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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 30, 1997
REGISTRATION NO. 33-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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OMEGA WORLDWIDE, INC.
(Exact Name of Registrant as Specified in its Charter)
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<S> <C> <C>
MARYLAND 6512 PENDING
(State or Other Jurisdiction
of
Incorporation or (Primary Standard Industrial (IRS Employer
Organization) Classification Code Number) Identification No.)
905 WEST EISENHOWER CIRCLE
SUITE 101 THE CORPORATION TRUST INCORPORATED
ANN ARBOR, MICHIGAN 48103 32 SOUTH STREET
TELEPHONE: (734) 747-9791 BALTIMORE, MARYLAND 21202
(ADDRESS AND TELEPHONE NUMBER OF TELEPHONE: (410) 539-2837
REGISTRANT'S (NAME, ADDRESS AND TELEPHONE NUMBER
PRINCIPAL EXECUTIVE OFFICES) OF AGENT FOR SERVICE)
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Copies to:
RICHARD W. SHEPRO, ESQ.
MAYER, BROWN & PLATT
190 SOUTH LASALLE STREET
CHICAGO, ILLINOIS 60603
(312) 782-0600
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
possible after the effective date of this registration statement.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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=====================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED UNIT PRICE(1) REGISTRATION FEE
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Common Stock, $0.10 par value per
per share......................... (2) (2) $31,500,000 $9,545
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457.
(2) Omitted pursuant to Rule 457(o) under the Securities Act.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION DATED DECEMBER 30, 1997
PROSPECTUS
OMEGA WORLDWIDE, INC.
The 2,100,000 shares of common stock, par value $.10 per share (the "Omega
Worldwide Common Stock"), of Omega Worldwide, Inc., a Maryland corporation
("Omega Worldwide" or the "Company"), offered hereby (the "Secondary Offering")
are being sold by Omega Healthcare Investors, Inc., a Maryland corporation and a
shareholder of the Company ("Omega"). The Company will not receive any of the
proceeds from the sale of the Omega Worldwide Common Stock in the Secondary
Offering. See "Use of Proceeds." This Prospectus is also being furnished to the
shareholders of Omega in connection with the distribution by Omega of rights
(the "Rights") to subscribe for and purchase Omega Worldwide Common Stock at
$ per share (the "Subscription Price") and the 2,100,000 shares of Omega
Worldwide Common Stock that are issuable by the Company upon exercise of the
Rights (the "Rights Offering"). Prior to the Secondary Offering and the Rights
Offering (the "Offerings"), there has not been a public market for the Omega
Worldwide Common Stock. It is presently estimated that the initial public
offering price will be approximately $ per share.
SEE "RISK FACTORS" BEGINNING ON PAGE 12 OF THIS PROSPECTUS FOR A
DISCUSSION OF CERTAIN FACTORS RELEVANT TO THE OWNERSHIP OF OMEGA WORLDWIDE
COMMON STOCK.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The Secondary Offering will be accompanied by a distribution (the
"Distribution") by Omega of 5,800,000 shares of Omega Worldwide Common Stock and
the Rights to its shareholders. It is expected that the Distribution will be
made on March , 1998. The Distribution will be made on the basis of one share
of Omega Worldwide Common Stock for every 3.45 common shares, $.10 par value, of
Omega (the "Omega Common Shares") held on the Record Date. No certificates
representing fractional shares of Omega will be issued in connection with the
Distribution. In lieu of fractional shares, the Distribution Agent (as
hereinafter defined) will pay to any holder who would be entitled to a
fractional share of Omega Worldwide Common Stock an amount of cash (without
interest) equal to his pro rata share of the sales proceeds obtained by the
Distribution Agent from aggregating and selling the fractional shares.
The Rights will be distributed on the basis of one Right for every ten Omega
Common Shares (defined below) held on January 30, 1998 (the "Record Date"). Each
Right entitles the holder thereof to purchase one share of Omega Worldwide
Common Stock at the price of $ per share. The Subscription Price is based
on a valuation of the Company and will be equal to the price at which shares of
Omega Worldwide Common Stock are sold pursuant to the Secondary Offering. Rights
will be evidenced by nontransferable Rights certificates and will expire at 5:00
p.m., Eastern Standard Time, on March , 1998, or such later date as Omega
Worldwide may determine in its sole discretion (the "Expiration Date"). A holder
of shares of Omega Common Shares on the Record Date who validly exercises all of
such shareholder's Rights may also oversubscribe (the "Oversubscription
Privilege"), at the Subscription Price, for additional shares of Omega Worldwide
Common Stock covered by this Prospectus that have not been purchased through the
exercise of Rights ("Unsubscribed Shares"). Only holders of Omega Common Shares
on the Record Date will be entitled to the Oversubscription Privilege.
Certain directors and officers of Omega and their affiliates have agreed to
purchase all of the Unsubscribed Shares at the Subscription Price. Shareholders
of Omega who do not exercise all of their Rights will own a smaller relative
equity ownership and voting interest in Omega Worldwide after the Rights
Offering and the Distribution. There is no minimum number of shares of Omega
Worldwide Common Stock required to be sold as a condition to the consummation of
the Rights Offering.
Omega Worldwide will provide investment advisory services and hold equity
and debt interests in companies engaged in providing sale/leaseback and other
capital financing to healthcare service providers throughout the world. Omega
Worldwide will seek to leverage its management expertise in financing healthcare
providers globally by providing seed equity and debt capital and investment
advisory services to newly-formed or existing finance companies principally in
countries other than the United States. In addition, Omega Worldwide will
maintain an ongoing relationship with Omega and anticipates conducting certain
activities in the United States to the extent Omega is unable to do so because
of certain real estate investment trust ("REIT") tax provisions or for other
reasons.
No payment need be made by, or will be accepted from, Omega shareholders for
the Omega Worldwide Common Stock or Rights to be received by them in the
Distribution. Omega shareholders will not be required to surrender or exchange
Omega Common Shares in order to receive Omega Worldwide Common Stock or Rights.
Each share of Omega Worldwide Common Stock sold in the Secondary Offering or
issued in the Distribution or pursuant to an exercise of the Rights will be
accompanied by one preferred share purchase right (a "Preferred Share Purchase
Right").
There is currently no public market for Omega Worldwide Common Stock. Shares
of Omega Worldwide Common Stock have not been approved for listing on any
national securities exchange although application will be made to report the
Omega Worldwide Common Stock on the NASDAQ National Market System ("NASDAQ")
under the symbol "OWWI".
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A
PROXY.
The date of this Prospectus is , 1998.
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AVAILABLE INFORMATION
Omega Worldwide has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 (the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to Omega Worldwide Common Stock, Rights and Preferred Share
Purchase Rights described herein. This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules thereto. For further information, reference is made hereby to the
Registration Statement, exhibits and schedules thereto. Statements contained
herein concerning any documents are not necessarily complete and, in each
instance, reference is made to the copies of such documents filed as exhibits to
the Registration Statement. Each such statement is qualified in its entirety by
such reference. Copies of these documents may be inspected without charge at the
principal office of the Commission at 450 5th Street, N.W., Washington, D.C.
20549, and at the Regional Offices of the Commission at 7 World Trade Center,
Suite 1300, New York, New York 10048, at Citicorp Center, Suite 1400, 500 West
Madison Street, Chicago, Illinois 60661, and at 5670 Wilshire Boulevard, Suite
1100, Los Angeles, California 90036, and copies of all or any part thereof may
be obtained from the Commission upon payment of the charges prescribed by the
Commission. Copies of such material may also be obtained from the Commission's
Web Site (http://www.sec.gov).
Following the Distribution, Omega Worldwide will be required to comply with
the reporting requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and will file annual, quarterly and other reports with the
Commission. The Company will also be subject to the proxy solicitation
requirements of the Exchange Act and, accordingly, will furnish audited
financial statements to its stockholders in connection with its annual meetings
of stockholders. The Company will also file with NASDAQ copies of such reports,
proxy statements and other information which subsequently can be inspected at
the offices of NASDAQ.
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<PAGE> 4
SUMMARY
This summary is qualified by the more detailed information set forth
elsewhere in this Prospectus, which should be read in its entirety, including
the discussion of certain factors set forth under "Risk Factors." Unless the
context requires otherwise, each reference to "Omega" and "Omega Worldwide"
herein includes its direct and indirect subsidiaries.
OMEGA WORLDWIDE
Omega Worldwide............... Omega Worldwide will provide investment
advisory and management services and hold
equity and debt interests in companies engaged
in providing sale/leaseback and other capital
financing to healthcare service providers
throughout the world. Omega Worldwide will seek
to leverage its management expertise in
financing healthcare providers by providing
seed equity and debt capital and investment
advisory services to newly-formed or existing
real estate and finance companies principally
in countries other than the United States.
Private healthcare and its finance,
particularly for the aging population in
developed countries, represents a growing
priority in which capital is a major
consideration. Based upon management's
experience in establishing Principal Healthcare
Finance Limited, a private company incorporated
with limited liability in the Isle of Jersey
("Principal"), Omega Worldwide will seek to
extend its investments in healthcare finance on
a global basis. The Company may also consider
investment in other actively managed real
estate opportunities which develop. Principal
provides capital and medium-term financing to
the private-sector healthcare industry in the
United Kingdom by acquiring and leasing back to
experienced operators, existing and newly-built
nursing homes or residential care facilities.
Principal currently owns and leases to eight
operators a total of 155 facilities (7,200
beds) in the United Kingdom.
The Company will use its and Omega's extensive
resources to identify, develop and structure
attractive opportunities to invest in
healthcare real estate ownership and finance on
a global basis.
The Company intends to invest its capital in
two principal ways: first, to increase its
existing investment in Principal, as needed to
establish its dominant position in private
healthcare finance in the United Kingdom; and
second, to establish similar relationships with
existing or newly-formed entities in other
suitable developed countries. Omega Worldwide
also will coordinate and integrate its
investment activity with Omega so as to take
advantage of investment opportunities which
would not be suitable for Omega due to its REIT
status.
Omega Worldwide anticipates that a substantial
portion of the firms it will develop and to
which it will provide seed capital will consist
of companies which have the potential for
public trading in the markets in which they
operate.
In connection with the formation and
capitalization of Omega Worldwide, Omega has
contributed or will contribute to Omega
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Worldwide prior to the consummation of the
Offerings and the Distribution, the following
significant assets (collectively, the
"Assets"):
-- 3,337,500 Class A voting ordinary shares of
Principal. Omega Worldwide will also receive
warrants to purchase 10,000,000 Class B
non-voting ordinary shares of Principal
expiring June 30, 2001 at an exercise price
of L1.50 per share and 554,583 Class A
ordinary shares of Principal expiring
December 31, 2000 at an exercise price of
L1.00 per share. It is anticipated that,
prior to the transfer of the Assets to Omega
Worldwide, Principal will be recapitalized
with only Class A voting shares, at which
time the Company's investment will represent
33.375% of the outstanding shares prior to
exercising any warrants. The exercise of all
issued and outstanding warrants would
increase Omega Worldwide's ownership
interest in Principal to approximately 54%.
-- Omega Worldwide will replace Omega as holder
with respect to L15,000,000 of escalating
fixed rate subordinated debt provided by
Omega to Principal and maturing on December
31, 2000. Omega will also transfer to Omega
Worldwide the benefit of a ten-year British
pound currency swap contract under which
Omega Worldwide will have the right to
exchange L20,000,000 for $31,740,000 on
October 15, 2007. Pursuant to this contract,
the effect on Omega Worldwide of exchange
rate changes during the term of the swap
agreement will be mitigated. These assets
are collectively referred to herein as the
"Principal Assets."
-- Advisory Services Agreement with Principal
(the "Management Agreement") pursuant to
which Omega Worldwide will provide the
following services for Principal: marketing
of its services; identification and
evaluation of potential investments;
administration of the business and
day-to-day affairs of Principal; monitoring
and evaluating the financial and operational
performance of the healthcare operating
organizations financed by Principal; and
developing new products and services. Omega
Worldwide will also provide advice upon and
facilitate capital markets transactions and
arrangements of credit facilities and
permanent financing for Principal. Pursuant
to the Management Agreement, Omega Worldwide
will receive an annual fee equal to 0.9% of
Principal's assets (as defined in the
Management Agreement) and may earn an
additional incentive fee. See "Business --
The Principal Assets."
Omega Worldwide intends to enter into a
$25,000,000 three-year line of credit agreement
with a financial institution pursuant to which
borrowings by Omega Worldwide under the line of
credit will be guaranteed by Omega. Omega will
receive a fee from Omega Worldwide for
providing the guaranty. See "Certain
Transactions."
Prior to the consummation of the Offerings and
the Distribution, Omega Worldwide will enter
into an agreement with Omega (the
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"Operating Agreement"), pursuant to which Omega
Worldwide and Omega will agree to provide each
other with rights to participate in certain
transactions and to make certain investments in
parallel or jointly. Omega Worldwide and Omega
will also enter into a Services Agreement
pursuant to which Omega will provide management
and other employees and administrative services
to Omega Worldwide. See "Business -- The
Operating Agreement" and "Certain
Transactions."
Business Strategy............. Omega Worldwide intends to perform the
Management Agreement with Principal, to enter
into additional contracts to provide advisory
services and to pursue additional opportunities
for global investments in healthcare real
estate and finance. Omega Worldwide believes
that it has, or will have access to, sufficient
liquidity and management expertise to invest in
and manage the healthcare real estate assets
successfully.
Omega Worldwide's investment and operating
strategies reflect the experience of its
management in the establishment of Principal as
a means of extending, principally outside of
the United States, real estate based healthcare
financing like that which Omega now conducts in
the United States. Omega Worldwide intends to
expand its investments in real estate and
healthcare finance and to enter into agreements
similar to the Management Agreement with other
entities engaged in activities similar to
Principal and Omega, including entities
established by Omega Worldwide. Omega Worldwide
will also invest in other entities like
Principal conducting financing activities in
the healthcare industry in other areas of the
world. To pursue additional opportunities,
Omega Worldwide plans to capitalize on its
relationship with Omega and Omega's ability to
structure transactions creatively and to take
advantage of investment opportunities presented
to Omega in which it cannot or chooses not to
invest.
Management.................... Essel W. Bailey, Jr., James P. Flaherty, F.
Scott Kellman, Susan A. Kovach and David A.
Stover are President and Chief Executive
Officer, Vice President-International,
Executive Vice President, Vice President and
Secretary, and Vice President and Chief
Financial Officer, respectively, of Omega
Worldwide. Each currently serves in the same
capacity at Omega. See "Management."
Preferred Share Purchase
Rights........................ Omega Worldwide expects to adopt a Preferred
Share Purchase Rights Plan (the "Rights Plan")
on or prior to the consummation of the
Offerings and the Distribution. If so adopted,
shares of Omega Worldwide Common Stock sold
pursuant to the Secondary Offering and issued
in the Distribution and upon exercise of the
Rights will also initially represent an
equivalent number of associated Preferred Share
Purchase Rights of Omega Worldwide. See
"Certain Antitakeover Provisions -- Rights
Plan."
Certain Antitakeover
Provisions.................... Certain provisions of Omega Worldwide's
Articles of Incorporation (the "Charter") and
Omega Worldwide's Bylaws (the "Bylaws"), as
each will be in effect as of the consummation
of the Offerings and the Distribution, and of
the Maryland General Corporation
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<PAGE> 7
Law (the "MGCL"), have the effect of making
more difficult an acquisition of control of
Omega Worldwide in a transaction not approved
by the Omega Worldwide Board of Directors (the
"Omega Worldwide Board"). See "Description of
Omega Worldwide Capital Stock" and Certain
Antitakeover Provisions. The Rights Plan will
also make more difficult an acquisition of
control of Omega Worldwide in a transaction not
approved by the Omega Worldwide Board. The
Rights Plan and certain provisions of the
Charter will not apply to Omega and its
affiliates. See "Certain Antitakeover
Provisions -- Rights Plan."
Post-Distribution Dividend
Policy........................ The primary objective of Omega Worldwide is to
achieve long-term growth. The Company intends
to use its available funds to pursue investment
and business opportunities and, so long as such
opportunities exist, does not anticipate the
payment of any cash dividends on Omega
Worldwide Common Stock in the foreseeable
future. Payment of dividends on Omega Worldwide
Common Stock may be subject to limitations
under the proposed loans from a financial
institution. The declaration of dividends will
be subject to the discretion of the Omega
Worldwide Board. See "Dividend Policy."
Interests of Executive
Officers...................... Essel W. Bailey, Jr., James P. Flaherty, F.
Scott Kellman, Susan A. Kovach and David A.
Stover are President and Chief Executive
Officer, Vice President-International,
Executive Vice President, Vice President and
Secretary, and Vice President and Chief
Financial Officer, respectively, of Omega
Worldwide and Omega. Mr. Bailey is also a
director of Omega Worldwide and Omega. These
officers have a significant interest in Omega
and will receive shares of Omega Worldwide and
options to acquire shares of Omega Worldwide.
See "Risk Factors -- Potential Conflicts of
Interest" and "Certain Transactions."
Transfer Agent and
Registrar..................... First Chicago Trust Company of New York will be
the Transfer Agent and Registrar for Omega
Worldwide after the Distribution and the
Offerings.
THE SECONDARY OFFERING
Securities Offered............ 2,100,000 shares of Omega Worldwide Common
Stock.
Omega Worldwide Common Stock
outstanding after Secondary
Offering.................... 10,000,000 shares (assuming consummation of
Rights Offering and Distribution).
Trading Market................ There is currently no public market for Omega
Worldwide Common Stock. The Omega Worldwide
Common Stock has not been approved for listing
on any national securities exchange, although
application will be made to report the Omega
Worldwide Common Stock on NASDAQ under the
symbol "OWWI". See "Risk Factors -- Absence of
a Public Market for Omega Worldwide Common
Stock" and "The Distribution -- Listing and
Trading of Omega Worldwide Common Stock."
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Use of Proceeds............... The Company will not receive any of the
proceeds from the sale of the Omega Worldwide
Common Stock in the Secondary Offering.
Rights Offering Restriction... Shareholders of Omega as of the Record Date who
purchase shares of Omega Worldwide Common Stock
pursuant to the Secondary Offering will agree
not to exercise any Rights pursuant to the
Rights Offering.
THE RIGHTS OFFERING
Securities Offered............ 2,100,000 Rights, exercisable for an aggregate
of 2,100,000 shares of Omega Worldwide Common
Stock.
Subscription Right............ One Right, per every ten Omega Common Shares,
issued as a dividend by Omega to each holder of
Omega Common Shares on the Record Date. Each
Right entitles the holder to purchase one share
of Omega Worldwide Common Stock at the
Subscription Price. See "The Rights Offering."
Oversubscription Privilege.... A holder of Omega Common Shares on the Record
Date who validly exercises all of such
shareholder's Rights may also oversubscribe, at
the Subscription Price, for additional shares
of Omega Worldwide Common Stock. Only holders
of Omega Common Shares on the Record Date will
be entitled to the Oversubscription Privilege.
See "The Rights Offering -- Oversubscription
Privilege."
Unsubscribed Shares........... Certain directors and officers of Omega and
their affiliates have agreed to acquire the
Unsubscribed Shares at the Subscription Price.
Expiration Date............... March , 1998 at 5:00 p.m., Eastern Standard
Time, or such later date as the Company may
determine in its sole discretion. After such
time, the Rights will become void and have no
value.
Subscription Price............ $ per share.
Transferability of Rights..... The Rights are not transferable.
Subscription Agent............ The First Chicago Trust Company of New York
Use of Proceeds............... The Rights Offering is intended to provide
funds to the Company for working capital and
acquisitions and investments. See "Use of
Proceeds."
Federal Income Tax
Consequences................ As a result of the Rights Offering, an Omega
shareholder will be treated as receiving a
distribution from Omega in an amount equal to
the fair market value of the Rights received by
such shareholder. Depending on an Omega
shareholder's adjusted tax basis and the amount
of Omega's current and accumulated earnings and
profits, the Rights Offering will result in
ordinary income, a tax-free return of capital,
capital gain or a combination thereof.
Management anticipates that, for a typical
Omega shareholder, the Rights Offering likely
will result in an increase in the shareholder's
tax-free return of capital and in capital gain,
but this result cannot be assured. See "The
Rights Offering -- Certain Federal Income Tax
Consequences of the Rights Offering."
7
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THE DISTRIBUTION
Distributing Company.......... Omega Healthcare Investors, Inc.
Shares to be Distributed...... Approximately 5,800,000 shares of Omega
Worldwide Common Stock, all of which are held
by Omega.
Distribution Ratio............ One share of Omega Worldwide Common Stock for
every 3.45 Omega Common Shares. No certificates
representing fractional shares of Omega
Worldwide will be issued in connection with the
Distribution. In lieu of fractional shares, the
Distribution Agent (as defined below) will
aggregate and sell the fractional shares and
distribute the cash proceeds on a pro rata
basis to those holders otherwise entitled to a
fractional interest. No payment need be made
by, or will be accepted from, Omega
shareholders for Omega Worldwide Common Stock
to be received by them in the Distribution, nor
will Omega shareholders be required to
surrender or exchange Omega Common Shares, in
order to receive Omega Worldwide Common Stock.
See "The Distribution -- Manner of Effecting
the Distribution."
Risk Factors.................. Shareholders should consider certain factors
discussed under "Risk Factors," including risks
associated with the assets that Omega Worldwide
will acquire and own, Omega Worldwide's lack of
operating history, potential conflicts of
interest and Omega Worldwide's dependence on
Omega.
Background of and Reasons
for the Distribution........ Omega Worldwide will provide investment
advisory and management services and hold
equity and debt interests in companies engaged
in providing sale/leaseback and other capital
financing to healthcare service providers
throughout the world.
In connection with its management and other
activities, Omega Worldwide will operate under
the Operating Agreement pursuant to which Omega
Worldwide and Omega will agree to provide each
other with rights to participate in certain
transactions and to make certain investments in
parallel or jointly. In particular, Omega
Worldwide will have the right to pursue certain
opportunities that Omega may determine it is
unable to pursue (whether due to its status as
a REIT or for other reasons) or that Omega may
elect not to pursue. See "Business -- The
Operating Agreement."
The Distribution of Omega Worldwide Common
Stock will provide Omega shareholders as of the
Record Date with the ability to benefit from
both the real estate operations of Omega and
the business operations of Omega Worldwide.
Federal Income Tax
Consequences................ As a result of the Distribution, an Omega
shareholder will be treated as receiving a
distribution from Omega in an amount equal to
the fair market value of the Omega Worldwide
Common Stock received by such shareholder.
Depending on an Omega shareholder's adjusted
tax basis and the amount of Omega's current and
accumulated earnings and profits, the
Distribution will result in ordinary income, a
tax-free return of capital, capital gain or a
combination thereof. Management anticipates
that for a typical
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Omega shareholder the Distribution likely will
result in an increase in the shareholder's
tax-free return of capital and capital gain,
but this result cannot be assured. See "The
Distribution -- Certain Federal Income Tax
Consequences of the Distribution."
Distribution Agent............ First Chicago Trust Company of New York
Record Date................... January 30, 1998 (the "Record Date").
Distribution Date............. March , 1998 (the "Distribution Date").
Commencing on or about the Distribution Date,
the Distribution Agent will begin mailing
account statements reflecting ownership of
Omega Worldwide Common Stock to holders of
Omega Common Shares on the Record Date. Omega
shareholders will not be required to make any
payment or to take any other action to receive
the Omega Worldwide Common Stock to which they
are entitled in the Distribution. See "The
Distribution -- Manner of Effecting the
Distribution."
Trading Market................ There is currently no public market for Omega
Worldwide Common Stock. The Omega Worldwide
Common Stock has not been approved for listing
on any national securities exchange although
application will be made to report the Omega
Worldwide Common Stock on NASDAQ under the
symbol "OWWI". See "Risk Factors -- Absence of
a Public Market for Omega Worldwide Common
Stock" and "The Distribution -- Listing and
Trading of Omega Worldwide Common Stock."
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SUMMARY PRO FORMA FINANCIAL DATA
The following table sets forth certain unaudited summary financial
information for the Company on a combined pro forma basis. This summary
information is qualified by, and should be read in conjunction with, the
financial statements and notes thereto included elsewhere in this Prospectus.
The pro forma information for the year ended November 30, 1997, assumes
completion, in each case as of December 1, 1996 in determining operating data,
and, in each case as of November 30, 1997, in determining balance sheet data, of
the formation and capitalization of Omega Worldwide, the related contribution of
the Assets by Omega, and receipt of the proceeds of the Rights Offering.
