<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 25, 1998
REGISTRATION NO. 333-43417
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
AMENDMENT NO. 4
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------------
OMEGA WORLDWIDE, INC.
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C> <C>
MARYLAND 6512 38-3382537
(State or Other Jurisdiction
of
Incorporation or (Primary Standard Industrial (IRS Employer
Organization) Classification Code Number) Identification No.)
SUSAN A. KOVACH
905 WEST EISENHOWER CIRCLE VICE PRESIDENT AND SECRETARY
SUITE 101 905 WEST EISENHOWER CIRCLE
ANN ARBOR, MICHIGAN 48103 SUITE 101
TELEPHONE: (734) 747-9791 ANN ARBOR, MICHIGAN 48103
(ADDRESS AND TELEPHONE NUMBER OF TELEPHONE: (734) 747-9791
REGISTRANT'S (NAME, ADDRESS AND TELEPHONE NUMBER
PRINCIPAL EXECUTIVE OFFICES) OF AGENT FOR SERVICE)
</TABLE>
-------------------------
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 and the
contribution of the assets to Registrant as described herein.
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. [X]
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. [ ]
-------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=====================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) UNIT PRICE REGISTRATION FEE(2)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $0.10 par value per
per share......................... 11,250,000 $7.50 $45,375,000 $13,386
=====================================================================================================================
</TABLE>
(1) Includes 5,200,000 being distributed to shareholders for no consideration.
(2) Previously paid.
-------------------------
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.
================================================================================
<PAGE> 2
PROSPECTUS
OMEGA WORLDWIDE, INC.
Of the 2,800,000 shares of common stock, par value $.10 per share (the
"Omega Worldwide Common Stock"), of Omega Worldwide, Inc., a Maryland
corporation (the "Company"), offered hereby, 500,000 shares are being offered by
the Company (the "Primary Offering") and 2,300,000 shares (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 in connection with the distribution by the Company of rights (the
"Rights") to subscribe for and purchase Omega Worldwide Common Stock at $7.50
per share (the "Subscription Price") and the 2,250,000 shares of Omega Worldwide
Common Stock that are issuable by the Company upon exercise of the Rights (the
"Rights Offering"). Prior to the Primary Offering, 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 $7.50 per share. To the extent
shares of Omega Worldwide Common Stock trade in excess of $8.625 per share
during the first 30 days after the Distribution Date (as defined below), the
Company will issue to Omega a specified number of shares of preferred stock. See
"The Distribution -- Background of and Reasons for Distribution."
SEE "RISK FACTORS" BEGINNING ON PAGE 14 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 5,200,000 shares of Omega Worldwide Common Stock to
its shareholders. It is expected that the Distribution will be made on April 1,
1998 (the "Distribution Date"). The Distribution will be made on the basis of
one share of Omega Worldwide Common Stock for every 3.77 common shares, $.10 par
value, of Omega (the "Omega Common Shares") held on February 1, 1998 (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 by the Company on the basis of one Right for
every 4.00 shares of Omega Worldwide Common Stock held on April 3, 1998 (the
"Rights Record Date"). Each Right entitles the holder thereof to purchase one
share of Omega Worldwide Common Stock at the price of $7.50 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 Primary Offering and Secondary Offering. Rights will be evidenced by
nontransferable Rights certificates and will expire at 5:00 p.m., Eastern
Standard Time, on April 23, 1998, or such later date as the Company may
determine in its sole discretion (the "Expiration Date"). EXCEPT AS DESCRIBED
UNDER "THE RIGHTS OFFERING -- 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 (AS HEREINAFTER DEFINED)
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 shares of
Omega Worldwide Common Stock on the Rights 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 Worldwide
Common Stock on the Rights Record Date will be entitled to the Oversubscription
Privilege.
Certain directors and officers of Omega and their affiliates (the "Rights
Investors") will agree to purchase all of the Unsubscribed Shares at the
Subscription Price and the Company has authorized an additional 1,000,000 shares
of Omega Worldwide Common Stock (the "Additional Shares") to ensure that the
Rights Investors will have the right to purchase an aggregate of 1,000,000
Unsubscribed Shares. Shareholders of the Company who do not exercise all of
their Rights will own a smaller relative equity ownership and voting interest in
the Company 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.
The Company is a newly-formed subsidiary of Omega that 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. The Company 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, the Company 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 to be received by them in the Distribution.
Omega shareholders will not be required to surrender or exchange Omega Common
Shares (as hereinafter defined) in order to receive Omega Worldwide Common
Stock. 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 has been made to report the
Omega Worldwide Common Stock on the NASDAQ National Market System ("NASDAQ")
under the symbol "OWWI". Listing will not occur nor will there be any trading in
Omega Worldwide Common Stock prior to the Distribution Date.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A
PROXY.
The date of this Prospectus is March 27, 1998.
<PAGE> 3
AVAILABLE INFORMATION
The Company 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 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, the Company 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 "the Company" herein
includes its direct and indirect subsidiaries.
OVERVIEW
The Company is a newly-formed corporation that was incorporated in Maryland
on November 13, 1997 as a wholly-owned subsidiary of Omega. Omega created the
Company to engage in the investment advisory and management services currently
being provided by Omega in order to distinguish between the lines of business
Omega conducts. The Distribution allows the current holders of Omega Common
Shares to continue to participate in the business operations being conducted by
the Company (through ownership of Omega Worldwide Common Stock) as well as the
real estate operations being conducted by Omega (through ownership of Omega
Common Shares). The sale of shares of Omega Worldwide Common Stock pursuant to
the Secondary Offering allows Omega to replenish its capital base following the
contribution of the Assets (as defined below) to the Company. The Rights
Offering and Primary Offering allow the Company to raise capital to pursue
further business opportunities. After the consummation of the Distribution and
the Offerings, Omega will continue to own 1,000,000 shares of Omega Worldwide
Common Stock (approximately 9% of the issued and outstanding shares of Omega
Worldwide Common Stock assuming no Additional Shares are issued).
THE COMPANY
The Company................... The Company 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. The Company 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"), the Company
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 it develops. Principal was formed on June
28, 1995 and was a wholly-owned subsidiary of
Omega until October 1996. 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.
At December 31, 1997, Principal owned and
leased to eight operators a total of 154
facilities (approximately 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.
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<PAGE> 5
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. The Company 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. The
Company does not intend to operate property or
businesses in the healthcare or any other
industry but may perform advisory services and
invest in less than majority positions in
healthcare operating firms, healthcare services
or otherwise.
The Company 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 the Company, Omega will
contribute to the Company prior to the
consummation of the Offerings and the
Distribution, the following significant assets
(collectively, the "Assets") pursuant to a
Contribution Agreement with the Company (the
"Contribution Agreement"):
-- 3,337,500 Class A voting ordinary shares of
Principal. The Company will also receive
warrants to purchase 10,000,000 ordinary
shares of Principal expiring June 30, 2001
at an exercise price of (pound)1.50
(approximately $2.40) per share and
554,583 ordinary shares of Principal
expiring December 31, 2000 at an exercise
price of (pound)1.00 (approximately $1.60)
per share. The Company's investment now
represents 33.375% of the outstanding
shares prior to exercising any warrants.
The exercise of all issued and outstanding
warrants, absent the issuance of additional
shares by Principal, would increase the
Company's ownership interest in Principal
to approximately 54%.
-- The Company will replace Omega as holder
with respect to (pound)15,000,000
(approximately $24,000,000) of
escalating fixed rate subordinated debt
provided by Omega to Principal and maturing
on December 31, 2000. Omega will also
transfer to the Company the benefit of a
ten-year British pound currency swap
contract under which the Company will have
the right to exchange (pound)20,000,000
(approximately $32,000,000) for $31,740,000
on October 15, 2007. Pursuant to this
contract, the risk to the Company 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."
-- Amended and Restated Advisory Agreement with
Principal (the "Management Agreement")
pursuant to which the Company 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
4
<PAGE> 6
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. The
Company 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, the Company 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."
In exchange for the contribution of the Assets,
Omega will receive 8,499,000 shares of Omega
Worldwide Common Stock and up to 5,000,000
shares of Series B Preferred Stock, par value
$1.00 per share, of the Company (the "Series B
Preferred"). Pursuant to the Contribution
Agreement, the Company will automatically issue
65,000 shares of Series B Preferred to Omega
for each $0.0625 above $8.625 per share of
Omega Worldwide Common Stock that more than
12,000 shares of Omega Worldwide Common Stock
are traded on any single date prior to May 2,
1998. The Series B Preferred will receive a
cumulative 8% per annum dividend which is
payable annually based on a liquidation value
of $10.00 per share. The Series B Preferred has
no voting rights. Each share of Series B
Preferred will convert into one share of Omega
Worldwide Common Stock immediately after Omega
distributes the Series B Preferred to its
shareholders or otherwise transfers the Series
B Preferred to any unaffiliated third party.
Prior to the consummation of the Offerings and
the Distribution, the Company will enter into
an agreement with Omega (the "Opportunity
Agreement"), pursuant to which the Company and
Omega will agree to provide each other with
rights to participate in certain transactions
and to make certain investments individually or
jointly. The Company and Omega will also enter
into a Services Agreement pursuant to which
Omega will provide management and other
employees, office space and administrative
services to the Company. See "Business -- The
Opportunity Agreement" and "Certain
Transactions."
Business Strategy............. The Company 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. The Company 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.
The Company's investment and operating
strategies reflect the experience of its
management in the establishment of Principal as
a means of extending, principally outside the
United States, real estate based healthcare
financing like that which Omega now conducts in
the United States. The Company intends to
expand its investments in real estate and
healthcare finance and to enter into agreements
similar to the Management Agreement with other
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entities engaged in activities similar to
Principal and Omega, including entities
established by the Company. The Company 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, the
Company 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., Susan A. Kovach and David
A. Stover are President and Chief Executive
Officer, Vice President, General Counsel and
Secretary, and Vice President and Chief
Financial Officer, respectively, of the
Company. Each currently serves in the same
capacity at Omega. F. Scott Kellman is Chief
Operating Officer of Omega and a Vice President
of the Company. James P. Flaherty is Chief
Operating Officer of the Company and Vice
President-International of Omega. Todd P.
