SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by 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 Rule 14a-11(c) or Rule 14a-12
Omega Healthcare Investors, Inc.
(Name of Registrant as Specified in Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form of Schedule and the date of its filing.
(1) Amount previously paid:
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(4) Date filed:
OMEGA HEALTHCARE INVESTORS, INC.
9690 Deereco Road, Suite 100
Timonium, Maryland 21093
(410) 427-1700
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
May 30, 2002
To our Stockholders:
The Annual Meeting of Stockholders of Omega Healthcare Investors, Inc.
("Omega") will be held at the Holiday Inn Select, Baltimore-North, 2004
Greenspring Drive, Timonium, Maryland on Thursday, May 30, 2002, at 10:00 A.M.
EST, for the following purposes:
1. To elect four members to the Board of Directors;
2. To amend our Articles of Incorporation and Bylaws to increase the
maximum size of our Board of Directors from nine to thirteen
directors. The Board of Directors has approved the increase of the
current size of the Board of Directors by one seat and has nominated
C. Taylor Pickett, our Chief Executive Officer, to fill the resulting
vacancy.
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The nominees for election as directors are Thomas W. Erickson, Harold J.
Kloosterman and Donald J. McNamara, each of whom presently serve as a director
of Omega, and C. Taylor Pickett.
The Board of Directors has fixed the close of business on April 12, 2002 as
the record date for the determination of stockholders who are entitled to notice
of and to vote at the meeting or any adjournments thereof.
We encourage you to attend the meeting. Whether you are able to attend or
not, we urge you to indicate your vote on the enclosed proxy card FOR the
election of directors and FOR the amendments to our Articles of Incorporation
and Bylaws as set forth in the attached Proxy Statement. Please sign, date and
return the proxy card promptly in the enclosed envelope. If you attend the
meeting, you may vote in person even if you previously have mailed a proxy card.
By order of the Board of Directors,
C. Taylor Pickett
Chief Executive Officer
April 15, 2002
Timonium, Maryland
YOUR VOTE IS IMPORTANT. Please sign, date and mail the proxy card promptly
in the enclosed envelope whether or not you plan to attend the meeting. It is
important that you return the proxy card promptly whether or not you plan to
attend the meeting, so that your shares are properly voted.
If you hold shares through a broker, bank or other nominee (in "street
name"), you may also have the ability to vote by telephone or the Internet in
accordance with instructions that they will include with this mailing. In either
event, we urge you to vote promptly.
OMEGA HEALTHCARE INVESTORS, INC.
9690 Deereco Road, Suite 100
Timonium, Maryland 21093
(410) 427-1700
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
May 30, 2002
The accompanying proxy is solicited by our Board of Directors to be voted
at the Annual Meeting of Stockholders to be held at the Holiday Inn Select,
Baltimore-North, 2004 Greenspring Drive, Timonium, Maryland at 10:00 A.M. EST on
Thursday, May 30, 2002, and any adjournments of the meeting. It is anticipated
that this proxy material will be mailed on or about April 19, 2002 to our common
stockholders of record on April 12, 2002.
A copy of our Annual Report for the year ended December 31, 2001, including
financial statements, is enclosed.
A stockholder giving a proxy has the power to revoke it at any time before
it is exercised. A proxy may be revoked by filing with our Secretary (i) a
signed instrument revoking the proxy or (ii) a duly executed proxy bearing a
later date. A proxy also may be revoked if the person executing the proxy is
present at the meeting and elects to vote in person. If the proxy is not
revoked, it will be voted by those named in the proxy.
VOTING SECURITIES
Our outstanding voting securities as of April 12, 2002, the record date,
consisted of 37,127,456 shares of common stock, par value $.10 per share and
1,048,420 shares of Series C Convertible Preferred Stock ("Series C preferred
stock"). Each holder of record of common stock and Series C preferred stock as
of the close of business on April 12, 2002 is entitled to notice of and to vote
at the Annual Meeting or any adjournments thereof. Each holder of shares of
common stock is entitled to one vote per share on all matters properly brought
before the Annual Meeting. The holder of our Series C preferred stock will vote
as a single class with holders of common stock on all matters properly brought
before the Annual Meeting on an as-converted basis. The 1,048,420 shares of
Series C preferred stock outstanding as of April 12, 2002 are convertible into
16,774,720 shares of common stock and accordingly an aggregate of 53,902,176
votes are entitled to be cast by the holders of common stock and Series C
preferred stock at the meeting.
VOTING
The presence at the Annual Meeting of shares representing a majority of the
voting power associated with our issued and outstanding common stock and Series
C preferred stock will be necessary to establish a quorum for the conduct of
business at the Annual Meeting. Under our Bylaws, directors are elected by a
plurality of the votes cast at the Annual Meeting. The proposal to amend our
Articles of Incorporation and Bylaws to increase the maximum number of members
of the Board of Directors from nine to thirteen must be approved by the
affirmative vote of at least 80% of the shares of issued and outstanding common
stock and Series C preferred stock, voting together as a class on an
as-converted basis.
As of the record date, our directors and executive officers beneficially
owned 30,563,715 shares of our common stock (representing 56.7% of the votes
entitled to be cast at the meeting), including 29,113,030 shares beneficially
owned by directors as a result of their affiliation with Explorer. Excluding
shares beneficially owned by Explorer, shares held by directors and executive
officers of our company entitle them to exercise approximately 2.7% of the
voting power of the shares entitled to vote at the Annual Meeting on an
as-converted basis.
Brokers holding shares in "street name" may vote the shares only if the
beneficial owner provides instructions on how to vote. Brokers will provide
beneficial owners instructions on how to direct the brokers to vote the shares.
Brokers holding shares for beneficial owners cannot vote on Proposal 2 without
the beneficial owners' specific instructions. A so-called "broker non-vote"
occurs when a broker, holding common stock as nominee, does not receive voting
instructions from the beneficial owner. With respect to the election of
directors, broker non-votes and the decision to withhold authority to vote for
any or all of the director nominees named above will have no impact on the
outcome of the voting. With respect to Proposal 2 to amend the Articles of
Incorporation and the Bylaws, abstentions and broker non-votes will have the
same effect as a vote against the proposal. There are no rights of appraisal or
similar dissenter's rights with respect to any matter to be acted upon pursuant
to this Proxy Statement.
We urge stockholders to vote promptly either by signing, dating and
returning the enclosed proxy card in the enclosed envelope, or for stockholders
who own their shares in street name through a broker, in accordance with the
telephone or Internet voting instructions your broker may include with this
mailing.
PROPOSAL 1 -- ELECTION OF DIRECTORS
Director Nominees and Voting Requirements.
Our Board of Directors currently consists of nine directors. Pursuant to
our Articles of Incorporation, the directors have been divided into three
groups. At this year's Annual Meeting, four directors will be elected to hold
office for a term of three years or, in each case, until their respective
successors have been duly elected and qualified.
The nominees for election as directors are Thomas W. Erickson, Harold J.
Kloosterman, Donald J. McNamara and C. Taylor Pickett. Mr. Pickett, our Chief
Executive Officer, has been nominated to fill the vacancy that would be created
upon the increase in the total number of directors described in Proposal 2, and
therefore his election is subject to the approval of Proposal 2. The holders of
our Series A and Series B preferred stock are entitled to call a special meeting
of preferred stockholders to elect two additional directors when dividends on
the Series A and Series B preferred stock are in arrears for 18 months or more.
Unless authority to vote for the election of directors has been
specifically withheld, the persons named in the accompanying proxy card intend
to vote FOR the election of the nominees named above to hold office for the
terms indicated above or until their respective successors have been duly
elected and qualified.
Under our Bylaws, directors are elected by a plurality of the votes cast at
the Annual Meeting. As a result, broker non-votes and the decision to withhold
authority to vote for any or all of the director nominees named above will have
no impact on the outcome of the voting.
If any nominee becomes unavailable for any reason (which event is not
anticipated), the shares represented by the enclosed proxy may (unless the proxy
contains instructions to the contrary) be voted for such other person or persons
as may be determined by the holders of the proxies. In no event would the proxy
be voted for more than four nominees.
Stockholders' Agreement with Explorer Holdings, L.P.
On July 14, 2000, Explorer Holdings, L.P. ("Explorer"), completed an
investment (the "Series C Investment") of $100.0 million in exchange for
1,000,000 shares of Omega's Series C preferred stock. In connection with
Explorer's Series C Investment, Omega entered into a Stockholders' Agreement
with Explorer dated July 14, 2000 (the "Stockholders' Agreement"). As a
condition to the closing of Explorer's additional $31.3 million investment in
February 2002, we amended our Stockholders' Agreement with Explorer (the "2002
Stockholders' Agreement") to permit Explorer to designate a number of directors
that would generally be proportionate to Explorer's ownership of voting
securities, not to exceed five directors (six following an increase in the size
of the Board of Directors to ten directors). Under the 2002 Stockholders'
Agreement, Omega agreed to appoint C. Taylor Pickett to the Board of Directors
following approval of an increase in the size of the Board of Directors. If Mr.