The pro forma financial information is not necessarily indicative of what
the Company's financial position or results of operations would have been
assuming the above events actually occurred as of the dates indicated, nor do
they purport to project the Company's financial position or results of
operations at any future date or for any future period.
OMEGA WORLDWIDE, INC.
CONDENSED PRO FORMA BALANCE SHEET
NOVEMBER 30, 1997
(UNAUDITED)
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PRO FORMA AS ADJUSTED
HISTORICAL ADJUSTMENTS(A) FOR PROCEEDS(B) PRO FORMA
---------- -------------- --------------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Cash.................................. $ 1,000 $ 210,000 $15,000,000 $15,211,000
Investment in Principal Healthcare
Finance Limited....................
Subordinated loan.................. 23,805,000 23,805,000
Common stock....................... 5,296,612 5,296,612
--------- ----------- ----------- -----------
TOTAL ASSETS............................ $ 1,000 $29,311,612 $15,000,000 $44,312,612
========= =========== =========== ===========
SHAREHOLDER'S EQUITY
Common stock.......................... $ 211,000 $29,101,612 $15,000,000 $44,312,612
Common stock subscription
receivable......................... (210,000) 210,000
--------- ----------- ----------- -----------
TOTAL LIABILITIES & EQUITY.............. $ 1,000 $29,311,612 $15,000,000 $44,312,612
========= =========== =========== ===========
</TABLE>
- -------------------------
(A) Payment of subscription receivable balance and contribution by Omega of
investment in Principal, recorded at Omega's carrying value, in exchange
for 7,899,000 fully paid shares of Omega Worldwide Common Stock. The
Subordinated Loan earns interest at the rate of 11.83% with annual
increases of 3%, and is due December 2000. The Common Stock represents
33.375% (after recapitalization of Principal into one class of voting
stock, see "Business -- The Principal Assets") of the outstanding voting
stock of Principal.
(B) Proceeds of assumed issuance of 2,100,000 shares of Omega Worldwide to its
shareholders pursuant to the Rights Offering at $[7.50] per share (less
estimated offering and registration costs of $750,000).
10
<PAGE> 12
OMEGA WORLDWIDE, INC.
CONDENSED PRO FORMA STATEMENT OF INCOME
YEAR ENDED NOVEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA AS ADJUSTED PRO
HISTORICAL ADJUSTMENTS FOR PROCEEDS FORMA
---------- ----------- ------------ -----
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenue
Advisory fees................. $ $1,764,000(A) $ 1,764,000
Interest -- subordinated
loan........................ 2,843,000 2,843,000
Interest -- other............. $ 825,000(E) 825,000
-- ---------- --------- -----------
Total revenue............ 0 4,607,000 825,000 5,432,000
Expenses
Costs of services provided.... 1,174,000(B) 1,174,000
General and administrative.... 1,186,000(C) 1,186,000
-- ---------- --------- -----------
Total expenses........... 0 2,360,000 0 2,360,000
-- ---------- --------- -----------
0 2,247,000 825,000 3,072,000
Equity in loss of Principal
Healthcare
Finance Limited............... (235,000)(D) (235,000)
-- ---------- --------- -----------
Income before income taxes......... 0 2,012,000 825,000 2,837,000
Provision for income taxes......... 0 (764,000) (280,000) (1,044,000)
-- ---------- --------- -----------
Net income......................... $0 $1,248,000 $ 545,000 $ 1,793,000
== ========== ========= ===========
Shares............................. 10,000,000
Net income per share............... $0.18
</TABLE>
- -------------------------
(A) Fees pursuant to Management Agreement at .9% of Principal's average net
assets.
(B) Costs of services provided by Omega (UK) Limited.
(C) Comprises estimated direct corporate expenses ($679,000) plus allocated
share of costs of Omega Healthcare Investors, Inc. ($507,000) pursuant to
provisions of Services Agreement.
(D) Share of loss (33.375% assuming shareholders approve recapitalization to
create only one class of voting stock of Principal; see "Business -- The
Principal Assets") for Principal's fiscal year ended August 31, 1997.
(E) Interest on $15,000,000 proceeds of Rights Offering at assumed interest rate
of 5.5%.
11
<PAGE> 13
RISK FACTORS
Shareholders should carefully consider and evaluate all of the information
set forth in this Prospectus, including the risk factors listed below. Omega
Worldwide also cautions readers that, in addition to the historical information
included herein, this Prospectus includes certain forward-looking statements and
information that are based on management's beliefs as well as on assumptions
made by and information currently available to management. When used in this
Prospectus, the words "expect," "anticipate," "intend," "plan," "believe,"
"seek," "estimate" and similar expressions are intended to identify such
forward-looking statements. Such statements are not guarantees of future
performance and involve certain risks, uncertainties and assumptions, including
but not limited to the following factors, which could cause the Company's future
results and stockholder values to differ materially from those expressed in any
forward-looking statements made by or on behalf of Omega Worldwide. Many of such
factors are beyond the Company's ability to control or predict. Readers are
cautioned not to put undue reliance on forward-looking statements. Omega
Worldwide disclaims any intent or obligation to update publicly any
forward-looking statements, whether as a result of new information, future
events or otherwise.
NO HISTORY OF OPERATIONS
The Company is newly formed and has no operating history except as part of
Omega. The financial information relating to the Assets that is presented
elsewhere in this Prospectus is not necessarily indicative of future operations
of Omega Worldwide.
HEALTHCARE INDUSTRY
The Company will invest in entities which will own healthcare facilities
principally outside of the United States. Accordingly, the Company will not
diversify its investments to reduce the risks associated with investment in the
healthcare industry. Future investments by the Company may be on terms or
conditions less favorable than the terms applicable to the Company's initial
investments. The operation of healthcare facilities is subject to substantial
regulation. In addition to other laws and regulations with which the Company
will be required to comply, the Company will be subject to laws that govern
financial arrangements between healthcare providers. Any failure to comply with
these laws or regulations could have an adverse effect on the operations of the
Company.
Healthcare is an area of extensive governmental regulation and frequent
regulatory change. The lessees and mortgagors of Principal or similar companies
in which the Company invests are and will continue to be subject to extensive
regulation. Changes in laws or regulations or new interpretations of existing
laws or regulations can have a dramatic effect on the healthcare industry with
respect to methods of doing business, costs of doing business and revenues.
Principal is attempting to develop and market a method of financing for
healthcare properties which is not, at present, widely accepted in the United
Kingdom or elsewhere, and the business of the Company may not develop and grow
as the Company anticipates.
The operating results of the healthcare facilities underlying the
investments of Principal or similar companies in which the Company invests will
depend on various factors over which the Company will have no control and which
may affect the present or future cash flows of the Company. Those factors
include, without limitation, general economic conditions, changes in supply of,
or demand for, competing long-term healthcare facilities, changes in occupancy
levels, the ability of the lessees and mortgagors of Principal or similar
companies in which the Company invests through rate increases or otherwise to
absorb increases in operating expenses, changes in governmental regulations and
changes in planning (zoning) regulations.
A significant portion of the revenues of the lessees and mortgagors of
Principal or similar companies in which the Company invests will be dependent
upon payments from third party payors, including private insurers and local and
national governments. The levels of revenues and profitability of such lessees
and mortgagors may be affected by the continuing efforts of third party payors
to contain or reduce the cost of healthcare. Medical advances and changes in the
method of providing long-term healthcare services may significantly change the
healthcare needs of the elderly and thereby reduce the demand for long-term
12
<PAGE> 14
healthcare facilities. Likewise, such advances and changes may make obsolete the
healthcare properties owned or financed by Principal or similar companies in
which the Company invests.
Although Principal plans to increase rapidly the number of healthcare
operators it finances, currently all of Principal's income is derived from rent
payments received from eight operators and over 50% of its revenues come from
two operators, Tamaris plc and Ashbourne Healthcare plc. Thus, the results of
operations and financial condition of Principal will be principally dependent
upon the ability of Tamaris plc and Ashbourne Healthcare plc to meet their
obligations under their agreements with Principal and, thus, upon the operating
results of the facilities financed by Principal.
Private market healthcare services, particularly those for the elderly
outside the United States, often have been provided by government or by
not-for-profit organizations, and the ability of the Company to extend its
financing and investment activities is premised upon additional changes in the
way in which healthcare services for the elderly will be provided in such
countries as the Company may invest. While the United Kingdom has been advanced
in permitting and encouraging the private for-profit sector to develop
healthcare services, there is no assurance that such encouragement and
permission will be available in other countries in which the Company may desire
to invest.
No assurance can be given that a lessee will exercise any option to renew
its lease upon the expiration of its term. In such an instance, the Company may
not be able to locate a qualified purchaser or qualified replacement tenant for
the healthcare properties in question, and as a result it would lose a source of
revenue while remaining responsible for payment of its obligations incurred in
financing such properties.
COMPETITION
The Company and Principal will be competing for additional healthcare
facility investments with other healthcare investors, including commercial banks
and other financial institutions. Many of the Company's and Principal's
competitors have been established for a longer period of time and have financial
resources far in excess of the Company.
INTERNATIONAL OPERATIONS AND EXCHANGE RATE FLUCTUATIONS
The Company anticipates that international financing will account for a
significant portion of its business. As a result, the Company will be subject to
risks associated with international operations, including trade restrictions,
overlapping or differing tax structures and legal systems and difficulties in
staffing and managing international operations.
The Company will experience foreign currency exchange gains and losses due
to exchange rate fluctuations among a variety of currencies. Significant
portions of the Company's revenues and expenses will be denominated in
currencies other than the U.S. dollar, including, the British pound as Principal
records its transactions and prepares its financial statements in pounds.
Fluctuations in the values of foreign currencies may cause reported amounts to
change from period to period, and may produce significant changes in the
Company's financial condition and results of operations that do not necessarily
reflect the Company's operating activities. While the Company plans to engage in
foreign currency hedging transactions from time to time to moderate the overall
effect of these currency movements, the Company expects that such fluctuations
will occur, and there can be no assurance that exchange rate fluctuations will
not have a material adverse effect on the Company's financial condition or
results of operations, or cause significant fluctuations in quarterly results of
operations.
LEVERAGE
The Company intends to implement its international investment strategy by
investing in entities utilizing a high degree of borrowing to fund its
investments. For example, Principal was organized with a capital plan
contemplating 60-70% senior debt, 10-20% subordinated unsecured debt and 10-20%
equity.
13
<PAGE> 15
RESTRICTIONS ON OMEGA WORLDWIDE'S OPPORTUNITIES
Under the Operating Agreement, Omega Worldwide has agreed not to acquire or
make investments in real estate (which, for purposes of the Operating Agreement,
includes the provision of services related to real estate) unless it has
notified Omega of the acquisition or investment opportunity, and Omega has
determined not to pursue such acquisition or investment. Omega Worldwide also
has agreed to assist Omega in structuring any such acquisition or investment
which Omega elects to pursue, on terms determined by Omega.
While Omega must notify Omega Worldwide of investments which may be of
interest to Omega Worldwide, Omega is not required to offer Omega Worldwide the
opportunity to participate in transactions, or make investments, where Omega is
able to pursue the entire transaction or investment. To the extent that Omega is
obligated by the Operating Agreement to offer certain transactions or
investments to Omega Worldwide, it is required to do so only if it has
determined, in its sole discretion, that it is unable to pursue the entire
transaction or investment. Because of the provisions of the Operating Agreement,
the nature of Omega Worldwide's business and the opportunities it may pursue are
restricted.
GROWTH THROUGH NEW OPPORTUNITIES
There is no assurance that any opportunities that Omega or Omega Worldwide
identifies will be within Omega Worldwide's financial, operational or management
parameters. In addition, there is no assurance that Omega Worldwide will have
sufficient capital resources or capabilities to pursue additional opportunities,
or that opportunities it pursues will be integrated, perform as expected or
contribute significant revenues or profits to Omega Worldwide.
POTENTIAL CONFLICTS OF INTEREST
Essel W. Bailey, Jr. is President and Chief Executive Officer of Omega and
Omega Worldwide, James P. Flaherty is Vice President -- International of Omega
and Omega Worldwide, F. Scott Kellman is Executive Vice President of Omega and
Omega Worldwide, Susan A. Kovach is Vice President and Secretary of Omega and
Omega Worldwide and David A. Stover is Vice President and Chief Financial
Officer of Omega and Omega Worldwide. Although each of them is committed to the
success of Omega Worldwide they are also committed to the success of Omega. None
of Mr. Bailey, Mr. Flaherty, Mr. Kellman, Ms. Kovach or Mr. Stover is committed
to spending a particular amount of time on Omega Worldwide's affairs, nor will
any of them devote his or her full time to Omega Worldwide. A majority (seven)
of the members of the Omega Worldwide Board will initially be members of the
Omega Board. In addition, the Omega Worldwide Board will include two members who
are unaffiliated with Omega. Management and directors as a group presently own
1.8% of the outstanding Omega Common Shares but intends to acquire a greater
percentage of shares of Omega Worldwide Common Stock.
Officers and directors of a corporation owe fiduciary duties to the
stockholders of that corporation. There is a risk that the common membership of
management and members of the Boards of Omega Worldwide and Omega will lead to
conflicts of interest in connection with transactions between the two companies
and opportunities presented to each of the companies. Although each of Omega and
Omega Worldwide will initially have at least 2 directors on its Board of
Directors who are independent of the other company, no assurance can be made
that this structure will continue in the future.
FUTURE CAPITAL REQUIREMENTS
Omega Worldwide has not received any commitment with respect to any
additional borrowing. There is no assurance that Omega Worldwide will have
sufficient working capital to finance future investments. Omega Worldwide
expects to be able to access capital markets or to seek other financing,
including financing from Omega or with Omega's assistance, but there is no
assurance that it will be able to do so at all or in amounts or on terms
acceptable to the Company. Omega currently is not obligated to provide any funds
to Omega Worldwide or to assist it in obtaining financing except for providing a
guaranty in connection with Omega Worldwide's proposed line of credit facility.
14
<PAGE> 16
ABSENCE OF A PUBLIC MARKET FOR OMEGA WORLDWIDE COMMON STOCK
There is currently no public market for Omega Worldwide Common Stock.
Although Omega Worldwide intends to report the Omega Worldwide Common Stock on
NASDAQ, it has not yet been approved and there can be no assurance as to the
prices at which trading in Omega Worldwide Common Stock will occur after the
Distribution. Until the Omega Worldwide Common Stock is fully distributed and an
orderly trading market develops, the prices at which trading in such stock
occurs may fluctuate significantly. There can be no assurance that an active
trading market in Omega Worldwide Common Stock will develop or be sustained in
the future or as to the price at which the Omega Worldwide Common Stock may
trade. Volatility in the market and other factors may materially adversely
affect the market price of Omega Worldwide Common Stock.
CERTAIN ANTITAKEOVER PROVISIONS
The Charter and Bylaws, the Rights Plan and applicable sections of the MGCL
contain several provisions that may make more difficult the acquisition of
control of Omega Worldwide without the approval of the Omega Worldwide Board.
Certain provisions of Omega Worldwide's Charter and the Bylaws, among other
things: (i) classify the Omega Worldwide Board into three classes, which serve
for staggered three-year terms; (ii) provide that a director of Omega Worldwide
may be removed by the stockholders only for cause; (iii) provide that only the
Chairman, the President, the Omega Worldwide Board or holders of 50% of the
Omega Worldwide Common Stock may call special meetings of the stockholders; (iv)
provide that the stockholders may take action only at a meeting of Omega
Worldwide stockholders, not by written consent; (v) provide that stockholders
must comply with certain advance notice procedures in order to nominate
candidates for election to the Omega Worldwide Board or to place stockholders'
proposals on the agenda for consideration at meetings of the stockholders; (vi)
provide that, under certain circumstances, the affirmative vote of the holders
of 80% of the Omega Worldwide Common Stock is required to approve any merger or
similar business combination involving Omega Worldwide (the "business
combination provision"); and (vii) provide that the stockholders may amend or
repeal any of the foregoing provisions of the Charter or the Bylaws only by a
vote of 80% of the stock entitled to vote generally in the election of
directors. The Rights Plan would cause substantial dilution to a person or group
that attempts to acquire Omega Worldwide on terms not approved in advance by the
Omega Worldwide Board. In addition, Subtitle 6 of Title 3 of the MGCL (the
"Business Combination Statute") restricts business combinations between Omega
Worldwide and any holder of 10% or more of the Omega Worldwide Common Stock, and
Subtitle 7 of Title 3 of the MGCL (the "Control Shares Acquisition Statute")
imposes certain restrictions on the voting rights of control shares acquired in
a control share acquisition. The Charter provides that the business combination
provision, the Rights Plan, the Business Combination Statute and the Control
Shares Acquisition Statute do not apply to Omega and its affiliates.
Accordingly, Omega and its affiliates will be in a position to effect a business
combination or other transaction with Omega Worldwide in situations where others
would be restricted from effecting a similar transaction. See "Description of
Omega Worldwide Capital Stock" and "Certain Antitakeover Provisions."
15
<PAGE> 17
THE COMPANY
Omega Worldwide was incorporated in Maryland in November 1997. Omega
Worldwide will own the Assets contributed by Omega and will receive cash from
the Rights Offering. Prior to the contribution of the Assets, Omega Worldwide
has had no operations. See "Business."
The Company's executive offices are located at 905 West Eisenhower Circle,
Suite 101, Ann Arbor, Michigan 48103 and its telephone number is (734) 747-9791.
The Company will also have an office at 145 Cannon Street, London, England EC
4N5 BP, telephone number (171) 929-3444.
THE RIGHTS OFFERING
RIGHTS
Omega is distributing, at no cost, to each holder of Omega Common Shares of
record as of the close of business on the Record Date, one Right for every ten
Omega Common Shares held by such holder on such Record Date. Each Right entitles
the holder thereof to purchase one share of Omega Worldwide Common Stock at the
Subscription Price. The Rights are evidenced by nontransferable Rights
certificates, which shareholders will receive with the delivery of this
Prospectus. A holder of Rights may (i) subscribe for shares of Omega Worldwide
Common Stock through the exercise of all of his or her Rights, thereby
preserving approximately the same percentage ownership in Omega Worldwide as he
or she currently enjoys in Omega relative to the other shareholders of Omega, or
(ii) allow part or all of his or her Rights to expire unexercised. In the latter
case, after the Rights Offering and the Distribution the shareholder would own a
smaller relative equity ownership and voting interest in Omega Worldwide as he
or she currently enjoys in Omega relative to the other shareholders of Omega.
SUBSCRIPTION PRICE
The Subscription Price for one share of Omega Worldwide Common Stock, which
may be purchased upon the exercise of one Right, is $ .
EXPIRATION DATE
The Rights will expire and become void at 5:00 p.m., Eastern Standard Time,
on March , 1998 or such later date as Omega Worldwide may determine in its
sole discretion. The Rights will thereafter have no value. Notice will be given
to shareholders of record on the Record Date, by mail or by publication in a
newspaper of national circulation, of a new Expiration Date in the event Omega
Worldwide extends the period for the exercise of the Rights.
RESTRICTIONS
All shareholders of Omega as of the Record Date who purchase shares of
Omega Worldwide Common Stock pursuant to the Secondary Offering will agree not
to exercise any Rights they may receive pursuant to the Rights Offering.
OVERSUBSCRIPTION PRIVILEGE
A holder of Omega Common Shares on the Record Date who validly exercises
all of the Rights initially issued to such holder to the extent possible will
have the further right to exercise the Oversubscription Privilege for
Unsubscribed Shares at the Subscription Price. Only holders of Omega Common
Shares on the Record Date will be entitled to the Oversubscription Privilege.
See, however, "Restrictions." Holders of Omega Common Shares so entitled to
exercise the Oversubscription Privilege may oversubscribe for as many additional
shares of Omega Worldwide Common Stock as desired (subject to the maximum number
of shares of Omega Worldwide Common Stock offered in the Rights Offering and
certain other restrictions). See "-- Limitation on Subscriptions." If the demand
for shares of Omega Worldwide Common Stock pursuant to the Oversubscription
Privilege exceeds the number of shares of Omega Worldwide Common Stock
available, holders of Omega Common Shares on the Record Date shall participate
in the Oversubscription Privilege (up
16
<PAGE> 18
to, but not exceeding, the number of shares of Omega Worldwide Common Stock
oversubscribed for by each such holder) pro rata based upon the number of Rights
exercised by each such person (without regard to the number of shares of Omega
Worldwide Common Stock oversubscribed for by each such person pursuant to the
Oversubscription Privilege), with fractional shares of Omega Worldwide Common
Stock adjusted in any manner Omega Worldwide deems appropriate. Promptly after
the Expiration Date, Omega Worldwide will send each subscriber exercising the
Oversubscription Privilege a written confirmation (the "Oversubscription
Notice") of the number of shares of Omega Worldwide Common Stock allocated to
such subscriber under the Oversubscription Privilege.
UNSUBSCRIBED SHARES AND THIRD PARTY SALES
Certain directors and officers of Omega Worldwide and their affiliates (the
"Rights Investors") have committed to purchase any Unsubscribed Shares. On or
promptly after March , 1998, the business day after the Expiration Date, the
Subscription Agent will send each Rights Investor a written confirmation of the
number of shares of Omega Worldwide Common Stock allocated to such Rights
Investor. On or prior to April , 1998, the fourth business day after the
Expiration Date, the Rights Investors must deliver payment for the shares of
Omega Worldwide Common Stock subscribed for to the Subscription Agent by wire
transfer of immediately available funds, based upon such Rights Investor's
prorated allocation of shares of Omega Worldwide Common Stock as notified by the
Subscription Agent.
WITHDRAWAL
Omega Worldwide reserves the right to withdraw the Rights Offering (and the
offering of Unsubscribed Shares to the Rights Investors) at any time prior to or
on the Expiration Date and for any reason (including, without limitation, the
market price of the Common Shares), in which event all funds received from
subscribers will be refunded promptly without interest.
SUBSCRIPTION AGENT
The Subscription Agent and escrow agent for the Rights Offering is First
Chicago Trust Company of New York (the "Subscription Agent"). The address to
which Rights Certificates, Notices of Guaranteed Delivery and payments should be
mailed or delivered is:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
By Mail:
First Chicago Trust Company
of New York
Attention: Tenders & Exchanges
P.O. Box 2565, Suite 4660
Jersey City, NJ 07303-2565
By Facsimile Transmission:
(201) 222-4720
or
(201) 222-4721
By Hand:
First Chicago Trust Company
of New York
Attention: Tenders & Exchanges
c/o THE DEPOSITORY
TRUST COMPANY
55 Water Street, DTC TAD
Vietnam Veterans Memorial Plaza
New York, NY 10041
By Overnight Courier:
First Chicago Trust Company
of New York
Attention: Tenders & Exchanges
Suite 4680-EEG
14 Wall Street, 8th Floor
New York, NY 10005
Confirm By Telephone:
(201) 222-4707
Delivery of Rights Certificates, Notices of Guaranteed Delivery and
payments (other than wire transfers) other than as set forth above will not
constitute a valid delivery.
ANY QUESTIONS OR REQUESTS FOR ASSISTANCE CONCERNING THE METHOD OF
SUBSCRIBING FOR SHARES OF OMEGA WORLDWIDE COMMON STOCK OR FOR ADDITIONAL COPIES
OF THIS PROSPECTUS SHOULD BE DIRECTED TO AT .
17
<PAGE> 19
FRACTIONAL SHARES
No fractional shares of Omega Worldwide Common Stock will be issued and
Omega Worldwide may adjust for fractional shares of Omega Worldwide Common Stock
resulting from the exercise of the Oversubscription Privilege in any manner it
deems appropriate. Rights Certificates may not be divided in such a manner as to
create fractional Rights or permit holders to subscribe for a greater number of
shares of Omega Worldwide Common Stock. Banks, trust companies, securities
dealers and brokers that hold shares of Omega Worldwide Common Stock as nominees
for more than one beneficial owner may have a Rights Certificate divided by the
Subscription Agent (see "-- Method of Transferring Rights"), or may, upon proper
showing to the Subscription Agent, exercise their Rights Certificates on the
same basis as if the beneficial owners were record holders on the Record Date.
Omega Worldwide reserves the right to deny any division of Rights Certificates
if in its opinion the result would be inconsistent with the intent of this
privilege.
METHOD OF EXERCISING RIGHTS
Shares of Omega Worldwide Common Stock may be subscribed for pursuant to
the exercise of the Rights by properly completing and duly executing the Rights
Certificate accompanying this Prospectus and mailing or delivering the Rights
Certificate, together with payment of the full Subscription Price for each share
of Omega Worldwide Common Stock subscribed for pursuant to the exercise of
Rights to the Subscription Agent at the appropriate address set forth above.