Robinson is Vice President of the Company, but
serves in a non-executive capacity, as
Assistant Vice President, of Omega. See
"Management."
Preferred Share Purchase
Rights........................ The Company expects to authorize Preferred
Share Purchase Rights prior to the consummation
of the Offerings and the Distribution. If so
adopted, shares of Omega Worldwide Common Stock
sold pursuant to the Primary Offering and
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 the Company. See "Certain
Antitakeover Provisions -- Rights Agreement."
Certain Antitakeover
Provisions.................... Certain provisions of the Company's charter
(the "Charter") and 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 Law (the
"MGCL"), may make more difficult an acquisition
of control of the Company 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 the Company 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 the Company is to
achieve long-term growth. The Company intends
to use its available funds to pursue 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. The authorization of dividends will be
subject to the discretion of the Omega
Worldwide Board. See "Dividend Policy."
Interests of Executive
Officers...................... Essel W. Bailey, Jr., Susan A. Kovach and David
A. Stover are President and Chief Executive
Officer, Vice President, General Counsel and
Secretary, and Vice President and Chief
Financial
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Officer, respectively, of Omega and serve in
similar executive officer capacities for the
Company. Mr. Bailey is also a director of the
Company and Omega. F. Scott Kellman is Chief
Operating Officer of Omega and Vice President
of the Company. James P. Flaherty is Vice
President-International of Omega and Chief
Operating Officer of the Company. Todd P.
Robinson serves in a non-executive capacity, as
Assistant Vice President, of Omega, but serves
in an executive capacity as Vice President of
the Company. These officers have a significant
interest in Omega and as such will receive
shares of the Company. They will also receive
options to acquire shares of the Company and
they intend to purchase shares of the Company.
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 the
Company after the Distribution and the
Offerings.
THE PRIMARY OFFERING
Securities Offered............ 500,000 shares of Omega Worldwide Common Stock.
Omega Worldwide Common Stock
outstanding after Primary
Offering.................... 11,250,000 shares (assuming consummation of the
Secondary Offering, Rights Offering and
Distribution and that no Additional Shares are
issued).
Use of Proceeds............... The Primary Offering is intended to provide
funds to the Company for working capital and
acquisitions and investments. See "Use of
Proceeds."
THE SECONDARY OFFERING
Securities Offered............ 2,300,000 shares of Omega Worldwide Common
Stock.
Omega Worldwide Common Stock
outstanding after Secondary
Offering.................... 11,250,000 shares (assuming consummation of the
Primary Offering, Rights Offering and
Distribution and that no Additional Shares are
issued).
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 has been made to report the Omega
Worldwide Common Stock on NASDAQ under the
symbol "OWWI". Listing will not occur nor will
there be any trading in Omega Worldwide Common
Stock prior to the Distribution Date. See "Risk
Factors -- Absence of a Public Market for Omega
Worldwide Common Stock" and "The Distribution
-- Listing and Trading of Omega Worldwide
Common Stock."
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 Obligation.... Shareholders of Omega as of the Record Date who
purchase shares of Omega Worldwide Common Stock
pursuant to the Secondary
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<PAGE> 9
Offering will agree to exercise all Rights they
may receive pursuant to the Rights Offering.
THE RIGHTS OFFERING
Securities Offered............ 2,250,000 Rights, exercisable for an aggregate
of 2,250,000 shares of Omega Worldwide Common
Stock, with 1,000,000 Additional Shares
authorized for issuance to ensure that the
Rights Investors will have the right to
purchase an aggregate of 1,000,000 Unsubscribed
Shares.
Rights Record Date............ April 3, 1998.
Subscription Right............ One Right, per every 4.0 shares of Omega
Worldwide Common Stock, issued by the Company
to each holder of Omega Worldwide Common Stock
on the Rights 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 Worldwide Common Stock on the
Rights 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 Worldwide Common
Stock on the Rights 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 will agree to acquire the
Unsubscribed Shares at the Subscription Price
and will be guaranteed the right to purchase an
aggregate of 1,000,000 Unsubscribed Shares by
the issuance of Additional Shares. See "The
Rights Offering -- Unsubscribed Shares."
Expiration Date............... April 23, 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............ $7.50 per share.
Method of Exercising
Rights and Oversubscription
Privilege................... Holders of Omega Worldwide Common Stock must
properly complete the Rights Certificate
accompanying this Prospectus indicating the
number of Rights being exercised and whether
the Oversubscription Privilege is being
exercised. Prior to the Expiration Date, the
subscriber must mail or deliver the Rights
Certificate and the full Subscription Price for
the shares subscribed for pursuant to the
exercise of the Rights and the Oversubscription
Privilege to the Subscription Agent. See "The
Rights Offering -- Method of Exercising Rights"
and "The Rights Offering -- Oversubscription
Privilege."
Transferability of Rights..... The Rights are not transferable.
Subscription Agent............ First Chicago Trust Company of New York
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<PAGE> 10
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................ A shareholder of the Company generally should
not recognize any gain or loss upon the receipt
of a Right, the exercise of a Right or the
lapse of a Right. See "The Rights Offering --
Federal Income Tax Consequences of the Rights
Offering."
Risk Factors.................. Shareholders should consider certain factors
discussed under "Risk Factors," including risks
associated with the assets that the Company
will acquire and own, the Company's lack of
operating history, potential conflicts of
interest and the Company's dependence on Omega.
THE DISTRIBUTION
Distributing Company.......... Omega Healthcare Investors, Inc.
Shares to be Distributed...... Approximately 5,200,000 shares of Omega
Worldwide Common Stock, all of which are held
by Omega.
Distribution Ratio............ One share of Omega Worldwide Common Stock for
every 3.77 Omega Common Shares. No certificates
representing fractional shares of the Company
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."
Background of and Reasons
for the Distribution........ The Company 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, the Company will operate under the
Opportunity Agreement pursuant to which the
Company and Omega will agree to provide each
other with rights to participate in certain
transactions and to make certain investments
individually or jointly. In particular, the
Company 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 does not elect
to pursue. See "Business -- The Opportunity
Agreement."
The Distribution of Omega Worldwide Common
Stock will provide Omega shareholders as of the
Record Date with the ability to
9
<PAGE> 11
benefit from both the real estate operations of
Omega and the business operations of the
Company.
Federal Income Tax
Consequences................ 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 plus any cash received in lieu of
fractional shares. 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 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
-- Federal Income Tax Consequences of the
Distribution."
Distribution Agent............ First Chicago Trust Company of New York
Record Date................... February 1, 1998 (the "Record Date").
Distribution Date............. April 1, 1998 (the "Distribution Date").
Commencing on or after 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 has been made to report the Omega
Worldwide Common Stock on NASDAQ under the
symbol "OWWI". Listing will not occur nor will
there be any trading in Omega Worldwide Common
Stock prior to the Distribution Date. See "Risk
Factors -- Absence of a Public Market for Omega
Worldwide Common Stock" and "The Distribution
-- Listing and Trading of Omega Worldwide
Common Stock."
10
<PAGE> 12
BENEFITS OF THE OFFERINGS TO SELLING SHAREHOLDER
As a result of the sale of 2,300,000 shares of the Company by Omega in the
Secondary Offering, Omega will receive gross proceeds of $17,250,000 (based on
an initial public offering price of $7.50 per share). The Company will not
receive any proceeds from the sale of shares by Omega. Omega will, after the
Offerings, own 1,000,000 shares of the Company valued at $7,500,000 (based on
the initial public offering price of $7.50 per share). Omega may at any time
after the Offerings sell or distribute to its shareholders its remaining equity
interests in the Company.
11
<PAGE> 13
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 the Company, 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)
<TABLE>
<CAPTION>
PRO FORMA AS ADJUSTED
HISTORICAL ADJUSTMENTS(A) FOR PROCEEDS(B) PRO FORMA
---------- -------------- --------------- ---------
<S> <C> <C> <C> <C>
ASSETS
Cash.................................... $1,000 $ $16,125,000 $16,126,000
Investment in Principal Healthcare
Finance Limited......................
Subordinated loan.................. 23,805,000 23,805,000
Common stock....................... 5,296,612 5,296,612
Omega (UK) Limited and other assets..... 150,000 150,000
------ ----------- ----------- -----------
TOTAL ASSETS.............................. $1,000 $29,251,612 $16,125,000 $45,377,612
====== =========== =========== ===========
SHAREHOLDER'S EQUITY
Common stock............................ $ 100 $ 849,900 $ 225,000 $ 1,075,000
Paid-in Capital......................... 900 28,401,712 15,900,000 44,302,612
------ ----------- ----------- -----------
TOTAL LIABILITIES & EQUITY................ $1,000 $29,251,612 $16,125,000 $45,377,612
====== =========== =========== ===========
</TABLE>
- -------------------------
(A) Contribution by Omega of investment in Principal, recorded at Omega's
carrying value, in exchange for 8,499,000 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 in December 2000. The common
stock investment represents 33.375% of the outstanding voting stock of
Principal. These investments are stated at Omega's original cost basis in
pounds sterling as adjusted for translation to dollars. Omega has not
previously recognized any writedowns or other adjustments to these
investments. Based on circumstances at the date of the respective
transactions, no values were ascribed to the warrants issued by Principal
(See Note 7 to Principal's financial statements concerning valuation of
warrants). The currency swap arrangement was entered into in order to hedge
the currency risk associated with the Company's investment in Principal.
The carrying value of the investment in Principal is based on the rate
established in the forward exchange contract, and therefore no amount is
assigned to the swap arrangement. Foreign exchange rate contracts mitigate
the effect of currency movements because any gain or loss on the contract
offsets any losses or gains, respectively, on the investment in Principal.
(B) Proceeds of issuance of 2,250,000 shares of the company to its shareholders
pursuant to the Rights Offering at $7.50 per share (less estimated offering
and registration costs of $750,000). The Rights Investors will agree to
purchase all of the Unsubscribed Shares at the Subscription Price.
