonshine is also a director of Counsel Corporation and
President and Chief Executive Officer of Counsel Management Services, Inc.
Director Perlis, the Chairman of the Board, is also a director and President of
Counsel Corporation.
The Company believes that past transactions it has had with its
affiliates have been at prices and on terms no less favorable to the Company
than transactions with independent third parties. The Company may enter into
transactions with its affiliates in the future, but it intends to do so only at
prices and on terms no less favorable to the Company than transactions with
independent third parties. The Company will obtain the approval of the
disinterested members of its Board, or a Board Committee, before entering into
any transaction with an affiliate. In addition, the Company's debt agreements
generally prohibit it from entering into any such affiliate transaction other
than on an arm's-length basis.
MEETINGS AND COMMITTEES
During 1997, the Board of Directors held 7 meetings and adopted no
written consent actions. Each Director attended meetings or executed written
consent actions with respect to at least 75% of the meetings and consent actions
of the Board and its committees held or taken in 1997.
The Board has standing Audit, Executive, Compensation and Disinterested
Stock Option Plan Committees. The Board does not have a nominating committee.
The Executive Committee is composed of Directors Perlis, Silber and
Wissing. The Board has the authority to designate an executive committee to
carry out any functions of the Board. Between meetings of the Board, the
Executive Committee may exercise all powers of the Board. During 1997, the
Executive Committee held no meetings and adopted 40 written consent actions.
The Compensation Committee is composed of Directors Blackstock, Dattilo
and Silber. This Committee approves remuneration arrangements for the Company's
executive officers, administers the Company's Supplemental Executive Retirement
Plan, and reviews compensation plans relating to executive officers, Directors
and employees generally. In 1997, the Compensation Committee held one meeting
and adopted no written consent actions.
The Audit Committee is composed of Directors Blackstock, Furlong and
Sonshine. This Committee engages independent auditors, reviews audit fees,
supervises matters relating to audit functions, and reviews and sets internal
polices and procedures regarding audits, accounts and other financial controls.
In 1997, the Audit Committee held 3 meetings and adopted no written consent
actions.
The Disinterested Stock Option Plan Committee is composed of Directors
Blackstock and Sonshine. This Committee grants options to the Company's
Directors, employees and agents under the Company's 1991 Nonqualified Stock
Option Plan. In 1997, the Disinterested Stock Option Plan Committee held no
meetings and adopted 2 written consent actions.
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<PAGE> 11
STOCK OWNERSHIP OF DIRECTORS,
EXECUTIVE OFFICERS AND PRINCIPAL HOLDERS
The following table contains stockholding information as of April 3,
1998 for (i) persons known to us to be holders of 5% or more of the Company's
Common Stock, (ii) each Director, including those nominated for re-election,
(iii) each of the executive officers named in the Summary Compensation Table on
page 13, and (iv) all Directors and executive officers as a group. Unless
otherwise indicated, all holdings are of record and beneficial.
Ownership of the Company's Common Stock is shown on a "beneficial"
basis. Generally, a person "beneficially owns" shares if he either has the right
to vote those shares or dispose of them. Consequently, more than one person may
be considered beneficially to own the same shares.
In this Proxy Statement, unless otherwise specifically noted, a person
has sole voting and dispositive power for the shares shown as beneficially owned
by him. Shares shown as beneficially owned may include shares that a person has
a right to acquire by exercising options on or before June 2, 1998. The
percentages shown in the table compare a person's beneficially owned shares with
the total number of shares of the Company's Common Stock outstanding on April 3,
1998 (being 14,959,659 shares), plus, as to each person, the number of shares
deemed owned by him because of his right to acquire them by exercising options
on or before June 2, 1998.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE OF
NAME BENEFICIALLY OWNED TOTAL SHARES
- ---- ------------------ ------------
<S> <C> <C>
Counsel Corporation(1)................................. 3,979,625 26.60%
Two First Canadian Place, Suite 1300
Toronto, Ontario, Canada MX5 1E3
J.&W. Seligman & Co. Incorporated(2)................... 1,391,655 9.30
100 Park Avenue
New York, New York 10017
AMVESCAP PLC(3)........................................ 1,225,650 8.19
11 Devonshire Square
London, England EC2M 4YR
Edward K. Wissing(4)................................... 370,231 2.42
Mary Ellen Rodgers(5).................................. 42,132 *
David R. Gnass(6)...................................... 47,483 *
Rita N. Hill(7)........................................ 56,639 *
Kathey S. Palmer(8).................................... 34,293 *
Thomas E. Mills........................................ 0 *
Allan C. Silber(1), (9)................................ 325,667 2.13
Henry T. Blackstock(10)................................ 16,500 *
Edward Sonshine(11).................................... 9,000 *
Morris A. Perlis(12)................................... 325,667 2.13
Thomas A. Dattilo(13).................................. 31,500 *
Joseph F. Furlong, III(14)............................. 61,551 *
Mark Manner(15)........................................ 24,000 *
All Directors and executive officers
as a group(16) (13 persons).......................... 1,344,663 8.26
</TABLE>
- -----------------
* Indicates less than 1% ownership
1 Counsel Corporation, a Toronto, Ontario, Canada corporation, owns 100% of
Counsel Healthcare Assets Inc., which owns 100% of Counselcare Ltd., which
owns 100% of DCAmerica Inc., which owns 100% of AHOM Holdings, Inc., which
directly beneficially owns the shares of Common Stock listed in the table.
Directors Silber, Sonshine and Perlis are directors of Counsel Corporation
and Counsel Healthcare Assets, Inc., and Directors Silber and Perlis are
directors of Counselcare Ltd., DCAmerica, Inc. and AHOM Holdings, Inc.