Upon receipt of the Oversubscription Notice, each subscriber exercising the
Oversubscription Privilege must deliver payment to the Subscription Agent for
the shares of Omega Worldwide Common Stock subscribed for pursuant to the
Oversubscription Privilege on or prior to the fourth business day after receipt
of the Oversubscription Notice. Banks, trust companies, securities dealers and
brokers that hold shares of Omega Worldwide Common Stock as nominee for more
than one beneficial owner may, upon proper showing to the Subscription Agent,
exercise their Rights and the Oversubscription Privilege on the same basis as if
the beneficial owners were record holders on the Record Date. Payments must be
made in United States currency by personal check, cashier's check, bank draft or
money order payable to the order of "Omega Worldwide Rights Offering". In the
case of holders of Rights that are held of record through The Depository Trust
Company ("DTC"), such Rights may be exercised by instructing DTC to transfer
Rights from such holder's DTC account to the Subscription Agent's DTC account,
together with payment of the full Subscription Price. Except as described under
"-- Late Delivery of Payment and Rights Certificates", to be accepted, the
properly completed and duly executed Rights Certificate and the payment must be
received by the Subscription Agent prior to 5:00 p.m., Eastern Standard Time, on
the Expiration Date. Rights Certificates received after such time will not be
honored.
A holder of Rights who exercises fewer than all of the Rights represented
by his or her Rights Certificate will receive from the Subscription Agent a new
Rights Certificate representing such unexercised Rights. No new Rights
Certificates will be issued after , 1998. Neither Omega Worldwide
nor the Subscription Agent shall incur any liability if a Rights Certificate,
furnished by the Subscription Agent or otherwise, is not received in time to be
exercised, transferred or sold.
The instruction letter accompanying the Rights Certificate should be read
carefully and strictly followed. DO NOT SEND RIGHTS CERTIFICATES OR PAYMENTS TO
OMEGA WORLDWIDE. Except as described under the captions "-- Unsubscribed Shares
and Third Party Sales" and "-- Late Delivery of Payments and Rights
Certificates," no subscription will be deemed to have been received until the
Subscription Agent has received delivery of a properly completed and duly
executed Rights Certificate and payment of the full Subscription Price. The risk
of delivery of all documents and payments is on subscribers, not Omega Worldwide
or the Subscription Agent. If the mail is used, it is recommended that insured,
registered mail, return receipt requested, be used and that a sufficient number
of days be allowed to ensure delivery to the Subscription Agent before the
Expiration Date.
LATE DELIVERY OF PAYMENTS AND RIGHTS CERTIFICATES
If, prior to 5:00 p.m., Eastern Standard Time, on the Expiration Date, the
Subscription Agent has received a properly completed and duly executed Notice of
Guaranteed Delivery substantially in the form
18
<PAGE> 20
accompanying this Prospectus (either by hand, mail, telegram or facsimile
transmission) specifying the name of the holder of Rights and the number of
shares of Omega Worldwide Common Stock subscribed for (stating separately the
number of shares of Omega Worldwide Common Stock subscribed for pursuant to the
exercise of the Rights and the Oversubscription Privilege) and guaranteeing that
the properly completed and duly executed Rights Certificate and payment of the
full Subscription Price for all shares of Omega Worldwide Common Stock
subscribed for will be delivered to the Subscription Agent within three business
days after the Expiration Date, such subscription may be accepted, subject to
the Subscription Agent's withholding the certificates for the shares of Omega
Worldwide Common Stock until receipt of the properly completed and duly executed
Rights Certificate and payment of such amount within such time period. In the
case of holders of Rights that are held of record through DTC, such Rights may
be exercised by instructing DTC to transfer Rights from such holder's DTC
account to the Subscription Agent's DTC account, together with payment of the
full Subscription Price. The Notice of Guaranteed Delivery must be guaranteed by
a commercial bank, trust company or credit union having an office, branch or
agency in the United States or by a member of a Stock Transfer Association
approved medallion program such as STAMP, SEMP or MSP. Notices of Guaranteed
Delivery and Payments should be mailed or delivered to the appropriate addresses
set forth under "-- Subscription Agent".
VALIDITY OF SUBSCRIPTIONS
All questions with respect to the validity and form of the exercise of any
Rights or the Oversubscription Privilege, or third-party subscriptions for
Unsubscribed Shares (including time of receipt and eligibility to participate in
the Rights Offering) will be determined solely by Omega Worldwide, which
determination shall be final and binding. Once made, subscriptions and
directions are irrevocable, and no alternative, conditional or contingent
subscriptions or directions will be accepted. Omega Worldwide reserves the
absolute right to reject any subscriptions or directions not properly submitted
or the acceptance of which, in the opinion of Omega Worldwide's counsel, would
be unlawful. Any irregularities in connection with subscriptions must be cured
prior to the Expiration Date unless waived by Omega Worldwide in its sole
discretion. Neither Omega Worldwide nor the Subscription Agent shall be under
any duty to give notification of defects in such subscriptions or incur any
liability for failure to give such notification. A subscription will be deemed
to have been accepted (subject to Omega Worldwide's right to withdraw or
terminate the Rights Offering) only when a properly completed and duly executed
Rights Certificate, any other required documents and payment of the full
Subscription Price with respect to such subscription have been received by the
Subscription Agent. Omega Worldwide's interpretations of the terms and
conditions of the Rights Offering shall be final and binding.
RIGHTS OF SUBSCRIBERS
Subscribers will have no rights as shareholders of Omega Worldwide with
respect to shares of Omega Worldwide Common Stock subscribed for until
certificates representing such shares of Omega Worldwide Common Stock are issued
to them. Subscribers will have no right to revoke their subscriptions after
delivery to the Subscription Agent of a completed Rights Certificate and any
other required documents.
DELIVERY OF SHARES
Certificates for shares of Omega Worldwide Common Stock purchased pursuant
to the exercise of Rights will be mailed as soon as practicable after the
receipt of all required documents and payment in full of the Subscription Price
due for such shares of Omega Worldwide Common Stock. Certificates for shares of
Omega Worldwide Common Stock purchased pursuant to the Oversubscription
Privilege or third-party subscriptions for Unsubscribed Shares will be mailed as
soon as practicable after the Expiration Date and the receipt of all required
documents and payment in full of the Subscription Price due for such shares of
Omega Worldwide Common Stock. In the case of shareholders whose shares of Omega
Worldwide Common Stock are held through DTC and Rights Investors who arrange for
delivery and payment through DTC, the appropriate participant account will be
credited.
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<PAGE> 21
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS REGARDING THE RIGHTS OFFERING
The following is a summary description of the material U.S. federal income
tax consequences of the Rights Offering. This summary is based upon the current
provisions of the Internal Revenue Code of 1986, as amended (the "Code"), its
legislative history, Treasury regulations, administrative pronouncements and
judicial decisions, all of which are subject to change, possibly with
retroactive effect. This summary does not purport to be a complete discussion of
all U.S. federal income tax considerations relating to the Rights Offering. This
summary does not address the tax consequences of the Rights Offering under
state, local or non-U.S. tax laws. In addition, this summary may not apply, in
whole or in part, to particular categories of Omega shareholders, such as
financial institutions, broker-dealers, life insurance companies, tax-exempt
organizations, investment companies, foreign taxpayers and other special status
taxpayers. Finally, a tax ruling from the Internal Revenue Service has not been
requested. THIS SUMMARY IS INCLUDED FOR GENERAL INFORMATION ONLY. ALL OMEGA
SHAREHOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS TO DETERMINE THE SPECIFIC
TAX CONSEQUENCES OF THE RIGHTS OFFERING, INCLUDING ANY STATE, LOCAL AND NON-U.S.
TAX CONSEQUENCES.
Taxation of Omega on the Rights Offering. Omega will recognize gain on the
capitalization of Omega Worldwide with the Assets to the extent the fair market
value of the Assets exceeds Omega's adjusted tax basis in the Assets. In
addition, Omega will recognize gain on the Rights Offering to the extent the
fair market value of the Rights distributed to the Omega shareholders exceeds
Omega's adjusted tax basis in the Rights. Such gain will increase Omega's
current earnings and profits.
Taxation of Omega Shareholders on the Rights Offering. As a result of the
Rights Offering, an Omega shareholder will be treated as receiving a
distribution from Omega in an amount equal to the fair market value of the
Rights received by such shareholder. Omega's distributions (including the Rights
Offering) will be ordinary income to the extent of Omega's current and
accumulated earnings and profits, which will be increased by the amount of gain
recognized by Omega as described above. To the extent that distributions
(including the Rights Offering) will be in excess of current and accumulated
earnings and profits (unless designated as capital gain dividends), such
distributions will be treated as a tax-free return of capital, reducing the tax
basis in the shareholder's Omega Common Shares by the amount of the distribution
(but not below zero). To the extent that distributions (including the Rights
Offering) will be in excess of a shareholder's adjusted tax basis in Omega, such
distributions will be capital gain (if the Omega Common Shares are held as a
capital asset). An Omega shareholder will have a tax basis in the Rights equal
to the fair market value of the Rights received on the Distribution Date.
Based upon the above, management anticipates that, for a typical Omega
shareholder, the Rights Offering will result in an increase in the shareholder's
tax-free return of capital and in capital gain, but this result cannot be
assured.
Taxation of Non-U.S. Omega Shareholders on the Rights Offering. For
purposes of this discussion a "non-U.S. holder" means any Omega shareholder who,
for United States income tax purposes, is a foreign corporation, a nonresident
alien, a nonresident alien fiduciary of a foreign estate or trust, or a foreign
partnership which has at least one member that is, for United States federal
income tax purposes, a foreign corporation, a nonresident alien individual or a
nonresident alien fiduciary of a foreign estate or trust. Non-U.S. holders will
be subject to U.S. withholding tax at a rate of 30%, or if applicable, a lower
treaty rate, on the portion of the Rights Offering not attributable to capital
gains unless the Rights Offering is effectively connected with the conduct of a
trade or business in the United States by such non-U.S. holder. In addition,
under the Foreign Investment in Real Property Tax Act of 1980 ("FIRPTA"), any
Rights Offering made by Omega to a non-U.S. holder, to the extent attributable
to gains from dispositions of United States Real Property Interests ("USRPIs")
by Omega ("USRPI Capital Gains"), will be considered effectively connected with
a U.S. trade or business of the non-U.S. holder and subject to U.S. income tax
at the rates applicable to U.S. individuals or corporations. Omega will be
required to withhold tax equal to 35% of the amount of the Rights Offering
applicable to a non-U.S. holder to the extent it constitutes USRPI Capital
Gains, without regard to the portion of the Rights Offering which Omega
designates as a capital gain dividend. The portion of the Rights Offering which
constitutes USRPI Capital Gains may also be subject to the 30% branch profits
tax (unless reduced by treaty) in the case of a non-U.S. holder that is a
foreign corporation.
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<PAGE> 22
Any portion of the Rights Offering that exceeds both current and
accumulated earnings and profits of Omega will not be taxed as either an
ordinary dividend or a capital gain dividend. However, because Omega will not be
able to determine at the time the Rights Offering is made whether or not the
Rights Offering will be in excess of Omega's current and accumulated earnings
and profits, the Rights Offering will be subject to full withholding. The
non-U.S. holder may seek a refund of over-withholding from the Internal Revenue
Service if it is subsequently determined that the Rights Offering was, in fact,
in excess of Omega's current and accumulated earnings and profits. Under current
Treasury Regulations, offerings paid to an address in a foreign country are
presumed to be paid to a resident of that country (unless the payor has
knowledge to the contrary) for foreign withholding purposes and, under the
current interpretation of the Treasury Regulations, for purposes of determining
the applicability of a tax treaty rate. In any case where an offering is payable
in any medium other than money, the withholding agent cannot release the
property so distributed until the property has been converted into funds
sufficient to enable the withholding agent to pay over in money the tax required
to be withheld. For a discussion of the manner in which this withholding
obligation will be satisfied by Omega in connection with the Rights Offering see
"Foreign Shareholders."
Taxation of Omega Shareholder upon Exercise of Rights. Except as discussed
below with respect to cash received in lieu of fractional shares of Omega
Worldwide Common Stock, an Omega shareholder will not recognize gain or loss
upon the exercise of a Right. An Omega shareholder's tax basis in the Omega
Worldwide Common Stock will be equal to the sum of (i) such shareholder's tax
basis in the Right exercised and (ii) the exercise price paid. The holding
period of the Omega Worldwide Common Stock received upon the exercise of a Right
will begin on the date of exercise. An Omega shareholder receiving cash in lieu
of fractional shares of Omega Worldwide Common Stock upon the exercise of a
Right will recognize gain to the extent that the cash received exceeds such
shareholder's tax basis in the portion of the Right exercised for cash in lieu
of fractional shares of Omega Worldwide Common Stock.
Taxation of Omega Shareholder upon Expiration of Rights. If an Omega
shareholder's Rights expire without being exercised, such shareholder will
recognize a loss equal to its tax basis in the expired Rights. In general, such
loss will be a capital loss if the stock into which the Rights were exercisable
would be a capital asset in such shareholder's hands and will be a short-term
loss.
Backup Withholding. Under the backup withholding rules of the Code (which
generally impose a 31% withholding tax on certain persons who fail to furnish
the information required under the U.S. federal tax reporting requirements), an
Omega shareholder may be subject to backup withholding with respect to the
receipt of the Rights unless such shareholder (i) is a corporation or comes
within certain other exempt categories and, when required, demonstrates this
fact or (ii) provides a correct taxpayer identification number and certifies
under penalties of perjury that the taxpayer identification number is correct
and that the holder is not currently subject to backup withholding because of a
failure to report all dividend and interest income. The taxpayer identification
number of an individual is his or her Social Security number. Any amount
withheld under these rules will be credited against the shareholder's U.S.
federal income tax liability.
Information Reporting. Omega is required to report to its shareholders the
value of the Rights issued in the Rights Offering on Form 1099-DIV for 1998.
LISTING AND TRADING OF OMEGA WORLDWIDE COMMON STOCK
There is currently no public market for Omega Worldwide Common Stock.
Although Omega Worldwide intends to report the Omega Worldwide Common Stock on
NASDAQ, it has not yet been approved for listing, and there can be no assurance
as to the prices at which trading in Omega Worldwide Common Stock will occur
after the Distribution. Until Omega Worldwide Common Stock is fully distributed
and an orderly trading market develops, the prices at which trading in such
stock occurs may fluctuate significantly. There can be no assurance that an
active trading market in Omega Worldwide Common Stock will develop or be
sustained in the future.
The prices at which Omega Worldwide Common Stock trades will be determined
by the marketplace and may be influenced by many factors, including, among
others, Omega Worldwide's performance and prospects, the depth and liquidity of
the market for Omega Worldwide Common Stock, investor perception of Omega
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<PAGE> 23
Worldwide and of the industries in which the Company operates and economic
conditions in general, Omega Worldwide's dividend policy, and general financial
and other market conditions. In addition, financial markets have experienced
extreme price and volume fluctuations that have affected the market price of
many stocks and that, at times, could be viewed as unrelated or disproportionate
to the operating performance of such companies. Such fluctuations have also
affected the share prices of many newly public issuers. Such volatility and
other factors may materially adversely affect the market price of Omega
Worldwide Common Stock.
Omega Worldwide will have approximately 3,000 stockholders of record, based
on the number of record holders of Omega Common Shares on the Record Date. The
Transfer Agent and Registrar for the Omega Worldwide Common Stock will be First
Chicago Trust Company of New York. For certain information regarding options and
other equity-based employee benefit awards involving Omega Worldwide Common
Stock that may become outstanding after the Distribution, see "Management."
FOREIGN SHAREHOLDERS
In the Rights Offering, Rights will not be mailed immediately to Omega
shareholders of record whose mailing addresses are outside the United States
("Foreign Shareholders") but instead will be held by the Distribution Agent for
such shareholders' accounts. As described under the heading "-- Certain Federal
Income Tax Considerations Regarding the Rights Offering -- Taxation of Non-U.S.
Omega Shareholders on the Rights Offering" Omega is subject to a United States
federal tax withholding obligation with respect to the Rights distributed to
Foreign Shareholders. On the Record Date, the Distribution Agent will mail a
notice to a Foreign Shareholder announcing the Distribution and instructing the
Foreign Shareholder that in order to receive the full amount of the Rights, the
Foreign Shareholder must provide a check to the Distribution Agent in the amount
of the Rights to be withheld. Within ten business days after the Record Date,
the Distribution Agent will mail an additional notice to each Foreign
Shareholder setting forth the amount of the withholding obligation. A Foreign
Shareholder must deliver to the Distribution Agent his or her check in the
proper amount of the withholding within 20 business days of the Record Date.
THE DISTRIBUTION
BACKGROUND OF AND REASONS FOR THE DISTRIBUTION
Omega Worldwide will provide investment advisory and management services
and hold equity and debt interests in companies engaged in providing
sale/leaseback and other capital financing to healthcare service providers
throughout the world. Omega Worldwide will seek to leverage its management
expertise in financing healthcare providers globally by providing seed equity
and debt capital and investment advisory services to newly-formed or existing
real estate and finance companies principally in countries other than the United
States. Under the Operating Agreement, Omega Worldwide and Omega will agree to
provide each other with rights to participate in certain transactions and to
make certain investments. In particular, Omega Worldwide will have the right to
pursue certain opportunities that Omega may determine it is unable to pursue
(whether due to its status as a REIT for federal income tax purposes or for
other reasons), or that Omega may elect not to pursue. See "Business -- The
Operating Agreement." In addition, Omega Worldwide intends to pursue additional
opportunities with others in the future. The Distribution of Omega Worldwide
Common Stock will provide Omega shareholders as of the Record Date with the
opportunity to benefit from activities Omega elects not to pursue due to its
REIT status or for other reasons. Concurrent with the effectiveness of the
Company's Registration Statement of which this Prospectus is a part, Omega will
contribute the Assets in exchange for 5,799,000 shares of Omega Worldwide Common
Stock, bringing the aggregate amount of shares of Omega Worldwide Common Stock
owned by Omega to 7,900,000, of which 2,100,000 shares are being sold in the
Secondary Offering and 5,800,000 shares are being distributed by Omega to its
shareholders in connection with the Distribution.
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<PAGE> 24
MANNER OF EFFECTING THE DISTRIBUTION
It is expected that the Distribution Date will be March , 1998. At the
time of the Distribution, share certificates for Omega Worldwide Common Stock
will be delivered to the Distribution Agent. Commencing on or about the date of
the Distribution, the Distribution Agent will begin mailing account statements
reflecting ownership of Omega Worldwide Common Stock to holders of Omega Common
Shares as of the close of business on the Record Date. The Distribution will be
made on the basis of one share of Omega Worldwide Common Stock for every 3.45
Omega Common Shares held on the Record Date. No certificates representing
fractional shares of Omega will be issued in connection with the Distribution.
In lieu of fractional shares, the Distribution Agent will aggregate and sell the
fractional shares and distribute the cash proceeds to those holders otherwise
entitled to a fractional interest in the amount of their pro rata share of the
total sale proceeds. Proceeds from sales of fractional shares will be paid by
the Distribution Agent based upon the average gross selling price per share of
the Omega Worldwide Common Stock of all such sales. Omega will bear the cost of
commissions incurred in connection with such sales. Such sales are expected to
be made as soon as practicable after the Distribution Date. None of Omega, Omega
Worldwide or the Distribution Agent will guarantee any minimum sale price for
the fractional shares of the Omega Worldwide Common Stock and no interest will
be paid on the proceeds of such sales. All shares of Omega Worldwide Common
Stock will be fully paid and nonassessable. See "Description of Omega Worldwide
Capital Stock."
Prior to the Distribution Date, inquiries relating to the Distribution
should be directed to the Distribution Agent at ; or by telephone at
; Monday through Friday, 9 a.m. to 5 p.m. (Eastern time), toll-free at
. After the Distribution Date, inquiries may be directed to the
Distribution Agent or Omega Worldwide Investor Relations, at ; or by
telephone at , Monday through Friday, 9 a.m. to 5 p.m. (Eastern
time).
NO HOLDER OF OMEGA COMMON SHARES WILL BE REQUIRED TO MAKE ANY PAYMENT FOR
THE SHARES OF OMEGA WORLDWIDE COMMON STOCK TO BE RECEIVED IN THE DISTRIBUTION OR
TO SURRENDER OR EXCHANGE OMEGA COMMON SHARES OR TO TAKE ANY OTHER ACTION IN
ORDER TO RECEIVE OMEGA WORLDWIDE COMMON STOCK TO WHICH THE HOLDER IS ENTITLED IN
THE DISTRIBUTION.
EFFECT ON OMEGA
The Board of Directors of Omega intends not to reduce the Omega dividend or
alter Omega's dividend policy as a consequence of the Distribution of shares of
Omega Worldwide Common Stock or the contribution of Assets of Omega to Omega
Worldwide.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE DISTRIBUTION
The following is a summary description of the material U.S. federal income
tax consequences of the Distribution. This summary is based upon the current
provisions of the Code, its legislative history, Treasury regulations,
administrative pronouncements and judicial decisions, all of which are subject
to change, possibly with retroactive effect. This summary does not purport to be
a complete discussion of all U.S. federal income tax considerations relating to
the Distribution. This summary does not address the tax consequences of the
Distribution under state, local or non-U.S. tax laws. In addition, this summary
may not apply, in whole or in part, to particular categories of Omega
shareholders, such as financial institutions, broker-dealers, life insurance
companies, tax-exempt organizations, investment companies, foreign taxpayers and
other special status taxpayers. Finally, a tax ruling from the Internal Revenue
Service has not been requested. THIS SUMMARY IS INCLUDED FOR GENERAL INFORMATION
ONLY. ALL OMEGA SHAREHOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS TO
DETERMINE THE SPECIFIC TAX CONSEQUENCES OF THE DISTRIBUTION, INCLUDING ANY
STATE, LOCAL AND NON-U.S. TAX CONSEQUENCES.
Taxation of Omega on the Distribution. Omega will recognize gain on the
capitalization of Omega Worldwide with the Assets to the extent the fair market
value of the Assets exceeds Omega's adjusted tax basis in the Assets. In
addition, Omega may recognize gain on the Distribution to the extent the fair
market value of the Omega Worldwide Common Stock distributed to the Omega
shareholders exceeds Omega's adjusted tax basis in the Omega Worldwide Common
Stock, which basis will depend on the fair market value
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<PAGE> 25
of the Assets. Furthermore, Omega may recognize gain on the sale of the
remaining 21% of the Omega Worldwide Common Stock to the purchasers in the
Secondary Offering to the extent the fair market value of the Omega Worldwide
Common Stock sold to the purchasers in the Secondary Offering exceeds Omega's
adjusted tax basis in the Assets, which basis will depend on the fair market
value of the Assets. Such gains will increase Omega's current earnings and
profits.
Taxation of Omega Shareholders on the Distribution. As a result of the
Distribution, an Omega shareholder will be treated as receiving a distribution
from Omega in an amount equal to the fair market value of the Omega Worldwide
Common Stock received by such shareholder. Omega's distributions (including the
Distribution) will be ordinary income to the extent of Omega's current and
accumulated earnings and profits (unless designated as capital gain dividends),
which will be increased by the amount of gain recognized by Omega as described
above. To the extent that distributions (including the Distribution) will be in
excess of current and accumulated earnings and profits, such distributions will
be treated as a tax-free return of capital, reducing the tax basis in the
shareholder's Omega Common Shares by the amount of the distribution (but not
below zero). To the extent that distributions (including the Distribution) will
be in excess of a shareholder's adjusted tax basis in Omega, such distributions
will be capital gain (if the Omega Common Shares are held as a capital asset).
An Omega shareholder will have a tax basis in the Omega Worldwide Common Stock
equal to the fair market value of the Omega Worldwide Common Stock received on
the Distribution Date. An Omega shareholder's holding period for the Omega
Worldwide Common Stock received in the Distribution will begin on the
Distribution Date.
Based upon the above, management anticipates that, for a typical Omega
shareholder, the Distribution likely will result in an increase in the
shareholder's tax-free return of capital and capital gain, but this result
cannot be assured.