(C) The carrying value of the investment in Common Stock of Principal exceeds
the Company's proportionate share of Principal's equity by approximately
$960,000 at August 31, 1997. The Company will amortize this amount over a
period of 10 years.
12
<PAGE> 14
OMEGA WORLDWIDE, INC.
CONDENSED PRO FORMA STATEMENT OF INCOME
YEAR ENDED NOVEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
---------- ---------
<S> <C> <C>
Revenue
Advisory fees............................................. $ $ 1,764,000(A)
Interest -- Subordinated Loan at the contractual yield
(See Note 5 to Principal's financial statements)....... 2,843,000
-----------
Total Revenues......................................... 0 4,607,000
Expenses
Costs of Services Provided................................ 1,174,000(B)
General and Administrative................................ 507,000(C)
-- -----------
Total Expenses......................................... 0 1,681,000
-- -----------
0 2,926,000
Equity in loss of Principal................................. (331,000)(D)
-- -----------
Income before income taxes.................................. 0 2,595,000
Provision for federal income taxes.......................... 0 (882,000)(E)
-- -----------
Net income.................................................. $0 $ 1,713,000(F)
== ===========
Shares Outstanding.......................................... 11,250,000
Net income per share........................................ $0.15
</TABLE>
- -------------------------
(A) Fees pursuant to management agreement at .9% of Principal's average net
assets. Management believes that the assignment of the existing management
contract by Omega to the Company will not materially affect the
revenue-producing activity or cost structure for services provided to
Principal.
(B) Costs of services provided by Omega (UK) Limited, which is the primary
service provider for activities related to Principal. The reported amount
represents direct costs incurred in the delivery of the services for which
fee income has been recognized.
(C) Comprises allocated share of costs of Omega pursuant to the provisions of
the Services Agreement. Indirect costs incurred by Omega for the year ended
November 30, 1997, which are allocated based on the relationship of assets
under the Company's management to the combined total of those assets and
Omega's assets. The Company's general and administrative costs, including
the cost of state taxes, investor relations, legal and accounting and
similar items, are estimated to be approximately $650,000 to $700,000, are
not factually supportable and therefore have been omitted.
(D) Represents the Company's share (33.375%) of loss of Principal for the fiscal
year ended August 31, 1997, plus amortization of $96,000 related to the
excess of the carrying value of its investment over its proportionate share
of Principal's underlying equity. The Company's share of annual earnings
which result from Principal's acquisitions after August 31, 1997 is
estimated to approximate $30,000. This immaterial amount has been omitted
from the equity in loss of Principal. The Company will account for its
investment in Principal using the equity method of accounting, and at no
time does the Company expect its ownership will be more than 50%. Management
has not selected the Company's year end. Should November 30 be the selected
date, the equity in net earnings of Principal would be recognized on a three
month lag basis.
(E) There are no income taxes in the State of Michigan.
(F) The Company may issue shares of Series B Preferred to Omega in the event the
Company's Common Stock trades above $8.625 during the 30-day period
following the Distribution Date. Dividends related to such stock would be
recorded as a reduction in net earnings available to common shareholders and
Income Applicable to Common Stock (net of preferred stock dividends) would
be presented on the face of the income statement.
13
<PAGE> 15
RISK FACTORS
Shareholders should carefully consider and evaluate all of the information
set forth in this Prospectus, including the risk factors listed below. The
Company 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 the Company. 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. The Company
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 Principal Assets that is
presented elsewhere in this Prospectus is not necessarily indicative of future
operations of the Company.
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
14
<PAGE> 16
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.
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, governmental fiscal
policies 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.
15
<PAGE> 17
RESTRICTIONS ON OMEGA WORLDWIDE'S OPPORTUNITIES
Under the Opportunity Agreement, the Company has agreed that it will not
acquire or make investments in United States real estate, real estate mortgages,
real estate derivatives or entities that invest exclusively in or have a
substantial portion of their assets in any of the foregoing, nor will it acquire
or make any investment which, if made by a REIT, would not result in the
termination of the REIT's status as a REIT, unless it has notified Omega of the
acquisition or investment opportunity, and Omega has determined not to pursue
such acquisition or investment.
Because of the provisions of the Opportunity Agreement, the nature of the
Company's business and the opportunities it may pursue are restricted.
GROWTH THROUGH NEW OPPORTUNITIES
There is no assurance that any opportunities that Omega or the Company
identifies will be within the Company's financial, operational or management
parameters. In addition, there is no assurance that the Company 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 the Company.
POTENTIAL CONFLICTS OF INTEREST
Essel W. Bailey, Jr. is President and Chief Executive Officer of Omega and
the Company; James P. Flaherty is Vice President -- International of Omega and
Chief Operating Officer the Company; F. Scott Kellman is Chief Operating Officer
of Omega and Vice President of the Company; Susan A. Kovach is Vice President,
General Counsel and Secretary of Omega and the Company; David A. Stover is Vice
President and Chief Financial Officer of Omega and the Company; and Todd P.
Robinson is Assistant Vice President of Omega and Vice President of the Company.
Although each of them is committed to the success of the Company, 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 the Company's affairs, nor will any of them devote his or her full
time to the Company. It is anticipated that, except for Mr. Flaherty and Mr.
Robinson, who will spend a substantial majority of their time on the Company's
affairs, the officers will spend the majority of their time on Omega. The major
factors affecting the time split between the two entities will be the pace of
acquisition opportunities for the Company and the methods of financing. 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 be
expanded after the consummation of the transactions set forth herein to 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 intend to acquire
a greater percentage of shares of Omega Worldwide Common Stock and certain of
them have committed to purchase all of the Unsubscribed Shares and have the
right to acquire the Additional Shares.
There is a risk that the common membership of management and members of the
Boards of the Company 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 the Company will initially have at
least 1 director on its Board of Directors who is independent of the other
company, no assurance can be made that this structure will continue in the
future.
FUTURE CAPITAL REQUIREMENTS
The Company has not received any commitment with respect to any additional
borrowing. There is no assurance that the Company will have sufficient working
capital to finance future investments. The Company 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 the Company or to assist it in obtaining
financing.
16
<PAGE> 18
ABSENCE OF A PUBLIC MARKET FOR OMEGA WORLDWIDE COMMON STOCK
There is currently no public market for Omega Worldwide Common Stock.
Although the Company has applied 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. Listing will not occur nor will there be any trading in Omega
Worldwide Common Stock prior to the Distribution Date. 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 MGCL, the Charter and Bylaws and the Rights Agreement contain several
provisions that may make more difficult the acquisition of control of the
Company without the approval of the Omega Worldwide Board or may make more
difficult a change of control of the Company or other transaction that may
involve a premium price for the Omega Worldwide Common Stock. Subtitle 6 of
Title 3 of the MGCL (the "Business Combination Statute") restricts business
combinations between the Company 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. Certain provisions of
the Charter and the Bylaws, among other things: (i) classify the Omega Worldwide
Board into three classes of directors who serve for staggered three-year terms;
(ii) provide that a director of the Company 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 the Company 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 outstanding shares of stock of
the Company entitled to vote generally in the election of directors is required
to approve any merger or similar business combination involving the Company (the
"business combination provision"); and (vii) provide that the stockholders may
amend or repeal any of the provisions of the Charter set forth above 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 the Company on terms not approved in advance by the
Omega Worldwide Board. 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 the Company in situations where others
would be restricted from effecting a similar transaction. See "Description of
Omega Worldwide Capital Stock" and "Certain Antitakeover Provisions."
BROAD DISCRETION IN USE OF PROCEEDS
The Company currently has no specific plans for the use of the proceeds to
be obtained from the Offerings but intends to use such proceeds for general
corporate purposes consistent with the business strategy described under
"Business -- Business Strategy." See "Use of Proceeds."
17
<PAGE> 19
THE COMPANY
The Company was incorporated in Maryland in November 1997. The Company will
own the Assets contributed by Omega and will receive cash from the Rights
Offering and Primary Offering. Prior to the contribution of the Assets, the
Company 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
The Company is distributing, at no cost, to each holder of Omega Worldwide
Common Stock of record as of the close of business on the Rights Record Date,
one Right for every 4.0 shares of Omega Worldwide Common Stock held by such
holder on such Rights 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 the Company as he or she currently enjoys relative to
the other shareholders of the Company, 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 the Company as he or she currently enjoys relative to the
other shareholders of the Company. All shareholders of Omega as of the Record
Date who purchase shares of Omega Worldwide Common Stock pursuant to the
Secondary Offering will agree to exercise all Rights they may receive pursuant
to the Rights Offering.
SUBSCRIPTION PRICE
The Subscription Price for one share of Omega Worldwide Common Stock, which
may be purchased upon the exercise of one Right, is $7.50.
EXPIRATION DATE
The Rights will expire and become void at 5:00 p.m., Eastern Standard Time,
on April 23, 1998 or such later date as the Company may determine in its sole
discretion. The Rights will thereafter have no value. Notice will be given to
shareholders of record on the Rights Record Date, by mail or by publication in a
newspaper of national circulation, of a new Expiration Date in the event the
Company extends the period for the exercise of the Rights.
OVERSUBSCRIPTION PRIVILEGE
A holder of Omega Worldwide Common Stock on the Rights 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 Worldwide Common Stock on the Rights Record Date will be entitled to the
Oversubscription Privilege. Holders of Omega Worldwide Common Stock 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 (not including the Additional Shares) and certain other restrictions).
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 (not including the Additional Shares), holders of Omega
Worldwide Common Stock on the Rights Record Date shall participate in the
Oversubscription Privilege (up 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
18
<PAGE> 20
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 the Company deems
appropriate. Promptly after the Expiration Date, the Company 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. Any
amounts overpaid by subscribers will be held in a segregated account at the
Subscription Agent and will be refunded promptly after the Expiration Date
without interest.
UNSUBSCRIBED SHARES AND THIRD PARTY SALES
The Rights Investors have committed to purchase any Unsubscribed Shares and
the Company has authorized the Additional Shares to ensure that the Rights
Investors will have the right to purchase an aggregate of 1,000,000 Unsubscribed
Shares. On or promptly after April 24, 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 29, 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.