Director Silber beneficially owns or controls approximately 19.6% of the
common stock of Counsel Corporation, approximately 45% of which is pledged
to a lender. Director Sonshine owns approximately 2.6% of Counsel
Corporation's common stock, and Director Perlis owns approximately 3.2% of
Counsel Corporation's common stock. All of the Directors listed in this
footnote (1) disclaim beneficial ownership of shares of the
9
<PAGE> 12
Company's Common Stock in their capacity as directors of Counsel
Corporation, Counselcare Healthcare Assets Inc., Counselcare Ltd., DCAmerica
Inc. and AHOM Holdings, Inc. Director Silber also disclaims beneficial
ownership of shares of the Company's Common Stock in his capacity as a
shareholder of Counsel Corporation.
2 Ownership information included in the table is based on a Schedule 13G filed
by J.&W. Seligman & Co. and William C. Morris, as the owner of a majority of
the outstanding shares of J.&W. Seligman & Co., claiming shared voting and
dispositive power of 1,391,655 shares.
3 Ownership information included in the table is based on a Schedule 13G filed
by AMVESCAP PLC claiming shared voting and dispositive power of 1,225,650
shares directly and through its subsidiaries.
4 The amount shown includes shares purchasable upon exercise of options issued
under the 1991 Nonqualified Stock Option Plan (the "1991 Option Plan") and
additional shares purchasable upon exercise of options issued under the 1995
Director Plan. Such number of shares and respective per-share exercise
prices are as follows: Under the 1991 Option Plan - 37,500 shares at $15.83,
75,000 shares at $16.50, 225,000 shares at $17.50 and 16,667 shares at
$18.125. Under the 1995 Director Plan - 3,000 shares at $19.67, 3,000 shares
at $26.25, and 3,000 shares at $21.06.
5 The amount shown includes shares purchasable upon exercise of options issued
under the 1991 Option Plan, 30,000 shares at a $22.50 per-share exercise
price, 6,000 shares at a $21.50 per-share exercise price, and 5,000 shares
at a $18.125 per-share exercise price.
6 The amount shown includes shares purchasable upon exercise of options issued
under the 1991 Option Plan, 25,000 shares at a $26.916 per-share exercise
price, 13,333 shares at a $21.50 per-share exercise price, and 8,333 shares
at a $18.125 per-share exercise price.
7 The amount shown includes shares purchasable upon exercise of options issued
under the 1991 Option Plan, 15,000 shares at $16.50 per-share exercise
price, 30,000 shares at a $17.50 per-share exercise price, 6,000 shares at a
$21.50 per-share exercise price, and 5,000 shares at a $18.125 per-share
exercise price.
8 The amount shown includes shares purchasable upon exercise of options issued
under the 1991 Option Plan, 7,500 shares at a $10.00 per-share exercise
price, 9,000 shares at a $16.50 per-share exercise price, 7,500 shares at a
$17.50 per-share exercise price, 4,000 shares at a $21.50 per-share exercise
price, and 5,000 shares at a $18.125 per-share exercise price.
9 The amount shown includes shares purchasable upon exercise of options issued
under the 1991 Option Plan and additional shares purchasable upon exercise
of options issued under the 1995 Director Plan. Such number of shares and
respective per-share exercise prices are as follows: Under the 1991 Option
Plan - 75,000 shares at $16.50, 225,000 shares at $17.50 and 16,667 shares
at $18.125. Under the 1995 Director Plan - 3,000 shares at $19.67, 3,000
shares at $26.25 and 3,000 shares at $21.06. The amount shown does not
include shares of Common Stock beneficially owned by Counsel. See footnote
(1) above.
10 The amount shown includes 7,500 shares purchasable upon exercise of options
at $6.00 per share issued under 1991 Option Plan and additional shares
purchasable upon exercise of options issued under the 1995 Director Plan,
being 3,000 shares at a $19.67 per-share exercise price, 3,000 shares at a
$26.25 per-share exercise price and 3,000 shares at a $21.06 per-share
exercise price.
11 The amount shown includes shares purchasable upon exercise of options issued
under the 1995 Director Plan, 3,000 shares at a $19.67 per-share exercise
price, 3,000 shares at a $26.25 per-share exercise price and 3,000 shares at
a $21.06 per-share exercise price.
12 The amount shown includes shares purchasable upon exercise of options issued
under the 1991 Option Plan and additional shares purchasable upon exercise
of options issued under the 1995 Director Plan. Such number of shares and
respective per-share exercise prices are as follows: Under the 1991 Option
Plan - 75,000 shares at $16.50, 225,000 shares at $17.50 and 16,667 shares
at a $18.125 per-share exercise price. Under the 1995 Director Plan - 3,000
shares at $19.67, 3,000 shares at $26.25 and 3,000 shares at $21.06.
13 The amount shown includes shares purchasable upon exercise of options issued
under the 1991 Option Plan and additional shares purchasable upon exercise
of options issued under the 1995 Director Plan. Such number of shares and
respective per-share exercise prices are as follows: Under the 1991 Option
Plan - 15,000 shares at $10.04 and 7,500 shares at $16.50. Under the 1995
Director Plan - 3,000 shares at $19.67, 3,000 shares at $26.25, and 3,000
shares at $21.06.
14 The amount shown includes 16,006 shares subject to a stock purchase warrant
with an exercise price of $7.33 per share, which warrant was granted in
connection with consulting services provided to the Company. The amount also
includes 15,000 shares purchasable upon exercise of options at $10.04 per
share and 7,500 shares purchasable upon exercise of options at $16.50 per
share, all such options being issued under the 1991 Option Plan. The amount
also includes shares purchasable upon exercise of options issued under the
1995 Director Plan, being 3,000 shares at a $19.67 per-share exercise price,
3,000 shares at a $26.25 per-share exercise price and 3,000 shares at a
$21.06 per-share exercise price.