The following example illustrates the application of the above rules to a
hypothetical Omega shareholder. (All of the facts in this paragraph are
hypothetical and are assumed for purposes of illustration.) An Omega shareholder
has a $20 adjusted tax basis in an Omega Common Share. Omega will make a
distribution equal to or in excess of its 1998 earnings and profits from
operations. In addition to Omega's earnings and profits from operations, the
consummation of the transaction contemplated herein generates additional
earnings and profits equal to $1.50 for each outstanding Omega Common Share. The
fair market value of a share of Omega Worldwide Common Stock at the Distribution
Date is $7.50 (the equivalent of $2.17 per Omega Common Share) which will be the
tax basis of the share of Omega Worldwide Common Stock. Omega will designate the
Distribution as a capital gain dividend. Based upon the above hypothetical
facts, such shareholder would be treated as receiving a capital gain dividend
equal to $1.50 and would have a tax-free return of capital equal to $0.67 which
would reduce such shareholders adjusted tax basis in its Omega Common Share from
$20 to $19.33.
Taxation of Non-U.S. Omega Shareholders on the Distribution. For purposes
of this discussion a "non-U.S. holder" means any Omega shareholder who, for
United States income tax purposes, is a foreign corporation, a nonresident
alien, a nonresident alien fiduciary of a foreign estate or trust, or a foreign
partnership which has at least one member that is, for United States federal
income tax purposes, a foreign corporation, a nonresident alien individual or a
nonresident alien fiduciary of a foreign estate or trust. Non-U.S. holders will
be subject to U.S. withholding tax at a rate of 30%, or if applicable, a lower
treaty rate, on the portion of the Distribution not attributable to capital
gains unless the Distribution is effectively connected with the conduct of a
trade or business in the United States by such non-U.S. holder. In addition,
under FIRPTA, any distribution made by Omega to a non-U.S. holder, to the extent
attributable to USRPI Capital Gains, will be considered effectively connected
with a U.S. trade or business of the non-U.S. holder and subject to U.S. income
tax at the rates applicable to U.S. individuals or corporations. Omega will be
required to withhold tax equal to 35% of the amount of the Distribution
applicable to a non-U.S. holder to the extent it constitutes USRPI Capital
Gains, without regard to the portion of the Distribution which Omega designates
as a capital gain dividend. The portion of the Distribution which constitutes
USRPI Capital Gains may also be subject to the 30% branch profits tax (unless
reduced by treaty) in the case of a non-U.S. holder that is a foreign
corporation.
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<PAGE> 26
Any portion of the Distribution that exceeds both current and accumulated
earnings and profits of Omega will not be taxed as either an ordinary dividend
or a capital gain dividend. However, because Omega will not be able to determine
at the time the Distribution is made whether or not the Distribution will be in
excess of Omega's current and accumulated earnings and profits, the Distribution
will be subject to full withholding. The non-U.S. holder may seek a refund of
over-withholding from the Internal Revenue Service if it is subsequently
determined that the Distribution was, in fact, in excess of Omega's current and
accumulated earnings and profits. Under current Treasury Regulations,
distributions paid to an address in a foreign country are presumed to be paid to
a resident of that country (unless the payor has knowledge to the contrary) for
foreign withholding purposes and, under the current interpretation of the
Treasury Regulations, for purposes of determining the applicability of a tax
treaty rate. In any case where a distribution is payable in any medium other
than money, the withholding agent cannot release the property so distributed
until the property has been converted into funds sufficient to enable the
withholding agent to pay over in money the tax required to be withheld. For a
discussion of the manner in which this withholding obligation will be satisfied
by Omega in connection with the Distribution see "Foreign Shareholders."
Backup Withholding. Under the backup withholding rules of the Code (which
generally impose a 31% withholding tax on certain persons who fail to furnish
the information required under the U.S. federal tax reporting requirements), an
Omega shareholder may be subject to backup withholding with respect to the
receipt of Omega Worldwide Common Stock unless such shareholder (i) is a
corporation or comes within certain other exempt categories and, when required,
demonstrates this fact or (ii) provides a correct taxpayer identification number
and certifies under penalties of perjury that the taxpayer identification number
is correct and that the holder is not currently subject to backup withholding
because of a failure to report all dividend and interest income. The taxpayer
identification number of an individual is his or her Social Security number. Any
amount withheld under these rules will be credited against the shareholder's
U.S. federal income tax liability.
Information Reporting. Omega is required to report to its shareholders the
value of the Omega Worldwide Common Stock issued in the Distribution on Form
1099-DIV for 1998.
SHARES AVAILABLE FOR FUTURE SALE
Omega Worldwide Common Stock distributed in the Distribution and acquired
pursuant to the Offerings (approximately 10,000,000 shares) will be freely
transferable, except for securities received by persons who may be deemed to be
"affiliates" of Omega Worldwide under the Securities Act. Persons who may be
deemed to be affiliates of Omega Worldwide after the Distribution and the
Offerings generally include individuals or entities that control, are controlled
by, or are under common control with, Omega Worldwide and may include certain
officers and directors of Omega Worldwide as well as principal stockholders of
Omega Worldwide, if any. Persons who are affiliates of Omega Worldwide will be
permitted to sell their shares of Omega Worldwide Common Stock only pursuant to
an effective registration statement under the Securities Act or an exemption
from the registration requirements of the Securities Act, such as the exemption
afforded by Section 4(2) of the Securities Act (relating to private sales) or by
Rule 144 under the Securities Act. Neither Omega nor Omega Worldwide is able to
predict whether substantial amounts of Omega Worldwide Common Stock will be sold
in the open market following the Distribution and the Offerings. Sales of
substantial amounts of Omega Worldwide Common Stock in the public market, or the
perception that such sales might occur, could adversely affect the market price
of Omega Worldwide Common Stock.
FOREIGN SHAREHOLDERS
In the Distribution, shares of Omega Worldwide Common Stock will not be
mailed immediately to Foreign Shareholders but instead will be held by the
Distribution Agent for such shareholders' accounts. As described under the
heading "-- Certain Federal Income Tax Consequences of the Distribution --
Taxation of Non-U.S. Omega Shareholders on the Distribution" Omega is subject to
a United States federal tax withholding obligation with respect to the shares of
Omega Worldwide Common Stock to be distributed to Foreign Shareholders. On the
Record Date, the Distribution Agent will mail a notice to each Foreign
Shareholder announcing the Distribution as well as seeking instructions from the
Foreign Shareholder electing
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<PAGE> 27
between the following options: (i) providing a check to the Distribution Agent
in the amount to be withheld and receiving the full amount of shares of Omega
Worldwide Common Stock or (ii) having the Distribution Agent sell the number of
shares of Omega Worldwide Common Stock necessary to satisfy the withholding
obligations and receiving his or her remaining shares of Omega Worldwide Common
Stock. Within ten business days after the Record Date, the Distribution Agent
will mail an additional notice to each Foreign Shareholder setting forth the
amount of the withholding obligation. A Foreign Shareholder must deliver to the
Distribution Agent his or her instructions and, if option (i) is elected, a
check in the proper amount of the withholding must be received by the
Distribution Agent within 20 business days of the Record Date. If no
instructions are received from a Foreign Shareholder by the end of such period,
the Distribution Agent will take the actions specified in option (ii) in
satisfying the withholding obligations with respect to such shareholder.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 2,100,000 shares of
Omega Worldwide Common Stock pursuant to the Rights Offering will be
$15,000,000, after deducting the expenses. The Company intends to use the net
proceeds for general corporate purposes, including working capital requirements
and possible acquisitions. The Company will not receive any proceeds from the
Secondary Offering or the Distribution.
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<PAGE> 28
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
November 30, 1997 on a historical basis, as adjusted for the contribution of the
Assets by Omega, and assumed completion as of November 30, 1997 of the formation
and capitalization of Omega Worldwide.
<TABLE>
<CAPTION>
NOVEMBER 30, 1997
-----------------------------------------
AS
HISTORICAL ADJUSTED(A) PRO FORMA(B)
---------- ----------- ------------
<S> <C> <C> <C>
Shareholders' Equity
Preferred stock $1.00 par value: 10,000,000 shares
authorized.........................................
Common stock $0.10 par value; 50,000,000 shares
authorized; 2,101,000 issued and outstanding
(historical); 7,900,000 issued and outstanding (as
adjusted); and 10,000,000 issued and outstanding
(pro forma)........................................ $ 210,100 $ 790,000 $ 1,000,000
Common stock subscription receivable.................. (210,000)
Additional paid-in capital............................ 900 28,312,612 43,102,612
--------- ----------- -----------
Total shareholders' equity......................... 1,000 29,312,612 44,312,612
--------- ----------- -----------
Total capitalization............................... $ 1,000 $29,312,612 $44,312,612
========= =========== ===========
</TABLE>
- -------------------------
(A) Reflects contribution by Omega of investment in Principal, recorded at
Omega's carrying value, in exchange for 5,799,000 additional shares of Omega
Worldwide Common Stock.
(B) Reflects proceeds of assumed issuance of 2,100,000 shares of Omega Worldwide
to its shareholders pursuant to the Rights Offering at $7.50 per share (less
estimated offering and registration costs of $750,000).
DIVIDEND POLICY
The primary objective of Omega Worldwide is to achieve long-term growth.
The Company intends to use its available funds to pursue investment and business
opportunities and, so long as such opportunities exist, does not anticipate the
payment of any cash dividends on Omega Worldwide Common Stock in the foreseeable
future. Payment of dividends on Omega Worldwide Common Stock also may be subject
to limitations under the proposed credit facility from a financial institution
and will also be subject to such limitations as may be imposed by any other
credit facilities that Omega Worldwide may obtain from time to time. The
declaration of dividends will be subject to the discretion of the Omega
Worldwide Board.
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<PAGE> 29
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Omega Worldwide's Assets may not be readily marketable and their values may
be affected by general market conditions in the United States and the United
Kingdom. Nevertheless, the Company believes that its capital and revenues will
be sufficient to fund the Company's anticipated investments and proposed
operations.
LIQUIDITY AND CAPITAL RESOURCES
In connection with the formation and capitalization of the Company, the
Company expects to obtain a $25,000,000 line of credit from a financial
institution. The line of credit will mature in 2001 and will be guaranteed by
Omega. The terms of the line of credit are described generally in "Certain
Transactions." The proceeds of the line of credit are expected to be used to
pursue investment and financing opportunities.
RESULTS OF OPERATIONS
Omega Worldwide has no external sources of financing except as described
above in "Liquidity and Capital Resources." The Company is not aware of any
known trends or uncertainties, other than national or international economic
conditions, which have had or which may reasonably be expected to have a
material impact, favorable or unfavorable, on revenues or income from the
acquisition of the Assets and operations of its business, other than those
referred to in this Prospectus.
CAPITAL RESOURCES -- LONG-TERM CASH GENERATION
As of the date of this Prospectus, the Company has no commitments to
purchase any assets except as may be necessary to maintain its current ownership
interest in Principal. The purchase of additional assets will be contingent upon
securing adequate funding on terms acceptable to the Company. The Company is not
aware of any material unfavorable trends in either capital resources or the
outlook for long-term cash generation, nor does it expect any material changes
in the availability and relative cost of such capital resources.
BUSINESS
OVERVIEW
Omega Worldwide will provide investment advisory services to and hold
equity and debt interests in companies engaged in providing sale/leaseback and
other capital financing to healthcare service providers throughout the world.
Omega Worldwide will seek to leverage its management expertise in financing
healthcare providers by providing seed equity and debt capital and investment
advisory services to newly-formed or existing real estate and finance companies
principally in countries other than the United States. Private healthcare and
its finance, particularly for the aging population in developed countries,
represents a growing priority in which capital is a major consideration. Based
upon management's experience in establishing Principal, Omegal Worldwide will
seek to extend its investments in healthcare finance on a global basis. The
Company may also consider investment in other actively managed real estate
opportunities. The Company will use its and Omega's extensive resources to
identify, develop and structure attractive opportunities to invest in healthcare
real estate ownership and finance. The Company intends to invest its capital in
two principal ways: first, to increase its existing investment in Principal, as
needed to establish its dominant position in private healthcare finance in the
United Kingdom; and second, to establish similar relationships with existing or
newly-formed entities in other suitable developed countries. Omega Worldwide
also will coordinate and integrate its investment activity with Omega so as to
take advantage of investment opportunities which would not be suitable for Omega
due to its REIT status.
A substantial portion of the firms Omega Worldwide develops and to which it
provides seed capital will ultimately consist of companies which have the
potential for public trading in the markets in which they operate. Omega
Worldwide will own the Assets contributed by Omega and will receive cash from
the Rights
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Offering. Prior to the contribution of Assets by Omega, Omega Worldwide has had
no operations. Omega Worldwide has entered into the Operating Agreement with
Omega, pursuant to which Omega Worldwide and Omega have agreed to provide each
other with rights to participate in certain transactions and to make certain
investments.
BUSINESS STRATEGY
Omega Worldwide intends to provide investment advisory services to
Principal pursuant to the Management Agreement and to develop additional
opportunities in healthcare finance. Omega Worldwide believes that it has, or
will have access to, sufficient management expertise to identify investment
opportunities, evaluate risks and possible returns, fund investments and thus
manage the Assets successfully. Omega Worldwide intends to enter into agreements
similar to the Management Agreement with other entities engaged in activities
similar to Principal. Omega Worldwide will also establish and invest in other
entities like Principal conducting real estate investment and financing
activities for the healthcare industry in European and Pacific Rim countries.
Furthermore, to pursue additional opportunities, Omega Worldwide plans to
capitalize on its relationship with Omega and Omega's ability to structure
investment transactions creatively.
The Distribution of Omega Worldwide Common Stock and the Rights Offering
will provide Omega shareholders as of the Record Date with the opportunity to
benefit from activities Omega elects not to pursue due to its REIT status, or
for other reasons.
The Company intends to invest in entities that are organized outside the
United States and that acquire or establish portfolios of income-producing
healthcare facilities or participating mortgages, with a primary focus on
nursing home facilities or other facilities that provide institutional services
to the elderly. The Company will also enter into management agreements with
those entities. In deciding in which entities and countries to invest, Omega
Worldwide will consider such factors as the demand and opportunity to provide
private sector financing to healthcare facilities for the elderly; the
healthcare reimbursement/payment system; the ability to have enforceable legal
rights; and the ability to repatriate earnings. In advising and making
recommendations concerning potential investments by such entities, the Company
will consider such factors as: the quality and experience of management and the
creditworthiness of the operator of the facility; the facility's historical,
current and forecast cash flow and its adequacy to meet operational needs,
capital expenditures and lease or debt service obligations, while providing a
competitive return on investment to the Company; the construction quality,
condition and design of the facility; the geographic area and type of facility;
the growth and regulatory environment of the community in which the facility is
located; the occupancy and demand for similar healthcare facilities in the same
or nearby communities; and the mix of private and publicly-funded patients.
In pursuing investments, the Company intends to focus on established and
creditworthy healthcare operators who meet the Company's standards for quality
and experience of management. Each of the entities in which the Company invests
will seek to diversify its investments in terms of geographic location and
operators. Additionally, one of their fundamental investment strategies will be
to obtain contractual rent escalations under long-term, non-cancelable net
leases or to obtain revenue participations through participating mortgage loans.
Each of the entities in which the Company invests will seek to require that
a healthcare operator enter into a master lease or a series of
cross-collateralized, cross-defaulted, cross-guaranteed leases covering
properties leased by the Company to that operator, with careful attention to
financial and operational covenants from the operator. Each of the entities in
which the Company invests will seek to develop and use effective security
devices under local law to protect its position.
THE OPERATING AGREEMENT
Omega Worldwide and Omega have entered into the Operating Agreement to
provide each other with rights to participate in certain transactions and make
certain investments. The Operating Agreement provides, subject to certain terms,
that Omega will provide Omega Worldwide with a right of first refusal (i) to
become the manager with respect to any real property assets identified by Omega
in markets outside of the United
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<PAGE> 31
States and (ii) to participate in transactions or make investments in markets
where Omega is unable to pursue the entire transaction or investment. Omega may,
but will not be required to, offer Omega Worldwide the opportunity to
participate in transactions, or make investments, where Omega is able to pursue
the entire transaction or investment. Under the Operating Agreement, Omega
Worldwide has agreed not to acquire or make investments in real estate (which,
for purposes of the Operating Agreement, includes the provision of services
related to real estate) in the United States unless it has notified Omega of the
acquisition or investment opportunity, and Omega has determined not to pursue
such acquisitions or investments. Omega Worldwide also has agreed to assist
Omega in structuring any such acquisition or investment which Omega elects to
pursue, on terms determined by Omega. Omega, in its sole discretion, will make
all decisions as to its ability or inability to pursue transactions or
investments. In addition, Omega and Omega Worldwide each agree to notify the
other of, and make available to the other, investment opportunities developed by
such party or of which such party becomes aware but is unable or unwilling to
pursue. The Operating Agreement has a term of ten years and automatically renews
for successive five-year terms unless terminated.
THE PRINCIPAL ASSETS
Prior to the contribution of the Assets to Omega Worldwide, Principal will
be recapitalized to convert the outstanding Class B ordinary shares which are
currently non-voting into Class A ordinary shares which are voting shares. As a
consequence of the recapitalization, Omega Worldwide will own 3,337,500 shares
of Class A voting ordinary shares of Principal (representing 33.375% of the
outstanding shares) and warrants with respect to a total of 10,554,583 shares of
Class A voting ordinary shares.
Principal was established in 1995 to provide capital and medium-term
finance on a stable, continuing basis to the private-sector healthcare industry
in the United Kingdom. Principal does not build or operate nursing homes or
other long-term care facilities itself; the role of Principal is to acquire and
lease back to experienced operators or to finance through medium-term or
long-term participating mortgage loans existing and newly-built nursing homes or
residential care facilities for the elderly, disabled, elderly mentally infirm
and subacute medical patients. Principal currently owns and leases 155
facilities (7,200 beds) in the United Kingdom. Principal has grown rapidly since
inception with assets increasing from approximately L40,000,000 at August 31,
1995 to L70,000,000 at August 31, 1996, L173,000,000 at August 31, 1997 and
L213,000,000 at November 30, 1997.
Pursuant to the Management Agreement, Omega Worldwide (in such capacity,
the "Manager") will provide various services to Principal and will receive an
annual fee equal to 0.9% of the book value of Principal's invested assets (as
defined therein). The Manager will be able to earn an additional incentive fee
if it is able to achieve at least a 20% earnings growth from one year to the
next. The term of the Management Agreement expires December 31, 2001, but
automatically extends for 1 year periods unless terminated. The Management
Agreement may be terminated by Principal in the event of a change of control of
Manager.
The long-term healthcare industry in the United Kingdom encompasses a broad
range of nursing and residential care home services provided to elderly people
and to other client groups, including younger, physically-handicapped people,
those with a chronic mental illness and people with learning disabilities, who
do not need the level of medical supervision provided in an acute care hospital.
Both nursing homes and residential homes provide 24 hour support and the
majority of residents are aged over 80 in each type of home. The main difference
between the two types of care homes is that nursing homes provide nursing care,
with qualified nurses on site at all times, whereas residential homes offer
personal care only, i.e., help with dressing, eating, hygiene and mobility;
residential homes do not need to employ qualified nurses. Nursing homes are
typically larger than residential homes, their residents are typically more
dependent and their revenue per bed is greater. Most major providers who have
invested in the long-term healthcare sector in the United Kingdom have
concentrated their investment in nursing homes.
The long-term healthcare industry in the United Kingdom is undergoing
significant change at present. The Company believes that demand for private
sector long-term care facilities will increase substantially during the next
decade. Demographies will continue to be the principal driving force for the
dominant elderly
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client group. The other major factor, which applies to all client groups, is the
substantial cost advantage of private care homes over public sector provision,
whether by local authorities or the National Health Service ("NHS"). This cost
advantage is likely to ensure that the decline in public sector provision over
the last 20 years will not be reversed, though it may slow under the new Labor
government.
In the United States, where the private nursing home industry has expanded
dramatically over the past twenty years, there is a recognition among investment
managers and advisors that the nursing home industry is primarily a service
business. The break with the concept of nursing homes as residential property
investments occurred twenty years ago; today, the growing focus on operations
and, in particular, operating revenues and profits, has led the financial
markets to dissociate the "bricks and mortar" element from the operating
activity. Accordingly, management believes that approximately 50% of all nursing
homes in the United States are not owned by the entity which holds the licence
and operates them. This has attracted to the nursing home industry significant
capital and has enabled the United States nursing home industry to grow and
prosper by focusing on an expanded range of care and medical activities, with a
corresponding growth in revenues and profits, rather than focusing on the
necessity to raise equity capital for investment in bricks and mortar.
This same trend has now become evident in the United Kingdom nursing home
industry where several companies, some of which are subsidiaries of North
American public companies, have focused on new purpose-built facilities to
replace the existing stock of converted properties and have begun to offer an
expanded range of care services. The opportunity afforded to operators with
access to capital will be to consolidate small operators who do not have the
capital to sustain the overhead associated with increasingly complex medical
conditions and who do not have the management skills and abilities to take
advantage of the economies of scale offered by such growth and concentration. As
United Kingdom healthcare operators grow and consolidate, economies of scale
will be derived from reduced overheads, allowing profitability to be increased
in line with operating margins.
Principal is committed to acquiring a diversified group of investment
assets, subject to long-term master leases. Because of its recent formation, it
currently has a relatively high concentration of investments which are managed
by Ashbourne plc (25%), Tamaris plc (38%), and Baneberry Healthcare Ltd. (18%).
Ashbourne is a wholly owned subsidiary of Sun Healthcare Group, Inc., a NYSE
listed, US healthcare firm with annualized revenues of approximately $3 billion
and a market capitalization in excess of $1 billion. [Tamaris is a publicly
quoted company on the London Stock Exchange with a market capitalization of L25
million. Tamaris operates 86 homes containing 4,633 registered beds in 86
communities across England, Scotland and Northern Ireland. Its revenues for its
most recent fiscal year ending March 31, 1997, were L18.866 million and its
profits before tax were L2.652 million.] Baneberry is a private company, whose
management had previously been employed at Ashbourne. Baneberry operates 40
nursing homes in Northern Ireland and one in Wales. On an interim basis,
Principal has taken a majority stock interest in Baneberry.
Principal's leases are typically thirty-year, non-cancelable operating
leases that permit breaks by tenants at the tenth and twentieth years. The
leases generally include security interests in accounts and personal property,
and require liquidity deposits and cross-default and cross-collateralization of
assets operated by a single operating firm. Its assets are located in England
(75%), Northern Ireland (20%) and Scotland (5%).
Acting on behalf of Principal, Omega arranged an initial fixed five-year
syndicated senior debt facility of L40,000,000 with one of the leading providers
of debt financing to the healthcare industry in the United Kingdom. As of this
date, the outstanding principal under this facility is L5,000,000. All advances
are repayable on August 25, 2000. The financial institution holds a first
mortgage on certain real property of Principal and a fixed and/or floating
charge over certain other assets of Principal.
In addition to this senior debt, Omega has provided L15,000,000 and an
institutional investor in the United Kingdom has provided L5,000,000 of
subordinated debt due December 31, 2000. Omega Worldwide will assume the rights
and obligations of Omega with respect to the subordinated debt. In consideration
for providing the subordinated debt, Principal issued to Omega warrants to
purchase 10,000,000 Class B ordinary shares of Principal (or Class A voting
shares if the warrant is exercised by an entity other than Omega) at L1.50 per
share and to the financial institutional investor warrants to purchase 3,333,333
Class A ordinary shares at L1.50 per share. Omega will transfer the warrants to
purchase 10,000,000 Class B ordinary shares to
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Omega Worldwide in connection with the transfer of the subordinated debt. Omega
Worldwide will be allowed Class A shares upon exercise of the warrant. The
warrants will expire on June 30, 2001.
On December 12, 1997, Principal completed a securitization of a significant
portion of its assets through the issuance of L150,000,000 of first mortgage
bonds which are listed for trading on the Luxembourg Stock Exchange. This
transaction enabled Principal to fix its cost of these borrowings for a 28-year
period at a coupon interest rate of approximately 7.52%. Principal may use
securitization, mortgage debt and unsecured debt along with other similar
techniques in the financing of its long term care facilities. In connection with
the securitization, Omega (UK) executed an Asset Management Agreement pursuant
to which, for a fee of L105,000 annually, Omega (UK) will monitor and administer
the assets committed to the transaction for the benefit of the bondholders and a
subsidiary of Principal as residual owner.
In connection with the securitization, a financial institution has agreed
to provide Principal with a three-year revolving credit facility of up to
L150,000,000 (the "Securitization Facility") to permit the accumulation of
investments with the objective of repaying sums borrowed under the line pursuant
to subsequent securitization transactions. The Securitization Facility matures
October 2, 2000 and bears interest at 2.0% per annum above LIBOR for 1 month
advances. The financial institution will receive a first mortgage on the real
property of Principal financed by the Securitization Facility.