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-OWI
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 TENDERS & EXCHANGES AT 1-800-250-4215.
FRACTIONAL SHARES
No fractional shares of Omega Worldwide Common Stock will be issued and the
Company 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
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<PAGE> 21
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 Rights Record Date. The Company 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 and the Oversubscription Privilege to the Subscription Agent at the
appropriate address set forth above. 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 Rights Record Date. Payments
must be made in United States currency by personal check, cashier's check, wire
transfer, 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 April 16, 1998. Neither the Company 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
THE COMPANY. 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 the Company 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 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 and oversubscribed 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
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<PAGE> 22
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 the Company, 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. The Company reserves the absolute
right to reject any subscriptions or directions not properly submitted or the
acceptance of which, in the opinion of the Company's counsel, would be unlawful.
Any irregularities in connection with subscriptions must be cured prior to the
Expiration Date unless waived by the Company in its sole discretion. Neither the
Company 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
the Company'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. The Company'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 the Company 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.
FEDERAL INCOME TAX CONSEQUENCES OF THE RIGHTS OFFERING
The following is a summary of the material U.S. federal income tax
consequences of the Rights Offering. To the extent this summary discusses
matters of law, it is based on the opinion of Mayer, Brown & Platt. 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 consequences 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.
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<PAGE> 23
In addition, this summary may not apply, in whole or in part, to particular
categories of shareholders of the Company, such as financial institutions,
broker-dealers, life insurance companies, tax-exempt organizations, investment
companies, foreign taxpayers, individuals who acquired Rights pursuant to stock
options, restricted stock programs or in other compensatory transactions, 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 SHAREHOLDERS OF THE COMPANY 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.
The Rights Offering should be treated for U.S. federal income tax purposes
as a distribution, subsequent to the Distribution and the Secondary Offering, of
the Rights by the Company to its shareholders. As such, the U.S. federal income
tax consequences of the Rights Offering should be as follows.
Taxation of Shareholder of the Company upon Receipt of Right. A Company
shareholder will not recognize any gain or loss upon receipt of a Right.
Taxation of Shareholder of the Company upon Exercise of Right. A
shareholder of the Company generally will not recognize any gain or loss upon
the purchase of a share of Omega Worldwide Common Stock pursuant to the exercise
of a Right. The tax basis of shares of Omega Worldwide Common Stock purchased
pursuant to the exercise of Rights will be equal to the sum of (a) the
shareholder's tax basis in the Rights exercised and (b) the Subscription Price
paid for such Omega Worldwide Common Stock. If a shareholder exercises a Right,
the tax basis of such Right in the hands of the shareholder will be determined
by allocating the shareholder's existing tax basis in his or her Omega Worldwide
Common Stock with respect to which the Right was distributed ("Old Shares")
between his or her Old Shares and the Right, in proportion to their relative
fair market values on the date of distribution of the Rights. If, however, the
fair market value of the Rights distributed to the shareholder (on the date of
distribution) is less than 15% of the fair market value of his or her Old
Shares, the tax basis of each Right will be deemed to be zero unless the
shareholder affirmatively elects, by attaching an election statement to his or
her federal income tax return for the year in which he or she receives his or
her Rights, to compute the tax basis of his or her Rights in accordance with the
preceding sentence. Once made, such an election is irrevocable. The Company
expects that the fair market value of the Rights distributed to each shareholder
will be less than 15% of the fair market value of his or her Old Shares. The
holding period of the shares of Omega Worldwide Common Stock purchased pursuant
to the exercise of Rights will commence on the date of exercise.
Taxation of Shareholder of the Company upon Lapse of Right. A shareholder
of the Company will not recognize any gain or loss upon the expiration of his or
her Right since a Right will not be treated as having any tax basis if it
lapses.
Taxation of the Company on the Rights Offering. The Company will generally
not recognize any gain or loss upon the issuance of Rights, the receipt of cash
for Omega Worldwide Common Stock pursuant to the exercise of Rights or the lapse
of Rights.
Other Possible Characterizations. Although the Rights Offering should be
treated for U.S. federal income tax purposes as a distribution (and both Omega
and the Company intend to report the transaction on this basis), subsequent to
the Distribution and the Secondary Offering, of the Rights by the Company to its
shareholders, alternative characterizations of the Rights Offering are possible.
For example, Omega could be treated as receiving Rights (as well as Omega
Worldwide Common Stock) in exchange for the Assets, as distributing Rights (as
well as Omega Worldwide Common Stock) to its shareholders in the Distribution,
and as selling Rights (as well as Omega Worldwide Common Stock) to the
purchasers in the Secondary Offering. Recipients of Rights are urged to consult
their tax advisors with regard to possible alternative characterizations and the
U.S. federal income tax consequences thereof.
LISTING AND TRADING OF OMEGA WORLDWIDE COMMON STOCK
There is currently no public market for Omega Worldwide Common Stock.
Although the Company has applied 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
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<PAGE> 24
will occur after the Distribution. Listing will not occur nor will there be any
trading in Omega Worldwide Common Stock prior to the Distribution Date. 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, the Company's performance and prospects, the depth and liquidity of the
market for Omega Worldwide Common Stock, investor perception of the Company and
of the industries in which the Company operates and economic conditions in
general, the Company'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.
The Company will have approximately 3,000 stockholders of record and
approximately 30,000 beneficial shareholders, 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."
THE DISTRIBUTION
BACKGROUND OF AND REASONS FOR THE DISTRIBUTION
The Company 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. The Company 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
Opportunity Agreement, the Company and Omega will agree to provide each other
with rights to participate in certain transactions and to make certain
investments. In particular, the Company 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 Opportunity Agreement."
In addition, the Company 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 8,499,000 shares of Omega Worldwide Common Stock, of which
2,300,000 shares are being sold in the Secondary Offering and 5,200,000 shares
are being distributed by Omega to its shareholders in connection with the
Distribution. Omega will retain 1,000,000 shares of Omega Worldwide Common
Stock.
In connection with the Distribution, and to allow Omega to properly realize
the value of its net contribution to the Company, the Company has agreed to
issue up to 5,000,000 shares of Series B Preferred in connection with the
contribution of the Assets. Pursuant to the Contribution Agreement, the Company
will automatically issue 65,000 shares of Series B Preferred to Omega for each
$0.0625 above $8.625 per share of Omega Worldwide Common Stock that more than
12,000 shares of Omega Worldwide Common Stock are traded on any single date
prior to May 2, 1998. The Series B Preferred will receive a cumulative 8% per
annum dividend which is payable annually based on a liquidation value of $10.00
per share. The Series B Preferred has no voting rights. Each share of Series B
Preferred will convert into one share of Omega Worldwide
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<PAGE> 25
Common Stock immediately after Omega ever distributes the Series B Preferred to
its shareholders or otherwise transfers the Series B Preferred to any
unaffiliated third party.
MANNER OF EFFECTING THE DISTRIBUTION
It is expected that the Distribution Date will be April 1, 1998. At the
time of the Distribution, share certificates for Omega Worldwide Common Stock
will be delivered to the Distribution Agent. Commencing on or after 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 3.77
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, the
Company 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."
Inquiries relating to the Distribution should be directed to the
Distribution Agent by telephone at (201) 324-1225; Monday through Friday, 8:30
a.m. to 7:00 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 the
Company.
FEDERAL INCOME TAX CONSEQUENCES OF THE DISTRIBUTION
The following is a summary of the material U.S. federal income tax
consequences of the Distribution. To the extent this summary discusses matters
of law, it is based upon the opinion of Mayer, Brown & Platt. 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 consequences
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,
individuals who received Omega Worldwide Common Stock pursuant to stock options,
restricted stock programs or in other compensatory transactions, 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
Distribution to the extent the fair market value of the Omega Worldwide Common
Stock distributed to the Omega shareholders exceeds
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Omega's adjusted tax basis in the Omega Worldwide Common Stock, which basis will
depend on Omega's adjusted tax basis in the Assets. Furthermore, Omega will
recognize gain on the sale 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 Omega Worldwide Common Stock, which basis will
depend on Omega's adjusted tax basis in 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 plus any cash received in lieu of
fractional shares. 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. Distributions of
net capital gain designated by Omega as capital gain dividends will be taxed to
such shareholders as long-term capital gain (to the extent they do not exceed
Omega's actual net capital gain for the fiscal year) without regard to the
period for which the shareholder has held its shares of Omega. However,
corporate shareholders may be required to treat up to 20% of capital gain
dividends as ordinary income. (If an Omega shareholder receives a capital gain
dividend and holds his or her Omega Common Share for six months or less, any
loss on the sale or exchange of such shareholder's Omega Common Share will be
treated as a long-term capital loss.) 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 $1.99 per Omega Common Share) which will be the
tax basis of the share of Omega Worldwide Common Stock to the shareholder. 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 $1.42 and would have a tax-free return of capital equal
to $0.57, which would reduce such shareholder's adjusted tax basis in its Omega
Common Share from $20 to $19.43.
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 the Foreign Investment in Real Property Tax Act, any distribution made by
Omega to a non-U.S. holder, to the
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<PAGE> 27
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.
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 11,250,000 shares) will be freely
transferable, except for securities received by persons who may be deemed to be
"affiliates" of the Company under the Securities Act. Persons who may be deemed
to be affiliates of the Company after the Distribution and the Offerings
generally include individuals or entities that control, are controlled by, or
are under common control with, the Company and may include certain officers and
directors of the Company as well as principal stockholders of the Company, if
any. Persons who are affiliates of the Company 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 the Company 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.
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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 "-- 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 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 2,750,000 shares of
Omega Worldwide Common Stock pursuant to the Rights Offering and Primary
Offering (assuming no Additional Shares are issued) will be $19,875,000, after
deducting the expenses. The Company intends to use the net proceeds for general
corporate purposes, including additional investments in Principal, working
capital requirements and possible acquisitions. Pending the above uses, the
Company intends to invest the net proceeds to the Company in short-term,
investment grade, interest bearing securities. The Company will not receive any
proceeds from the Secondary Offering or the Distribution.
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<PAGE> 29
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 the Company.