15 The amount shown includes 7,500 shares purchasable upon exercise of options
at $20.67 issued under the 1991 Option Plan and additional shares
purchasable upon exercise of options issued under the 1995 Director Plan,
being 7,500 shares at a $20.67 per-share exercise price, 3,000 shares at a
$19.67 per-share exercise price, 3,000 shares at a $26.25 per-share exercise
price and 3,000 shares at a $21.06 per-share exercise price..
16 The amount shown includes 1,224,167 shares purchasable upon exercise of
options issued under the 1991 Option Plan, 79,500 shares purchasable upon
exercise of options issued under the 1995 Director Plan, and 16,006 shares
purchasable upon exercise of a warrant.
10
<PAGE> 13
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's executive officers, its Directors, and
persons who own more than 10% of its Common Stock to file reports regarding
their stockholdings in the Company with the Securities and Exchange Commission
("SEC") and the NASDAQ Stock Market. They are required to send the Company
copies of all Section 16(a) reports they file.
The Company is aware that in 1997 Director Silber and Rita Hill, a
Senior Vice President of the Company, each filed late one report on Form 4.
Director Silber's report concerned a single purchase by AHOM Holdings, Inc. on
November 21, 1996 of 20,000 shares of the Company's Common Stock. Officer Hill's
report concerned a single sale on May 13, 1997 of 658 shares of the Company's
Common Stock that were bought on March 3, 1997 through the Company's Employee
Stock Purchase Plan. Based solely on representations of the Company's Directors
and executive officers, and our review of reports on file, we believe that all
other such reports were timely filed.
EXECUTIVE OFFICERS
This table provides biographical information regarding the Company's
executive officers:
<TABLE>
<CAPTION>
HIS OR PRINCIPAL OCCUPATIONS
OFFICER'S NAME HER AGE DURING THE LAST FIVE YEARS
- -------------- ------- --------------------------
<S> <C> <C>
Edward K. Wissing 60 Mr. Wissing has been the President and Chief Executive
Officer of the Company since May 1994 and has been
the President and Chief Executive Officer of American
HomePatient, Inc., a Tennessee corporation and
wholly-owned subsidiary of the Company ("AHPT"), since
February 1983. Since August 1997 he has been a director
of Psychiatric Solutions, Inc. From October 1991 to
May 1994, he was Executive Vice President of Diversicare Inc.
Mary Ellen Rodgers 45 Ms. Rodgers has been the Company's Senior Vice President,
Chief Financial and Accounting Officer, and Secretary since
April 1996. She has also been Senior Vice President and
Chief Financial Officer of AHPT since June 1996. She was
Financial Director/Controller of Eli Lilly and Company
(Information Technology Division), an international
pharmaceutical company, from September 1994 to October
1995, and Controller of Eli Lilly and Company (Lilly Research
Laboratories) from March 1990 to May 1994. She has served
on the board of Peoples Bank & Trust Company, Indianapolis,
Indiana since April 1991.
David R. Gnass 45 Mr. Gnass has been the Company's Senior Vice President
since June 1996 and its Chief Operating Officer since October
1997. He has also been a Senior Vice President of AHPT
since June 1996. He was Senior Vice President of Homedco,
Inc., a home health care company, from April 1993 to June
1995, and Vice President and General Manager of Homedco,
Inc. from January 1992 to April 1993.
</TABLE>
11
<PAGE> 14
<TABLE>
<CAPTION>
HIS OR PRINCIPAL OCCUPATIONS
OFFICER'S NAME HER AGE DURING THE LAST FIVE YEARS
- -------------- ------- --------------------------
<S> <C> <C>
Rita N. Hill 42 Ms. Hill has been the Company's Senior Vice President-
Business Development since February 1997, its Assistant
Secretary since 1994, and the Vice President and Assistant
Secretary of AHPT since April 1996. She was the Company's
Vice President-Business Development from April 1994 to
February 1997, Vice President - Development of Diversicare
Inc. from January 1994 to April 1994, and Vice President -
Finance of Diversicare Inc. from March 1992 to January 1994.
Kathey S. Palmer 40 Ms. Palmer has been the Company's Senior Vice President of
Marketing, Investor Relations and Sales Support since August
1997. From December 1994 to August 1997, she served as Vice
President of Marketing Investor Relations, and from
November 1991 to December 1994 she was Vice President of
Marketing.
Thomas E. Mills 43 Mr. Mills was the Company's Senior Vice President-Strategic
Alliances from February 1996 until December 1997. He was
the Company's Senior Vice President and Chief Operating
Officer from May 1994 to February 1996, and its Secretary
from May 1994 to June 1994. Mr. Mills was Chief Operating
Officer and Vice President of AHPT from August 1992 to
May 1994, and Senior Vice President of AHPT from February
1992 to August 1992.
</TABLE>
EXECUTIVE COMPENSATION
The following table provides compensation information for the 1997,
1996 and 1995 fiscal years regarding the Company's chief executive officer and,
at December 31, 1997, the Company's other five most highly compensated executive
officers. The principal positions given in the table are as of December 31,
1997. Mr. Mills resigned on December 31, 1997.
Instead of awarding annual bonuses in cash for 1996 performance, the
Company purchased split-dollar life insurance policies for the benefit of
certain management personnel, including the named executive officers. The
Company has decided to purchase such insurance policies again to award certain
management personnel for 1997 performance, however, each employee may elect to
receive up to one-half (1/2) of his or her annual incentive bonus in cash
instead. Each named executive officer has elected to receive one-half (1/2) of
the annual incentive bonus in cash. Each amount listed under the column titled
"Other Annual Compensation" is the imputed income received by the named
executive officer due to the insurance policies' death benefit, as calculated
according to the Internal Revenue Service. In addition, each amount listed under
the column titled "All Other Compensation" reflects additional benefits
attributed to the named executive officer based on the premium paid by the
Company to buy the policies. For 1997 one-half (1/2) of the annual incentive
bonus is reflected in the "Bonus" column based on each executive's election
described above.