OPERATIONS
Omega has established detailed and comprehensive underwriting standards as
well as monitoring procedures for reviewing on a monthly basis the performance
of nursing home and long-term care facility operators to which Principal leases
properties or for which Principal provides participating mortgage lending.
Pursuant to the Management Agreement, Omega provided the following services to
Principal: marketing of its services; identification and evaluation of potential
investments; administration of the business and day-to-day affairs of Principal;
monitoring and evaluation of the financial and operational performance of the
healthcare operating organizations financed by Principal; and developing new
products and services. Omega also provided advice upon and arranged credit
facilities for Principal. These services were provided in part by Omega (UK)
Limited, a United Kingdom corporation ("Omega (UK)") with a staff of seven
skilled healthcare employees in the United Kingdom. Omega (UK) is currently a
wholly-owned subsidiary of Omega but the shares of Omega (UK) will be
transferred to Omega Worldwide prior to the consummation of the Offerings and
the Distribution. In consideration for the services to be provided under the
Management Agreement, Principal will pay the Manager an annual fee equal to 0.9%
of the book value of Principal's assets (as defined therein). Additionally in
connection with the securitization, Principal and the Trustee for the
bondholders agreed to pay Omega (UK) L105,000 annually to monitor and administer
the properties that are subject to the securitization.
PROPERTY
Omega Worldwide maintains its corporate office in Ann Arbor, Michigan,
which it occupies jointly with Omega pursuant to a five-year facilities
cost-sharing agreement. The space consists of approximately 5,823 square feet of
office space. Omega Worldwide believes that its facilities are adequate to meet
its expected requirements for the coming year. Omega (UK) occupies 3,000 square
feet at 145 Canon Street, London, England.
EMPLOYEES
By the Distribution Date, Omega Worldwide will have 8 employees in the
United Kingdom who are all former employees of Omega (UK). Omega Worldwide has
executed a Services Agreement with Omega pursuant to which Omega will provide
management and other employees and administrative services to Omega Worldwide on
a shared cost basis.
LEGAL PROCEEDINGS
There are currently no legal proceedings involving the Assets or Omega
Worldwide.
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TAXATION OF OMEGA WORLDWIDE AND ITS SHAREHOLDERS
TAXATION OF OMEGA WORLDWIDE
Omega Worldwide is a Subchapter C corporation subject to applicable federal
and state tax on its taxable income at regular corporate rates. As a result, it
is under no obligation to make any distributions to shareholders. If
distributions are made by Omega Worldwide, shareholders will recognize ordinary
income to the extent of current and accumulated earnings and profits of Omega
Worldwide and any amounts distributed in excess of current and accumulated
earnings and profits will be considered a tax-free return of capital, reducing
the tax basis in the shareholder's Omega Worldwide Common Stock by the amount of
such distribution (but not below zero), with distributions in excess of the
shareholder's tax basis taxable as capital gains (if the Omega Worldwide Common
Stock is held as a capital asset). In general, any gain or loss upon a sale or
other disposition of Omega Worldwide Common Stock by a shareholder will be
considered short-term, mid-term (i.e., more than 12 months but not more than 18
months) or long-term capital gain depending upon the period of time the Omega
Worldwide Common Stock was held by the shareholder.
CERTAIN UNITED STATES TAX CONSIDERATIONS FOR NON-U.S. HOLDERS OF OMEGA WORLDWIDE
COMMON STOCK
The following is a general discussion of certain U.S. federal tax
consequences of the ownership and disposition of a share of Omega Worldwide
Common Stock by a beneficial owner of such shares that is not a U.S. person (a
"non-U.S. holder"). For purposes of this discussion, a "U.S. person" means a
citizen or resident of the United States, a corporation or partnership created
or organized in the United States or under the law of the United States or of
any State or political subdivision of the foregoing, any estate whose income is
includible in gross income for U.S. federal income tax purposes regardless of
its source, or a "United States Trust". A United States Trust is any trust if,
and only if, (i) a court within the United States is able to exercise primary
supervision over the administration of the trust and (ii) one or more U.S.
persons have the authority to control all substantial decisions of the trust.
This discussion does not deal with all aspects of U.S. federal income and estate
taxation that may be relevant to non-U.S. holders in light of their particular
circumstances, and does not address state, local or non-U.S. tax considerations.
Furthermore, the following discussion is based on provisions of the Code,
Treasury Regulations promulgated thereunder and administrative and judicial
interpretations as of the date hereof, all of which are subject to change,
possibly with retroactive effect. Each prospective investor is urged to consult
its own tax adviser with respect to the U.S. federal, state and local
consequences of owning and disposing of a share of Omega Worldwide Common Stock,
as well as any tax consequences arising under the laws of any other taxing
jurisdiction.
U.S. Income and Estate Tax Consequences. Dividends paid to a non-U.S.
holder are subject to U.S. withholding tax at a 30% rate, or if applicable, a
lower treaty rate, unless the dividend is effectively connected with the conduct
of a trade or business in the United States by a non-U.S. holder (and, if
certain tax treaties apply, is attributable to a United States permanent
establishment maintained by such non-U.S. holder). A dividend that is
effectively connected with the conduct of a trade or business in the United
States by a non-U.S. holder (and, if certain tax treaties apply, is attributable
to a United States permanent establishment maintained by such non-U.S. holder)
will be exempt from the withholding tax described above and subject instead (i)
to the U.S. federal income tax on net income that applies to U.S. persons and
(ii) with respect to corporate holders under certain circumstances, a 30% (or,
if applicable, lower treaty rate) branch profits tax that in general is imposed
on its "effectively connected earnings and profits" (within the meaning of the
Code) for the taxable year, as adjusted for certain items.
Under Treasury Regulations currently in effect, dividends paid to an
address in a foreign country are presumed to be paid to a resident of that
country (unless the payor has knowledge to the contrary) for purposes of the
withholding discussed above and for purposes of determining the applicability of
a tax treaty rate. Under recently enacted withholding tax regulations (the
"Final Regulations") which will be effective for payments made after 1998,
however, a non-U.S. holder of Omega Worldwide Common Stock who wishes to claim
the benefit of an applicable treaty rate would be required to satisfy applicable
certification and other requirements. Such certification generally will be made
on Internal Revenue Service Form W-8, although non-U.S. holders who own Omega
Worldwide Common Stock in an offshore account may provide alternate
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forms of certification. In the case of a foreign partnership, the certification
requirement would generally be applied to the partners of the partnership unless
the foreign partnership is a qualified intermediary. A non-U.S. holder that is
eligible for a reduced rate of U.S. withholding tax pursuant to an income tax
treaty may obtain a refund of any excess amount withheld by filing an
appropriate claim for refund with the U.S. Internal Revenue Service (the "IRS").
A non-U.S. holder generally will not be subject to U.S. federal income tax
on any gain recognized on a sale or other disposition of a share of Omega
Worldwide Common Stock unless (i) the Company is or has been during the
five-year period ending on the date of disposition a "United States real
property holding corporation" for U.S. federal income tax purposes (which the
Company does not believe that it has been or is currently and does not
anticipate becoming), (ii) the gain is effectively connected with the conduct of
a trade or business within the United States of the non-U.S. holder (and, if
certain tax treaties apply, is attributable to a United States permanent
establishment maintained by the nonU.S. holder), (iii) the gain is not described
in clause (ii) above, the non-U.S. holder is an individual who holds the share
as a capital asset, is present in the United States for 183 days or more in the
taxable year of the disposition and either (a) such individual has a "tax home"
(as defined for U.S. federal income tax purposes) in the United States or (b)
the gain is attributable to an office or other fixed place of business
maintained in the United States by such individual, or (iv) the non-U.S. holder
is subject to tax pursuant to the Code provisions applicable to certain U.S.
expatriates. In the case of a non-U.S. holder that is described under clause
(ii) above, its gain will be subject to the U.S. federal income tax on net
income that applies to U.S. persons and, in addition, if such non-U.S. holder is
a foreign corporation, it may be subject to the branch profits tax as described
in the second preceding paragraph. An individual non-U.S. holder that is
described under clause (iii) above will be subject to a flat 30% tax on the gain
derived from the sale, which may be offset by U.S. capital losses
(notwithstanding the fact that he or she is not considered a resident of the
United States). Thus, individual non-U.S. holders who have spent 183 days or
more in the United States in the taxable year in which they contemplate a sale
of the Omega Worldwide Common Stock are urged to consult their tax advisers as
to the tax consequences of such sale.
Omega Worldwide Common Stock owned or treated as owned by an individual who
is not a citizen or resident (as specially defined for United States federal
estate tax purposes) of the United States at the date of death, or Omega
Worldwide Common Stock subject to certain lifetime transfers made by such an
individual, will be included in such individual's estate for United States
federal estate tax, unless an applicable estate tax treaty provides otherwise.
Backup Withholding and Information Reporting -- Dividends. Except as
provided below, the Company must report annually to the IRS and to each non-U.S.
holder the amount of dividends paid to and the tax withheld with respect to such
holder. These information reporting requirements apply regardless of whether
withholding was reduced or eliminated by an applicable tax treaty. Copies of
these information returns may also be available under the provisions of a
specific treaty or agreement with the tax authorities in the country in which
the non-U.S. holder resides. In general, backup withholding at a rate of 31% and
additional information reporting will apply to dividends paid on shares of Omega
Worldwide Common Stock to holders that are not "exempt recipients" and that fail
to provide in the manner required certain identifying information (such as the
holder's name, address and taxpayer identification number). Generally,
individuals are not exempt recipients, whereas corporations and certain other
entities generally are exempt recipients. However, dividends that are subject to
U.S. withholding tax at the 30% statutory rate or at a reduced tax treaty rate
are exempt from backup withholding of U.S. federal income tax and such
additional information reporting.
Backup Withholding and Information Reporting -- Broker Sales. If a non-U.S.
holder sells shares of Omega Worldwide Common Stock through a U.S. office of a
U.S. or foreign broker, the broker is required to file an information return and
is required to withhold 31% of the sale proceeds unless the non-U.S. holder is
an exempt recipient or has provided the broker with the information and
statements, under penalties of perjury, necessary to establish an exemption from
backup withholding. If payment of the proceeds of the sale of a share by a
non-U.S. holder is made to or through the foreign office of a broker, that
broker will not be required to backup withhold or, except as provided in the
next sentence, to file information returns. In the case of proceeds from a sale
of a share by a non-U.S. holder paid to or through the foreign office of a U.S.
broker or a foreign office of a foreign broker that is (i) a controlled foreign
corporation for U.S. tax purposes or (ii) a
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person 50% or more of whose gross income for the three-year period ending with
the close of the taxable year preceding the year of payment (or for the part of
that period that the broker has been in existence) is effectively connected with
the conduct of a trade or business within the United States (a "Foreign U.S.
Connected Broker"), information reporting is required unless the broker has
documentary evidence in its files that the payee is not a U.S. person and
certain other conditions are met, or the payee otherwise establishes an
exemption. Under the Final Regulations, certification on IRS Form W-8 or other
certification in the case of Omega Worldwide Common Stock held in an offshore
account will be required if (i) the sale occurs within the United States or (ii)
the sale is made through a Foreign U.S. Connected Broker.
Backup Withholding and Information Reporting -- Refunds. Any amounts
withheld under the backup withholding rules from a payment to a non-U.S. holder
may be refunded or credited against the non-U.S. holder's U.S. federal income
tax liability, provided that the required information is furnished to the IRS.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS OF OMEGA WORLDWIDE
As of November 13, 1997, Essel W. Bailey, Jr. was the sole director of
Omega Worldwide and served as its President and Chief Executive Officer. David
A. Stover has served as Vice President and Chief Financial Officer, F. Scott
Kellman has served as Executive Vice President and James P. Flaherty has served
as Vice President -- International since November 13, 1997 and Susan A. Kovach
has served as Vice President and Secretary since December 1, 1997. The following
table sets forth certain information concerning these employees as well as those
persons who have agreed to serve as directors of Omega Worldwide commencing
January 15, 1998 and prior to the consummation of the Offerings and the
Distribution.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Essel W. Bailey, Jr....................... 53 Chairman of the Board of Directors, President and
Chief Executive Officer
James E. Eden............................. 60 Director
James P. Flaherty......................... 50 Vice President -- International
Thomas F. Franke.......................... 68 Director
F. Scott Kellman.......................... 41 Executive Vice President and Assistant Secretary
Harold J. Kloosterman..................... 55 Director
Bernard J. Korman......................... 66 Director
Susan A. Kovach........................... 37 Vice President and Secretary
Edward Lowenthal.......................... 53 Director
Robert L. Parker.......................... 63 Director
David A. Stover........................... 52 Vice President and Chief Financial Officer
</TABLE>
On or before the consummation of the Offerings and the Distribution, Omega
Worldwide will add 2 independent directors and designate the expiration date of
each director's term.
Mr. Bailey has been President, Chief Executive Officer and Secretary of
Omega, as well as a Director, since its formation in 1992 and Chairman of the
Board since July 1995. Prior to that he was a Managing Director of Omega
Capital, a healthcare investment partnership, from 1986 to 1992. Mr. Bailey is
formerly a Director of Evergreen Healthcare, Inc., which was a NYSE listed
public company engaged in the operation of long-term healthcare facilities, and
is currently a Managing Director of Principal and a Director of Vitalink
Pharmacy Services, Inc., a NYSE listed public company and the fourth largest
institutional pharmacy serving the long-term care industry in the United States.
Mr. Eden is President and principal owner of Eden's Associates, Inc., which
provides consulting services to the senior housing and long-term care
industries. From 1992 to present, Mr. Eden has served as Chairman and Chief
Executive Officer of Oakwood Living Centers, Inc., which owns and operates
nursing homes. From 1976 to 1992, he held various positions in healthcare,
ultimately as Executive Vice President of Marriott Corporation and General
Manager of its Senior Living Services Division. Mr. Eden is also a director of
Omega, the Alliance for Aging Research and United Vanguard Homes.
Mr. Flaherty joined Omega in 1996 and was appointed Vice
President-International and Managing Director of Omega (UK) Limited in January
1997. Before he joined Omega, he was Chairman of Black Rock Capital Corporation,
a leasing and merchant banking firm he founded in 1994. From April 1991 until
December of 1993 Mr. Flaherty was Managing Partner of Pareto Partners, a London
based investment management firm. Prior to 1991, he was employed by American
Express Bank Ltd. in London and Geneva in a number of senior management
capacities and by State National Bank of Connecticut and its successor, The
Connecticut Bank & Trust Co.
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<PAGE> 38
Mr. Franke is Chairman and principal owner of Cambridge Partners, 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 a private hotel firm
in the United Kingdom. Since its formation in 1992, Mr. Franke has been a
Director of Omega and, since its formation in 1995, Mr. Franke has been a
Director of Principal.
Mr. Kellman joined Omega as Senior Vice President-Acquisitions in August
1993, and was appointed Executive Vice President in August 1994. From 1986 to
1989, he was Vice President of Meritor Savings Bank, the last years as director
of the healthcare lending unit. From 1989 to 1991, he served as Vice President
of Van Kampen Merritt, Inc., an investment banking subsidiary of Xerox. From
September 1991 to December 1992, he was employed by Philadelphia First Group
(Investment Bank), and from January 1993 through August of 1993 he was the Chief
Operating Officer of Medical REIT.
Mr. Kloosterman was a managing director of Omega Capital from 1986 to 1992
and has been a Director of Omega since its formation in 1992. Mr. Kloosterman
has been involved in the acquisition, development and management of commercial
and multi-family properties since 1978. He has been a senior officer of LaSalle
Partners, Inc. and formed Cambridge Partners, Inc. with Thomas Franke in 1985
where he serves as President. At Cambridge, he has been involved in the
development and management of commercial, apartment and condominium projects in
Grand Rapids and Ann Arbor, Michigan and the Chicago area.
Mr. Korman is Chairman of the Board of Directors of Graduate Health System,
Inc., a not-for-profit health care system, and of NutraMax Products, Inc., a
public consumer health care products company. He formerly was President, Chief
Executive Officer and Director of MEDIQ (health care services) from 1977 to
1995. Mr. Korman has been a Director of Omega since 1993 and also is a Director
of the following public companies: The New America High Income Fund (financial
services), The Pep Boys, Inc. (auto supplies), Today's Man, Inc. (retail men's
clothing sales), InnoServe Technologies, Inc. (medical equipment support
services) and Kapson Senior Quarters Corp. (assisted living services).
Ms. Kovach joined Omega in December 1997 as Vice President and Secretary.
Prior to that she was a real estate lawyer with Dykema Gossett PLLC in Detroit,
Michigan for 12 years, the last three years as a senior member of the firm.
Mr. Lowenthal is President and Chief Executive Officer of Wellsford Real
Properties, Inc. and President of the predecessor of Wellsford Real Properties,
Inc. since 1986. Mr. Lowenthal has been a Director of Omega since 1995 and also
serves as a Director of United American Energy Corporation, a developer, owner
and operator of energy facilities, a Director of Corporate Renaissance Group,
Inc., a mutual fund, and as a Director of Equity Residential Properties Trust
and Great Lakes REIT, Inc., which are REITs.
Mr. Parker is a consultant, formerly Chairman of Omega from 1992 to 1995
and Managing Director of Omega Capital from 1986 to 1992. From 1972 through
1983, Mr. Parker was a senior officer of Beverly Enterprises, the largest
operator of long-term care facilities in the United States. At the time of his
retirement in 1983, Mr. Parker was Executive Vice President of Beverly
Enterprises. Mr. Parker is a registered architect, licensed in California and
Oklahoma. He has been a Director of Omega since 1992 and also served as a
Director of GranCare, Inc., a public company engaged in the operation of
long-term care facilities from 1995 to 1997, and of Vitalink Pharmacy Services
Inc., a publicly-traded institutional pharmacy during 1997, of Principal from
1995, and of First National Bank of Bethany, Oklahoma.
Mr. Stover has been Vice President and Chief Financial Officer of Omega
since September 1994. Mr. Stover is a Certified Public Accountant and has 23
years' experience with the international accounting firm of Ernst & Young, LLP
and its predecessor firms. From 1981 through 1990, he was an audit, tax and
consulting partner, spending the last of those years as area partner-in-charge
of services for the firm's healthcare clients in Western Michigan. From 1992 to
1994, Mr. Stover was principal of his own consulting firm and, from 1990 to
1992, he was Chief Financial Officer of International Research and Development
Corporation.
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<PAGE> 39
COMMITTEES OF THE BOARD OF DIRECTORS
The Omega Worldwide Board has standing Audit, Compensation and Nominating
Committees. The Audit Committee consists of , the Compensation
Committee consists of and the Nominating Committee consists of
. The Audit Committee makes recommendations concerning the
engagement of independent public accountants, approves the compensation to be
paid to such accountants and reports to the Board concerning the scope of audit
procedures. The Compensation Committee is responsible for establishing salaries,
bonuses and other compensation for the Company's officers and administering the
Company's stock option plans. The Nominating Committee reviews suggestions of
candidates for director made by directors, shareholders, management and others,
and makes recommendations to the Board of Directors regarding composition of the
Board of Directors and nomination of individual candidates for election to the
Board of Directors.
COMPENSATION OF DIRECTORS
Each director other than employees of Omega Worldwide will receive from the
Company an annual fee of $10,000, 1,000 shares of Omega Worldwide Common Stock
and a meeting fee of $500 for each Omega Worldwide Board or Committee meeting
attended and reimbursement of expenses incurred in attending meetings. The
Chairman of the Board and of the Compensation and Audit Committees will receive
an additional retainer of $1,000 per year. The directors are also eligible to
receive Omega Worldwide Common Stock as set forth in the Stock Option and
Restricted Stock Plan. Certain directors intend to invest in the ownership of
the Company. See "Management -- Omega Worldwide Stock Option and Restricted
Stock Plan."
ANNUAL MEETING
Omega Worldwide's Bylaws provide that its annual meeting of stockholders
will be held on the date specified by the Board of Directors and at such place
and time as may be specified by Omega Worldwide's Board. The first annual
meeting for which proxies will be solicited from stockholders will be held in
1998.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Executive officers and directors of Omega Worldwide will receive shares of
Omega Worldwide Common Stock in the Distribution in respect of Omega Common
Shares held by them on the Record Date. Omega Worldwide Common Stock issued with
respect to outstanding but not yet vested shares of Restricted Stock of Omega
issued under the Omega Stock Option and Restricted Stock Plan of 1993, as
amended, will be released at the same time as the Omega Restricted Stock is
released; however, Rights issued with respect to unvested Omega Restricted Stock
shall be immediately exercisable in accordance with their terms and any Omega
Worldwide shares issued pursuant to such exercise shall be free of any vesting
requirement. See "Principal and Selling Shareholders" for further description of
the shares owned by management.
EXECUTIVE COMPENSATION
Omega Worldwide was recently formed. None of the Company's executive
officers has received compensation from or on behalf of Omega Worldwide since
its formation. None of the executive officers other than James P. Flaherty will
be direct employees of Omega Worldwide. The executive officers will provide
services for Omega Worldwide pursuant to a Services Agreement that will be
executed between Omega Worldwide and Omega. The Services Agreement extends for 2
years and Omega Worldwide reimburses Omega for a portion of Omega's allocable
overhead expenses based on assets managed by Omega Worldwide in relation to the
total of assets of Omega and assets managed by Omega Worldwide measured at the
end of each fiscal quarter.
The Company has not granted any options or SARs to the Company's named
executive officers.
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<PAGE> 40
OMEGA WORLDWIDE STOCK OPTION AND RESTRICTED STOCK PLAN
Omega Worldwide's Stock Option and Restricted Stock Plan (the "Stock Plan")
was adopted by the Company and approved by Omega, its sole shareholder, prior to
the Offerings and the Distribution. Under the Stock Plan, the Company reserved
750,000 shares of common stock for grants to be issued during a period of up to
10 years. Directors, officers and key employees are eligible to participate in
the Stock Plan. The following summary of the Stock Plan is qualified by the full
text of the Stock Plan, a copy of which is an Exhibit to the Registration
Statement of which this Prospectus is a part.
The Stock Plan is administered by the Compensation Committee. The
Compensation Committee may grant Restricted Stock and/or Stock Options to
non-employee directors, employee directors and non-director employees at such
times and in such amounts and on such terms and conditions as it deems advisable
and specifies in the respective grants except as set forth below for
non-employee directors. The exercise price of Stock Options shall be determined
by the Compensation Committee at the date of the grant, except that the exercise
price of any Stock Option which is designated as an "incentive stock option"
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended, shall be 100% of the fair market value of the common stock on the date
of the grant. Each non-employee director will be awarded options with respect to
10,000 shares, and each non-employee director is to be granted an additional
option grant with respect to 1,000 shares on or after each anniversary of the
initial grant. All option grants to non-employee directors have been and are to
be at an exercise price equal to 100% of the fair market value of the Company's
common stock on the date of the grant. At the discretion of the Committee, each
non-employee director also is annually awarded shares of Restricted Stock.
Subject to compliance with the terms, conditions and restrictions set forth
in the Stock Plan, the Compensation Committee has the exclusive right, in its
sole and absolute discretion, to establish the terms and conditions of all Stock
Options and Restricted Stock granted under the Stock Plan and to prescribe and
amend the terms, provisions and form of each instrument and agreement setting
forth the terms and conditions of Stock Options and Restricted Stock granted
thereunder. The Compensation Committee has the authority to construe and
interpret the Stock Plan, to define the terms used therein, to prescribe, amend,
and rescind rules and regulations relating to the administration of the Stock
Plan, and to make all other determinations necessary or advisable for
administration of the Stock Plan. Determinations of the Compensation Committee
on matters referred to above are final and conclusive so long as the same are
not inconsistent with the terms of the Stock Plan.
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<PAGE> 41
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth the number of shares of Omega Worldwide
Common Stock owned by Omega, as the selling shareholder, and by each person
agreeing to serve as an executive officer and director of Omega Worldwide, all
such executive officers and directors of Omega Worldwide as a group, and persons
or entities owning 5% or more of the outstanding shares of Omega Worldwide
Common Stock.