<TABLE>
<CAPTION>
NOVEMBER 30, 1997
-----------------------------------------
AS
HISTORICAL ADJUSTED(A) PRO FORMA(B)
---------- ----------- ------------
<S> <C> <C> <C>
Shareholders' Equity
Preferred stock, $1.00 par value per share; 10,000,000
shares authorized.................................. 0 0 0
Common stock, $0.10 par value per share; 50,000,000
shares authorized; 1,000 issued and outstanding
(historical); 8,500,000 issued and outstanding (as
adjusted); 11,250,000 issued and outstanding (pro
forma)............................................. $ 100 $ 850,000 $ 1,125,000
Additional paid-in capital............................ 900 28,402,612 48,002,612
--------- ----------- -----------
Total shareholders' equity......................... 1,000 29,252,612 49,127,612
--------- ----------- -----------
Total capitalization............................... $ 1,000 $29,252,612 $49,127,612
========= =========== ===========
</TABLE>
- -------------------------
(a) Reflects contribution by Omega Healthcare Investors, Inc of the net carrying
amount of its investment in Principal, the issuance of 8,499,000 shares of
the Company's common stock in exchange for the Assets contributed, resulting
in a total of 8,500,000 shares issued to Omega following the contribution.
(b) Reflects net proceeds of issuance of 2,250,000 shares and 500,000 shares of
the Company to its shareholders pursuant to this Rights Offering and Primary
Offering, respectively, at $7.50 per share (less estimated offering and
registration costs of $750,000).
DIVIDEND POLICY
The primary objective of the Company 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 the Company may obtain from time to time. The
authorization of dividends will be subject to the discretion of the Omega
Worldwide Board.
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<PAGE> 30
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
As a result of the transactions contemplated hereby, the Company will
receive approximately $19,875,000 of net proceeds which will be sufficient to
fund operations and investments as the Company currently has no obligations to
fund additional investments. The Company may, in its discretion, make additional
investments in Principal. The Company's decisions with respect to whether to
invest will be based on the capital resources available to the Company at the
time. To the extent funds are not available from retained earnings to fund
operations of the Company, the Company from time to time intends to raise
additional capital from the public markets.
Pursuant to a ten-year British pound currency swap agreement, the Company
will have the right to exchange (pound)20,000,000 (approximately $32,000,000)
for $31,740,000 on October 15, 2007. The swap contract is solely to reduce the
effect on the Company of fluctuations in currency exchange rates and the Company
may enter into additional hedge transactions with respect to revenues from
operations received in pounds Sterling. Foreign exchange rate contracts mitigate
the effect of currency movements because any gain or loss on the contract
offsets the losses or gains respectively on the foreign currency asset.
Management believes that given the long-term stability of the pound (See
"Business -- Exchange Rate History"), fluctuations in exchange rates will not
materially affect results of operations or liquidity.
RESULTS OF OPERATIONS
Principal is highly leveraged and has incurred losses since its inception.
Notwithstanding these losses, revenues from operations totaled $10,370,000 for
the fiscal quarter ended November 30, 1997. The following summarizes the cash
flows for Principal for the three months ended November 30, 1997 and 1996 and
the year ended August 31, 1997 and 1996. (For additional information, see page
F-8.)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
NOVEMBER 30 YEAR ENDED AUGUST 31
------------------ ---------------------
1997 1996 1997 1996
---- ---- ---- ----
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Cash provided by operating activities.............. $ 3,624 $ 1,729 $ 2,845 $ 748
Cash used in investing activities.................. (71,459) (6,344) (120,767) (100,922)
Cash provided by financing activities.............. 65,681 6,325 123,513 100,771
-------- ------- --------- ---------
(Decrease) Increase in cash and cash equivalent.... $ (2,154) $ 1,710 $ 5,591 $ 597
======== ======= ========= =========
</TABLE>
Principal historically has been reliant on Omega as a source of temporary
financing. However, as a result of Principal's line of credit (as described more
fully on page F-18), Principal is no longer reliant on Omega as a source of
financing.
Principal's investments are concentrated in two operators -- Tamaris Plc
(approximately 35%) and Exceler Healthcare Services Limited (approximately 24%).
See Note 4 to Principal's Consolidated Financial Statements on Page F-12.
Principal has never experienced or declared a payment default from any of its
tenants.
The Company will account for its investment in Principal at its equity in
the underlying net assets of Principal and will recognize in its statement of
income its pro rata share of the net results of operations of Principal.
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<PAGE> 31
The Company 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 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 but may, in its discretion, make additional investments 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
The Company 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. The
Company 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, the Company 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. The Company 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. The Company does not intend to operate property or
businesses in the healthcare or any other industry but may perform advisory
services and invest in less than majority positions in healthcare operating
firms, healthcare services or otherwise.
A substantial portion of the firms the Company 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. The Company
will own the Assets contributed by Omega and will receive cash from the Rights
Offering and the Primary Offering. Prior to the contribution of Assets by Omega,
the Company will have had no operations. The Company will enter into the
Opportunity Agreement with Omega, pursuant to which the Company and Omega have
agreed to provide each other with rights to participate in certain transactions
and to make certain investments.
The Company has assessed its current computer software for proper
functionality with respect to dates in the Year 2000 and thereafter. The Year
2000 and related costs are not expected to have a material impact on the
Company's operations.
BUSINESS STRATEGY
The Company intends to provide investment advisory services to Principal
pursuant to the Management Agreement and to develop additional opportunities in
healthcare finance. The Company 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. The Company intends to enter
30
<PAGE> 32
into agreements similar to the Management Agreement with other entities engaged
in activities similar to Principal. The Company 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, the Company 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 primarily 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, the Company 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. The Company
does not intend to invest in countries where it would be materially and
adversely affected by governmental, economic, fiscal, monetary or other similar
factors in the region. 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 to protect its position which, depending on local law and business
custom, may include cash deposits, corporate guarantees, letters of credit,
financial performance covenants and security interests in accounts receivable
and property.
THE OPPORTUNITY AGREEMENT
The Company and Omega have entered into the Opportunity Agreement to
provide each other with rights to participate in certain transactions and make
certain investments. The Opportunity Agreement provides, subject to certain
terms, that, regardless of whether the following kinds of investments (each a
"Worldwide Opportunity") first come to the attention of the Company or Omega,
the Company will have the right to: (a) provide advisory services and/or
management services to any healthcare investors, wherever located; (b) acquire
or make debt and/or equity investments (through a joint venture or otherwise) in
any healthcare investor or in healthcare real estate-related assets outside the
United States; (c) make investments in any entity conducting healthcare
operations; and (d) make any other real estate, finance or other investments not
customarily undertaken by a qualified REIT. However, Omega will have the right,
regardless of whether the following kinds of investments (each a "REIT
Opportunity") first come to the attention of the Company or Omega, to: make any
investment within the United States (a) in real estate, real estate
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<PAGE> 33
mortgages, real estate derivatives or entities that invest exclusively in or
have a substantial portion of their assets in any of the foregoing, so long as
Omega's REIT status would not be jeopardized by the investment; and (b) that, if
made by a REIT, would not result in the termination of the REIT's status as a
REIT under Sections 856 through 860 of the Code. If the Company declines to
pursue a Worldwide Opportunity, it must offer that opportunity to Omega, and if
Omega declines to pursue a REIT Opportunity, it must offer that opportunity to
the Company. Each of the Company and Omega may participate, in its discretion,
in any REIT Opportunity or Worldwide Opportunity that the other requests be
pursued jointly. The terms upon which each of the Company and Omega may elect to
participate in such an opportunity will be negotiated in good faith on
arm's-length terms mutually acceptable to the respective boards of directors of
the Company and Omega, with the affirmative votes of the independent directors
of the respective boards of directors of the Company and Omega. Each of the
Company and Omega, in its sole discretion, will make all decisions as to whether
to pursue transactions or investments. The determination by each of the Company
and Omega as to whether to pursue an investment or transaction individually
shall be made by the affirmative votes of the independent director(s) of the
board of directors of the Company or Omega. Each of Omega and the Company will
agree, pursuant to the Opportunity Agreement, that it will appoint, within
ninety (90) days after the Distribution Date, and at all times thereafter during
the term of the Opportunity Agrement will seek to maintain, at least one (1)
independent director. A director will be considered independent if he or she is
not an associate, direct or indirect beneficial stockholder, director, officer,
employee or affiliate of the other company. In addition, Omega and the Company
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 Opportunity Agreement has a term of ten
years and automatically renews for successive five-year terms unless terminated.
EXCHANGE RATE HISTORY
As Principal's revenues are denominated in pounds sterling, the following
table sets forth the average exchange rate of dollars to pounds sterling by
calendar quarter for the five most recent years.
<TABLE>
<CAPTION>
AVERAGE EXCHANGE RATE ($/POUND STERLING)
THREE MONTHS ENDING THREE MONTHS ENDING THREE MONTHS ENDING THREE MONTHS ENDING
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
1993................. $1.4774 $1.5344 $1.5045 $1.4925
1994................. $1.4886 $1.5049 $1.5513 $1.5836
1995................. $1.5830 $1.5962 $1.5734 $1.5606
1996................. $1.5318 $1.5314 $1.5544 $1.6369
1997................. $1.6327 $1.6355 $1.6262 $1.6597
</TABLE>
THE PRINCIPAL ASSETS AS OF JANUARY 31, 1998
Principal's shareholders recently approved a recapitalization 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, the Company will own 3,337,500 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 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; instead, 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 gross real estate 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 L215,000,000 at November 30, 1997.