Pickett is appointed as a member of the Board of Directors, he will not be
serving in the capacity of one of Explorer's designated directors. Explorer has
determined not to designate any additional directors at this time (although it
has the right to do so under the 2002 Stockholders' Agreement as a result of its
present ownership of a majority of our voting stock). Explorer reserves the
right at any time during the term of the 2002 Stockholders' Agreement and during
which it owns a majority of our voting stock to request the Board of Directors
to increase the size of the Board of Directors to permit Explorer to designate a
majority of the directors. Under the 2002 Stockholders' Agreement, the number of
directors on the Board of Directors may not exceed nine without the consent of
Explorer (thirteen following stockholder approval of the increase in the size of
the Board of Directors). We have agreed to take appropriate action to ensure
generally that Explorer's representation on all committees of the Board of
Directors is proportionate to its representation on the entire board, other than
any special committee established to consider transactions in which Explorer or
any of its affiliates may have a conflict of interest. Explorer is entitled to
designate at least one director of Omega's Board of Directors as long as it owns
at least five percent (5%) of the total voting power of Omega and to approve one
"independent director" as long as it owns at least twenty-five percent (25%) of
the shares it acquired at the time it completed the Series C Investment (or
common stock issued upon the conversion of the Series C preferred stock acquired
by Explorer at such time). Explorer has the right to elect additional preferred
stock directors if the dividends on shares of the Series C preferred stock are
in arrears for four or more dividend periods. Explorer has waived such right
through December 31, 2002 provided that dividends on any shares of Series C
preferred stock are not in arrears for six or more dividend periods from January
31, 2001 through December 31, 2002. See "Certain Transactions - Explorer
Holdings, L.P., Dividend and Governance Right Deferral." Explorer's director
designation rights will terminate upon the fifth anniversary of the
Stockholders' Agreement.
Information Regarding Directors
The following information relates to the nominees for election as directors
of Omega and the other persons whose terms as directors continue after this
meeting. Individuals not standing for election at the Annual Meeting are
presented under the heading "Continuing Directors."
Director Nominees
Year First
Became a Term to
Directors Director Business Experience During Past 5 Years Expire in
--------- -------- --------------------------------------- ---------
Thomas W. Erickson*(51)...... 2000 Mr. Erickson served as our Interim President and Chief Executive 2005
Officer from October 1, 2000 to June 12, 2001. Mr. Erickson has
also served as President and Chief Executive Officer of CareSelect
Group, Inc., an operator of physician clinics, from 1994 through
2001 and ECG Ventures, Inc., a healthcare venture capital firm,
since 1987.
Harold J. Kloosterman (60).... 1992 Mr. Kloosterman currently serves as President of Cambridge Partners, 2005
Inc., a company he formed in 1985. He has been involved in the
development and management of commercial, apartment and condominium
projects in Grand Rapids and Ann Arbor, Michigan and in the Chicago
area. Mr. Kloosterman was formerly a Managing Director of Omega
Capital from 1986 to 1992. Mr. Kloosterman has been involved in the
acquisition, development and management of commercial and multifamily
properties since 1978. He has also been a senior officer of LaSalle
Partners, Inc.
Donald J. McNamara*(49)....... 2000 Mr. McNamara is the founder of The Hampstead Group, L.L.C. 2005
("Hampstead"), a privately-held equity investment firm based in
Dallas, Texas, and has served as its Chairman since its inception
in 1989. He has served as Chairman of the Board of Directors of
FelCor Lodging Trust (NYSE:FCH) since its merger with Bristol Hotel
Company in July 1998. Mr. McNamara has also served as a director of
Franklin Covey Co. (NYSE:FC) since May 1999. Mr. McNamara also
currently serves as a trustee of St. Mark's School in Texas and a
trustee of the Virginia Tech Foundation.
C. Taylor Pickett (40)........ Mr. Pickett is our Chief Executive Officer and has served in that 2005
capacity since June 12, 2001. He served as the Executive Vice
President and Chief Financial Officer of Integrated Health Services,
Inc., a public company specializing in post-acute healthcare
services, from January 1998 to June 2001. Mr. Pickett also served
as the President of Symphony Health Services, Inc. from January 1996
to May 1997.
Daniel A. Decker*(49)......... 2000 Mr. Decker is Chairman of the Board of Directors and has served in 2003
this capacity since October 2000. Mr. Decker also served as Executive
Chairman from March 2001 to June 12, 2001. Mr. Decker has been a
partner of The Hampstead Group, L.L.C., a privately-held equity
investment firm based in Dallas, Texas, since 1990. Mr. Decker has
served as a director of various other public companies, including
Bristol Hotel Company (NYSE), Wyndham Hotel Company (NYSE:WYN) and
the Forum Group (NASDAQ:FOUR).
Thomas F. Franke (72)......... 1992 Mr. Franke is Chairman and principal owner of Cambridge Partners, 2003
Inc., an owner, developer and manager of multifamily housing in
Grand Rapids and Ann Arbor, Michigan. He is also the principal
owner of private healthcare firms operating in the United States
and the United Kingdom and is a principal owner of a private hotel
firm in the United Kingdom. Mr. Franke is a director of Principal
Healthcare Finance Limited.
Bernard J. Korman (70)........ 1993 Mr. Korman is Chairman of the Board of Trustees of Philadelphia 2003
Health Care Trust, a private healthcare foundation, and has served
in this capacity since December 1995. He was formerly President,
Chief Executive Officer and Director of MEDIQ Incorporated (health
care services) from 1977 to 1995. Mr. Korman also is a director of
the following public companies: The New America High Income Fund,
Inc. (financial services), The Pep Boys, Inc. (auto supplies), Kramont
Realty Trust (real estate investment trust), NutraMax Products, Inc.
(consumer health care products) and Omega Worldwide, Inc.
Edward Lowenthal (57)......... 1995 Mr. Lowenthal was President and Chief Executive Officer of 2004
Wellsford Real Properties, Inc. (AMEX:WRP), a real estate Merchant
bank from 1997 to 2002 and was President of the predecessor of
Wellsford Real Properties, Inc. since 1986. Mr. Lowenthal is a member
of the Board of Equity Residential Properties Trust and Reis, Inc., a
privately held real estate market information and analytics company.
Christopher W. Mahowald*(40).. 2000 Mr. Mahowald is Managing Partner of the EFO Realty Sponsor Funds, a 2004
series of real estate private equity funds, and has served in this
capacity since January 1997. In this capacity, he is responsible for
the origination, analysis, structuring and execution of new investment
activity and asset management relating to the Funds' existing real estate
assets. Mr. Mahowald also serves as a director of Integroup Realty Trust
(a privately held off-campus student housing company), Aureus Group (a
privately held assisted living company) and previously served as a
director of IMPAC Commercial Holdings (NYSE:ICH), a mortgage REIT.
Stephen D. Plavin**(42)....... 2000 Mr. Plavin is Chief Operating Officer of Capital Trust, Inc., a New 2004
York City-based specialty finance and investment management company
and has served in this capacity since 1998. In this role, Mr. Plavin
is responsible for all of the lending, investing and portfolio
management activities of Capital Trust, Inc.
*Director designated by Explorer pursuant to the Stockholders' Agreement
**Independent Director approved by Explorer pursuant to the Stockholders' Agreement.
RECOMMENDATION
The Board of Directors unanimously recommends a vote FOR the election of
Messrs. Erickson, Kloosterman, McNamara and Pickett.
PROPOSAL 2 - APPROVAL OF THE AMENDMENTS TO THE ARTICLES OF INCORPORATION
AND BYLAWS INCREASING THE MAXIMUM NUMBER OF DIRECTORS
Article V, Section 3 of our Articles of Incorporation and Article III,
Section 1 of our Bylaws currently provide that Omega shall have not less than
five nor more than nine directors. Any increase in the number of authorized
directors requires the affirmative vote of the holders of 80% of the shares of
our common stock and Series C preferred stock, voting together as a class on an
as-converted basis. The Board of Directors has approved and recommends that you
approve amendments to our Articles of Incorporation and to our Bylaws that
increase the maximum number of directors from nine to thirteen, subject to the
rights of preferred stockholders to designate additional directors in certain
events under the terms of the preferred stock.
The purpose of these amendments to our Articles of Incorporation and to our
Bylaws is to enable Omega to take timely advantage of the availability of
well-qualified candidates and to increase our ability to attract high-quality
individuals to serve as directors of Omega. The Board of Directors has deemed
these amendments to be in the best interest of Omega because it believes that
the presence of additional talented individuals with industry experience will
enhance our ability to meet the challenges we face in an increasingly
competitive market. Furthermore, increasing the maximum size of the Board of
Directors to thirteen will enable Explorer to exercise its governance rights
under the 2002 Stockholders' Agreement and, if appropriate, under the terms of
the Series C preferred stock without the need to have any incumbent director
resign.
Accordingly, it is proposed that the last paragraph of Article V, Section 3
of our Articles of Incorporation be amended to read as follows:
"The number of Directors may be increased or decreased from time to time in
such manner as may be provided in the Bylaws, provided that the number of
Directors constituting the full Board of Directors shall not be less than
five (5) nor more than thirteen (13), subject, at all times, to the rights
of the holders of any class of the Corporation's preferred stock to elect
directors in certain circumstances pursuant to the express terms of such
preferred stock."
Accordingly, it is proposed that the first two sentences of Article III,
Section 1 of our Bylaws be amended to read as follows:
"The number of Directors constituting the full Board of Directors shall be
not less than five (5) nor more than thirteen (13) until changed by
amendment of these Bylaws, subject, at all times, to the rights of the
holders of any class of the Corporation's preferred stock to elect
directors in certain circumstances pursuant to the express terms of such
preferred stock. The exact number of Directors within such range shall be
fixed from time to time by resolution of the Board of Directors or the
stockholders."
Any person who is appointed as a director by the Board of Directors to fill a
vacancy resulting from an increase in the size of the Board of Directors would
stand for re-election at the next annual meeting of stockholders following his
or her appointment.
The Board of Directors has fixed the number of directors constituting the
full Board of Directors at ten directors as of the effective date of these
amendments and subject to the rights of preferred stockholders to designate
additional directors in certain events under the terms of the preferred stock.
C. Taylor Pickett has been nominated to fill the vacancy created thereby. See
"Proposal 1 - Election of Directors."