BENEFICIAL OWNERSHIP
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES(1) SHARES
------------------------------------ --------- ----------
<S> <C> <C>
Selling Shareholder
Omega Healthcare Investors, Inc. ...................... 2,100,000
Executive Officers
Essel W. Bailey, Jr. .................................. 64,849 *
James P. Flaherty...................................... 110 *
F. Scott Kellman....................................... 5,051 *
Susan A. Kovach........................................ 0 *
David A. Stover........................................ 5,170 *
--------- ----
75,179 *
Directors
James E. Eden.......................................... 244 *
Thomas F. Franke....................................... 4,538 *
Harold Kloosterman..................................... 7,624 *
Bernard J. Korman...................................... 244 *
Edward Lowenthal....................................... 568 *
Robert L. Parker....................................... 30,299 *
--------- ----
43,517 *
--------- ----
Directors and executive officers as a group (11)
persons............................................. 118,696 1.19%
========= ====
</TABLE>
- -------------------------
(1) The selling shareholder will own no shares of Omega Worldwide Common Stock
after consummation of the Offerings and the Distribution. Assumes full
exercise of the Rights and ignores shares acquired, if any, in the Secondary
Offering and assumes no shares are acquired from the Oversubscription
Privilege.
* Less than 1%.
The business address of all the above persons is 905 W. Eisenhower Circle,
Suite 101, Ann Arbor, Michigan 48103.
CERTAIN TRANSACTIONS
In connection with the formation and capitalization of Omega Worldwide,
Omega will remit $210,000 for 2,100,000 outstanding shares of Omega Worldwide
Common Stock and will contribute the Assets in exchange for 5,799,000 of the
outstanding shares of Omega Worldwide Common Stock and 2,100,000 Rights.
Omega Worldwide intends to obtain a three-year line of credit of up to
$25,000,000. The borrowings under the line of credit will be guaranteed by
Omega. Omega will receive a fee from Omega Worldwide for providing the guaranty.
This line of credit will be utilized to finance the Company's investment
strategy over the next 3 years.
The Operating Agreement sets forth the basis on which Omega Worldwide and
Omega will refer opportunities to one another. See "Business -- The Operating
Agreement."
Omega and Omega Worldwide will enter into a Services Agreement in
connection with the Distribution pursuant to which Omega will provide management
and other employees and administrative services to
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<PAGE> 42
Omega Worldwide, and a Facilities Cost-Sharing Agreement pursuant to which Omega
Worldwide will reimburse Omega for use of office space at Omega's headquarters.
In connection with the Rights Offering, certain officers and directors of
Omega and their affiliates have agreed to acquire the Unsubscribed Shares at the
Subscription Price.
DESCRIPTION OF OMEGA WORLDWIDE CAPITAL STOCK
AUTHORIZED CAPITAL STOCK
Omega Worldwide's authorized capital stock consists of 10,000,000 shares of
preferred stock, par value $1.00 per share (the "Preferred Stock"), and
50,000,000 shares of Omega Worldwide Common Stock. Immediately following the
Secondary Offering, the Distribution and the Rights Offering, approximately
10,000,000 shares of Omega Worldwide Common Stock will be outstanding. All of
the shares of Omega Worldwide Common Stock that will be outstanding immediately
following the Secondary Offering, the Distribution and the Rights Offering will
be validly issued, fully paid and nonassessable. Certain provisions of Omega
Worldwide's Charter and Bylaws and applicable Maryland state corporation law
have the effect of making more difficult an acquisition of control of Omega
Worldwide in a transaction not approved by the Board. See "Certain Anti-takeover
Provisions."
COMMON STOCK
The holders of Omega Worldwide Common Stock will be entitled to one vote
for each share on all matters voted on by stockholders, including elections of
directors, and, except as otherwise required by law or provided in any
resolution adopted by Omega Worldwide's Board with respect to any series of
Preferred Stock, the holders of such shares will possess all voting power. The
Charter does not provide for cumulative voting in the election of directors.
Subject to any preferential rights of any outstanding series of Preferred Stock
created by the Omega Worldwide Board from time to time, the holders of Omega
Worldwide Common Stock will be entitled to such dividends as may be declared
from time to time by the Omega Worldwide Board from funds available therefor,
and upon liquidation will be entitled to receive pro rata all assets of the
Company available for distribution to such holders.
PREFERRED STOCK
The Charter authorizes the Omega Worldwide Board to establish one or more
series of Preferred Stock and to determine, with respect to any series of
Preferred Stock, the terms and rights of such series, including (i) the number
of shares constituting such series and the distinctive designation thereof; (ii)
the voting rights, if any, of such series; (iii) the rate of dividends payable
on such series, the time or times when such dividends will be payable, the
preference to, or any relation to, the payment of dividends to any other class
or series of stock and whether the dividends will be cumulative or
non-cumulative; (iv) whether there shall be a sinking or similar fund for the
purchase of shares of such series and, if so, the terms and provisions that
shall govern such fund; (v) the rights of the holders of shares of such series
upon the liquidation, dissolution or winding up of the Company; (vi) the rights,
if any, of holders of shares of such series to convert such shares into, or to
exchange such shares for, shares of any other class or classes or any other
series of the same or of any other class or classes of stock of the Company, the
price or prices or rate or rates of exchange, with such adjustments as shall be
provided, at which such shares shall be convertible or exchangeable, whether
such rights of conversion or exchange shall be exercisable at the option of the
holder of the shares or the Company or upon the happening of a specified event,
and any other terms or conditions of such conversion or exchange; and (vii) any
other preferences, powers and relative participating, optional or other special
rights and qualifications, limitations or restrictions of shares of such series.
Omega Worldwide believes that the ability of the Omega Worldwide Board to
issue one or more series of Preferred Stock will provide it with flexibility in
structuring possible future financings and acquisitions and in meeting other
corporate needs which might arise. The authorized shares of Preferred Stock, as
well as shares of Omega Worldwide Common Stock, will be available for issuance
without further action by Omega
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<PAGE> 43
Worldwide's stockholders, unless such action is required by applicable law or
the rules of any stock exchange or automated quotation system on which Omega
Worldwide's securities may be listed or traded. If the approval of Omega
Worldwide's stockholders is not required for the issuance of shares of Preferred
Stock or Omega Worldwide Common Stock, the Omega Worldwide Board may determine
not to seek stockholder approval.
Although the Omega Worldwide Board has no intention at the present time of
doing so, it could issue a series of Preferred Stock that could, depending on
the terms of such series, impede the completion of a merger, tender offer or
other takeover attempt. The Omega Worldwide Board will make any determination to
issue such shares based on its judgment as to the best interests of Omega
Worldwide and its stockholders. The Omega Worldwide Board, in so acting, could
issue Preferred Stock having terms that could discourage an acquisition attempt
through which an acquiror may be able to change the composition of the Omega
Worldwide Board, including a tender offer or other transaction that some, or a
majority, of Omega Worldwide's stockholders might believe to be in their best
interests or in which such stockholders might receive a premium for their stock
over the then-current market price of such stock.
The Company expects to reserve Junior Preferred Shares (as described in
"Certain Antitakeover Provisions -- Rights Plan") for issuance upon exercise of
the Preferred Share Purchase Rights.
CERTAIN ANTITAKEOVER PROVISIONS
STAGGERED BOARD OF DIRECTORS
The Charter and the Bylaws provide that the Omega Worldwide Board will be
divided into three classes of directors, each class constituting approximately
one-third of the total number of directors, with the classes serving staggered
three-year terms. The classification of the Omega Worldwide Board will have the
effect of making it more difficult for stockholders to change the composition of
the Omega Worldwide Board, because only a minority of the directors are up for
election, and the Omega Worldwide Board may not be replaced by vote of the
stockholders, at any one time. Omega Worldwide believes, however, that the
longer terms associated with the classified Omega Worldwide Board will help to
ensure continuity and stability of the Company's management and policies.
The classification provisions also could have the effect of discouraging a
third party from accumulating a large block of Omega Worldwide Common Stock or
attempting to obtain control of Omega Worldwide even though such an attempt
might be beneficial to the Company and some, or a majority, of its stockholders.
Accordingly, under certain circumstances stockholders could be deprived of
opportunities to sell their shares of Omega Worldwide Common Stock at a higher
price than might otherwise be available.
BUSINESS COMBINATION APPROVAL
The Charter requires the affirmative vote of the holders of not less than
80% of the outstanding shares of "voting stock" of the Company for the approval
or authorization of any "Business Combination" of the Company with any "Related
Person." However, such 80% voting requirement is not applicable if: (i) the
board of directors by unanimous vote or written consent expressly approves in
advance the acquisition of outstanding shares of voting stock of the Company
that cause the Related Person to become a Related Person or have approved the
Business Combination prior to the Related Person involved in the Business
Combination becoming a Related Person; or (ii) the Business Combination is
solely between the Company and another corporation, 100% of the voting stock of
which is owned directly or indirectly by the Company.
The term "Business Combination" means (i) any merger or consolidation of
the Company with or into a Related Person, (ii) any sale, lease, exchange,
transfer or other disposition, including without limitation a mortgage or any
other security device, of all or any "Substantial Part" of the assets of the
Company (including without limitation any voting securities of a subsidiary) to
a Related Person, (iii) any merger or consolidation of a Related Person with or
into the Company, (iv) any sale, lease, exchange, transfer or other disposition
of all or any Substantial Part of the assets of a Related Person to the Company,
(v) the issuance of any securities
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<PAGE> 44
(other than by way of pro rata distribution to all shareholders) of the Company
to a Related Person, and (vi) any agreement, contract or other arrangement
providing for any of the transactions described in this definition of Business
Combination.
The term "Related Person" means and includes any individual, corporation,
partnership or other person or entity which, together with its "Affiliates" and
"Associates" (as defined in Rule 12b-2 under the Securities Exchange Act of
1934), "Beneficially Owns" (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934) in the aggregate 10% or more of the outstanding voting
stock of the Company, and any Affiliate or Associate of the corporation.
The term "Substantial Part" means more than 10% of the book value of the
total assets of the corporation as of the end of its most recent fiscal year
ending prior to the time the determination is being made.
The term "voting stock" means the outstanding shares of capital stock of
the Company entitled to vote generally in the election of Directors. In a vote
required by or provided for herein, each share of voting stock shall have the
number of votes granted to it generally in the election of directors.
Without limitation, any shares of common stock of the Company that any
Related Person has the right to acquire pursuant to any agreement, or upon
exercise of conversion rights, warrants or options, or otherwise, shall be
deemed beneficially owned by the Related Person.
Under certain circumstances, the Charter makes it more difficult for a
person who would be a Related Person to effect various Business Combinations
with the Company. The Charter may encourage persons interested in acquiring
Omega Worldwide to negotiate in advance with the Omega Worldwide Board, because
the stockholder approval requirement would be avoided if the directors then in
office unanimously approve either the Business Combination or the transaction
which results in any such person becoming a Related Person. It is possible that
such a provision could make it more difficult to accomplish transactions which
the Company's stockholders may otherwise deem to be in their best interests.
NUMBER OF DIRECTORS; REMOVAL; FILLING VACANCIES
The Charter provides that, subject to any rights of holders of Preferred
Stock to elect additional directors under specified circumstances ("Preferred
Holders' Rights"), the number of directors will be fixed by the Bylaws. The
Bylaws provide that, subject to any Preferred Holders' Rights, the number of
directors will be fixed by the Omega Worldwide Board, but must not be more than
nor less than the minimum number required by the MGCL. In addition, the
Bylaws provide that any vacancies (other than vacancies created by an increase
in the total number of directors) will be filled by the affirmative vote of a
majority of the remaining directors, though less than a quorum, and any
vacancies created by an increase in the total number of directors may be filled
by a majority of the entire Omega Worldwide Board. Accordingly, the Omega
Worldwide Board could temporarily prevent any stockholder from enlarging the
Omega Worldwide Board and then filling the new directorship with such
stockholder's own nominees.
The Charter provides that, subject to any Preferred Holders' Rights,
directors may be removed only for cause and only upon the affirmative vote of
holders of at least 80% of the entire voting power of all the then-outstanding
shares of stock entitled to vote generally in the election of directors, voting
together as a single class.
NO STOCKHOLDER ACTION BY WRITTEN CONSENT; SPECIAL MEETINGS
The Bylaws provide that any action required or permitted to be taken by the
stockholders of Omega Worldwide must be effected at a duly called annual or
special meeting of such holders and may not be effected by any consent in
writing by such holders. Except as otherwise required by law and subject to the
rights of the holders of any Preferred Stock, special meetings of stockholders
of Omega Worldwide for any purpose or purposes may be called only by the
Chairman, President, the Omega Worldwide Board or holders of 50% of the Omega
Worldwide Common Stock pursuant to a resolution stating the purpose or purposes
thereof. No business other than that stated in the notice shall be transacted at
any special meeting. These provisions may have the effect of delaying
consideration of stockholder proposal until the next annual meeting unless a
special
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<PAGE> 45
meeting is called by the Chairman, President, the Omega Worldwide Board or
holders of 50% of the Omega Worldwide Common Stock.
ADVANCE NOTICE PROVISIONS FOR STOCKHOLDER NOMINATIONS AND STOCKHOLDER PROPOSALS
The Bylaws establish an advance notice procedure for stockholders to make
nominations of candidates for directors or bring other business before an annual
meeting of stockholders of Omega Worldwide (the "Stockholder Notice Procedure").
The Stockholder Notice Procedure provides that (i) only persons who are
nominated by, or at the direction of, the Omega Worldwide Board, or by a
stockholder who has given timely written notice containing specified information
to the Secretary of Omega Worldwide prior to the meeting at which directors are
to be elected, will be eligible for election as directors of Omega Worldwide and
(ii) at an annual meeting, only such business may be conducted as has been
brought before the meeting by, or at the direction of, the Chairman or the Omega
Worldwide Board or by a stockholder who has given timely written notice to the
Secretary of Omega Worldwide of such stockholder's intention to bring such
business before such meeting. In general, for notice of stockholder nominations
or proposed business to be conducted at an annual meeting to be timely, such
notice must be received by the Company not less than 60 days nor more than 90
days prior to the first anniversary of the previous year's annual meeting.
The purpose of requiring stockholders to give the Company advance notice of
nominations and other business is to afford the Omega Worldwide Board a
meaningful opportunity to consider the qualifications of the proposed nominees
or the advisability of the other proposed business and, to the extent deemed
necessary or desirable by the Omega Worldwide Board, to inform stockholders and
make recommendations about such nominees or business, as well as to ensure an
orderly procedure for conducting meetings of stockholders. Although the Bylaws
do not give the Omega Worldwide Board power to block stockholder nominations for
the election of directors or proposal for action, they may have the effect of
discouraging a stockholder from proposing nominees or business, precluding a
contest for the election of directors or the consideration of stockholder
proposals if procedural requirements are not met, and deterring third parties
from soliciting proxies for a non-management slate of directors or proposal,
without regard to the merits of such slate or proposal.
RELEVANT FACTORS TO BE CONSIDERED BY THE OMEGA WORLDWIDE BOARD
The Charter provides that, in determining what is in the best interest of
Omega Worldwide in evaluating a "business combination," "change in control" or
other transaction, a director of Omega Worldwide shall consider all of the
relevant factors, which may include (i) the immediate and long-term effects of
the transaction on Omega Worldwide's stockholders, including stockholders, if
any, who do not participate in the transaction; (ii) the social and economic
effects of the transaction on the Company's employees, suppliers, creditors and
customers and others dealing with the Company and on the communities in which
the Company operates and is located; (iii) whether the transaction is
acceptable, based on the historical and current operating results and financial
condition of the Company; (iv) whether a more favorable price would be obtained
for the Company's stock or other securities in the future; (v) the reputation
and business practices of the other party or parties to the proposed
transaction, including its or their management and affiliates, as they would
affect employees of the Company; (vi) the future value of the Company's
securities; (vii) any legal or regulatory issues raised by the transactions;
(viii) the effect on the Operating Agreement; and (ix) the business and
financial condition and earnings prospects of the other party or parties to the
proposed transactions including, without limitation, debt service and other
existing financial obligations, financial obligations to be incurred in
connection with the transaction and other foreseeable financial obligations of
such other party or parties. Pursuant to this provision, the Omega Worldwide
Board may consider subjective factors affecting a proposal, including certain
nonfinancial matters, and on the basis of these considerations may oppose a
business combination or other transaction which, evaluated only in terms of its
financial merits, might be attractive to some, or a majority, of the Company's
stockholders.
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AMENDMENT
The Bylaws provide that the affirmative vote of the holders of at least 80%
of the stock entitled to vote generally in the election of directors (the
"Voting Stock"), voting together as a single class, is required to amend
provisions of the Bylaws relating to stockholder action without a meeting; the
calling of special meetings; the number, election and term of the Company's
directors; the filling of vacancies; and the removal of directors. The Charter
provides that the provisions of the Charter relating to business combinations
and the number, election and term of the Company's directors may be amended only
by the affirmative vote of the holders of at least 80% of the voting power of
the outstanding shares of Voting Stock, voting together as a single class. In
all cases, amendments to the Charter require that the Omega Worldwide Board
determine that the proposed amendment is advisable.
RIGHTS PLAN
The Omega Worldwide Board currently expects to adopt a Rights Plan on or
prior to the Distribution Date. Pursuant to the Rights Plan, the Omega Worldwide
Board will cause to be issued one Preferred Share Purchase Right for each
outstanding share of Omega Worldwide Common Stock. Each Preferred Share Purchase
Right will entitle the registered holder to purchase from Omega Worldwide
one-hundredth of a share of a new series of junior preferred stock, par value
$.01 per share (the "Junior Preferred Shares"), of Omega Worldwide at a price of
$ (the "Purchase Price"), subject to adjustment. The description and terms
of the Preferred Share Purchase Rights will be set forth in a Rights Agreement
(the "Rights Agreement"), between Omega Worldwide and the designated Rights
Agent (the "Rights Agent"). The description set forth below is intended as a
summary only and is qualified in its entirety by reference to the form of the
Rights Agreement, which will be filed as an exhibit to the Registration
Statement. See "Available Information."
Until the earlier to occur of (i) 10 days following a public announcement
that a person or group of affiliated or associated persons (an "Acquiring
Person") has acquired beneficial ownership of 10% or more of the outstanding
shares of Omega Worldwide Common Stock or (ii) 10 business days (or such later
date as may be determined by action of the Omega Worldwide Board prior to such
time as any person becomes an Acquiring Person) following the commencement of,
or announcement of an intention to make, a tender offer or exchange offer the
consummation of which would result in the beneficial ownership by a person or
group of 10% or more of such outstanding shares of Omega Worldwide Common Stock
(the earlier of such dates being called the "Rights Distribution Date"), the
Preferred Share Purchase Rights will be evidenced by the certificates
representing the Omega Worldwide Common Stock.
The Rights Agreement will provide that, until the Rights Distribution Date
(or earlier redemption or expiration of the Preferred Share Purchase Rights),
the Preferred Share Purchase Rights will be transferred with and only with the
Omega Worldwide Common Stock. Until the Rights Distribution Date (or earlier
redemption or expiration of the Preferred Share Purchase Rights), the Omega
Worldwide Common Stock certificates will contain a notation incorporating the
Rights Agreement by reference. As soon as practicable following the Rights
Distribution Date, separate certificates evidencing the Preferred Share Purchase
Rights (the "Right Certificates") will be mailed to holders of record of the
Omega Worldwide Common Stock as of the close of business on the Rights
Distribution Date and such separate Right Certificates alone will evidence the
Preferred Share Purchase Rights.
The Preferred Share Purchase Rights will not be exercisable until the
Rights Distribution Date. The Preferred Share Purchase Rights will expire on the
tenth anniversary of the date of issuance (the "Final Expiration Date"), unless
the Final Expiration Date is extended or unless the Preferred Share Purchase
Rights are earlier redeemed or exchanged by Omega Worldwide in each case, as
summarized below.
In the event that any person or group of affiliated or associated persons
becomes an Acquiring Person, proper provision shall be made so that each holder
of a Preferred Share Purchase Right, other than Preferred Share Purchase Rights
beneficially owned by the Acquiring Person (which will thereafter be void), will
thereafter have the right to receive upon exercise that number of shares of
Omega Worldwide Common Stock having a market value of two times the exercise
price of the Preferred Share Purchase Right. In the event that
45
<PAGE> 47
Omega Worldwide is acquired in a merger or other business combination
transaction or 50% or more of its consolidated assets or earning power are sold
after a person or group of affiliated or associated persons becomes an Acquiring
Person, proper provision will be made so that each holder of a Preferred Share
Purchase Right will thereafter have the right to receive, upon the exercise
thereof at the then-current exercise price of the Preferred Share Purchase
Right, that number of shares of common stock of the acquiring company which at
the time of such transaction will have a market value of two times the exercise
price of the Preferred Share Purchase Right.
At any time after the acquisition by a person or group of affiliated or
associated persons of beneficial ownership of 10% or more of the outstanding
Omega Worldwide Common Stock and prior to the acquisition by such person or
group of 50% or more of the outstanding Omega Worldwide Common Stock, the Omega
Worldwide Board may exchange the Preferred Share Purchase Rights (other than
Preferred Share Purchase Rights owned by such person or group which have become
void), in whole or in part, at an exchange ratio of one share of Omega Worldwide
Common Stock, or one-hundredth of a Junior Preferred Share (or of a share of a
class or series of the Preferred Stock having equivalent rights, preference and
privileges) per Preferred Share Purchase Right (subject to adjustment).
At any time prior to the acquisition by a person or group of affiliated or
associated persons of beneficial ownership of 10% or more of the outstanding
Omega Worldwide Common Stock, the Omega Worldwide Board may redeem the Preferred
Share Purchase Rights in whole, but not in part, at a price of $.01 per
Preferred Share Purchase Right (the "Redemption Price"). The redemption of the
Preferred Share Purchase Rights may be made effective at such time on such basis
and with such conditions as the Omega Worldwide Board, in its sole discretion,
may establish. Immediately upon any redemption of the Preferred Share Purchase
Rights, the right to exercise the Preferred Share Purchase Rights will terminate
and the holders of the Preferred Share Purchase Rights then will be eligible to
receive only the Redemption Price.
The terms of the Preferred Share Purchase Rights may be amended by the
Omega Worldwide Board without the consent of the holders of the Preferred Share
Purchase Rights; provided, however, that from and after such time as any person
or group of affiliated or associated persons becomes an Acquiring Person, no
such amendment may adversely affect the interests of the holders of the
Preferred Share Purchase Rights.
Until a Preferred Share Purchase Right is exercised, the holder thereof, as
such, will have no rights as a stockholder of Omega Worldwide including, without
limitation, the right to vote or to receive dividends.
The number of outstanding Preferred Share Purchase Rights and the number of
one-hundredths of a Junior Preferred Share issuable upon exercise of each
Preferred Share Purchase Right also will be subject to adjustment in the event
of a split of the Omega Worldwide Common Stock, or a stock dividend on the Omega
Worldwide Common Stock payable in Omega Worldwide Common Stock or subdivisions,
consolidations or combinations of the Omega Worldwide Common Stock occurring, in
any such case, prior to the Rights Distribution Date.
The Purchase Price payable, and the number of Junior Preferred Shares or
other securities or property issuable, upon exercise of the Preferred Share
Purchase Rights will be subject to adjustment from time to time to prevent
dilution (i) in the event of a stock dividend on, or a subdivision, combination
or reclassification of, the Junior Preferred Shares, (ii) upon the grant to
holders of the Junior Preferred Shares of certain rights or warrants to
subscribe for or purchase Junior Preferred Shares at a price, or securities
convertible into Junior Preferred Shares with a conversion price, less than the
then-current market price of the Junior Preferred Shares or (iii) upon the
distribution to holders of the Junior Preferred Shares of evidences of
indebtedness or assets (excluding regular periodic cash dividends paid out of
earnings or retained earnings or dividends payable in Junior Preferred Shares)
or of subscription rights or warrants (other than those referred to above).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least one
percent in such Purchase Price. No fractional Junior Preferred Shares will be
issued (other than fractions which are integral multiples of one-hundredth of a
Junior Preferred Share, which may, at the election of the Company, be evidenced
by depositary receipts) and in lieu
46
<PAGE> 48
thereof, an adjustment in cash will be made based on the market price of the
Junior Preferred Shares on the last trading day prior to the date of exercise.
Junior Preferred Shares purchasable upon exercise of the Preferred Share
Purchase Rights will not be redeemable. Each Junior Preferred Share will be
entitled to a minimum preferential quarterly dividend payment of $ per share
but will be entitled to an aggregate dividend of 100 times the dividend declared
per share of Omega Worldwide Common Stock. In the event of liquidation, the
holders of the Junior Preferred Shares will be entitled to a minimum
preferential liquidation payment of $ per share but will be entitled to an
aggregate payment of 100 times the payment made per share of Omega Worldwide
Common Stock. Each Junior Preferred Share will have 100 votes voting together
with the Omega Worldwide Common Stock. Finally, in the event of any merger,
consolidation or other transaction in which shares of Omega Worldwide Common
Stock are exchanged, each Junior Preferred Share will be entitled to receive 100
times the amount received per share of Omega Worldwide Common Stock. These
rights are protected by customary antidilution provisions.