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<PAGE> 34
Pursuant to the existing Management Agreement, the Company (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 entitled to earn an additional
incentive fee if it achieves 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 over 80 years of age 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 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 20 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 20 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 or
affiliated with 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
(pound)25 million. Tamaris operates 86 homes containing 4,633 registered beds
in 86 communities across England,
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<PAGE> 35
Scotland and Northern Ireland. Its revenues for its most recent fiscal year
ending March 31, 1997, were (pound)19.124 million and its profits before tax
were (pound)2.652 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 (pound)40,000,000 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
(pound)5,000,000. 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 (pound)15,000,000 and
an institutional investor in the United Kingdom has provided (pound)5,000,000 of
subordinated debt due December 31, 2000. The Company 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 (pound)1.50 per share
and to the financial institutional investor warrants to purchase 3,333,333
Class A ordinary shares at (pound)1.50 per share. Omega will transfer the
warrants to purchase 10,000,000 Class B ordinary shares to the Company in
connection with the transfer of the subordinated debt. The Company 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 (pound)150,000,000 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 (pound)105,000 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
(pound)150,000,000 (the "Credit Facility") to permit the accumulation of
investments with the objective of repaying sums borrowed under the line
pursuant to subsequent securitization transactions. The Credit 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 Credit 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 existing Management Agreement, Omega provides 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 eight 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 the Company prior to the consummation of the Offerings and the
Distribution. In consideration for the services to be provided under the
Management Agreement,
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<PAGE> 36
Principal currently pays 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) (pound)105,000 annually to monitor and administer the
properties that are subject to the securitization.
PROPERTY
The Company maintains its corporate office in Ann Arbor, Michigan, which it
occupies jointly with Omega pursuant to the Services Agreement. The Services
Agreement extends for 2 years and the Company reimburses Omega quarterly for a
portion of Omega's overhead expenses based on a formula determined by dividing
the value of the assets managed by the Company by the sum of the value of the
assets of Omega and assets managed by the Company measured at the end of each
fiscal quarter. The space consists of approximately 5,823 square feet of office
space. Omega (UK) occupies 3,000 square feet at 145 Canon Street, London,
England. The Company believes that its facilities are adequate to meet its
expected requirements for the coming year.
EMPLOYEES
By the Distribution Date, the Company will have 8 employees in the United
Kingdom who are all former employees of Omega (UK). The Company has executed a
Services Agreement with Omega pursuant to which Omega will provide management
and other employees and administrative services to the Company on a shared cost
basis.
LEGAL PROCEEDINGS
There are currently no legal proceedings involving the Assets or the
Company.
TAXATION OF THE COMPANY AND ITS SHAREHOLDERS
The following is a summary of the material U.S. federal income tax
consequences of owning Omega Worldwide Common Stock. To the extent this summary
discusses matters of law, it is based upon the opinion of Mayer, Brown & Platt.
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 consequences relating to owning Omega Worldwide Common Stock. This
summary does not address the tax consequences of owning Omega Worldwide Common
Stock 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 Company shareholders,
such as financial institutions, broker-dealers, life insurance companies,
tax-exempt organizations, investment companies, individuals who receive Omega
Worldwide Common Stock pursuant to stock options, restricted stock programs or
in other compensatory transactions, 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 COMPANY SHAREHOLDERS ARE
URGED TO CONSULT THEIR TAX ADVISORS TO DETERMINE THE SPECIFIC TAX CONSEQUENCES
OF OWNING OMEGA WORLDWIDE COMMON STOCK, INCLUDING ANY STATE, LOCAL AND NON-U.S.
TAX CONSEQUENCES.
TAXATION OF THE COMPANY
The Company 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 the Company, shareholders will recognize ordinary income to the
extent of current and accumulated earnings and profits of the Company 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
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<PAGE> 37
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.
UNITED STATES TAX CONSEQUENCES FOR NON-U.S. HOLDERS OF OMEGA WORLDWIDE COMMON
STOCK
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 laws 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.
U.S. Income and Estate Tax Consequences. Dividends paid to a beneficial
owner of Omega Worldwide Common Stock that is not a U.S. person (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 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 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
36
<PAGE> 38
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 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.
37
<PAGE> 39
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS OF OMEGA WORLDWIDE
As of November 13, 1997, Essel W. Bailey, Jr. was the sole director of the
Company 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 a Vice President; James P. Flaherty has served as Vice President --
International since November 13, 1997 and Chief Operating Officer since March
1998; Susan A. Kovach has served as Vice President, General Counsel and
Secretary since December 1, 1997; and Todd P. Robinson has served as Vice
President since March 1998. The following table sets forth certain information
concerning these employees as well as those persons who have agreed to serve as
directors of the Company commencing upon effectiveness of the Registration
Statement of which this Prospectus is a part and prior to the consummation of
the Offerings and the Distribution.
<TABLE>
<CAPTION>
TERM
NAME EXPIRES AGE POSITION
---- ------- --- --------
<S> <C> <C> <C>
Essel W. Bailey, Jr....................... 1999 53 Chairman of the Board of Directors,
President and Chief Executive Officer
James E. Eden............................. 2000 60 Director
James P. Flaherty......................... 50 Chief Operating Officer
Thomas F. Franke.......................... 2001 68 Director
F. Scott Kellman.......................... 41 Vice President
Harold J. Kloosterman..................... 1999 55 Director
Bernard J. Korman......................... 2000 66 Director
Susan A. Kovach........................... 38 Vice President, General Counsel and
Secretary
Edward Lowenthal.......................... 2001 53 Director
Robert L. Parker.......................... 1999 64 Director
Todd P. Robinson.......................... 32 Vice President
David A. Stover........................... 52 Vice President and Chief Financial Officer
</TABLE>
After the consummation of the Offerings and the Distribution, the Company
will add 2 independent directors and designate the expiration date of each
director's term.
Mr. Bailey has been President and Chief Executive Officer of Omega, as well
as a Director, since its formation in 1992 and Chairman of the Board since July
1995. It is anticipated that Mr. Bailey will spend a majority of his time on the
affairs of Omega. 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 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 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 & Associates, Inc., which
provides consulting services to the senior living and long-term care industries.
He is also President and principal owner of Senior Living Properties, LLC, and
serves as Chairman and Chief Executive Officer of Oakwood Living Centers, Inc.,
which owns and operates 7 nursing homes in Massachusetts and Virginia. 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 of Omega and Managing Director of Omega (UK) Limited in
January 1997. Mr. Flaherty was appointed Chief Operating Officer of the Company
in March 1998. Mr. Flaherty expects to spend the substantial majority of his
time on the Company's business matters. 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
38
<PAGE> 40
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.
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 and Chief
Operating Officer of Omega in March 1998. It is anticipated that Mr. Kellman
will spend a majority of his time on the affairs of Omega. 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, and from
January 1993 through August of 1993 he was an 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. 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, General Counsel
and Secretary. Ms. Kovach expects to spend a majority of her time on work
relating to Omega. Prior to that she was a 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. Robinson, Assistant Vice President and Director of Acquisitions for
Omega, is a Certified Public Accountant who joined Omega in June 1995 after five
years with the real estate group at Interstate/Johnson Lane, where he was
responsible for the healthcare portfolio. Prior to joining Interstate, Mr.
Robinson was a tax consultant with Arthur Andersen & Company, LLP. Mr. Robinson
expects to spend the majority of his time on work relating to the Company.
39
<PAGE> 41
Mr. Stover has been Vice President and Chief Financial Officer of Omega
since September 1994. Mr. Stover anticipates spending most of his time on
Omega's business affairs. 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.
COMMITTEES OF THE BOARD OF DIRECTORS
The Omega Worldwide Board has standing Audit, Compensation and Nominating
Committees. The Audit Committee consists of Messrs. Kloosterman and Korman and
an additional member to be designated, the Compensation Committee consists of
Messrs. Lowenthal and Franke and an additional member to be designated and the
Nominating Committee consists of Messrs. Parker, Eden and Bailey. 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 the Company 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."
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Executive officers and directors of the Company 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
The Company was recently formed. None of the Company's executive officers
has received compensation from or on behalf of the Company since its formation.
None of the executive officers other than James P. Flaherty will be direct
employees of the Company. The executive officers will provide services for the
Company pursuant to a Services Agreement that will be executed between the
Company and Omega. The Services Agreement extends for 2 years and the Company
reimburses Omega quarterly for a portion of Omega's overhead expenses based on a
formula determined by dividing the value of the assets managed by the Company by
the sum of the value of the assets of Omega and assets managed by the Company
measured at the end of each fiscal quarter.
The Company has not granted any options to the Company's named executive
officers and the Stock Plan does not allow for the grant of SARs.
40
<PAGE> 42
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 consummation of 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.
Under the Stock Plan, in the event of a Change of Control (as defined
therein), all shares of the Company's Restricted Stock shall immediately vest
(but not prior to six months after the date of grant) and all outstanding Stock
Options shall be immediately exercisable in full (but not prior to one year
after the date of grant with respect to incentive stock options and not prior to
six months after the date of grant with respect to nonqualified options).
LIMITATION OF LIABILITY AND 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 contains
such a provision which eliminates such liability to the maximum extent permitted
by the MGCL.
The Charter authorizes the Company, 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
41
<PAGE> 43
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 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 him 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, real estate
investment trust, 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 Company has entered into indemnification agreements with each of it
officers and directors. The indemnification agreements require, among other
things, that the Company 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.
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<PAGE> 44
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 the Company, all such
executive officers and directors of the Company 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
SHARES AFTER
DISTRIBUTION PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER AND OFFERINGS(1) SHARES
------------------------------------ ---------------- ----------
<S> <C> <C>
Selling Shareholder
Omega Healthcare Investors, Inc. ................... 1,000,000 8.9%
========= =====
Executive Officers
Essel W. Bailey, Jr. ............................... 681,773 6.1%
James P. Flaherty................................... 33,946 *
F. Scott Kellman.................................... 20,503 *
Susan A. Kovach..................................... 4,068 *
Todd P. Robinson.................................... 69,701 *
David A. Stover..................................... 40,369 *
--------- -----
850,360 7.6%
Directors
James E. Eden....................................... 36,755 *
Thomas F. Franke.................................... 271,416 2.4%
Harold Kloosterman.................................. 74,910 *
Bernard J. Korman................................... 253,422 2.3%
Edward Lowenthal.................................... 35,640 *
Robert L. Parker.................................... 91,978 *
--------- -----
Directors and executive officers as a group (11)
persons.......................................... 1,616,481 14.4%
========= =====
</TABLE>
- -------------------------
(1) Assumes full exercise of the Rights by the executive officers and directors
and that all shares offered in the Secondary Offering are sold by, and that
no Rights are exercised by, Omega Healthcare Investors, Inc. Also assumes no
shares are acquired by the officers and directors in the Primary Offering or
Secondary Offering and assumes an aggregate of 1,000,000 Unsubscribed Shares
were purchased by the officers and directors who are Rights Investors.