12
<PAGE> 15
Perquisites for each executive officer are in amounts which do not
require disclosure.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
---------------------------------- --------------------------------------
Awards Payouts
------------------------- ---------
Securities Long-Term
Other Restricted Underlying Incentive
Annual Stock Options/ Plan All Other
Name and Principal Salary Bonus Compensation Award(s) SARs1 Payouts Compensation(2)
Position Year ($) ($) ($) ($) (#) ($) ($)
- ------------------ ---- ------- ------- ------------ ---------- ---------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Edward K. Wissing 1997 300,000 48,750 1,399 -0- 53,000(3)(6) -0- 66,750
President and CEO 1996 275,000 -0- 952 -0- 3,000(3) -0- 140,250
1995 253,000 102,465 -- -0- 228,000(3)(4) -0- 15,180
David R. Gnass 1997 170,000 10,413 235 -0- 25,000(6) -0- 10,412
Senior Vice President 1996 80,000 -0- 153 -0- 57,500(5) -0- 33,000
1995 * * * * * * *
Mary Ellen Rodgers 1997 157,500 17,916 181 -0- 15,000(6) -0- 27,704
Senior Vice President, 1996 112,500 -0- 116 -0- 42,000(5) -0- 40,814
Chief Financial Officer 1995 * * * * * * *
and Secretary
Rita N. Hill 1997 131,250 26,300 322 -0- 15,000(6) -0- 34,158
Senior Vice President 1996 125,000 -0- 222 -0- 12,000(5) -0- 69,663
Business Development 1995 106,000 37,100 -- -0- 30,000(4) -0- 6,360
and Assistant Secretary
Kathey S. Palmer 1997 100,000 10,150 107 -0- 15,000(6) -0- 16,487
Senior Vice President 1996 91,592 -0- 68 -0- 8,000(5) -0- 23,895
of Marketing, Investor 1995 85,600 19,900 -- -0- 7,500(4) -0- 5,136
Relations and Sales
Support
Thomas E. Mills 1997 156,000 -0- 167 -0- -0- -0- 9,360
Senior Vice President - 1996 154,000 -0- 155 -0- 8,000(5) -0- 43,890
Strategic Alliances 1995 154,000 34,650 -- -0- 12,000(4) -0- 9,240
</TABLE>
- ---------------------
* The Company employed Mr. Gnass in June 1996 and Ms. Rodgers in April
1996. Accordingly, no compensation was paid to such individuals in the
1995 fiscal year, as noted by the asterisks appearing in the table, and
paid less than a full year's compensation for each individual in 1996.
1 Amounts for 1995 and 1996 have been adjusted to reflect a 3-for-2
stock split the Company effected in June 1996.
2 Amounts listed reflect matching contributions made by the Company under
its Supplemental Executive Retirement Plan ("SERP") in 1997, 1996 and
1995. In addition, 1996 and 1997 amounts also reflect additional
benefits based on premiums paid by the Company to buy split-dollar life
insurance policies benefitting the named executive officers. A
breakdown of the 1996 and 1997 amounts follows:
<TABLE>
<CAPTION>
SERP Matching Benefit Based on Insurance
Year Contributions Premium
---- ------------- --------------------------
<S> <C> <C> <C>
Edward K. Wissing 1997 $18,000 48,750
1996 16,500 123,750
David R. Gnass 1997 -0- 10,412
1996 -0- 33,000
Mary Ellen Rodgers 1997 9,789 17,915
1996 3,014 37,800
Rita N. Hill 1997 7,858 26,300
1996 7,413 62,250
Kathey S. Palmer 1997 6,337 10,150
1996 5,595 18,300
Thomas E. Mills 1997 9,360 -0-
1996 9,240 34,650
</TABLE>
3 Amounts include options granted under 1995 Director Plan for services
as a Director.
4 Amounts include options granted in January 1996 that relate to 1995
performance.
5 Amounts include options granted in the first fiscal quarter of 1997
that relate to 1996 performance.
6 Amounts include options granted in the first fiscal quarter of 1998
that relate to 1997 performance.
13
<PAGE> 16
EMPLOYMENT AND OTHER AGREEMENTS
Edward K. Wissing
On October 1, 1991, the Company entered into an employment agreement
with Edward Wissing which was amended most recently on December 23, 1997. The
employment agreement provides for a 1997 base annual salary of $300,000 and a
1998 base annual salary of $325,000. Despite this provision, Mr. Wissing has
voluntarily agreed to temporarily maintain his base annual salary at $300,000 in
1998. The employment agreement also provides for annual incentive bonuses equal
to an amount up to 50% of Mr. Wissing's then current base annual salary. The
annual incentive bonuses are subject to performance criteria set by the
Company's Board of Directors and Mr. Wissing.
Mr. Wissing's employment agreement automatically renews each year
unless notice is given by either the Company or Mr. Wissing. If the employment
agreement is terminated by the Company without cause or by Mr. Wissing either
upon a change in control of the Company or a constructive discharge, Mr. Wissing
is entitled to receive a severance payment in an amount equal to (a) three times
his contractual base annual salary (currently $325,000), plus (b) an incentive
bonus amount equal to the annual incentive bonus paid to Mr. Wissing during the
last fiscal year ($97,500 in 1997), multiplied by a fraction, the numerator of
which is the number of months he was employed by the Company during the current
fiscal year, and the denominator of which is twelve. If, however, Mr. Wissing is
terminated prior to July 1 of any year, he will receive only 80% of that
incentive compensation amount. In addition, all benefits and perquisites
provided to Mr. Wissing at the time of termination will continue for three
years, and all stock options granted to Mr. Wissing will be deemed vested and
exercisable for three years, subject to the terms of the governing stock option
plans. Further, any options granted to Mr. Wissing prior to a change in control
of the Company will be fully vested upon the change in control, regardless of
whether he is terminated or elects to resign. Upon a termination of employment,
Mr. Wissing may elect to require the Company to repurchase options granted to
him for a purchase price equal to the difference between the fair market value
of the Company's Common Stock at the date of termination and the stated option
exercise price.