Required Vote for Approval of the Amendment to our Articles of Incorporation and
Bylaws
The affirmative vote of the holders of 80% of the shares of the outstanding
common stock and Series C preferred stock, voting together as a class on an
as-converted basis, is required to approve the amendments to our Articles of
Incorporation and our Bylaws to increase the maximum size of the Board of
Directors.
RECOMMENDATION
The Board of Directors unanimously recommends a vote FOR the approval of
the amendment to our Articles of Incorporation and Bylaws to increase the
maximum size of the Board of Directors from nine to thirteen members.
PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding beneficial ownership of our
capital stock as of March 31, 2002, except for Hampstead Investment Partners
III, L.P., Daniel A. Decker and Donald J. McNamara as to which the date is April
18, 2002, by:
o each of our directors and the named executive officers appearing in
the table under "Executive Compensation--Compensation of Executive
Officers," except for those executive officers no longer employed by
us;
o each of the four new executive officers who have joined Omega since
June 2001;
o all directors and executive officers as a group, except for those
executive officers no longer employed by us; and
o all persons known to us to be the beneficial owner of more than 5% of
our outstanding common stock.
Except as indicated in the footnotes to this table, the persons named in
the table have sole voting and investment power with respect to all shares of
our common stock shown as beneficially owned by them, subject to community
property laws where applicable. The business address of the directors and
executive officers is 9690 Deereco Road, Suite 100, Timonium, Maryland 21093.
Information regarding the beneficial ownership of the Series C preferred stock
is set forth in footnote 3 to the table below.
Common Stock Series A Preferred Series B Preferred
------------ ------------------ ------------------
Number of Percent of Number of Percent of Number of Percent of
Beneficial Owner Shares Class(1) Shares Class(15) Shares Class(16)
---------------- ------ -------- ------ --------- ------ ---------
C. Taylor Pickett.................... 73,256 (2) 0.1% -- -- -- --
Robert O. Stephenson................. 1,466 * -- -- -- --
Daniel J. Booth...................... -- * -- -- -- --
R. Lee Crabill, Jr................... -- * -- -- -- --
Daniel A. Decker..................... 29,121,337 (3)(4) 54.0% -- -- -- --
Thomas W. Erickson................... 95,201 (5) 0.2% -- -- -- --
Thomas F. Franke..................... 61,516 (6)(7) 0.1% 4,000 * -- --
Harold J. Kloosterman................ 88,676 (6)(8) 0.2% -- -- -- --
Bernard J. Korman.................... 541,095 (9) 1.0% 200 * 1,300 *
Edward Lowenthal..................... 19,236 (10)(11) * -- -- 100 *
Christopher W. Mahowald.............. 10,201 (4) * -- -- -- --
Donald J. McNamara................... 29,654,559(3)(4)(12) 55.0% 3,600 (14) * 4,300 *
Stephen D. Plavin.................... 10,202 (4) * -- -- -- --
Directors and executive officers as
a group (13 persons)................. 30,563,715 (13) 56.7% 7,800 * 5,700 *
5% Beneficial Owners:
Hampstead Investment Partners III, L.P.
(through Explorer Holdings, L.P.)
4200 Texas Commerce Tower West
2200 Ross Avenue
Dallas, TX 75201..................... 29,113,030 (3) 54.0%
-----------
* Less than 0.10%
(1) Based on 53,902,176 shares of our common stock outstanding as of March 31,
2002, including 16,774,720 shares of our common stock issuable upon
conversion of Series C preferred stock. See Note (3) below.
(2) Includes 50,000 unvested shares of Restricted Stock granted in July 2001.
(3) Based on Amendment No. 7 to Schedule 13D filed by Hampstead Investment
Partners III, L.P. on April 18, 2002. Represents shares of our common stock
issuable upon conversion of 1,048,420 shares of Series C preferred stock
and 12,338,310 shares of common stock owned by Explorer. Hampstead holds
the ultimate controlling interest in Explorer. Messrs. McNamara and Decker
disclaim beneficial ownership of the Series C preferred stock and the
common stock, which they may be deemed to beneficially own because of their
ownership interests in Hampstead, which holds the ultimate controlling
interest in Explorer.
(4) Includes stock options that are exercisable within 60 days to acquire 3,666
shares.
(5) Includes stock options that are exercisable within 60 days to acquire
88,666 shares.
(6) Includes stock options that are exercisable within 60 days to acquire 4,999
shares.
(7) Includes 47,141 shares owned by a family limited liability company (Franke
Family LLC) of which Mr. Franke is a Member.
(8) Includes shares owned jointly by Mr. Kloosterman and his wife, and 30,246
shares held solely in Mrs. Kloosterman's name.
(9) Includes stock options that are exercisable within 60 days to acquire 4,332
shares.
(10) Includes 2,000 shares held in a private profit sharing plan for the benefit
of Mr. Lowenthal.
(11) Includes stock options that are exercisable within 60 days to acquire 7,333
shares.
(12) Includes 367,745 shares held by a partnership established by Mr. McNamara
for the benefit of certain members of Mr. McNamara's family, 7,546 shares
held by a charitable foundation established by Mr. McNamara, and 1,466
shares held by a trust established by Mr. McNamara for non-family members
of which Mr. McNamara is the trustee. Mr. McNamara disclaims any beneficial
ownership of the shares held by the partnership, the foundation and the
trust.
(13) Includes 50,000 unvested shares of restricted stock and stock options that
are exercisable within 60 days to acquire 124,993 shares. Includes shares
of our common stock issuable upon conversion of Series C preferred stock
and shares of common stock owned by Explorer. See Note (3).
(14) Includes 800 shares held by a trust established by Mr. McNamara for
non-family members of which Mr. McNamara is the trustee. Mr. McNamara
disclaims any beneficial ownership of the shares held by the trust.
(15) Based on 2,300,000 shares of Series A preferred stock outstanding on March
31, 2002.
(16) Based on 2,000,000 shares of Series B preferred stock outstanding on March
31, 2002.
DIRECTORS AND OFFICERS OF OUR COMPANY
Board of Directors and Committees of the Board
The Board of Directors held eleven meetings during 2001. All members of the
Board of Directors attended more than 75% of the Board of Directors or Committee
meetings held during 2001.
The Board of Directors has an Audit Committee consisting of Messrs.
Kloosterman, Korman and Plavin, a Compensation Committee consisting of Messrs.
Franke, Kloosterman and McNamara, an Independent Directors Committee consisting
of Messrs. Franke, Kloosterman, Korman, Lowenthal and Plavin, and an Executive
Committee consisting of Messrs. Decker and Korman.
The Board of Directors does not have a standing Nominating Committee and
the functions that would typically be performed by this Committee are performed
by the entire Board of Directors, except that each nominee that is not
designated by Explorer pursuant to the Stockholders' Agreement will be
designated by the Independent Directors Committee.
The Audit Committee met twice in 2001. Its primary function is to assist
the Board of Directors in fulfilling its oversight responsibilities with respect
to (i) the annual financial information to be provided to stockholders and the
Securities and Exchange Commission ("SEC"); (ii) the system of internal controls
that management has established; and (iii) the external audit process. In
addition, the Audit Committee provides an avenue for communication between the
independent accountants, financial management and the Board of Directors.
The Compensation Committee met five times during 2001 and has
responsibility for the compensation of our key management personnel and
administration of our 2000 Stock Incentive Plan and our 1993 Deferred
Compensation Plan. The Compensation Committee also administered our Amended and
Restated Stock Option and Restricted Stock Plan (the "Amended and Restated
Plan") prior to its termination in 2000.
The Independent Directors Committee met eight times during 2001 and has
responsibility for passing upon those issues with respect to which a conflict
may exist between us and Explorer and/or Hampstead, including issues with
respect to the allocation of costs between us and Explorer pursuant to the
Advisory Agreement between Omega and Explorer. See "Certain Transactions -
Explorer Holdings, L.P., Advisory Agreement."
The Executive Committee, which did not meet during 2001, has the
responsibility to act on behalf of the Board of Directors in between meetings of
the Board of Directors.
Compensation of Directors
For the year ended December 31, 2001, each non-employee director received a
cash payment equal to $10,000 per year, payable in quarterly installments of
$2,500. Each non-employee director also received a quarterly grant of shares of
common stock equal to the number of shares determined by dividing the sum of
$2,500 by the fair market value of the common stock on the date of each
quarterly grant, currently set at February 15, May 15, August 15, and November
15. In addition, each non-employee director is entitled to receive fees equal to
$1,000 per meeting for attendance at each regularly scheduled meeting of the
Board of Directors. For each teleconference or called special meeting of the
Board of Directors, each non-employee director will receive $1,000 for meetings
with a duration in excess of 15 minutes and $500 for meetings with a duration of
less than 15 minutes. In addition, we reimbursed the directors for travel
expenses incurred in connection with their duties as directors. Employee
directors received no compensation for service as directors.
The cash compensation, not including reimbursement for expenses, paid by us
in consideration of Mr. Decker's and Mr. McNamara's service on the Board of
Directors as Explorer designees was paid directly to Hampstead under the
advisory agreement. Mr. Erickson is compensated through payments made to an
entity controlled by him under a management services agreement. Under the
management services agreement, Mr. Erickson may also receive awards of stock
options and dividend equivalent rights. See "Compensation and Severance
Agreements -- Thomas W. Erickson Management Services Agreement."
Directors are eligible to participate in our 2000 Stock Incentive Plan.
Directors received option grants under our amended and restated plan prior to
its termination in 2000. Each non-employee director was awarded options with
respect to 10,000 shares at the date the plan was adopted or on his or her
subsequent election as a director, and each non-employee director will be
granted an additional option grant with respect to 1,000 shares on January 1 of
each year they serve as a director. All grants have been and will be at an
exercise price equal to 100% of the fair market value of our common stock on the
date of the grant. Non-employee director options vest one third after each year
for three years.