* Less than 1%.
The business address of all the above persons is 905 W. Eisenhower Circle,
Suite 101, Ann Arbor, Michigan 48103.
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CERTAIN TRANSACTIONS
In connection with the formation and capitalization of the Company, Omega
will contribute the Assets in exchange for 8,499,000 of the outstanding shares
of Omega Worldwide Common Stock and the right to receive up to 5,000,000 shares
of Series B Preferred.
Pursuant to the Management Agreement, Principal pays Omega an annual fee
equal to 0.9% of Principal's assets (as defined in the Management Agreement)
and, if earned, an additional incentive fee. Upon transfer of the Management
Agreement from Omega to the Company, Principal will pay these fees to the
Company.
The Opportunity Agreement sets forth the basis on which the Company and
Omega will refer opportunities to one another. See "Business -- The Opportunity
Agreement."
Omega and the Company will enter into a Services Agreement in connection
with the Distribution pursuant to which Omega will provide management and other
employees, office space and administrative services to the Company. The Company
will reimburse Omega quarterly for a portion of Omega's overhead expenses such
as rent, compensation and utilities, based on a formula determined by dividing
the value of the assets managed by the Company at the end of each fiscal quarter
by the sum of the value of the assets of Omega and assets managed by the Company
at the end of each fiscal quarter. Had the Services Agreement been in effect on
November 30, 1997, the Company would have reimbursed Omega $507,000.
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 and the Company has authorized the issuance of Additional
Shares to ensure these Rights Investors will have the right to purchase an
aggregate of 1,000,000 Unsubscribed Shares.
DESCRIPTION OF OMEGA WORLDWIDE STOCK
The following summary of certain provisions of the Charter and Bylaws does
not purport to be complete and is subject to and qualified by reference to the
Charter and Bylaws, copies of which are exhibits to the Registration Statement
of which this Prospectus is a part. See "Available Information."
AUTHORIZED STOCK
The Company's authorized 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 Primary Offering, the
Secondary Offering, the Distribution and the Rights Offering, approximately
11,250,000 shares of Omega Worldwide Common Stock will be outstanding (assuming
no Additional Shares are issued). All of the shares of Omega Worldwide Common
Stock that will be outstanding immediately following the Primary Offering, the
Secondary Offering, the Distribution and the Rights Offering will be validly
issued, fully paid and nonassessable. Certain provisions of the MGCL and of
Omega Worldwide's Charter and Bylaws may make more difficult an acquisition of
control of the Company in a transaction not approved by the Board. See "Certain
Antitakeover Provisions."
The Charter provides that, to the extent permitted by Maryland law from
time to time, the Omega Worldwide Board, without any action by the stockholders
of the Company, may amend the Charter from time to time to increase or decrease
the aggregate number of shares of stock or the number of shares of stock of any
class or series that the Company has authority to issue. House Bill 360, which
has been introduced in the House of Delegates of the General Assembly of
Maryland and, if enacted, will become effective on October 1, 1998, will permit
the board of directors of a Maryland corporation, such as the Company, to
include in its charter a provision permitting the board of directors, without
stockholder action, to amend the corporation's charter to increase or decrease
the aggregate number of shares of stock or the number of shares of stock of any
class that the corporation has authority to issue.
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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 provided 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 authorized 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 the right to (i)
designate that class or series to distinguish it from all other classes and
series of stock; (ii) specify the number of shares to be included in the class
or series; (iii) set or change the preferences, conversion or other rights,
voting powers, restrictions, limitations as to dividends or other distributions
qualifications and terms and conditions of redemption; and (iv) cause the
Company to file articles supplementary with the State Department of Assessments
and Taxation of Maryland.
The Company believes that the ability of the Omega Worldwide Board to issue
one or more classes or 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 the Company's stockholders,
unless such action is required by applicable law or the rules of any stock
exchange or automated quotation system on which the Company's securities may be
listed or traded. If the approval of the Company'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 class or series of Preferred Stock having terms that
could delay, defer or prevent a change in control of the Company or other
transaction that some, or a majority, of the Company'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 Omega Worldwide Board will make any determination to issue such
shares based on its judgment as to the best interests of the Company.
The Company has authorized the Series B Preferred (as described below in
"-- Series B Preferred") and expects to reserve Junior Preferred Shares (as
described in "Certain Antitakeover Provisions -- Rights Plan") for issuance upon
exercise of the Preferred Share Purchase Rights.
SERIES B PREFERRED
Ranking. The Series B Preferred will rank on parity with all other series
of the Company's preferred stock (whether with or without par value) as to the
payment of dividends and the distribution of assets, unless the terms of any
such series provide otherwise.
Dividends. Subject to the prior and superior rights of the holders of any
shares of any class or series of preferred shares of the Company ranking prior
and superior to the Series B Preferred with respect to dividends, the holders of
Series B Preferred will be entitled to receive, when, as and if authorized by
the Board of Directors out of funds legally available for the purpose, annual
dividends payable in cash to holders of record on the last business day of
February in each year (each such date being referred to herein as a "Dividend
Payment Date"), commencing on the first Dividend Payment Date after the first
issuance of a share of Series B Preferred in an amount per share (rounded to the
nearest cent) equal to 8.0% per annum of the Series B Liquidation Value (as
defined below). The dividend will be calculated on the basis of a year of 360
days consisting of twelve 30-day months. Such dividends will accrue whether or
not they have been
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declared and whether or not there are profits, surplus or other funds of the
Company legally available for the payment of the dividends.
The Company will authorize a dividend or distribution on the Series B
Preferred at the time it authorizes a dividend or distribution on the Omega
Worldwide Common Stock (other than a dividend payable in Omega Worldwide Common
Stock). No dividend or distribution (other than a dividend or distribution
payable in Omega Worldwide Common Stock) will be paid or payable to the holders
of Omega Worldwide Common Stock unless, prior thereto, all accrued but unpaid
dividends to the date of that dividend or distribution have been paid to the
holders of Series B Preferred.
Dividends will begin to accrue and be cumulative on outstanding Series B
Preferred shares from the Dividend Payment Date next preceding the date of
issuance of such Series B Preferred shares, unless the date of issuance of such
shares is prior to the record date for the first Dividend Payment Date, in which
case dividends on such shares will begin to accrue and be cumulative from the
date of issuance of such shares, or unless the date of issuance is a Dividend
Payment Date or is a date after the record date for the determination of holders
of Series B Preferred entitled to receive an annual dividend and before such
Dividend Payment Date, in either of which events such dividends will begin to
accrue and be cumulative from such Dividend Payment Date. Accrued but unpaid
dividends will not bear interest. Dividends paid on the Series B Preferred in an
amount less than the total amount of such dividends at the time accrued and
payable on such shares will be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding.
Whenever any annual dividends or other dividends or distributions payable
on the Series B Preferred are in arrears, then, thereafter and until all accrued
and unpaid dividends and distributions, whether or not declared, on shares of
Series B Preferred outstanding have been paid in full, the Company may not:
(i) authorize or pay dividends on, make any other distributions on, or
redeem or purchase or otherwise acquire for consideration any shares
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series B Preferred, other than dividends paid or payable
in such junior shares;
(ii) authorize or pay dividends on or make any other distributions on
any shares ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series B Preferred, except dividends
paid ratably on the Series B Preferred and all such parity shares on which
dividends are payable or in arrears in proportion to the total amounts to
which the holders of all such shares are then entitled; or
(iii) redeem or purchase or otherwise acquire for consideration shares
ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series B Preferred, provided that the
Company may at any time redeem, purchase or otherwise acquire any such
parity shares in exchange for shares of the Company ranking junior (either
as to dividends or upon dissolution, liquidation or winding up) to the
Series B Preferred.
Voting Rights. The holders of Series B Preferred shares will have no voting
rights except as indicated below.
The Charter may not be amended in any manner which would materially and
adversely alter or change the powers, preferences or special rights of the
Series B Preferred without the affirmative vote of the holders of a majority or
more of the outstanding Series B Preferred, voting separately as a class.
Redemption. The shares of Series B Preferred are not redeemable by the
Company. The Company, however, is not limited in its ability to purchase or
otherwise deal in the Series B Preferred shares to the extent permitted by law.
Liquidation Preference. Upon any voluntary liquidation, dissolution or
winding up of the Company, no distribution will be made to the holders of shares
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series B Preferred unless, prior thereto, the holders of
Series B Preferred have received an amount in cash equal to the aggregate Series
B Liquidation Value of all shares held by such holders, plus an amount equal to
accrued and unpaid dividends and distributions thereon, whether or not declared,
to the date of such payment (the "Accrued Dividend Amount"). Following the
payment of the full
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<PAGE> 48
amount of the Series B Liquidation Value and the Accrued Dividend Amount, no
additional distributions will be made to the holders of Series B Preferred.
"Series B Liquidation Value" means $10.00 per share.
In the event that there are not sufficient assets available to permit
payment in full of the Series B Liquidation Value and the Accrued Dividend
Amount and the liquidation preferences of all other series of preferred shares,
if any, which rank on a parity with the Series B Preferred, then such remaining
assets will be distributed ratably to the holders of the Series B Preferred and
such parity shares in proportion to their respective liquidation preferences.
In determining whether a distribution (other than upon voluntary or
involuntary liquidation) by dividend, redemption or other acquisition of shares
of stock of the Company or otherwise, is permitted under the MGCL, amounts that
would be needed, if the Company were to be dissolved at the time of the
distribution, to satisfy the preferential rights upon dissolution of holders of
shares of Series B Preferred will not be added to the Company's total
liabilities.
Conversion. Each share of Series B Preferred sold, transferred, distributed
or otherwise disposed of by Omega, the initial holder of the Series B Preferred,
to any unaffiliated third party will automatically convert into one share of
Omega Worldwide Common Stock.