The employment agreement does not directly address retirement, and any
compensation or other benefits which may be granted Mr. Wissing upon retirement
will be determined by the Compensation Committee. If the employment agreement is
terminated by the Company for cause, or by Mr. Wissing other than upon
retirement, a constructive discharge or a change in control, Mr. Wissing will
not be entitled to any compensation following the date of termination other than
the pro rata amount of his current base salary through such date. In such case,
Mr. Wissing is prohibited from competing with the Company for one year.
Mary Ellen Rodgers and David R. Gnass
On April 1, 1996, the Company entered into a confidentiality,
non-competition and severance pay agreement with Mary Ellen Rodgers, and on of
June 16, 1996, the Company entered into a similar agreement with David R. Gnass.
Under the terms of those agreements, if either Ms. Rodgers' or Mr. Gnass'
employment is terminated within six months of a change in control of the
Company, he or she (as the case may be) will be entitled to receive a severance
payment in an amount equal to her or his annual base salary, exclusive of
incentive compensation. In addition, any stock options granted to them will
become fully vested upon a change in control of the Company, whether or not
employment is terminated.
Upon termination of employment, Ms. Rodgers and Mr. Gnass, as the case
may be, is prohibited from competing with the Company for one year.
14
<PAGE> 17
Kathey S. Palmer
On December 23, 1997, the Company entered into a confidentiality,
non-competition and severance pay agreement with Kathey S. Palmer. If the
Company terminates Ms. Palmer's employment within one year after a change in
control, Ms. Palmer will receive a severance payment in an amount equal to the
following: (a) her annual base salary (currently $116,000), plus (b) an
incentive compensation amount equal to the annual incentive bonus she received
during the last fiscal year ($20,300 in 1997) multiplied by a fraction, the
numerator of which is the number of months Ms. Palmer is employed by the Company
during the current year, and the denominator of which is twelve. If, however,
Ms. Palmer is terminated within six months of any change in control, she will
receive only 80% of that incentive bonus amount. In addition, upon termination
resulting from a change in control of the Company, the Company will continue all
Ms. Palmer's employee benefits for one year.
Upon a change in control of the Company, any stock options granted to
Ms. Palmer will be fully vested, whether or not she is terminated, subject to
the terms of the governing stock option plans.
Upon termination of employment, Ms. Palmer is prohibited from competing
with the Company for one year.
Thomas E. Mills
On February 8, 1995, the Company entered into a three-year employment
agreement with Thomas E. Mills. On December 22, 1997, the Company and Mr. Mills
entered into a severance agreement and, pursuant to this agreement, his
employment terminated on December 31, 1997. Pursuant to the severance agreement
the Company paid Mr. Mills a $130,000 severance payment, which is equal to ten
months of his base monthly salary. Mr. Mills did not receive any incentive
compensation for services performed during 1997. Mr. Mills is prohibited from
competing with the Company for one year, until January 1, 1999.
15
<PAGE> 18
OPTION GRANTS
The following table provides information concerning stock option grants
made in 1997 under both the Company's 1991 Nonqualified Stock Option Plan and
its 1995 Nonqualified Stock Option Plan for Directors to each of the executive
officers named in the Summary Compensation Table. In 1997 the Company granted to
employees options to purchase a total of 267,000 shares of Common Stock and to
Directors options to purchase a total of 24,000 shares of Common Stock, for a
total of options to purchase 291,000 shares of Common Stock. The Company grants
no stock appreciation rights.
Mr. Wissing's option to acquire 3,000 shares of Common Stock was
granted automatically on December 31, 1997 under the Company's 1995 Nonqualified
Stock Option Plan for Directors. The table does not reflect options granted in
1998 in recognition of services performed in 1997. Information regarding such
option grants is included in the Summary Compensation Table.
For services performed in 1996, on February 25, 1997 the Company
granted Mr. Gnass, Ms. Rodgers, Ms. Hill, Ms. Palmer and Mr. Mills options to
acquire shares of Common Stock. By contract, Mr. Gnass' options vest one-third
upon grant and one-third upon each of the first two anniversaries thereof. Each
of the other officers' options vest one-quarter upon grant and one-quarter upon
each of the first three anniversaries thereof. Information related to these and
Mr. Wissing's options are also provided in the Summary Compensation Table.
The dollar amounts appearing in the table's last two columns are the
result of calculations at the 5% and 10% rates as required by the SEC. These
amounts are not intended to forecast possible future appreciation, if any, of
the Company's Common Stock price.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable Value
at Assumed Annual Rate
of Stock Price Appreciation
Individual Grants For Option Term
---------------------------------------------------------------------- ---------------------------
Number Percent of Total
of Securities Options/SARs
Underlying Granted to Exercise or
Options/SARs Employees Base Price Expiration
Name Granted (#) in Fiscal Year ($/SH) Date 5% ($) 10%($)
- ------------------- ------------- ----------------- ----------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Edward K. Wissing 3,000 1.0% $21.06 12/31/2007 39,734 100,690
David R. Gnass 20,000 6.9 21.50 2/25/2007 270,427 685,291
Mary Ellen Rodgers 12,000 4.1 21.50 2/25/2007 162,256 411,175
Rita N. Hill 12,000 4.1 21.50 2/25/2007 162,256 411,175
Kathey S. Palmer 8,000 2.7 21.50 2/25/2007 108,171 274,116
Thomas E. Mills 8,000 2.7 21.50 3/31/1998 108,171 274,116
</TABLE>
16
<PAGE> 19
OPTION EXERCISES AND VALUES
The following table provides information concerning each exercise of
options during 1997 by the executive officers named in the Summary Compensation
Table and the year-end value of unexercised options held by each such officer.