Due to the nature of the Junior Preferred Shares' dividend, liquidation and
voting rights, the value of the one-hundredth interest in a Junior Preferred
Share purchasable upon exercise of each Preferred Share Purchase Right should
approximate the value of one share of Omega Worldwide Common Stock.
The Preferred Share Purchase Rights have certain antitakeover effects. The
Preferred Share Purchase Rights will cause substantial dilution to a person or
group of persons that attempts to acquire Omega Worldwide on terms not approved
by the Omega Worldwide Board. The Preferred Share Purchase Rights should not
interfere with any merger or other business combination approved by the Omega
Worldwide Board prior to the time that a person or group has acquired beneficial
ownership of 10% or more of the Omega Worldwide Common Stock since the Preferred
Share Purchase Rights may be redeemed by Omega Worldwide at the Redemption Price
until such time.
The Preferred Share Purchase Rights and the Company's Charter contain
certain provisions that exclude Omega and its affiliates from the operative
provisions of the Rights Plan.
MARYLAND BUSINESS COMBINATION STATUTE
Under the MGCL, certain "business combinations" (including a merger,
consolidation, share exchange or, in certain circumstances, an asset transfer or
issuance or reclassification of equity securities) between a Maryland
corporation and any person who beneficially owns ten percent or more of the
voting power of the corporation's shares or an affiliate of the corporation who,
at any time within the two-year period prior to the date in question, was the
beneficial owner of ten percent or more of the voting power of the
then-outstanding voting stock of the corporation (an "Interested Stockholder")
or an affiliate of such an Interested Stockholder are prohibited for five years
after the most recent date on which the Interested Stockholder becomes an
Interested Stockholder. Thereafter, any such business combination must be
recommended by the board of directors of such corporation and approved by the
affirmative vote of at least (i) 80% of the votes entitled to be cast by holders
of outstanding shares of voting stock of the corporation and (ii) two-thirds of
the votes entitled to be cast by holders of voting stock of the corporation
other than shares held by the Interested Stockholder with whom (or with whose
affiliate) the business combination is to be effected, unless, among other
conditions, the corporation's common stockholders receive a minimum price (as
defined in the MGCL) for their shares and the consideration is received in cash
or in the same form as previously paid by the Interested Stockholder for its
shares. These provisions of the MGCL do not apply, however, to business
combinations that are approved or exempted by the board of directors of the
corporation prior to the time that the Interested Stockholder becomes an
Interested Stockholder.
The Company's Charter specifies that the Business Combination Statute does
not apply to the Company unless the Board of Directors elects to be subject, in
whole or in part, specifically, generally or generally by types, as to
specifically identified or unidentified stockholders, to the provisions. If the
Board of Directors elects to be subject to the Business Combination Statute, the
Business Combination Statute could have the effect of discouraging mergers or
similar transactions subject to statutory stockholder vote and additional
transactions involving transfers of assets or securities in specified amounts.
In addition, pursuant to the statute,
47
<PAGE> 49
the Company has exempted any business combinations involving Omega and,
consequently, the five-year prohibition and the super-majority vote requirements
will not apply to business combinations between any of them and the Company. As
a result, Omega may be able to enter into business combinations with the Company
that may not be in the best interest of its stockholders without compliance by
the Company with the super-majority vote requirements and the other provisions
of the statute.
MARYLAND CONTROL SHARES ACQUISITION STATUTE
The MGCL provides that "control shares" of a Maryland corporation acquired
in a "control share acquisition" have no voting rights except to the extent
approved by a vote of two-thirds of the votes entitled to be cast on the matter,
excluding shares of stock owned by the acquiror, by officers or by directors who
are employees of the corporation. "Control Shares" are voting shares of stock
which, if aggregated with all other such shares of stock previously acquired by
the acquiror or in respect of which the acquiror is able to exercise or direct
the exercise of voting power (except solely by virtue of a revocable proxy),
would entitle the acquiror to exercise voting power in electing directors within
one of the following ranges of voting power: (i) one-fifth or more but less than
one-third, (ii) one-third or more but less than a majority, or (iii) a majority
or more of all voting power. Control shares do not include shares the acquiring
person is then entitled to vote as a result of having previously obtained
stockholder approval. A "control share acquisition" means the acquisition of
control shares, subject to certain exceptions.
A person who has made or proposes to make a control share acquisition, upon
satisfaction of certain conditions (including an undertaking to pay expenses),
may compel the board of directors of the corporation to call a special meeting
of stockholders to be held within 50 days of demand to consider the voting
rights of the shares. If no request for a meeting is made, the corporation may
itself present the question at any stockholders meeting.
If voting rights are not approved at the meeting or if the acquiring person
does not deliver an acquiring person statement as required by the statute, then,
subject to certain conditions and limitations, the corporation may redeem any or
all of the control shares (except those for which voting rights have previously
been approved) for fair value determined, without regard to the absence of
voting rights for the control shares, as of the date of the last control share
acquisition by the acquiror or of any meeting of stockholders at which the
voting rights of such shares are considered and not approved. If voting rights
for control shares are approved at a stockholders meeting and the acquiror
becomes entitled to vote a majority of the shares entitled to vote, all other
stockholders may exercise appraisal rights. The fair value of the shares as
determined for purposes of such appraisal rights may not be less than the
highest price per share paid by the acquiror in the control share acquisition.
The control share acquisition statute does not apply (i) to shares acquired
in a merger, consolidation or share exchange if the corporation is a party to
the transaction or (ii) to acquisitions approved or exempted by the charter or
bylaws of the corporation.
The Company's Charter specifies that the Control Shares Acquisition Statute
does not apply to the Company unless the Board of Directors elects to be
subject, in whole or in part, specifically, generally or generally by types, as
to specifically identified or unidentified stockholders, to the provisions. If
the Board of Directors elects to be subject to the Control Shares Acquisition
Statute, the Control Shares Acquisition Statute could have the effect of
discouraging offers to acquire the corporation and of increasing the difficulty
of consummating any such offer and of delaying, deterring or preventing a future
takeover or change in control of the corporation, by proxy contest, tender
offer, openmarket purchases or otherwise.
LIABILITY OF DIRECTORS AND OFFICERS; INDEMNIFICATION
The MGCL permits a Maryland corporation to include in its charter a
provision limiting the liability of its directors and officers to the
corporation and its stockholders for money damages except for liability
resulting from (i) actual receipt of an improper benefit or profit in money,
property or services or (ii) active and deliberate dishonesty established by a
final judgment as being material to the cause of action. The Charter
48
<PAGE> 50
of the Company contains such a provision which eliminates such liability to the
maximum extent permitted by the MGCL.
The Charter of the Company authorizes it, to the maximum extent permitted
by Maryland law, to obligate itself to indemnify and to pay or reimburse
reasonable expenses in advance of final disposition of a proceeding to (i) any
present or former director or officer or (ii) any individual who, while a
director of the Company and at the request of the Company, serves or has served
another corporation, real estate investment trust, partnership, joint venture,
trust, employee benefit plan or any other enterprise as a director, officer,
partner or trustee of such corporation, real estate investment trust,
partnership, joint venture, trust, employee benefit plan or other enterprise
from and against any claim or liability to which such person may become subject
or which such person may incur by reason of his status as a present or former
director or officer of the Company. The Bylaws of the Company obligate it, to
the maximum extent permitted by Maryland law, to indemnify and to pay or
reimburse reasonable expenses in advance of final disposition of a proceeding to
(i) any present or former director or officer who is made a party to the
proceeding by reason of his service in that capacity or (ii) any individual who,
while a director of the Company and at the request of the Company, serves or has
served another corporation, real estate investment trust, partnership, joint
venture, trust, employee benefit plan or any other enterprise as a director,
officer, partner or trustee of such corporation, real estate investment trust,
partnership, joint venture, trust, employee benefit plan or other enterprise and
who is made a party to the proceeding by reason of his service in that capacity.
The Charter and Bylaws also permit the Company to indemnify and advance expenses
to any person who served a predecessor of the Company in any of the capacities
described above and to any employee or agent of the Company or a predecessor of
the Company.
The MGCL requires a corporation (unless its charter provides otherwise,
which the Company's Charter does not) to indemnify a director or officer who has
been successful, on the merits or otherwise, in the defense of any proceeding to
which he is made a party by reason of his service in that capacity. The MGCL
permits a corporation to indemnify its present and former directors and
officers, among others, against judgments, penalties, fines, settlements and
reasonable expenses actually incurred by them in connection with any proceeding
to which they may be made a party by reason of their service in those or other
capacities unless it is established that (i) the act or omission of the director
or officer was material to the matter giving rise to the proceeding and (a) was
committed in bad faith or (b) was the result of active and deliberate
dishonesty, (ii) the director or officer actually received an improper personal
benefit in money, property or services or (iii) in the case of any criminal
proceeding, the director or officer had reasonable cause to believe that the act
or omission was unlawful. However, under the MGCL, a Maryland corporation may
not indemnify for an adverse judgment in a suit by or in the right of the
corporation or for a judgment of liability on the basis that personal benefit
was improperly received, unless in either case a court orders indemnification
and then only for expenses. In addition, the MGCL permits a corporation to
advance reasonable expenses to a director or officer upon the corporation's
receipt of (i) a written affirmation by the director or officer of his good
faith belief that he has met the standard of conduct necessary for
indemnification by the corporation and (ii) a written undertaking by or on his
behalf to repay the amount paid or reimbursed by the corporation if it shall
ultimately be determined that the standard of conduct was not met.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or persons controlling the
registrant pursuant to the foregoing provisions, the registrant has been
informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is
therefore unenforceable.
The Charter also specifically authorizes the Company, or a subsidiary or an
affiliate of the Company, to purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the Company, or
who, while a director, officer, employee or agent of the Company, is or was
serving at the request of the Company as a director, officer, partner, trustee,
employee or agent of another foreign or domestic corporation, partnership, joint
venture, trust, other enterprise or employee benefit plan against any liability
asserted against and incurred by such person in any such capacity or arising out
of such person's position, whether or not the Company would have the power to
indemnify against such liability under the provisions of Section 2-418 of the
MGCL.
49
<PAGE> 51
Omega Worldwide has entered into indemnification agreements with each of it
officers and directors. The indemnification agreements require, among other
things, that Omega Worldwide indemnify its officers and directors to the fullest
extent permitted by law, and advance to the officers and directors all related
expenses, subject to reimbursement if it is subsequently determined that the
indemnification is not permitted. The Company also must indemnify and advance
expenses incurred by officers and directors seeking to enforce their rights
under the indemnification agreements and cover officers and directors under the
Company's directors' and officers' liability insurance. Although the
indemnification agreements offer substantially the same scope of coverage
afforded by provisions in the Charter and Bylaws, they provide greater assurance
to directors and executive officers that indemnification will be available,
because, as contracts, they cannot be modified unilaterally in the future by the
Board of Directors or by the stockholders to alter, limit or eliminate the
rights they provide.
The Charter provides that no future amendment to the Charter shall affect
any right of any person under these provisions based on any event, omission or
proceeding prior to such amendment.
EXPERTS
The balance sheet of Omega Worldwide, Inc. as of November 30, 1997
appearing in this Prospectus and Registration Statement has been audited by
Ernst & Young LLP, independent auditors, and the consolidated financial
statements of Principal Healthcare Finance Limited as of August 31, 1997 and for
the two years in the period ended August 31, 1997 appearing in this Prospectus
and Registration Statement have been audited by Ernst & Young, independent
auditors, as set forth therein in their reports thereon appearing elsewhere
herein, and are included in reliance upon such reports given upon the authority
of such firms as experts in accounting and auditing.
LEGAL MATTERS
The legality of the issuance of the shares of Omega Worldwide Common Stock
to be distributed in the Distribution and sold pursuant to the Offerings will be
passed upon for the Company by Mayer, Brown & Platt.
50
<PAGE> 52
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Omega Worldwide, Inc.
Report of Independent Auditors............................ F-2
Balance Sheet as of November 30, 1997..................... F-3
Principal Healthcare Finance Limited
Report of Independent Auditors............................ F-4
Consolidated Balance Sheets as of August 31, 1997 and
1996................................................... F-5
Consolidated Statements of Operations for the years ended
August 31, 1997 and 1996............................... F-6
Consolidated Statements of Shareholder Equity for the
years ended August 31, 1997 and 1996................... F-7
Consolidated Statements of Cash Flows for the years ended
August 31, 1997 and 1996............................... F-8
Notes to consolidated financial statements................ F-9
</TABLE>
F-1
<PAGE> 53
REPORT OF INDEPENDENT AUDITORS
Shareholder
Omega Worldwide, Inc.
We have audited the accompanying balance sheet of Omega Worldwide, Inc. as
of November 30, 1997. This balance sheet is the responsibility of the Company's
management. Our responsibility is to express an opinion on this balance sheet
based on our audit.
We conducted our audit in accordance with generally accepted accounting
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall balance sheet presentation. We
believe that our audit of the balance sheet provides a reasonable basis for our
opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Omega Worldwide, Inc. at November
30, 1997, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
December 18, 1997
Detroit, Michigan
F-2
<PAGE> 54
OMEGA WORLDWIDE, INC.
BALANCE SHEET
NOVEMBER 30, 1997
<TABLE>
<S> <C>
ASSETS
Cash........................................................ $ 1,000
---------
Total assets................................................ $ 1,000
=========
SHAREHOLDERS' EQUITY:
Preferred stock $1.00 par value:
Authorized 10,000,000 shares........................... $
Common stock $.10 par value:
Authorized 50,000,000 shares
Issued and outstanding 2,101,000 shares................ 210,100
Additional paid-in capital................................ 900
Common stock subscription receivable...................... (210,000)
---------
Total shareholders' equity.................................. $ 1,000
=========
</TABLE>
1. ORGANIZATION
Omega Worldwide, Inc. (the "Company") was incorporated on November 30, 1997, in
the State of Maryland. All of the Company's common stock is owned by Omega
Healthcare Investors Inc. ("Omega"). Following the purchase of 1,000 shares of
common stock, Omega subscribed to the issuance of 2,100,000 shares at par value,
with the payment of the subscription price due upon the declaration of
effectiveness by the Securities and Exchange Commission of the Company's Form
S-1 Registration Statement. Prior to November 30, 1997 the Company has had no
operations.
F-3
<PAGE> 55
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Principal Healthcare Finance Limited
We have audited the accompanying consolidated balance sheets of Principal
Healthcare Finance Limited and subsidiaries as of August 31, 1997 and 1996, and
the related consolidated statements of operations, shareholders' equity, and
cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Principal
Healthcare Finance Limited and subsidiaries at August 31, 1997 and 1996, and the
consolidated results of their operations, and their cash flows for the years
then ended, in conformity with generally accepted accounting principles.
/s/ Ernst & Young
December 2, 1997, except for the third paragraph of
Note 11 as to which the date is December 12, 1997
Jersey, Channel Islands
F-4
<PAGE> 56
PRINCIPAL HEALTHCARE FINANCE LIMITED
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AUGUST 31
----------------------
1997 1996
---- ----
(IN THOUSANDS, EXCEPT
SHARE INFORMATION)
<S> <C> <C>
ASSETS
Investments in real estate
Real estate properties.................................... $274,982 $ 92,795
Accumulated depreciation.................................. 4,294 1,357
-------- --------
270,688 91,438
Mortgage notes receivable................................... 9,851
Other investments........................................... 5,474
-------- --------
276,162 101,289
Cash and short-term investments............................. 6,188 597
Accounts receivable......................................... 3,520 899
Assets held for sale........................................ 3,041
Cash on deposit as collateral -- restricted................. 18,056
Goodwill, net............................................... 14,190
Other assets................................................ 652 762
-------- --------
Total assets................................................ $321,809 $103,547
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable.......................................... $ 5,456 $ 1,371
Short-term loans from Omega Healthcare Investors, Inc..... 59,537 7,490
Deferred tax liability.................................... 14,025 168
Long-term borrowings...................................... 229,789 93,822
-------- --------
Total liabilities 308,807 102,851
Shareholders' equity:
Class A common stock $.016 par value:
Authorized -- 43,000,000 shares
Issued and outstanding -- 4,000,000 shares in 1997 and
1,500,000 in 1996..................................... 65 24
Class B common stock $.016 par value:
Authorized -- 17,000,000 shares
Issued and outstanding -- 6,000,000 shares in 1997 and
none in 1996.......................................... 96
Additional paid-in capital................................ 14,472 1,489
Retained earnings deficit................................. (1,697) (826)
Foreign currency translation adjustments.................. 66 9
-------- --------
Total shareholders' equity.................................. 13,002 696
-------- --------
Total liabilities and shareholders' equity.................. $321,809 $103,547
======== ========
</TABLE>
See accompanying notes.
F-5
<PAGE> 57
PRINCIPAL HEALTHCARE FINANCE LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31
---------------------
1997 1996
---- ----
(IN THOUSANDS)
<S> <C> <C>
Revenue:
Rental income............................................. $16,722 $8,248
Mortgage interest income.................................. 103 86
Other investment income................................... 187 164
------- ------
17,012 8,498
Expenses:
Depreciation and amortization............................. 2,959 1,357
Interest.................................................. 12,403 7,421
General and administrative................................ 1,652 378
------- ------
17,014 9,156
------- ------
Net loss before income taxes................................ (2) (658)
Provision for income taxes:
Current................................................... 202
Deferred.................................................. 509 168
------- ------
711 168
------- ------
Net loss.................................................... $(713) $(826)
======= ======
</TABLE>
See accompanying notes.
F-6
<PAGE> 58
PRINCIPAL HEALTHCARE FINANCE LIMITED
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED AUGUST 31, 1997 AND 1996
<TABLE>
<CAPTION>
EQUITY
ADJUSTMENT
CLASS A CLASS B ADDITIONAL RETAINED FROM FOREIGN
---------------- ---------------- PAID EARNINGS CURRENCY
SHARES AMOUNT SHARES AMOUNT IN CAPITAL (DEFICIT) TRANSLATION
------ ------ ------ ------ ---------- --------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of Class A common
stock as of June 28,
1995....................... 1,500 $24 $ $ 1,489 $ $
Foreign currency translation
adjustment................. 9
Net loss...................... (826)
----- --- ----- --- ------- ------- ---
Balance at August 31, 1996...... 1,500 24 1,489 (826) 9
Issuance of Class A common
stock...................... 2,500 41 3,994
Issuance of Class B common
stock...................... 6,000 96 8,989
Dividends paid................ (158)
Foreign currency translation
adjustment................. 57
Net loss...................... (713)
----- --- ----- --- ------- ------- ---
Balance at August 31, 1997...... 4,000 $65 6,000 $96 $14,472 $(1,697) $66
===== === ===== === ======= ======= ===
</TABLE>
See accompanying notes.
F-7
<PAGE> 59
PRINCIPAL HEALTHCARE FINANCE LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31
---------------------
1997 1996
---- ----
(IN THOUSANDS)
<S> <C> <C>
Net loss.................................................... $ (713) $ (826)
Adjustments to reconcile net loss to cash provided by
operating activities
Depreciation and amortization............................. 2,959 1,357
Deferred tax liability.................................... 509 168
Change in operating assets and liabilities
Accounts receivable.................................... (2,572) (888)
Accounts payable and accruals.......................... 2,542 930
Foreign currency translation gain........................... 120 7
--------- ---------
Cash provided by operating activities....................... 2,845 748
INVESTING ACTIVITIES
Acquisition of real estate.................................. (60,716) (91,071)
Quality Care Homes Plc acquisition.......................... (54,728)
Other investments........................................... (6,566)
Increase in restricted cash on deposit...................... 1,243
Issuance of mortgage notes.................................. (9,851)
--------- ---------
Cash used in investing activities........................... (120,767) (100,922)
FINANCING ACTIVITIES
Issuance of common stock.................................... 13,472 2,317
Proceeds from borrowings.................................... 59,958 92,670
Short term borrowings from Omega Healthcare Investors,
Inc....................................................... 50,875 7,398
Dividends paid.............................................. (158)
Cost of raising capital..................................... (634) (1,614)
--------- ---------
Cash provided by financing activities....................... 123,513 100,771
--------- ---------
Increase in cash and cash equivalents....................... 5,591 597
Cash and cash equivalents at beginning of year.............. 597
--------- ---------
Cash and cash equivalents at end of year.................... $ 6,188 $ 597
========= =========
</TABLE>
See accompanying notes.
F-8
<PAGE> 60
PRINCIPAL HEALTHCARE FINANCE LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 1997 AND 1996
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Principal Healthcare Finance Limited (the "Company") was formed and
initially funded in June, 1995 by Omega Healthcare Investors, Inc. ("Omega").
The Company is a Jersey, Channel Islands based company organized to purchase and
lease back nursing homes in the United Kingdom. The Company maintains its
records in British pounds sterling under accounting principles generally
acceptable in the United Kingdom. The accompanying financial statements are
based on generally accepted accounting principles in the United States and are
stated in U. S. dollars.
The Company is a subsidiary of Bayside International Inc., a company
incorporated in the Cayman Islands ("Bayside"). Omega together with certain
directors of Omega own Bayside.
The Company was incorporated in June, 1995. The results of operations from
the date of incorporation to August 31, 1995 were not significant.
The consolidated financial statements of the Company include the accounts
of the Company and all wholly owned subsidiaries after elimination of all
material intercompany accounts and transactions.
CASH AND SHORT-TERM INVESTMENTS
Short-term investments consist of highly liquid investments with a maturity
date of three months or less when purchased. These investments are stated at
cost which approximates fair value.
INVESTMENTS IN REAL ESTATE
Investments in real estate properties are recorded at cost. The cost of the
properties acquired is allocated between land and buildings based generally upon
management's valuations and external appraisals. Depreciation for buildings is
recorded on the straight-line basis, using 30 year estimated useful lives.
GOODWILL
The excess of the purchase price over the fair value of tangible net assets
acquired from the Company's purchase of Quality Care Homes plc is amortized on a
straight-line basis over a 40-year period.
REVENUE RECOGNITION
Rental income is recognized on a straight-line basis over the initial terms
of the related master leases. Such income includes periodic increases based on
predetermined formulas as defined in the master leases and mortgage loan
agreements.
TRANSLATION
Translation from British pounds sterling has been performed under the
provisions of Financial Accounting Standards Board Statement No. 52 which
provides that balance sheet amounts are translated at the year end exchange rate
and income statement amounts are translated at the average annual rate. There
are no material amounts of exchange gains or losses included in the results of
operations for 1996 and 1997.
INCOME TAXES
The Company is subject to UK income tax at a rate of 24% on its net rental
income after deducting related expenses, including interest payable. The
Company's subsidiary, Principal Healthcare Plc, is a UK resident company and is
subject to UK corporate tax at a rate of 33%.
F-9
<PAGE> 61
PRINCIPAL HEALTHCARE FINANCE LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. REAL ESTATE PROPERTIES
The Company's real estate properties, represented by 116 long-term care
facilities at August 31, 1997, are leased under provisions of master leases with
initial terms of generally thirty years, however the lease may be terminated
after 10 or 20 years by exercise of a purchase option by the operator or upon
giving proper notice. Substantially all of the master leases provide for minimum
annual rentals which are subject to annual increases based upon changes in the
Retail Price Index in the United Kingdom with certain minimum and maximum limits
(generally 2% and 5%, respectively). Under the terms of the leases, the lessee
is responsible for all maintenance, repairs, taxes and insurance on the leased
properties. A summary of the Company's investment in real estate properties is
as follows:
<TABLE>
<CAPTION>
AUGUST 31
-------------------
1997 1996
---- ----
(IN THOUSANDS)
<S> <C> <C>
Buildings................................................. $233,736 $78,830
Land...................................................... 41,246 13,965
-------- -------
274,982 92,795
Less accumulated depreciation............................. 4,294 1,357
-------- -------
Total..................................................... $270,688 $91,438
======== =======
</TABLE>
The following table summarizes the changes in real estate properties and
accumulated depreciation during 1997 and 1996:
<TABLE>
<CAPTION>
REAL ESTATE ACCUMULATED
PROPERTIES DEPRECIATION
----------- ------------
(IN THOUSANDS)
<S> <C> <C>
Balance at June 28, 1995............................... $ -- $ --
Additions for 1996..................................... 92,795.... 1,357
-------- ------
Balance at August 31, 1996............................. 92,795 1,357
Additions for 1997..................................... 182,187 2,937
-------- ------
Balance at August 31, 1997............................. $274,982 $4,294
======== ======
</TABLE>
Additions for 1997 include approximately $112 million stemming from the
Quality Care Homes Plc acquisition (see Note 6).