Compensation Committee Interlocks and Insider Participation
Mr. Decker, the Chairman of the Board of Directors, and Mr. Erickson were
previously members of our compensation committee. Both Mr. Decker and Mr.
Erickson have resigned from the compensation committee as of March 30, 2001. Mr.
McNamara is currently a member of the compensation committee. Messrs. Decker and
McNamara are affiliates of Explorer and Hampstead, and therefore may be deemed
to have an interest in the agreements and transactions described under "Certain
Transactions - Explorer Holdings, L.P." Mr. Erickson can be deemed to have an
interest in payments made by us under the terms of the management services
agreement, the terms of which are described under "Compensation and Severance
Agreements--Thomas W. Erickson Management Services Agreement."
EXECUTIVE COMPENSATION
Compensation Committee Report
The Compensation Committee (the "Committee") administers our 2000 Stock
Incentive Plan and 1993 Deferred Compensation Plan, and has responsibility for
other incentive and benefit plans. The Committee determines the compensation of
our executive officers and reviews with the Board of Directors all aspects of
compensation for our executive officers.
Historically, our policy and the guidelines followed by the Committee have
been directed toward providing compensation to our executive officers in order
to achieve the following objectives:
1) Assist in attracting and retaining talented and well-qualified
executives.
2) Reward performance and initiative.
3) Be competitive with other healthcare real estate investment trusts.
4) Be significantly related to accomplishments and our short-term and
long-term successes, particularly measured in terms of growth in funds
from operations on a per share basis.
5) Encourage executives to achieve meaningful levels of ownership of our
stock.
Our historical compensation practices have embodied the principle that
annual bonuses should be based primarily on achieving objectives that enhance
long-term stockholder value, and that meaningful stock ownership by management,
including participation in various benefit plans providing for stock options,
restricted stock and retirement, is desirable in aligning stockholder and
management interests.
Our approach to base compensation levels has been to offer competitive
salaries in comparison with prevailing market practices. The Committee has
annually examined market compensation levels and trends. Additionally, the
Committee has also considered the pool of executives who currently are employed
in similar positions in public companies, with emphasis on salaries paid by real
estate investment trusts.
The Committee has evaluated executive officer salary decisions in
connection with an annual review and based on input from the Chairman of the
Board of Directors and our Chief Executive Officer. In undertaking the annual
review, the Committee considered the decision-making responsibilities of each
position and the experience, work performance and team-building skills of each
incumbent. The Committee has viewed work performance as the single most
important measurement factor, followed by team-building skills and
decision-making responsibilities.
For executives other than the Chief Executive Officer of Omega, the
Committee has given consideration to both overall company performance and the
performance of the specific areas of the company under the incumbent's direct
control. It was the Committee's view that this balance supported the
accomplishment of overall objectives and rewarded individual contributions by
executive officers. Individual annual bonuses for each named executive have been
consistent with market practices for positions with comparable decision-making
responsibilities.
In connection with retaining the services of Mr. Pickett to act as our
Chief Executive Officer, we entered into an Employment Agreement dated June 12,
2001, with Mr. Pickett. The Committee believes that the terms of the Employment
Agreement are consistent with the duties and scope of responsibilities assigned
to Mr. Pickett as Chief Executive Officer. In order to align Mr. Pickett's
interests with the long-term interests of Omega, Mr. Pickett's compensation
package includes significant equity-based compensation, including stock options
and restricted stock. For a detailed description of the terms of the Employment
Agreement see "Compensation and Severance Agreements - C. Taylor Pickett
Employment Agreement" below.
The SEC requires that this report comment upon our policy with respect to
Section 162(m) of the Internal Revenue Code. From time to time, Mr. McNamara
recused himself from the Compensation Committee meetings to enable the Committee
to qualify as a committee of outside directors as set forth in Section 162(m) of
the Internal Revenue Code. Section 162(m) disallows a federal income tax
deduction for compensation over $1.0 million to any of the named executive
officers unless the compensation is paid pursuant to a plan which is
performance-related, non-discretionary and has been approved by our
stockholders. We did not pay any compensation during 2001 that would be subject
to Section 162(m). We believe that, because we qualify as a REIT under the
Internal Revenue Code and therefore are not subject to federal income taxes on
our income to the extent distributed, the payment of compensation that does not
satisfy the requirements of Section 162(m) will not generally affect our net
income, although to the extent that compensation does not qualify for deduction
under Section 162(m) a larger portion of stockholder distributions may be
subject to federal income taxation as dividend income rather than return of
capital. We do not believe that Section 162(m) will materially affect the
taxability of stockholder distributions, although no assurance can be given in
this regard due to the variety of factors that affect the tax position of each
stockholder. For these reasons, the Compensation Committee's compensation policy
and practices are not directly governed by Section 162(m).
Compensation Committee of the Board
/s/ Thomas F. Franke
/s/ Harold J. Kloosterman
/s/ Donald J. McNamara
Compensation of Executive Officers
The following table sets forth, for the years ended December 31, 2001, 2000
and 1999, the compensation for services in all capacities to Omega of each
person who served as chief executive officer during the year ended December 31,
2001, the four most highly compensated executive officers serving at December
31, 2001, and three former executive officers.
Long-Term Compensation
Annual Compensation Award(s) Payouts
Restricted Securities All
Stock Underlying LTIP Other
Name and Award(s) Options/ Payouts Compensation
Principal Position Year Salary($) Bonus($) ($) SARs(#) ($) ($)(1)
------------------ ---- --------- -------- --- ------- --- ------
C. Taylor Pickett.......... 2001 250,673 250,500 116,000(2) 1,120,000 -- --
Chief Executive Officer
(from June 12, 2001)
Thomas W. Erickson......... 2001 507,044(3) 250,000(3) -- 51,000(4) -- 31,499(5)
Interim Chief Executive 2000 127,055(3) -- -- 45,000(6) -- 12,000(5)
Officer (10/1/2000 through
6/12/2001)
Daniel J. Booth............ 2001 58,349 30,000 -- 350,000 -- --
Chief Operating Officer
(from October 15, 2001)
R. Lee Crabill, Jr......... 2001 91,237 45,500 -- 245,000 -- 21,851(7)
Senior Vice President
(from July 30, 2001)
Robert O. Stephenson....... 2001 89,583 45,500 -- 325,000 -- --
Chief Financial Officer
(from August 30, 2001)
Richard M. FitzPatrick..... 2001 322,866(8) 250,000 -- -- -- --
Chief Financial Officer 2000 139,634(9) -- -- -- -- --
(7/14/2000 through 7/31/2001)
F. Scott Kellman........... 2001 300,000 300,000(11) -- -- -- 386,230(12)
Chief Operating Officer 2000 266,651 325,000(13) 212,400(14) 500,000(15) -- 10,743
(prior to 10/15/2001)(10) 1999 245,000 55,000 55,000(14) 27,500 -- (19,559)
Laurence D. Rich........... 2001 175,000 205,000(11) -- -- -- 119,426(18)
Vice President (16) 2000 139,833 115,000(13) 104,000(17) 227,500(15) -- 3,239
1999 120,000 27,500 27,500(17) 15,000 -- 9,664
-----------
(1) Consists of our contributions to our 401(k) Profit-Sharing Plan and
provisions for each participant under our 1993 Deferred Compensation Plan,
except as follows or as otherwise noted in footnotes appearing in this
column: with respect to Mr. Kellman, such amount includes a payment of
$8,036 for consideration of acceleration of certain options in 1999.
(2) Represents a restricted stock award of 50,000 shares of our common stock to
Mr. Pickett on June 12, 2001, with shares vesting on June 12, 2003.
(3) Represents amounts paid to a company controlled by Mr. Erickson pursuant to
the terms of the Management Services Agreement in consideration of the
services performed by Mr. Erickson as our Interim Chief Executive Officer.
See "Compensation and Severance Agreements--Thomas W. Erickson Management
Services Agreement."
(4) Includes 50,000 shares subject to an option granted to Mr. Erickson under
the terms of the Management Services Agreement and 1,000 shares subject to
an option granted to Mr. Erickson as a director. See "Compensation and
Severance Agreements--Thomas W. Erickson Management Services Agreement."
(5) Includes stock grants for payment of director fees in 2001 and cash
payments for director fees of $21,500 in 2001 and $12,000 in 2000.
(6) Includes 35,000 shares subject to an option granted to Mr. Erickson under
the terms of the Management Services Agreement and 10,000 shares subject to
an option granted to Mr. Erickson in consideration of becoming a director.
See "Compensation and Severance Agreements--Thomas W. Erickson Management
Services Agreement."
(7) Represents compensation to Mr. Crabill for reimbursement of moving
expenses.
(8) Includes amounts payable to Mr. FitzPatrick by Hampstead in consideration
of Mr. FitzPatrick serving as our Chief Financial Officer from January 1,
2001 through April 30, 2001. Pursuant to the Advisory Agreement, we agreed
to reimburse Explorer for the services provided to us by Mr. FitzPatrick.
See "Certain Transactions--Explorer Holdings, L.P., Advisory Agreement."
(9) Represents compensation payable to Mr. FitzPatrick by Hampstead in
consideration of Mr. FitzPatrick serving as our Chief Financial Officer
through December 31, 2000. Pursuant to the Advisory Agreement, we agreed to
reimburse Explorer for the services provided to us by Mr. FitzPatrick. See
"Certain Transactions--Explorer Holdings, L.P., Advisory Agreement."
(10) See "F. Scott Kellman Retention, Severance and Release Agreement" below.
(11) Represents cash bonuses paid under a Severance and Release Agreement.