The Company grants no stock appreciation rights.
The unexercised option amounts do not include options granted in 1998
which relate to 1997 performance. Information regarding such option grants is
provided in the Summary Compensation Table.
Options are classified as "in-the-money" (a term used in the last
column of the table) if the market value of the underlying Common Stock exceeds
the exercise price of the option. The value of such in-the-money options is the
difference between the option exercise price and $23.50, the per-share market
value of the underlying Common Stock as of December 31, 1997. Such amounts may
not necessarily be realized. Actual values realized, if any, upon the exercise
of options will be based on the market price of shares of Common Stock at the
time of exercise, and are thus dependent upon future performance of the Common
Stock.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Shares
Acquired Number of Securities Underlying Value of Unexercised
on Exercise Value Realized Unexercised Options/SARs at In-the-Money Options/SARs at
Name (#) ($) 1997 Fiscal Year-End(#) 1997 Fiscal Year End ($)
- -------------------- ----------- -------------- ------------------------------- ----------------------------
Exercisable/Unexercisable Exercisable/Unexercisable
------------------------- -------------------------
<S> <C> <C> <C> <C>
Edward K. Wissing 37,500 461,330 271,500/75,000 1,731,435/450,000
David R. Gnass -0- -0- 31,666/25,834 13,332/26,668
Mary Ellen Rodgers -0- -0- 23,000/19,000 26,000/28,000
Rita N. Hill -0- -0- 34,250/22,750 204,750/104,250
Kathey S. Palmer -0- -0- 21,250/10,750 182,500/42,750
Thomas E. Mills 35,000 227,115 2,000/10,000 4,000/36,000
</TABLE>
17
<PAGE> 20
COMPENSATION COMMITTEE REPORT
This Compensation Committee Report is not deemed to be part of any
document filed with the SEC pursuant to the Securities Act of 1933 (the
"Securities Act") or the Exchange Act and is not to be deemed incorporated by
reference in any documents filed under the Securities Act or the Exchange Act
without the express written consent of the members of the Compensation Committee
named below.
The Compensation Committee of the Board of Directors makes decisions on
compensation of the Company's senior executives, except for decisions related to
awards under the Company's 1991 Nonqualified Stock Option Plan (which are made
by a separate committee of the Board). The Committee's task is to establish
reasonable and appropriate executive compensation guidelines which meet their
stated purposes and effectively serve the needs of the Company and its
stockholders. The Committee's members are Henry T. Blackstock, Thomas A. Dattilo
and Allan C. Silber.
Compensation Philosophy and Policies for Executive Officers
The Company's primary goal is to provide high quality patient care
while maximizing stockholder value. The Company believes the best way to achieve
this goal is threefold: (1) to be a leader in providing relevant, high quality
health services, (2) to expand its operations primarily through acquisitions and
internal growth, and (3) to establish a reputation as a desirable employer and
responsible corporate citizen. The Compensation Committee seeks to link this
goal and the Company's compensation programs by aligning the interests of its
stockholders and management personnel, including its executive officers, and
believes this alignment increases the likelihood of the Company's success on
both a short-term and long-term basis.
The Company's executive compensation program is consistent with its
compensation program for all management levels. For example, all key employees,
including executive officers, are eligible to participate in the Company's 1991
Nonqualified Stock Option Plan, and the Company has an Employee Stock Purchase
Plan in which approximately 18% of the Company's eligible employees participate.
The Company's executive compensation program supports the Company's
objective of creating stockholder value by:
- Emphasizing pay for performance by making a significant portion of
executive compensation "at risk."
- Aligning the interest of executives with the long-term
interest of stockholders by awarding stock options at current
market prices which only have value to the executives through
long-term stock appreciation.
- Providing compensation opportunities that attract and retain
talented and committed executives on a long-term basis.
- Balancing the Company's short-term and long-term business,
financial and strategic goals.
The Company's executive compensation program is comprised of three
principal components: base salary, annual incentive bonus, and long-term
incentive opportunity through nonqualified stock options. The combination of
these various compensation elements is designed to encourage management to
balance the Company's short-term and long-term goals.
18
<PAGE> 21
The Company intends the annual executive pay targets (base salary plus
incentive bonus) to be competitive with executive compensation of other U.S.
public health care companies. The Compensation Committee compares the Company's
executive pay targets with the annual executive pay of those companies which are
included in the Home Health Care Services Group, the peer group used for
comparison purposes in the Stock Performance Graph appearing on page 22 of this
Proxy Statement. Because the Home Health Care Services Group is small and
complete information is not available, the Compensation Committee also compares
the Company's executive pay targets with those of companies outside of this
group. Since the Company's competitors for executive talent is likely more
numerous than the entities included in the Home Health Care Services Group, such
broader-based comparison is appropriate and justified. By analyzing competing
compensation packages, the Compensation Committee hopes to attract and retain
talented and committed executives on a long-term basis.
Base Salary
With the help of the Chief Executive Officer, the Compensation
Committee evaluates all management salaries, including executive salaries, on a
regular basis. In these evaluations, the Compensation Committee considers levels
of responsibility, individual performance, internal equity, external pay
practices, and achievement of the Company's strategic goals. Regarding external
pay practices, the Compensation Committee seeks to set base salaries for
executive officers at approximately the market rate of the Company's competitors
for executive talent, as determined based on information gathered from outside
sources.
Annual Incentives
Annual incentive bonus awards are designed to focus management
attention on key operational goals for the current fiscal year. In this way the
Company strives to meet the objective of emphasizing performance-based
compensation. The key operational goals are specific to each executive's area of
responsibility. Specific weighting is assigned for identified financial,
strategic and management practices goals. Up to 50% of the available bonus
percentage for each executive officer is tied to Company profitability,
generally defined by achievement of the annual budget as approved by the Board.