F-10
<PAGE> 62
PRINCIPAL HEALTHCARE FINANCE LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. REAL ESTATE PROPERTIES (CONTINUED)
The future minimum rentals expected to be received for the remainder of the
initial terms of the leases are as follows:
<TABLE>
<CAPTION>
(IN
THOUSANDS)
<S> <C>
1998........................................................ $ 19,786
1999........................................................ 19,786
2000........................................................ 19,786
2001........................................................ 19,786
2002........................................................ 19,786
Thereafter.................................................. 75,649
--------
$174,579
========
</TABLE>
3. MORTGAGE NOTES RECEIVABLE
In August 1996, the Company made a loan of approximately $9,851,000,
secured by three properties. In October, 1996 the Company purchased these three
properties and entered into a lease agreement with the operator on terms similar
to other leases with the operator.
4. INVESTMENT CONCENTRATIONS
As of August 31, 1997, all of the Company's real estate investments related
to long-term care facilities. The properties are operated by 8 companies
including Ashbourne plc (30%), Specialty Care Plc (11%), and Tamaris Plc (46%).
The Company's facilities are located in England (92%) and Scotland (8%). The
following is a summary of the amounts originally invested and the facilities
acquired at August 31:
<TABLE>
<CAPTION>
1997 1996
------------------------------ ------------------------------
NUMBER OF NUMBER OF
INVESTMENT FACILITIES INVESTMENT FACILITIES
COUNTY AMOUNT OWNED AMOUNT OWNED
------ ---------- ---------- ---------- ----------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C>
Berkshire................................ $ 3,648 2 $ -- --
Cambridgeshire........................... 1,282 1 -- --
Coventry................................. 2,865 1 -- --
Cumbria.................................. 2,865 1 -- --
Derbyshire............................... 3,457 2 3,338 2
Durham................................... 49,977 21 -- --
Essex.................................... 5,471 2 2,981 1
Greater London........................... 5,713 2 -- --
Greater Manchester....................... 3,898 2 1,956 1
Hertfordshire............................ 3,954 1 3,818 1
Kent..................................... 2,228 1 -- --
Leicestershire........................... 3,233 1 3,122 1
Lincolnshire............................. 6,431 3 3,586 2
Merseyside............................... 4,090 2 3,949 2
Norfolk.................................. 660 1 -- --
North Ayrshire........................... 6,778 1 6,546 1
North Humberside......................... 4,668 1 4,507 1
North Yorkshire.......................... 1,987 2 -- --
</TABLE>
F-11
<PAGE> 63
PRINCIPAL HEALTHCARE FINANCE LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
1997 1996
------------------------------ ------------------------------
NUMBER OF NUMBER OF
INVESTMENT FACILITIES INVESTMENT FACILITIES
COUNTY AMOUNT OWNED AMOUNT OWNED
------ ---------- ---------- ---------- ----------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C>
4. INVESTMENT CONCENTRATIONS (CONTINUED)
Northhamptionshire....................... 3,368 1 -- --
Northhumberland.......................... 5,165 2 -- --
Nottinghamshire.......................... 18,948 11 16,235 9
Oxfordshire.............................. 6,052 3 -- --
South Yorkshire.......................... 8,128 5 5,082 4
Staffordshire............................ 11,800 4 7,706 3
Suffolk.................................. 10,249 4 9,185 3
Tyne & Wear.............................. 41,193 18 8,144 4
Warwickshire............................. 1,436 1 -- --
West Midlands............................ 17,530 10 2,387 1
West Yorkshire........................... 18,258 5 10,253 2
-------- --- ------- --
Total England.......................... 255,332 111 92,795 38
Dundee City.............................. 10,652 3 -- --
East Lothian............................. 6,133 1 -- --
Glasgow.................................. 2,865 1 -- --
-------- --- ------- --
Total Scotland......................... 19,650 5 -- --
-------- --- ------- --
Total.................................. $274,982 116 $92,795 38
======== === ======= ==
</TABLE>
5. BORROWING ARRANGEMENTS
The following is a summary of long-term borrowings all of which are
sterling denominated:
<TABLE>
<CAPTION>
AUGUST 31
-------------------
1997 1996
---- ----
(IN THOUSANDS)
<S> <C> <C>
Collateralized bank term loan............................. $ 18,181 $ --
Acquisition finance loan.................................. 55,245 --
Secured bank loan......................................... 64,556 62,548
Loan notes and guarantees................................. 18,087 --
Commercial mortgages...................................... 34,588 --
Overdrafts................................................ 6,854 --
Subordinated loans........................................ 32,278 31,274
-------- -------
$229,789 $93,822
======== =======
</TABLE>
The collateralized bank term loan is secured with cash of $18,056,000.
Substantially all of the real estate properties are collateralized by commercial
mortgages and bank loans.
The bank loan of $64,556,000 matures on August 25, 2000 and bears interest
to maturity at rates fixed at the time each tranche of the loan was drawn down.
The average rate fixed on funds drawn down as at August 31, 1997 and 1996 was
8.98%. The loan is secured by a mortgage on substantially all of the investment
properties held by the Company. Subsequent to year-end, $56 million of this loan
was repaid with funds drawn down under a revolving credit facility (Note 11).
F-12
<PAGE> 64
PRINCIPAL HEALTHCARE FINANCE LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. BORROWING ARRANGEMENTS (CONTINUED)
The acquisition finance loan is a bank borrowing due for repayment before
June 1998. A guarantee is provided by Omega. The interest rate on the facility
is 1% per annum over LIBOR.
Commercial mortgages are repayable in varying quarterly payments at dates
commencing between August 1996 through August 2002. Interest is payable at
varying rates ranging from 6.18% to 8.5%.
The loan notes issued to former shareholders of a business which sold its
properties to the Company, totaling $18,087,000, bear interest at the rate of
6.5% per annum payable six months after the date of issue of any of the loan
notes and on repayment, which will be on April 16, 1998. Repayment of principal
and payment of interest is guaranteed by a financial institution. The guarantee
fee is 1% per annum of the amount of the loan notes outstanding.
The subordinated loans are due for repayment on December 31, 2000 and bear
interest over the remaining term of the loans at rates ranging from 11.8% to
12.9%. Approximately $24 million of the subordinated loans are payable to Omega.
These loans are subordinated to the security interest provided under the secured
bank line and bear interest at 11.8% at August 31, 1997. In connection with the
loans, the Company provided warrants to acquire 13,333,333 shares of stock at
L1.50. These warrants expire June 30, 2001.
Approximately $56 million of the outstanding borrowings were refinanced in
October, 1997 with borrowings which are payable in 2025 (See Note 11). It is
expected that approximately $141,000,000 of the remaining borrowings will be
refinanced in fiscal 1998 with borrowings which will have an expected maturity
after 2002. The remainder of the borrowings ($32 million) are due in December,
2000.
Interest paid during 1997 and 1996 was approximately $12,400,000 and
$7,421,000, respectively.
The estimated fair values of the Company's long-term borrowings at August
31, 1997 and 1996 approximate their face amounts. Fair values are based on the
estimates of management and on rates currently prevailing for comparable loans.
6. QUALITY CARE HOMES PLC ACQUISITION
On June 30, 1997 the Company acquired all of the outstanding common stock
of Quality Care Homes plc. Quality Care Homes Plc was a company whose shares
were listed on the UK stock exchange. Following the acquisition, the shares of
Quality Care Homes plc were delisted and the company changed its name to Quality
Care Homes Limited ("QCHL"). The total purchase consideration of $73,818,000,
which includes acquisition costs of $367,000, was funded by acquisition
financing of $55,245,000, the issue of loan notes for $18,087,000 and cash. The
acquired assets and liabilities, recorded at their estimated fair values at the
date of acquisition, were as follows:
<TABLE>
<CAPTION>
(IN
THOUSANDS)
----------
<S> <C>
Investment properties....................................... $116,969
Accounts receivable and inventory........................... 3,194
Goodwill.................................................... 14,190
Cash (primarily restricted deposits)........................ 19,364
Bank borrowings............................................. (22,998)
Mortgages................................................... (34,884)
Deferred income tax liability............................... (13,331)
Accounts payable............................................ (8,179)
Other -- net................................................ (507)
--------
Net assets acquired......................................... $ 73,818
========
</TABLE>
F-13
<PAGE> 65
PRINCIPAL HEALTHCARE FINANCE LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. QUALITY CARE HOMES PLC ACQUISITION (CONTINUED)
As a result of the expected disposal of the assets of the nursing home
business, the Company effectively acquired only the nursing home facilities of
QCHL. The assets, which are being held for sale, are as follows (in thousands):
<TABLE>
<S> <C>
Land and buildings.......................................... $ 4,524
Receivables and inventory................................... 3,224
Cash........................................................ 23
Accounts payable and accruals............................... (4,730)
-------
Assets held for resale...................................... $ 3,041
=======
</TABLE>
7. CAPITAL STOCK
The Class B ordinary shares do not carry a right to vote except that at
each general meeting holders of Class B ordinary shares other than Omega shall
be called upon to vote on continuation of the Advisory Agreement between the
Company and Omega. Additionally, they are entitled to vote in relation to a
Class meeting being held in accordance with Article 52 of the Companies (Jersey)
Law 1991.
A holder of Class B shares other than Omega shall have the right to convert
such shares into Class A shares at any time after:
i. the Board of Directors shall have given notice in writing to
members that the value of the share capital of the Company in issue and
paid up exceeds the aggregate sum of L40,000,000 (approximately
$64,000,000) or
ii. the Board of Directors shall have given notice in writing to the
members of an offer for the purchase of the shares of the Company, or
iii. the Board of Directors shall have given notice in writing to
members of the listing of any class of shares of the Company.
The Company has issued warrants to subscribe for additional shares as
follows:
<TABLE>
<CAPTION>
NUMBER EXERCISE
OF SHARES PRICE EXPIRATION DATE
--------- -------- ---------------
<S> <C> <C> <C>
Class A ordinary shares............................. 666,666 L1.00 December 31, 2000
750,000 L1.10 December 31, 2000
3,333,333 L1.50 June 30, 2001
Class B ordinary shares............................. 1,000,000 L1.00 December 31, 2000
10,000,000 L1.50 June 30, 2001
</TABLE>
Subsequent to August 31, 1997 the Board of Directors authorized a
shareholder vote pursuant to which, if approved, all of common stock would be
converted into voting common stock.
F-14
<PAGE> 66
PRINCIPAL HEALTHCARE FINANCE LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. INCOME TAXES
The provision for income taxes was as follows:
<TABLE>
<CAPTION>
YEAR ENDED
AUGUST 31
---------------
1997 1996
---- ----
(IN THOUSANDS)
<S> <C> <C>
Current
UK income tax on net rental income........................ $266 $ --
UK corporation tax credit................................. (64) --
---- ----
202 --
Deferred.................................................. 509 168
---- ----
$711 $168
==== ====
</TABLE>
The 1997 and 1996 effective tax rate differs from the UK income tax rate
primarily due to depreciation and amortization expense which is not deductible
for tax purposes in the UK.
The primary components of the Company's deferred tax liability are as
follows:
<TABLE>
<CAPTION>
AUGUST 31
------------------
1997 1996
---- ----
(IN THOUSANDS)
--------------
<S> <C> <C>
Deferred tax liability
Accounts receivable....................................... $ 522 $168
Real estate............................................... 13,331
Other..................................................... 172 --
------- ----
$14,025 $168
======= ====
</TABLE>
9. LITIGATION
The Company is subject to certain legal proceedings and claims which arise
in the ordinary course of its business. In the opinion of management, the amount
of ultimate liability, if any, with respect to these actions will not materially
affect the consolidated financial position of the Company.
10. RELATED PARTY TRANSACTIONS
The Company has an agreement with Omega under which Omega provides
investment advice, portfolio monitoring, administration and advisory services to
the Company. The Company pays an annual fee of 0.9% of the book value of the
Company's invested assets to Omega. The Company paid approximately $1,341,000
and $614,000 to Omega during 1997 and 1996, respectively.
11. SUBSEQUENT EVENTS
In October, 1997, the Company obtained through a wholly owned subsidiary a
secured revolving credit facility permitting borrowings of approximately
$250,000,000. On October 3, 1997 the Company drew approximately $62 million to
repay temporary loans payable to Omega. Additionally, in November, 1997 the
Company borrowed $56,000,000 to repay a portion of the $64,000,000 due under the
secured bank loan agreement (Note 10). As a result of the repayment of the bank
loan, the Company paid prepayment fees of approximately $1,500,000.
F-15
<PAGE> 67
PRINCIPAL HEALTHCARE FINANCE LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. SUBSEQUENT EVENTS (CONTINUED)
On November 1, 1997, the Company acquired 30 facilities with 1,400 beds in
Northern Ireland. The total purchase price is $69,000,000 of which $61,000,000
was paid on the date of acquisition. The balance will be paid within the next 12
months. The initial rent on these facilities is at a rate of 10.8%. The lease
term is 30 years. The ultimate tenant is Baneberry Healthcare Limited, which is
the registered operator of the facilities. As part of the formation of
Baneberry, the Company acquired an 80% equity interest. The directors anticipate
this level of ownership will be temporary pending the completion of
capitalization of Baneberry to secure the additional $8,000,000 of funding for
the assets acquired.
On December 12, 1997, the Company completed a $250,000,000 mortgage bond
placement with a coupon of 7.52% and a final maturity date of 2025. The proceeds
were primarily used to repay certain outstanding borrowings totalling
$190,000,000 at the date of the offering.
F-16
<PAGE> 68
======================================================
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY DISTRIBUTION MADE PURSUANT HERETO SHALL, UNDER ANY
CIRCUMSTANCE, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE FACTS
SET FORTH IN THIS PROSPECTUS OR IN AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................. 2
Summary............................... 3
Risk Factors.......................... 12
The Company........................... 16
The Rights Offering................... 16
The Distribution...................... 22
Use of Proceeds....................... 26
Capitalization........................ 27
Dividend Policy....................... 27
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 28
Business.............................. 28
Taxation of Omega Worldwide and its
Shareholders........................ 33
Management............................ 36
Principal and Selling Shareholders.... 40
Certain Transactions.................. 40
Description of Omega Worldwide Capital
Stock............................... 41
Certain Antitakeover Provisions....... 42
Experts............................... 50
Legal Matters......................... 50
Index to Financial Statements......... F-1
</TABLE>
------------------------
UNTIL , 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK DISTRIBUTED PURSUANT HERETO,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
======================================================
======================================================
OMEGA WORLDWIDE, INC.
4,200,000 SHARES OF COMMON STOCK
2,100,000 RIGHTS TO PURCHASE
SHARES OF COMMON STOCK
------------------
PROSPECTUS
------------------
======================================================
<PAGE> 69
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses expected to be incurred in
connection with the issuance and distribution of the Omega Worldwide Common
Stock and Rights registered hereby, all of which expenses, except for the SEC
registration fee, are estimates:
<TABLE>
<CAPTION>
DESCRIPTION AMOUNT
----------- ------
<S> <C>
SEC Registration Fee........................................ $9,545
Listing Fee................................................. $ *
Transfer Agent's and Registrar's Fee........................ $ *
Distribution Agent's Fee.................................... $ *
Subscription Agent's Fee.................................... $ *
Printing and Engraving Fees................................. $ *
Legal Fees and Expenses..................................... $ *
Accounting Fees and Expenses................................ $ *
Miscellaneous............................................... $ *
------
Total..................................................... $ *
======
</TABLE>
- -------------------------
* To be furnished by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The MGCL permits a Maryland corporation to include in its Charter a
provision limiting the liability of its directors and officers to the
corporation and its stockholders for money damages except for liability
resulting from (a) actual receipt of an improper benefit or profit in money,
property or services or (b) active and deliberate dishonesty established by a
final judgment as being material to the cause of action. The Charter of the
Company contains such a provision which eliminates such liability to the maximum
extent permitted by Maryland law.
The Charter of the Company authorizes it, to the maximum extent permitted
by Maryland law, to obligate itself to indemnify and to pay or reimburse
reasonable expenses in advance of final disposition of a proceeding to (a) any
present or former director or officer or (b) any individual who, while a
director of the Company and at the request of the Company, serves or has served
another corporation, real estate investment trust, partnership, joint venture,
trust, employee benefit plan or any other enterprise as a director, officer,
partner or trustee of such corporation, real estate investment trust,
partnership, joint venture, trust, employee benefit plan or other enterprise
from and against any claim or liability to which such person may become subject
or which such person may incur by reason of his status as a present or former
director or officer of the Company. The Bylaws of the Company obligate it, to
the maximum extent permitted by Maryland law, to indemnify and to pay or
reimburse reasonable expenses in advance of final disposition of a proceeding to
(a) any present or former director or officer who is made a party to the
proceeding by reason of his service in that capacity or (b) any individual who,
while a director of the Company and at the request of the Company, serves or has
served another corporation, real estate investment trust, partnership, joint
venture, trust, employee benefit plan or any other enterprise as a director,
officer, partner or trustee of such corporation, real estate investment trust,
partnership, joint venture, trust, employee benefit plan or other enterprise and
who is made a party to the proceeding by reason of his service in that capacity.
The Charter and Bylaws also permit the Company to indemnify and advance expenses
to any person who served a predecessor of the Company in any of the capacities
described above and to any employee or agent of the Company or a predecessor of
the Company.
The MGCL requires a corporation (unless its charter provides otherwise,
which the Company's charter does not) to indemnify a director or officer who has
been successful, on the merits or otherwise, in the defense of any proceeding to
which he is made a party by reason of his service in that capacity. The MGCL
permits a corporation to indemnify its present and former directors and
officers, among others, against judgments,
II-1
<PAGE> 70
penalties, fines, settlements and reasonable expenses actually incurred by them
in connection with any proceeding to which they may be made a party by reason of
their service in those or other capacities unless it is established that (a) the
act or omission of the director or officer was material to the matter giving
rise to the proceeding and (i) was committed in bad faith or (ii) was the result
of active and deliberate dishonesty, (b) the director or officer actually
received an improper personal benefit in money, property or services or (c) in
the case of any criminal proceeding, the director or officer had reasonable
cause to believe that the act or omission was unlawful. However, under the MGCL,
a Maryland corporation may not indemnify for an adverse judgment in a suit by or
in the right of the corporation or for a judgment of liability on the basis that
personal benefit was improperly received, unless in either case a court orders
indemnification and then only for expenses. In addition, the MGCL permits a
corporation to advance reasonable expenses to a director or officer upon the
corporation's receipt of (a) a written affirmation by the director or officer of
his good faith belief that he has met the standard of conduct necessary for
indemnification by the corporation and (b) a written undertaking by or on his
behalf to repay the amount paid or reimbursed by the corporation if it shall
ultimately be determined that the standard of conduct was not met.
The Charter also specifically authorizes the Company, or a subsidiary or an
affiliate of the Company, to purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the Company, or
who, while a director, officer, employee or agent of the Company, is or was
serving at the request of the Company as a director, officer, partner, trustee,
employee or agent of another foreign or domestic corporation, partnership, joint
venture, trust, other enterprise or employee benefit plan against any liability
asserted against and incurred by such person in any such capacity or arising out
of such person's position, whether or not the Company would have the power to
indemnify against such liability under the provisions of Section 2-418 of the
MGCL.
The Charter provides that no future amendment to the Charter shall affect
any right of any person under these provisions based on any event, omission or
proceeding prior to such amendment.
Omega Worldwide has entered into indemnification agreements with each of
its officers and directors. The indemnification agreements require, among other
things, that Omega Worldwide indemnify its officers and directors to the fullest
extent permitted by law, and advance to the officers and directors all related
expenses, subject to reimbursement if it is subsequently determined that the
indemnification is not permitted. The Company also must indemnify and advance
expenses incurred by officers and directors seeking to enforce their rights
under the indemnification agreements and cover officers and directors under the
Company's directors' and officers' liability insurance. Although the
indemnification agreements offer substantially the same scope of coverage
afforded by provisions in the Charter and Bylaws, they provide greater assurance
to directors and executive officers that indemnification will be available,
because, as contracts, they cannot be modified unilaterally in the future by the
Board of Directors or by the stockholders to alter, limit or eliminate the
rights they provide.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
In connection with the formation of the Company, Omega Healthcare
Investors, Inc., a Maryland corporation ("Omega"), became the Company's sole
stockholder by acquiring 1,000 shares (100%) of its outstanding common stock for
$1,000. In connection with the further capitalization of the Company, Omega has
subscribed for 2,100,000 shares for $210,000. These issuances and sales of
common stock are claimed to be exempt from the registration provisions of the
Securities Act of 1933 pursuant to Section 4(2) of the Act.
II-2
<PAGE> 71
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<S> <C> <C>
3.1* -- Form of Amended and Restated Certificate of Incorporation
3.2* -- Form of Amended and Restated Bylaws
4.1* -- Specimen stock certificate
4.2* -- Form of Preferred Share Purchase Rights Plan
5* -- Opinion of Mayer, Brown & Platt as to the legality of the
Common Stock and Rights being registered
10.1* -- Form of Stock Option and Restricted Stock Plan
10.2* -- Form of Operating Agreement, dated as of ,
1998, between Omega and Omega Worldwide
10.3* -- Form of Services Agreement, dated as of ,
1998, between Omega and Omega Worldwide
10.4* -- Amended and Restated Advisory Agreement, dated as of July
21, 1995, between Omega Worldwide (successor by assignment
to Omega) and Principal
10.5* -- Form of Line of Credit Agreement, dated as of
, 1998, between Omega Worldwide
and
10.6* -- Form of Indemnity Agreements
21 -- List of Subsidiaries
23.1 -- Consent of Ernst & Young LLP
23.2 -- Consent of Ernst & Young LLP
23.3* -- Consent of Mayer, Brown & Platt (included as part of Exhibit
5)
99.1* -- Form of Rights Certificate
99.2* -- Form of Notice of Guaranteed Delivery
</TABLE>
- -------------------------
* To be filed by amendment.
(b) Financial Statement Schedules.
Not applicable.
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-3
<PAGE> 72
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Ann Arbor, State of
Michigan, on December 30, 1997.
OMEGA WORLDWIDE, INC.
(Registrant)
By: /s/ ESSEL W. BAILEY
------------------------------------
Essel W. Bailey, Jr.
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<C> <S> <C>
/s/ ESSEL W. BAILEY
- ------------------------------------------------ President, Chief Executive
Essel W. Bailey, Jr. Officer and Director December 30, 1997
/s/ DAVID A. STOVER
- ------------------------------------------------ Vice President and Chief
David A. Stover Financial Officer December 30, 1997
</TABLE>
II-4
<PAGE> 73
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<S> <C> <C>
3.1* -- Form of Amended and Restated Certificate of Incorporation
3.2* -- Form of Amended and Restated Bylaws
4.1* -- Specimen stock certificate
4.2* -- Form of Preferred Share Purchase Rights Plan
5* -- Opinion of as to the legality of the Common
Stock and Rights being registered
10.1* -- Form of Stock Option and Restricted Stock Plan
10.2* -- Form of Operating Agreement, dated as of ,
1998, between Omega and Omega Worldwide
10.3* -- Form of Services Agreement, dated as of ,
1998, between Omega and Omega Worldwide
10.4* -- Amended and Restated Advisory Agreement, dated as of July
21, 1995, between Omega Worldwide (successor by assignment
to Omega) and Principal
10.5* -- Form of Line of Credit Agreement, dated as of
, 1998, between Omega Worldwide
and
10.6* -- Form of Indemnity Agreements
21 -- List of Subsidiaries
23.1 -- Consent of Ernst & Young LLP
23.2 -- Consent of Ernst & Young LLP
23.3* -- Consent of Mayer, Brown & Platt (included as part of Exhibit
5)
99.1* -- Form of Rights Certificate
99.2* -- Form of Notice of Guaranteed Delivery
</TABLE>
- -------------------------
* To be filed by amendment.
<PAGE> 1
EXHIBIT 21
LIST OF SUBSIDIARIES
Omega (UK) Limited
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated December 2, 1997 (except Note 11, as to which the
date is December 12, 1997) with respect to the financial statements of Principal
Healthcare Finance Limited in the Registration Statement (Form S-1) and the
related Prospectus of Omega Worldwide, Inc. dated December 30, 1997.
/s/ Ernst & Young
Jersey, Channel Islands
December 30, 1997
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated December 18, 1997 with respect to the financial
statements of Omega Worldwide, Inc., in the Registration Statement (Form S-1)
and related Prospectus of Omega Worldwide, Inc. dated December 30, 1997.
/s/ Ernst & Young LLP
Detroit, Michigan
December 30, 1997