(12) Consists of $250,000 settlement of dividend equivalent rights in connection
with the cancellation of options, $131,130 payment under our 1993 Deferred
Compensation Plan and contributions to our 401(k) Profit-Sharing Plan for
Mr. Kellman.
(13) Includes a special bonus paid in connection with the Series C Investment
pursuant to a compensation agreement entered into between the named
individuals and us.
(14) Represents restricted stock awards of 35,258 shares and 7,097 shares of our
common stock made to Mr. Kellman on February 10, 2000 and January 31, 2000,
respectively. The February 10, 2000 award was a prospective award for
service in fiscal 2000. The January 31, 2000 award represents compensation
earned in fiscal 1999. With respect to the February 10, 2000 grant, 25% of
the shares vested 180 days following the grant date and 25% of the shares
vest on each anniversary of the grant date for the next three years. Under
the February 10, 2000 award, 17,629 shares were awarded subject to the
price of our common stock meeting certain performance hurdles. The price of
our common stock did not satisfy the required performance hurdles, and the
17,629 shares referred to above were forfeited in accordance with the terms
of the grant. With respect to the January 31, 2000 grant, 50% of the shares
vested 180 days following the grant date, with the balance vesting on the
anniversary of the grant date. Mr. Kellman receives dividends on unvested
shares. The number of unvested shares and value of Mr. Kellman's restricted
stock awards at the end of last year were 647 shares and $3,895 of which
all were released in January 2002.
(15) Represents special grant of options in connection with the Series C
Investment pursuant to the terms of a Compensation Agreement between the
named individual and us. Such options were cancelled in 2001 and a payment
was made to the named individuals in settlement of dividend equivalent
rights in connection with the cancellation of these options. See Notes (12)
and (18).
(16) See "Laurence D. Rich Retention, Severance and Release Agreement" below.
(17) Represents restricted stock awards of 17,269 shares and 3,548 shares of our
common stock made to Mr. Rich on February 10, 2000 and January 31, 2000,
respectively. The February 10, 2000 award was a prospective award for
service in fiscal 2000. The January 31, 2000 award represents compensation
earned in fiscal 1999. With respect to the February 10, 2000 grant, 25% of
the shares vested 180 days following the grant date and 25% of the shares
vest on each anniversary of the grant date for the next three years. Under
the February 10, 2000 award, 8,634 shares were awarded subject to the price
of our common stock meeting certain performance hurdles. The price of our
common stock did not satisfy the required performance hurdles, and the
8,634 shares referred to above were forfeited in accordance with the terms
of the grant. With respect to the January 31, 2000 grant, 50% of the shares
vested 180 days following the grant date, with the balance vesting on the
anniversary of the grant date. Mr. Rich receives dividends on unvested
shares. The number of unvested shares and value of Mr. Rich's restricted
stock awards at the end of the last year were 215 shares and $1,294 of
which all were released in January 2002.
(18) Consists of $113,750 settlement of dividend equivalent rights in connection
with the cancellation of options, provisions under our 1993 Deferred
Compensation Plan and contributions to our 401(k) Profit-Sharing Plan for
Mr. Rich.
Compensation and Severance Agreements
C. Taylor Pickett Employment Agreement
We entered into an employment agreement with C. Taylor Pickett dated as of
June 12, 2001, to be our Chief Executive Officer. The term of the agreement
expires on June 12, 2005.
Mr. Pickett's base salary is $450,000 per year, subject to increase by us
and provides that he will be eligible for an annual bonus of up to 100% of his
base salary based on criteria determined by the Compensation Committee of our
Board of Directors. We issued Mr. Pickett 50,000 shares of our restricted common
stock on June 12, 2001, which vest after he has completed two years of service.
Additionally, Mr. Pickett was granted an incentive stock option to purchase
172,413 shares of our common stock and a nonqualified stock option to purchase
627,587 shares of our common stock. The incentive stock option will be vested as
to 25% of the shares on December 31, 2002; as to an additional 25% after Mr.
Pickett completes two years of service; as to an additional 25% ratably on a
monthly basis in 2004; and as to the final 25% ratably on a monthly basis in the
first six months of 2005, in each case provided Mr. Pickett continues to work
for us on the applicable vesting date. The nonqualified stock option will become
vested as to 50% of the shares after Mr. Pickett completes two years of service
and will become ratably vested as to the remainder of the shares on a monthly
basis over the next 24 months of service following that two year anniversary.
If we terminate Mr. Pickett's employment without cause or if he resigns for
good reason, he will be entitled to payment of his base salary for a period of
12 months or, if shorter, for the remainder of the term of the agreement.
Additionally, Mr. Pickett will be entitled to payment of an amount equal to the
bonus paid in the prior year, payable in 12 monthly installments. Mr. Pickett is
required to execute a release of claims against us as a condition to the payment
of severance benefits. The vesting of Mr. Pickett's options may be subject to
acceleration upon the occurrence of certain events such as termination without
cause or resignation for good reason and will become fully vested if, within one
year following a change of control, he is terminated without cause or resigns
for good reason.
Mr. Pickett is restricted from using any of our confidential information
during his employment and for two years thereafter or from using any trade
secrets during his employment and for as long thereafter as permitted by
applicable law. Mr. Pickett is subject to covenants which prohibit him from
competing with us and from soliciting our customers or employees while he is
employed by us and for 12 months following his termination of employment.
Daniel J. Booth Employment Agreement
We entered into an employment agreement with Daniel J. Booth effective as
of October 15, 2001, to be our Chief Operating Officer. The term of the
agreement expires on January 1, 2006.
Mr. Booth's base salary is $275,000 per year, subject to increase by us,
and he is eligible for an annual bonus of up to 50% of his base salary based on
criteria determined by the Compensation Committee. Mr. Booth was granted an
incentive stock option to purchase 166,666 shares of our common stock and a
nonqualified stock option to purchase 83,334 shares of our common stock. The
incentive stock option will vest as to 20% of the shares on each of December 31,
2002, October 1, 2003, October 1, 2004, October 1, 2005 and January 1, 2006, and
the nonqualified stock option will vest on January 1, 2003, provided Mr. Booth
continues to work for us on the applicable vesting date.
Our agreement with Mr. Booth contains severance and accelerated option
vesting provisions similar to those in Mr. Pickett's agreement described above.
Mr. Booth is required to execute a release of claims against us as a condition
to the payment of severance benefits. He is also subject to restrictions on his
use of confidential information and our trade secrets that are the same as those
in our agreement with Mr. Pickett described above.
Robert O. Stephenson Employment Agreement
We entered into an employment agreement with Robert O. Stephenson effective
as of August 30, 2001, to be our Chief Financial Officer. The term of the
agreement expires on January 1, 2006.
Mr. Stephenson's base salary is $215,000 per year, subject to increase by
us, and he is eligible for an annual bonus of up to 50% of his base salary based
on criteria determined by the Compensation Committee. Mr. Stephenson was granted
an incentive stock option to purchase 181,155 shares of our common stock and a
nonqualified stock option to purchase 18,845 shares of our common stock. The
incentive stock option will vest as to 20% of the shares on each of December 31,
2002, August 1, 2003, August 1, 2004, August 1, 2005 and January 1, 2006, and
the nonqualified stock option will vest on August 1, 2003, provided Mr.
Stephenson continues to work for us on the applicable vesting date.
Our agreement with Mr. Stephenson contains severance and accelerated option
vesting provisions similar to those in Mr. Pickett's agreement described above.
Mr. Stephenson is required to execute a release of claims against us as a
condition to the payment of severance benefits. He is also subject to
restrictions on his use of confidential information and our trade secrets that
are the same as those in our agreement with Mr. Pickett described above.
R. Lee Crabill, Jr. Employment Agreement
We entered into an employment agreement with R. Lee Crabill, Jr. effective
as of July 30, 2001, to be our Senior Vice President of Operations. The term of
the agreement expires on July 30, 2005.
Mr. Crabill's base salary is $215,000 per year, subject to increase by us,
and he is eligible for an annual bonus of up to 50% of his base salary based on
criteria determined by the Compensation Committee. Mr. Crabill was granted an
incentive stock option to purchase 133,333 shares of our common stock and a
nonqualified stock option to purchase 41,667 shares of our common stock. The
incentive stock option will vest as to 25% of the shares on each of December 31,
2002, August 1, 2003, August 1, 2004 and August 1, 2005, and the nonqualified
stock option will vest as to 50% of the shares after Mr. Crabill completes two
years of service and will become ratably vested as to the remainder of the
shares on a monthly basis over the next 24 months of service following that two
year anniversary, provided Mr. Crabill continues to work for us on the
applicable vesting date.
Our agreement with Mr. Crabill contains severance and accelerated option
vesting provisions similar to those in Mr. Pickett's agreement described above.
Mr. Crabill is required to execute a release of claims against us as a condition
to the payment of severance benefits. He is also subject to restrictions on his
use of confidential information and our trade secrets that are the same as those
in our agreement with Mr. Pickett described above.
Thomas W. Erickson Management Services Agreement
We entered into a management services agreement with ECG Ventures, Inc.
("ECG Ventures") dated as of October 1, 2000, to obtain the services of Thomas
W. Erickson as our Interim Chief Executive Officer. Mr. Erickson continued to
provide services following the appointment of Mr. Pickett as Chief Executive
Officer to facilitate a transition. The term of the agreement expired on
December 31, 2001.
We paid ECG Ventures $41,667 per month and granted them an option to
purchase 50,000 shares of our common stock which was fully vested on December
31, 2001. We also reimbursed ECG Ventures for the premiums for healthcare
coverage for Mr. Erickson and his dependents. We paid ECG Ventures $250,000 for
Mr. Erickson to continue to provide transitional services through December 31,
2001. Mr. Erickson and ECG Ventures are subject to customary restrictions on
their use of our confidential information and trade secrets.