1997 annual incentive bonus awards were subject to weighting related to
management's responsibilities in connection with the Company's response to the
enactment of the Balanced Budget Act and the reduction of Medicare oxygen
reimbursement. The Company's response, in large part, was to undertake a
restructuring, announced on September 25, 1997, designed to fundamentally
reshape the Company's organization in order to increase shareholder value and
profitable growth. The imperatives against which weightings have been applied
for 1997 incentive awards include: continuing to be an active consolidator,
maximizing operating leverage by achieving cost efficiencies, initiating process
and structure improvements at all levels of the Company's operations, optimizing
regional density, accelerating the development of joint ventures and strategic
alliances, increasing local market share by focusing on core product categories
of respiratory and infusion, and continuing the Company's commitment to Personal
Caring Service(sm). During 1997, the operational and reshaping goals were
balanced to evaluate achievement by the management group.
Company executives may earn a bonus equal to between 20% and 50% of
their annual base salaries based upon achievement of their specific operational
goals and achievement by the Company or business unit of its financial targets.
At the end of the year, the Compensation Committee evaluates performance in
light of these goals on an arithmetic scale with pre-established weighting, and
has the discretion to adjust these calculations if circumstances warrant.
19
<PAGE> 22
In 1997, the annual incentive bonus awards for 1996 performance were
not paid in cash. Instead, the Company elected to buy split-dollar life
insurance policies on behalf of management personnel, including the executive
officers. The Company intends to buy split-dollar life insurance policies again
as incentive compensation for 1997 performance of certain management personnel.
The Company is providing each such management employee the option of receiving
up to one-half (1/2) of his or her annual incentive bonus award in cash. Each
employee for whom such a policy was bought will be entitled to that portion of
both the death benefit and the cash surrender value of the policy which exceeds
the premium paid by the Company to buy the policy. The Company elected to offer
the split-dollar life insurance product to certain of its middle and senior
management employees with the purpose of combining the benefits of a tax
advantaged insurance product, valuable insurance coverage for its employees, and
appropriate incentive compensation reflecting accomplishments and performance.
Bonuses for lower level management and branch managers continue to be paid in
cash.
Long-Term Incentives
The Company's long-term incentive compensation program consists of
nonqualified stock options which are related to improvement in long-term
stockholder value. Options are the right to purchase shares of Common Stock at
their fair market value on the trading day immediately preceding the date the
option is granted. Options thus will only have value if the Company's stock
price increases. Stock option grants are designed to align executive interests
with the long-term interest of stockholders.
The Board of Directors' Disinterested Stock Option Committee grants
stock options, not the Compensation Committee. The Disinterested Stock Option
Committee selects the number of shares covered by each grant based on an
executive's level of responsibility and past and anticipated contributions to
the Company.
Chief Executive Officer Compensation
Mr. Wissing is the Company's Chief Executive Officer. As Chief
Executive Officer, Mr. Wissing is eligible to participate in the same executive
compensation plans available to the Company's other senior executive officers.
The general approach in setting the Chief Executive Officer's annual
compensation is based on the same considerations described above, that is to be
competitive with other U.S. public health care corporations, but also to have a
significant portion of annual incentive compensation "at risk" based upon
specific corporate-wide operating performance criteria. The Compensation
Committee's approach is reflected in the Company's Employment Agreement with Mr.
Wissing, which sets Mr. Wissing's base compensation and his maximum annual
incentive bonus. See "Employment And Other Agreements" appearing earlier in this
Proxy Statement.
Under the Employment Agreement, the Company approved a $300,000.00 base
salary for Mr. Wissing for 1997 and established his target incentive bonus value
at 50% of his base salary, or $150,000.00. According to market data, such base
salary and annual incentive target were within the range of average market rates
and appropriately within the Company's overall internal pay practices. Mr.
Wissing earned a bonus for 1997 performance valued at $97,500, which was 32.5%
of his base salary and which represented 65% of his target. The basis for Mr.
Wissing's 1997 bonus includes: (1) leadership, planning and execution of the
restructuring and the fundamental reshaping activities announced September 25,
1997 to counteract the impact of the 25% Medicare oxygen reimbursement reduction
beginning January 1, 1998 that was enacted by Congress and signed by President
Clinton in the Balanced Budget Act of 1997, (2) achievement of specific
operational goals including an increase in revenue and acquisitions in excess of
budget, and (3) achievement of strategic and organizational goals in redefining
the Company's strategic imperatives for long-term profitability and value
creation.
20
<PAGE> 23
The Disinterested Stock Option Committee granted Mr. Wissing options to
acquire 50,000 shares of Common Stock at an exercise price of $18.125 per share
in relation to his performance as an executive officer in 1997. For services as
a Director under the Company's 1995 Nonqualified Stock Option Plan for
Directors, Mr. Wissing was granted an option on December 31, 1997 to acquire
3,000 shares at a per share exercise price of $21.06.
Tax Regulations
Section 162(m) of the Internal Revenue Code of 1986, as amended,
generally disallows a tax deduction to public companies for executive
compensation in excess of $1 million. It is not anticipated that the Company
will pay any of its executive officers compensation in excess of $1 million in
the 1998 fiscal year and, accordingly, to date the Company has not adopted a
policy in this regard.
Report Submitted By:
Henry T. Blackstock
Thomas A. Dattilo
Allan C. Silber
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As noted above, the Compensation Committee is currently composed of
Directors Blackstock, Dattilo and Silber. No member of the Compensation
Committee is or has been an employee of the Company. Director Silber, however,
is a consultant to the Company.