Richard M. FitzPatrick Employment Agreement
We entered into an employment agreement with Richard M. FitzPatrick
effective as of May 1, 2001, to be our Interim Chief Financial Officer. The term
of the agreement expired on January 31, 2002.
Mr. FitzPatrick's base salary was $250,000 per year and provided that he
was eligible for an annual bonus of up to 100% of his base salary based on
criteria determined by the compensation committee. We agreed to pay Mr.
FitzPatrick an amount equal to $125,000 plus 50% of his actual bonus for 2001 if
he continued to work for us for three months following the expiration of his
agreement to facilitate a transition to Mr. Stephenson. We also reimbursed The
Hampstead Group, L.L.C. for the amount of Mr. FitzPatrick's annual compensation
paid by Hampstead during the period from January 1, 2001 to May 1, 2001, since
Mr. FitzPatrick worked as our interim Chief Financial Officer on a full-time
basis during that period prior to the effectiveness of his employment agreement.
Following termination of Mr. FitzPatrick's employment, Mr. FitzPatrick agreed to
provide consulting services to us for a period of three months, and in
consideration for such services, we will pay to Mr. FitzPatrick an amount equal
to his base salary and bonus on a pro rata basis.
Mr. FitzPatrick was required to execute a release of claims against us as a
condition to the payment of severance benefits and his use of our confidential
information and trade secrets is subject to customary restraints.
F. Scott Kellman Retention, Severance and Release Agreement
We entered into a retention, severance and release agreement with F. Scott
Kellman, our former Chief Operating Officer, effective as of October 9, 2001,
which provided that Mr. Kellman continued his employment with us until January
31, 2002. Mr. Kellman was paid his regular base salary through January 31, 2002,
and received a cash bonus of $300,000 which was paid on February 1, 2002. In
addition, Mr. Kellman also received a retention bonus of $930,000 which was paid
on February 1, 2002. We will pay Mr. Kellman's premiums for eligible health care
insurance benefits, less required employee contributions for premiums, through
December 31, 2002. As a condition to payment of the amounts under the retention
grant, Mr. Kellman was required to execute a comprehensive release of claims
against us.
If any of the payments to Mr. Kellman are subject to an excise tax on
"excess parachute payments" under the Internal Revenue Code, he will be entitled
to receive a payment in an amount that puts him in the same after-tax position
as if no excise tax had been imposed. Mr. Kellman has agreed to maintain the
confidentiality of our information for a period of two (2) years after the
resignation date.
Laurence D. Rich Retention, Severance and Release Agreement
We entered into a retention, severance and release agreement with Laurence
D. Rich effective as of August 1, 2001, which provided that Mr. Rich continued
his employment until January 31, 2002. Mr. Rich was paid his regular base salary
through January 31, 2002, and received a cash bonus of $205,000 which was paid
on February 1, 2002. In addition, Mr. Rich received a retention bonus of
$530,000 which was paid on February 1, 2002. We will pay Mr. Rich's premiums for
eligible heath care insurance benefits, less required employee contributions for
premiums, through December 31, 2002. As a condition to payment of the amounts
under the retention agreement, Mr. Rich was required to execute a comprehensive
release of claims against us.
If any of the payments to Mr. Rich are subject to an excise tax on "excess
parachute payments" under the Internal Revenue Code, he will be entitled to
receive a payment in an amount that puts him in the same after-tax position as
if no excise tax had been imposed. Mr. Rich has agreed to maintain the
confidentiality of our information for a period of two (2) years after his
termination of employment.
Retention, Severance, and Release Agreements for Other Employees
In August 2001 we entered into retention, severance and release agreements
with a total of 23 of our employees (excluding Mr. Kellman and Mr. Rich) who
were not expected to work for us at our new headquarters in Maryland. Pursuant
to these agreements, each employee agreed to continue his or her employment with
us until January 31, 2002. Pursuant to the agreement, each employee was paid his
or her regular base salary through January 31, 2002, and received a cash bonus,
which was paid on February 1, 2002. In addition, the employee will also receive
a specified retention bonus to be paid in equal monthly installments beginning
on February 1, 2002 over a specified retention bonus period ranging from three
to nine months. The total amount of all bonuses and retention bonuses are
$514,320 and $495,490, respectively.
During the retention bonus period, we will pay the employee's premiums for
eligible health care insurance benefits, less required employee contributions
for premiums, and we will also provide outplacement services for a reasonable
period of time after the resignation date. As a condition to the payment of
these severance benefits, the employees were required to execute a comprehensive
release of claims against us.
Option Grants/SAR Grants
The following table sets forth certain information concerning options and
stock appreciation rights ("SARs") granted during 2001 to Messrs. Pickett,
Erickson, Booth, Crabill and Stephenson. Messrs. FitzPatrick, Kellman and Rich
did not receive any option grants during 2001 and therefore do not appear in the
table below.
Potential Realizable Value
at Assumed Annual Rates of
Stock Price Appreciation for
Individual Grants Option Term (1)
Number of % of Total
Securities Options/SARs Exercise
Underlying Granted to or Base
Options/SARs Employees in Price Expiration
Name Granted(2) Fiscal Year ($/Share) Date 5%($) 10%($)
---- ---------- ----------- --------- ---- ----- ------
C. Taylor Pickett......... 800,000 (3) $2.3200 06/12/11 $1,168,000 $2,960,000
320,000 (4) 3.1700 10/25/11 636,800 1,616,000
-------------- ------------------------------
1,120,000 49.89% 1,804,800 4,576,000
============== ==============================
Thomas W. Erickson........ 1,000 (5) 3.8125 01/01/12 2,400 6,080
50,000 (6) 2.1500 11/01/05 27,000 59,000
-------------- ------------------------------
51,000 2.27% 29,400 65,080
============== ==============================
Daniel J. Booth........... 250,000 (7) 3.0000 10/15/11 472,500 1,195,000
100,000 (4) 3.1700 10/25/11 199,000 505,000
-------------- ------------------------------
350,000 15.59% 671,500 1,700,000
============== ==============================
R. Lee Crabill, Jr........ 175,000 (8) 3.0000 07/30/11 330,750 836,500
70,000 (4) 3.1700 10/25/11 139,300 353,500
-------------- ------------------------------
245,000 10.91% 470,050 1,190,000
============== ==============================
Robert O. Stephenson...... 200,000 (9) 2.7600 08/30/11 348,000 880,000
125,000 (4) 3.1700 10/25/11 248,750 631,250
-------------- ------------------------------
325,000 14.48% 596,750 1,511,250
============== ==============================
-----------
(1) The assumed annual rates of appreciation of 5% and 10% would result in the
price of our stock increasing, at the expiration date of the options, to
between $0.54 and $2.40 at the 5% rate and between $1.18 and $6.08 at the
10% rate for the various grants. We cannot assure you that our stock price
will appreciate at such rates.
(2) Represents grants of incentive and nonqualified options which expire 10
years after the date of grant.
(3) As to 627,587 options, options are exercisable as to 50% of the award after
optionee has performed two years of service (June 12, 2003) and the
remaining 50% will become exercisable ratably over the 24 months of
optionee's service following the second anniversary of the grant date. As
to 172,413 options, options are exercisable as to 43,103 shares on December
31, 2002, as to 43,103 shares on June 12, 2003, as to 43,103 shares ratably
over the twelve months of service in 2004 and as to the remaining 43,104
shares ratably over the first six months of service in 2005.
(4) Vests as to 50% after the optionee has performed two years of service, and
the remaining 50% ratably over the 24 months of optionee's service
following the second anniversary of the grant date.
(5) Vests in equal increments of 1/3rd on each anniversary of the grant date of
January 2, 2001.
(6) Shares vested December 31, 2001 pursuant to the management services
agreement.
(7) Options are exercisable as to 33,333 shares on each of December 31, 2002,
October 1, 2004, October 1, 2005 and January 1, 2006 and 116,668 on October
1, 2003.
(8) Options are exercisable as to 33,333 shares on each of December 31, 2002,
August 1, 2003, August 1, 2004 and August 1, 2005 and 41,667 on July 30,
2003.
(9) Options are exercisable as to 36,231 on December 31, 2002; 55,076 on August
1, 2003; 36,231 on August 1, 2004; 36,231 on August 1, 2005 and 36,231 on
January 1, 2006.
Aggregated Options/ SAR Exercises in Last Fiscal Year and Fiscal Year-End
Option/ SAR Values
The following table summarizes options and stock appreciation rights exercised
during 2001 and presents the value of unexercised options and stock
appreciation rights held by the named executive officers at December 31,
2001. Mr. FitzPatrick and Mr. Rich did not have any outstanding options or
stock appreciation rights at December 31, 2001 and therefore do not appear
in the table below.
Number of Securities In-the-Money
Shares Underlying Unexercised Options/SARs at
Acquired Options/ SARs at Fiscal
on Value Fiscal Year-End(#) Year-End($)
Exercise Realized Unexercisable(U) Unexercisable(U)
Name (#) ($) Exercisable(E) Exercisable(E)
---- --- --- -------------- --------------
C. Taylor Pickett................. -- -- 1,120,000(U) $3,872,000(U)
Thomas W. Erickson................ -- -- 7,667(U) $2,208(U)
-- -- 88,333(E) $193,500(E)
Daniel J. Booth................... -- -- 350,000(U) $1,040,000(U)
R. Lee Crabill, Jr................ -- -- 245,000(U) $728,000(U)
Robert O. Stephenson.............. -- -- 325,000(U) $1,008,250(U)
F. Scott Kellman.................. -- -- 27,880(E) --(E)
Long-Term Incentive Plan
For the period from August 14, 1992, the date of commencement of our
operations, through December 31, 2001, we have had no long-term incentive plans.
Defined Benefit or Actuarial Plan
For the period from August 14, 1992, the date of commencement of our
operations, through December 31, 2001, we have had no pension plans.
COMPARISON OF CUMULATIVE TOTAL RETURN*
Among: Omega Healthcare Investors, Inc.
Hybrid REIT Index**
S&P 500 Index
OHI INDEX HYBRID REITS S&P INDEX
12/31/96 100 100 100
3/31/97 96 96 103
6/30/97 103 104 121
9/30/97 117 111 130
12/31/97 129 111 133
3/31/98 143 103 152
6/30/98 138 96 157
9/30/98 132 79 141
12/31/98 124 73 171
3/31/99 97 62 180
6/30/99 113 69 193
9/30/99 95 59 181
12/31/99 60 47 208
3/31/00 32 46 212
6/30/00 23 53 207
9/30/00 33 55 205
12/31/00 21 52 189
3/31/01 12 63 166
6/30/01 17 76 176
9/30/01 18 74 150
12/31/01 33 79 166
----------
* Total return assumes reinvestment of dividends.
** The Hybrid REIT Index is published by National Association of Real Estate
Investment Trusts, Inc. ("NAREIT"), Washington, D.C. It is comprised of
Hybrid REITs (REITs who both own properties and make loans to real estate
owners and operators) traded on the New York Stock Exchange and the
American Stock Exchange. A list of those REITs is available by request to
us or NAREIT.
THIS GRAPH REPRESENTS HISTORICAL STOCK PRICE PERFORMANCE AND IS NOT
NECESSARILY INDICATIVE OF ANY FUTURE STOCK PRICE PERFORMANCE.
THE REPORTS OF THE COMPENSATION COMMITTEE AND THE AUDIT COMMITTEE AND THE
PERFORMANCE GRAPH THAT APPEARS ABOVE SHALL NOT BE DEEMED TO BE SOLICITING
MATERIAL OR TO BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE
SECURITIES ACT OF 1933 OR THE SECURITIES EXCHANGE ACT OF 1934 OR INCORPORATED BY
REFERENCE IN ANY DOCUMENT SO FILED.
CERTAIN TRANSACTIONS
Explorer Holdings, L.P.
Hampstead, through its affiliate Explorer Holdings, L.P. ("Explorer"),
indirectly owned 1,048,420 shares of Series C preferred stock and 12,338,310
shares of our common stock, representing 54.0% of our outstanding voting power
as of April 19, 2002. Daniel A. Decker, our Chairman of the Board of Directors,
is a partner of Hampstead. Donald J. McNamara, the Chairman of Hampstead, is one
of our directors. Christopher W. Mahowald is one of our directors and holds an
equity investment in Explorer.
Series C Investment Agreement. Under the terms of an investment agreement dated
May 11, 2000 between us and Explorer in connection with Explorer's purchase of
Series C preferred stock and an investment agreement dated October 25, 2001
between us and Explorer in connection with Explorer's additional investment, we
agreed to reimburse Explorer for its out-of-pocket expenses, up to a maximum
amount of $2.5 million, incurred in connection with the Series C Investment and
up to $1.0 million incurred in connection with Explorer's additional investment.
To date, we have reimbursed Explorer for approximately $1.77 million of these
expenses.
Advisory Agreement. Under the terms of an amended and restated advisory
agreement dated October 4, 2000 between us and Hampstead, we have agreed to pay
Explorer an advisory fee if Hampstead provides assistance to us in connection
with the evaluation of growth opportunities or other financing matters. On June
1, 2001, in connection with Hampstead's agreement to provide certain specified
financial advisory, consulting and operational services, including but not
limited to assistance in our efforts to refinance, repay or extend certain
indebtedness and assist in efforts to manage our capitalization and liquidity,
we agreed to pay Hampstead a fee equal to 1% of the aggregate amount of our
indebtedness that is refinanced, repaid or extended, based on the maximum amount
available to be drawn in the case of revolving credit facilities, up to a
maximum fee of $3.1 million. The advisory fee is payable five business days
following the completion of the refinancing, repayment or extension of any of
our indebtedness, but as amended no fee will be payable prior to December 31,
2001. Upon the closing of the rights offering and Explorer's investment on
February 21, 2002, Hampstead had fulfilled all of its obligations under the
agreement, but the advisory fee will only be payable at such time as all of the
conditions to payment of the advisory fee contained in the advisory agreement
are met.
Direct Expenses. In addition to the Series C Investment costs and the advisory
fee costs of $3.1 million, we agreed to reimburse Explorer for Explorer's direct
expenses. To date, we have reimbursed Explorer for approximately $0.54 million
of such direct expenses.
Dividend and Governance Right Deferral. We and Explorer entered into a
dividend deferral letter agreement dated November 15, 2000 relating to the
extension of the dividend payment payable in connection with our Series C
preferred stock for the dividend period ended October 31, 2000. The deferral
period expired on April 2, 2001. The amount of the deferred dividend payment was
$4.67 million representing the total unpaid preferential cumulative dividend for
the October 2000 dividend. In exchange for the deferral, we also agreed to pay
Explorer a fee equal to 10% of the daily unpaid principal balance of the unpaid
dividend amount from November 15, 2000 until the dividend was paid. Under
certain circumstances, the portion of the unpaid dividend amount and fee which
is not paid in cash may be payable with additional shares of Series C preferred
stock. Shares of Series C preferred stock issued pursuant to this agreement are
valued at $100 per share, the stated per share liquidation preference, and are
convertible into our common stock at $6.25 per share. In consideration of the
payment of the deferral fee, Explorer agreed that the deferral of the subject
dividend would not be considered an unpaid dividend and, as a result, the
October 31, 2000 dividend period will not be included in the determination of
when Explorer's right to elect additional directors will vest.
In full payment of our obligations under the dividend deferral letter
agreement, we issued 48,420 shares of Series C preferred stock to Explorer on
April 2, 2001.
Right of Explorer to Appoint Directors
On July 14, 2000, Explorer completed an investment (the "Series C Investment")
of $100.0 million in exchange for 1,000,000 shares of Omega's Series C preferred
stock. In connection with Explorer's Series C Investment, Omega entered into a
Stockholders' Agreement with Explorer dated July 14, 2000 (the "Stockholders'
Agreement"). As a condition to the closing of Explorer's additional $31.3
million investment in the company on February 21, 2002, we amended our
Stockholders' Agreement with Explorer (the "2002 Stockholders' Agreement") to
permit Explorer to designate a number of directors that would generally be
proportionate to Explorer's ownership of voting securities, not to exceed five
directors (six following an increase in the size of the Board of Directors to
ten directors). Under the 2002 Stockholders' Agreement, Omega agreed to appoint
C. Taylor Pickett to the Board of Directors following approval of an increase in
the size of the Board of Directors. If Mr. Pickett is elected as a member of the
Board of Directors, he will not be serving in the capacity of one of Explorer's
designated directors. Explorer has determined not to designate any additional
directors at this time (although it has the right to do so under the 2002
Stockholders' Agreement as a result of its present ownership of a majority of
our voting stock). Explorer reserves the right at any time during the term of
the 2002 Stockholders'Agreement and during which it owns a majority of our
voting stock to request the Board of Directors to increase the size of the Board
of Directors to permit Explorer to designate a majority of the directors. Under
the 2002 Stockholders' Agreement, the number of directors on the Board of
Directors may not exceed nine without the consent of Explorer (ten following
stockholder approval of the increase in the size of the Board of Directors). We
have agreed to take appropriate action to ensure generally that Explorer's
representation on all committees of the Board of Directors is proportionate to
its representation on the entire board, other than any special committee
established to consider transactions in which Explorer or any of its affiliates
may have a conflict of interest. Explorer is entitled to designate at least one
director of Omega's Board of Directors as long as it owns at least five percent
(5%) of the total voting power of Omega and to approve one "independent
director" as long as it owns at least twenty-five percent (25%) of the shares it
acquired at the time it completed the Series C Investment (or common stock
issued upon the conversion of the Series C preferred stock acquired by Explorer
at such time). Explorer has the right to elect additional preferred stock
directors if the dividends on shares of the Series C preferred stock are in
arrears for four or more dividend periods.
The 2002 Stockholders' Agreement requires Explorer to vote its shares in
favor of three independent directors, as defined under the rules of the New York
Stock Exchange, who are not affiliated with Explorer so long as it owns at least
15.0% of our voting securities. Upon the increase of the size of the Board of
Directors to ten directors, Explorer will vote its shares in favor of a fourth
director who is not affiliated with Explorer. The fourth director will be C.
Taylor Pickett, our Chief Executive Officer. The 2002 Stockholders' Agreement
expires on February 21, 2007.
The terms of the Series C preferred stock provide that Explorer will have
the right to elect two additional directors if dividends on the Series C
preferred stock are in arrears for four or more dividend periods. By letter
dated January 31, 2001, Explorer waived its right to elect additional preferred
stock directors through December 31, 2002 provided that the dividends on any
shares of Series C preferred stock would not be in arrears for six or more
dividend periods from January 31, 2001 through and including December 31, 2002.
Omega Worldwide
Fleet Credit Guaranty. We guaranteed repayment of borrowings of our affiliate,
Omega Worldwide, Inc. ("Omega Worldwide"), pursuant to a revolving credit
facility with a bank group, of which Fleet Bank, N.A. acts as agent, in exchange
for an initial 1% fee and an annual facility fee of 0.25%. At December 31, 2001,
no borrowings were outstanding under Omega Worldwide's revolving credit
facility. No further borrowings may be made by Omega Worldwide under its
revolving credit facility. We were required to provide collateral in the amount
of up to $8.8 million related to the guarantee of Omega Worldwide's obligations.