The Company has a consulting agreement with Mr. Silber, a Director of
the Company and Chairman of the Board of Directors, Chief Executive Officer and
principal shareholder of Counsel, to provide certain services to the Company,
including the identification and analysis of potential businesses to be
considered for acquisition. The Consulting Agreement had an initial term of one
year beginning January 1992 and is renewable by agreement of Mr. Silber and the
Company, subject to approval by a majority of disinterested Board members
(currently Directors Blackstock, Sonshine, Furlong, Dattilo and Manner). The
Consulting Agreement was most recently renewed on March 31, 1997 for an
additional one-year term. The Consulting Agreement provides for a base monthly
consulting fee of $20,000.00, with an annual performance bonus, at the Board's
discretion, of up to $60,000. The Company paid Mr. Silber a bonus of $60,000 in
1997 for services performed in 1996 and a bonus of $60,000 in 1998 for services
performed in 1997. In 1997, an independent committee of Company Directors
reviewed records related to purchases and sales of Company stock by insiders and
discovered an inadvertent sale and purchase of Company shares within a six month
period by Counsel Corporation. Upon notification, Counsel Corporation promptly
paid to the Company $344,000, the amount of profits realized from the
inadvertent sale and purchase. Also in 1997, a separate claim was brought to the
attention of the Company, and although Counsel Corporation contended that the
sale and purchase did not occur within a six month period, to resolve the claim
Counsel Corporation agreed to pay the Company $60,000 as settlement.
The Company has entered into a letter agreement with DCAmerica Inc.
dated August 7, 1997. Director Silber is the Chairman and President of
DCAmerica. Under the agreement, the Company could engage DCAmerica to provide
certain financial and other consulting services in connection with certain
acquisitions or combinations, financing arrangements or other significant
transactions undertaken by the Company. Any fee paid to DCAmerica for its
services would be a percentage fee based on the value of the transaction. In
1997 the Company did not engage DCAmerica under the letter agreement, and no
fees were paid.
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<PAGE> 24
STOCK PERFORMANCE GRAPH
The stock performance graph shown below is not deemed to be part of any
document filed with the SEC pursuant to the Securities Act or the Exchange Act
and is not to be deemed incorporated by reference in any documents filed under
the Securities Act or the Exchange Act without the express written consent of
the Company.
The following graph compares the cumulative total returns of the
Company's Common Stock with those of the Nasdaq Market Index and the Home Health
Care Services Group (SIC Number 8082) Index, a peer group index compiled by
Media General Financial Services. The peer group includes approximately 28
companies, excluding the Company.
Cumulative return assumes $100 invested in the Company or respective
indices on January 1, 1993 with dividend reinvestment through December 31, 1997.
The comparisons in this table are required by the SEC and are not
indicative of possible future performance of the Company's Common Stock.
COMPARE 5-YEAR CUMULATIVE TOTAL RETURN
AMONG AMERICAN HOMEPATIENT, INC.,
NASDAQ MARKET INDEX AND SIC CODE INDEX
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
AMERICAN HOMEPATIENT, INC. 100 110.42 197.92 245.83 510.42 440.18
SIC CODE INDEX 100 84.30 79.50 76.93 69.80 71.44
NASDAQ MARKET INDEX 100 119.95 125.94 163.35 202.99 248.30
</TABLE>
ASSUMES $100 INVESTED ON JAN. O1, 1993
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING DEC. 31, 1997
The graph presents information since January 1, 1993. The Company does
not directly tie executive compensation to stock performance. The Board's
Compensation Committee will determine the future impact, if any, of stock
performance on executive compensation.
22
<PAGE> 25
Appendix A
PROXY AMERICAN HOMEPATIENT, INC. PROXY
ANNUAL MEETING OF STOCKHOLDERS, MAY 28, 1998
THE BOARD OF DIRECTORS SOLICITS THIS PROXY
The Annual Meeting will be held on May 28, 1998, at 9:00 a.m. Central
Daylight Time, at 1800 First American Center, 315 Deaderick Street, Nashville,
Tennessee, 37238. The undersigned hereby appoints Edward K. Wissing and Mary
Ellen Rodgers, or either of them, as proxies, with power of substitution, to
vote all shares of the undersigned at the Annual Meeting, and at any
adjournments or postponements thereof, in accordance with the following
instructions:
(1) ELECTION OF CLASS 1 DIRECTORS
<TABLE>
<S> <C>
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY to vote for all
(except as marked to the contrary below) nominees listed below
</TABLE>
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE CHECK THE
BOX TO VOTE "FOR" ALL NOMINEES AND STRIKE A LINE THROUGH THE NAME
OF THE NOMINEE LISTED BELOW FOR WHOM YOU WISH TO WITHHOLD
AUTHORITY TO VOTE.)
Henry T. Blackstock Thomas A. Dattilo Mark Manner
(2) In their discretion, on such other matters as may properly come before the
meeting.
[ ] FOR DISCRETION [ ] AGAINST DISCRETION [ ] ABSTAIN
(Continued on reverse side)
(Continued from other side)
THE SHARES REPRESENTED HEREBY WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION
IS MADE, THE SHARES WILL BE VOTED FOR THE NOMINEES IN THE ELECTION OF DIRECTORS
AND, IN THE DISCRETION OF THE PROXIES, ON SUCH OTHER MATTERS AS MAY PROPERLY
COME BEFORE THE MEETING.
PLEASE SIGN AND DATE BELOW AND RETURN PROMPTLY.
Dated: , 1998
-----------------------
------------------------------
Dated: , 1998
-----------------------
------------------------------
Signatures of stockholder(s)
should correspond exactly with
the name printed hereon. Joint
owners should each sign
personally. Executors,
administrators, trustees,
etc., should give full title
and authority.
AMERICAN HOMEPATIENT, INC.
5200 MARYLAND WAY, SUITE 400
BRENTWOOD, TENNESSEE 37027-5018