Upon repayment by Omega Worldwide of the remaining outstanding balance under its
revolving credit facility, the subject collateral was released in connection
with the termination of our guarantee.
Opportunity Agreement. We and Omega Worldwide have entered into an opportunity
agreement to provide each other with rights to participate in transactions and
make investments. The opportunity agreement provides that each company will
offer the other a right of first refusal to participate in transactions or
investments of which it becomes aware. In addition, both companies agree to
jointly pursue certain transactions and investments upon the request of either
company. The terms upon which each of us elect to participate in any transaction
or investment will be negotiated in good faith and must be mutually acceptable
to our respective boards of directors, with the affirmative votes of the
independent directors of each of the boards of directors. The opportunity
agreement has a term of ten years and automatically renews for successive
five-year terms, unless terminated.
Services Agreement. We and Omega Worldwide have entered into a services
agreement which provides for the allocation of indirect costs incurred by us to
Omega Worldwide. The allocation of indirect costs has been based on the
relationship of assets under our management to the combined total of those
assets and assets under Omega Worldwide's management. Upon expiration of this
agreement on June 30, 2000, we entered into a new agreement requiring quarterly
payments from Omega Worldwide of $37,500 for the use of offices and
administrative and financial services provided by us. Upon the reduction of our
accounting staff, the service agreement was renegotiated again on November 1,
2000 requiring quarterly payments from Omega Worldwide of $32,500. Costs
allocated to Omega Worldwide for 2001, 2000 and 1999 were $130,000, $404,000 and
$754,000, respectively. The former services agreement has expired and Omega
Worldwide is paying monthly invoices for services rendered.
Other
Relocation Loan. In connection with the 1994 relocation of F. Scott Kellman, our
former Chief Operating Officer, from the Philadelphia metropolitan area to Ann
Arbor, Michigan, we loaned him $220,000 to enable him to purchase a home in Ann
Arbor. At January 1, 2000 the outstanding principal balance on the loan was
$67,000. The loan was secured by a lien on Mr. Kellman's residence, and bore
interest at 7.05% per annum. Mr. Kellman paid the balance of the mortgage in
full on January 29, 2001.
Loan to Oakwood. On December 30, 1998, we made a $6.0 million loan to Oakwood
Living Centers of Massachusetts, Inc., an affiliate of Oakwood Living Centers,
Inc., of which James E. Eden, a former director of Omega, also is Chairman and
Chief Executive Officer. The loan bears interest at 14% per annum and is secured
by a first mortgage lien on accounts receivable and a second mortgage lien on
six skilled nursing facilities located in Massachusetts.
AUDIT COMMITTEE MATTERS
The Board of Directors has adopted a written charter for the Audit
Committee, a copy of which is included with our definitive proxy statement for
the 2001 Annual Meeting of Stockholders, which was filed on April 18, 2001 with
the Securities and Exchange Commission pursuant to Regulation 14A. The Board of
Directors reviews and approves changes to the Audit Committee Charter annually.
Each of the members of our Audit Committee meets the requirements for
independence as defined by the standards of the New York Stock Exchange.
Audit Committee Report
The Audit Committee, with respect to the audit of Omega's 2001 audited
Consolidated Financial Statements, reports as follows:
1) The Audit Committee has reviewed and discussed Omega's 2001 audited
Consolidated Financial Statements with the company's management;
2) The Audit Committee has discussed with Ernst & Young LLP the matters
required to be discussed by SAS 61, which include, among other items,
matters related to the conduct of the audit of Omega's Consolidated
Financial Statements;
3) The Audit Committee has received written disclosures and the letter
from Ernst & Young LLP required by ISB Standard No. 1 (which relates
to the auditor's independence from Omega and its related entities) and
has discussed with Ernst & Young LLP its independence from Omega; and
4) Based on reviews and discussions of Omega's 2001 audited Consolidated
Financial Statements with management and discussions with Ernst &
Young LLP, the Audit Committee recommended to the Board of Directors
that Omega's 2001 audited Consolidated Financial Statements be
included in the company's Annual Report on Form 10-K.
Audit Committee
/s/ Bernard J. Korman
/s/ Harold J. Kloosterman
/s/ Stephen D. Plavin
Independent Auditors
Ernst & Young LLP audited our financial statements for each of the years
ended December 31, 1999, 2000 and 2001. Representatives of Ernst & Young LLP are
expected to be present at the Annual Meeting and will be given the opportunity
to make a statement if they desire to do so. It is also expected that they will
be available to respond to appropriate questions from stockholders at the Annual
Meeting.
Audit Fees
In connection with services rendered in conjunction with the audit of our
annual financial statements and the review of our interim financial statements,
we have estimated that our total audit fees for fiscal year 2001 were
approximately $193,000. This figure is based on an estimate provided by our
accountants, Ernst & Young LLP, and includes fees for services that were billed
to us in fiscal year 2002 in connection with the 2001 fiscal year audit.
Financial Information Systems Design and Implementation Fees
We did not retain Ernst & Young LLP to perform any financial information
systems design or implementation services in fiscal year 2001.
Other Fees
During fiscal year 2001, we were billed $178,615 by Ernst & Young LLP for
services not described above.
Determination of Auditor Independence
The Audit Committee has considered the provision of non-audit services by
our principal accountants and has determined that the provision of such services
was consistent with maintaining the independence of Ernst & Young LLP.
STOCKHOLDER PROPOSALS
January 21, 2003 is the date by which proposals of stockholders intended to
be presented at the 2003 Annual Meeting of Stockholders must be received by us
for inclusion in our proxy statement and form of proxy relating to that meeting.
In addition, our Bylaws provide that in order for business to be brought
before the Annual Meeting, a stockholder must deliver or mail written notice to
our Secretary at our principal executive offices not less than 60 days nor more
than 90 days prior to the first anniversary of the preceding year's Annual
Meeting. The notice must state the stockholder's name, address, class and number
of shares of our stock and briefly describe the business to be brought before
the meeting, the reasons for conducting such business at the meeting, and any
material interest of the stockholder and of the beneficial owner, if any, on
whose behalf the proposal is made. If the stockholder intends to nominate a
candidate for election as a director, in addition to the the requirements set
forth above, the notice should include the name of the nominee for election as a
director, the age of the nominee, the nominee's business address and experience
during the past five years, the number of shares of our stock beneficially held
by the nominee, and such other information concerning the nominee as would be
required to be included in a proxy statement soliciting proxies for the election
of the nominee. The notice must also include a description of all arrangements
or understandings between such stockholder and each proposed nominee and any
other person pursuant to which the nominations are to be made by such
stockholder, a representation that such stockholder intends to appear in person
or by proxy at the meeting to nominate the person named in the notice, and the
consent of the nominee to serve as a director.
EXPENSES OF SOLICITATION
The total cost of this solicitation will be borne by us. In addition to use
of the mails, proxies may be solicited by our directors, officers and regular
employees of Omega personally and by telephone, telex or facsimile. We may
reimburse persons holding shares in their own names or in the names of the
nominees for expenses such persons incur in obtaining instructions from
beneficial owners of such shares. We have also engaged Georgeson Shareholder
Communications, Inc. to solicit proxies for a fee not to exceed $8,000, plus
out-of-pocket expenses.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
To our knowledge, all filings required under Section 16 of the Securities
Exchange Act of 1934 were made on a timely basis.
OTHER MATTERS
The Board of Directors knows of no other business to be presented at the
Annual Meeting, but if other matters do properly come before the Annual Meeting,
it is intended that the persons named in the proxy will vote on said matters in
accordance with their best judgment.
C. TAYLOR PICKETT
Chief Executive Officer
April 15, 2002
Timonium, Maryland
OMEGA HEALTHCARE INVESTORS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROXY
The undersigned hereby appoints Robert O. Stephenson and Thomas Peterson and
each of them, as proxies, each with the power to appoint his substitute to
represent and to vote as designated below, all the shares of common stock of
Omega Healthcare Investors, Inc. ("Omega") held of record by the undersigned on
April 12, 2002 at the Annual Meeting of Stockholders to be held on May 30, 2002
or any adjournment thereof.
This Proxy when properly executed will be voted in the manner directed herein by
the undersigned. If no specification is made, this Proxy will be voted FOR:
1. The Election of Directors
NOMINEES:
Thomas W. Erickson, Harold J. Kloosterman, Donald J. McNamara and
C. Taylor Pickett.
2. The amendments to our Articles of Incorporation and our Bylaws to
increase the maximum size of the Board of Directors from nine to
thirteen members.
In their discretion, the proxies are authorized to vote upon such other business
as may properly come before the meeting and at any adjournment thereof.
(Continued, and to be marked, dated and signed, on the other side)
SEE REVERSE SIDE
-- FOLD AND DETACH HERE --
[X] (Please mark your votes as in this example.)
The Directors recommend a vote "FOR" Proposals 1 and 2.
FOR AGAINST ABSTAIN
1. The Election of Directors [ ] [ ] [ ]
NOMINEES: Thomas W. Erickson, Harold J. Kloosterman, Donald J. McNamara and
C. Taylor Pickett.
(Instruction: To withhold authority to vote for any individual nominee,
write that nominee's name here.)
2. The amendments to our Articles of Incorporation and our Bylaws to increase [ ] [ ] [ ]
the maximum size of the Board of Directors from nine to thirteen members.
--------------------------------------------------------------------------------
NOTE: Please sign exactly as your name appears on this Proxy. When shares are
held by joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by authorized person.
Please check the box if you plan to attend the Annual Meeting in person. [ ]
SIGNATURE(S) DATE
NOTE:Please sign exactly as your name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such. This proxy will not be used if
you attend the meeting in person and so request.
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-- FOLD AND DETACH HERE --