CERTAIN ANTITAKEOVER PROVISIONS
The MGCL, the Charter and Bylaws and the Rights Agreement contain certain
provisions that may have the effect of delaying, deferring or preventing a
change of control of the Company or other transaction that may involve a premium
price for the Omega Worldwide Common Stock. The following summary of these
provisions does not purport to be complete and is subject to and qualified by
reference to the MGCL, the Charter and Bylaws and the Rights Agreement.
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. The Company 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 the Company 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 SUPERMAJORITY 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.
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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 (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 Company.
The term "Substantial Part" means more than 10% of the book value of the
total assets of the Company or a Related Person, as the case may be, 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 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 to which it is entitled 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 the
Company 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
ten 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 votes entitled to be cast 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 the Company must be effected at a duly called annual or special
meeting of such holders and may not be effected by any
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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 the Company for any purpose or purposes may be called only by
the Chairman, President, the Omega Worldwide Board or holders of 50% of the
outstanding shares entitled to vote on the business proposed to be transacted at
the meeting 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 a
stockholder proposal until the next annual meeting unless a special meeting is
called by the Chairman, President, the Omega Worldwide Board or holders of 50%
of the outstanding shares entitled to vote on the business proposed to be
transacted at the meeting.
ADVANCE NOTICE OF DIRECTOR NOMINATIONS AND NEW BUSINESS
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 the Company (the "Stockholder Notice Procedure").
The Stockholder Notice Procedure provides that (a) with respect to an
annual meeting of stockholders, nominations of persons for election to the Board
of Directors and the proposal of business to be considered by stockholders may
be made only (i) pursuant to the Company's notice of the meeting, (ii) by or at
the direction of the Board of Directors or (iii) by a stockholder who is
entitled to vote at the meeting and has complied with the advance notice
procedures set forth in the Bylaws and (b) with respect to special meetings of
stockholders, only the business specified in the Company's notice of meeting may
be brought before the meeting of stockholders and nominations of persons for
election to the Board of Directors may be made only (i) pursuant to the
Company's notice of the meeting, (ii) by or at the direction of the Board of
Directors or (iii) provided that the Board of Directors has determined that
directors shall be elected at such meeting, by a stockholder who is entitled to
vote at the meeting and has complied with the advance notice procedures set
forth in the Bylaws.
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.
AMENDMENT
The Bylaws provide that the Omega Worldwide Board has the exclusive power
to adopt, alter or repeal any provision of the Bylaws and to make new bylaws.
The Charter provides that the provisions of the Charter relating to business
combinations, the number, election term and removal of the Company's directors,
the applicability of elective statutes and the applicability of the Rights
Agreement to Omega may be amended only by the affirmative vote of the holders of
at least 80% of the outstanding shares of voting stock of the Company, voting
together as a single class. In all cases, the MGCL requires that the Omega
Worldwide Board first determine that the proposed amendment to the Charter is
advisable.
RIGHTS AGREEMENT
The Omega Worldwide Board currently expects to authorize 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
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<PAGE> 51
Purchase Right will entitle the registered holder to purchase from the Company
one-hundredth of a share of a new series of junior preferred stock, par value
$.01 per share (the "Junior Preferred Shares"), of the Company at a price of
$40.00 (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 the Company 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 represented 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 represent 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 the Company 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 the Company 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).
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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") so long as there are at
least two members of the Omega Worldwide Board who are Continuing Directors and
a majority of the Continuing Directors approve such redemption. 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. Continuing Director is defined
as a member of the Omega Worldwide Board who is not an Acquiring Person or an
Affiliate or Associate of an Acquiring Person or a representative or nominee of
an Acquiring Person or of any such Affiliate or Associate and who is not an
officer, employee or agent of the Company.
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 and there are at least two members of the Omega
Worldwide Board who are Continuing Directors and a majority of the Continuing
Directors approve such amendment. In addition, certain other actions may be
taken only with the approval of the Continuing Directors.
Until a Preferred Share Purchase Right is exercised, the holder thereof, as
such, will have no rights as a stockholder of the Company 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 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 $1.00 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 $1.00 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.
51
<PAGE> 53
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 the Company 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 the Company 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, 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 Omega 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
52
<PAGE> 54
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 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 Company and of increasing the difficulty of
consummating any such offer and of delaying, deferring or preventing a change in
control of the Company or other transaction that may involve a premium price for
Omega Worldwide Common Stock or otherwise be in the best interests of the
Company's stockholders, by proxy contest, tender offer, openmarket purchases or
otherwise.
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 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.
The financial statements of Tamaris Plc as of March 31, 1997 and for the
two years in the period ended March 31, 1997 appearing in this Prospectus and
Registration Statement have been audited by Grant Thornton, independent
accountants, as set forth in their report thereon appearing elsewhere herein,
and are included in reliance upon such report given upon the authority of such
firm as experts in accounting and auditing.
LEGAL MATTERS
The legality of the issuance of the shares of Omega Worldwide Common Stock
to be sold pursuant to the Offerings will be passed upon for the Company by
Mayer, Brown & Platt.
53
<PAGE> 55
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
and November 30, 1997 (unaudited)...................... F-5
Consolidated Statements of Operations for the years ended
August 31, 1997 and 1996 and three-month periods ended
November 30, 1997 and 1996 (unaudited)................. F-6
Consolidated Statements of Shareholders' Equity for the
years ended August 31, 1997 and 1996 and period of
three months ended November 30, 1997 (unaudited)....... F-7
Consolidated Statements of Cash Flows for the years ended
August 31, 1997 and 1996 and period of three months
ended November 30, 1997 and 1996 (unaudited)........... F-8
Notes to Consolidated Financial Statements................ F-9
Financial Statements of Tenants of Principal Healthcare
Finance Limited:
Tamaris Plc:
Report of Auditors........................................ F-19
Consolidated Profit and Loss Account for the years ended
March 31, 1997 and 1996 and Period of Six months ended
September 30, 1997 and 1996 (unaudited)................ F-20
Consolidated Balance Sheets as of March 31, 1997 and 1996
and September 30, 1997 (unaudited)..................... F-22
Company Balance Sheets as of March 31, 1997 and 1996...... F-23
Consolidated Cash Flow Statement for the years ended March
31, 1997 and 1996...................................... F-24
Notes to Financial Statements............................. F-25
</TABLE>
F-1
<PAGE> 56
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> 57
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, none issued
Common stock $.10 par value:
Authorized 50,000,000 shares
Issued and outstanding 1,000 shares.................... $ 100
Additional paid-in capital................................ 900
------
Total shareholders' equity.................................. $1,000
======
</TABLE>
1. ORGANIZATION
Omega Worldwide, Inc. (the "Company") was incorporated on November 13, 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. Subsequently, the Subscription agreement was
rescinded by mutual agreement, and the Company's balance sheet at November 30,
1997 has been adjusted to reflect this event. Prior to November 30, 1997 the
Company had no operations.
2. RELATED PARTY TRANSACTIONS
The Company intends to enter into an Opportunity Agreement and Services
Agreement with Omega prior to the effective date of the Registration Statement
filed with the Securities and Exchange Commission. Under the terms of the
Opportunity Agreement, the Company and Omega will agree to provide each other
with rights to participate in certain transactions and to make certain
investments in parallel or jointly. Pursuant to the Services Agreement, Omega
will provide the Company with management and other employees, administrative
services and office space. The Company will reimburse Omega quarterly for a
portion of Omega's overhead expenses based on a percentage determined by
dividing the carrying value of the assets managed by the Company at the end of a
fiscal quarter by the sum of the carrying value of the assets of Omega and
assets managed by the Company at the end of such fiscal quarter.
F-3
<PAGE> 58
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
Note 10 as to which the date is January 15, 1998
Jersey, Channel Islands
F-4
<PAGE> 59
PRINCIPAL HEALTHCARE FINANCE LIMITED
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AUGUST 31
NOVEMBER 30 ------------------------
1997 1997 1996
----------- ---- ----
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
<S> <C> <C> <C>
ASSETS
Investments in real estate
Real estate properties................................... $357,834 $274,982 $ 92,795
Accumulated depreciation................................. 6,269 4,294 1,357
-------- -------- --------
351,565 270,688 91,438
Mortgage notes receivable.................................. -- 9,851
Other investments.......................................... 7,137 5,474
-------- -------- --------
358,702 276,162 101,289
Cash and short-term investments............................ 5,184 6,188 597
Accounts receivable........................................ 4,430 3,520 899
Assets held for sale....................................... 3,150 3,041
Cash on deposit as collateral -- restricted................ 17,898 18,056
Cost in excess of tangible assets acquired, net............ 13,802 14,190
Other assets............................................... 5,843 652 762
-------- -------- --------
Total assets............................................... $409,009 $321,809 $103,547
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable and other liabilities................... $ 9,270 $ 5,456 $ 1,371
Loans from Omega Healthcare Investors, Inc............... 29,898 83,745 30,945
Deferred tax liability................................... 14,688 14,025 168
Long-term borrowings..................................... 342,853 205,581 70,367
-------- -------- --------
Total liabilities.......................................... 396,709 308,807 102,851
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 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 96
Additional paid-in capital............................... 14,472 14,472 1,489
Retained earnings deficit................................ (2,820) (1,697) (826)
Foreign currency translation adjustments................. 487 66 9
-------- -------- --------
Total shareholders' equity................................. 12,300 13,002 696
-------- -------- --------
Total liabilities and shareholders' equity................. $409,009 $321,809 $103,547
======== ======== ========
</TABLE>
See accompanying notes.
F-5
<PAGE> 60
PRINCIPAL HEALTHCARE FINANCE LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
NOVEMBER 30 YEAR ENDED AUGUST 31
------------------- ---------------------
1997 1996 1997 1996
---- ---- ---- ----
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenue:
Rental income....................................... $ 9,702 $3,246 $16,722 $8,248
Mortgage interest income............................ -- 104 103 86
Nursing home revenues............................... 2,550
Other investment income............................. 114 14 187 164
------- ------ ------- ------
12,366 3,364 17,012 8,498
Expenses:
Nursing home expenses............................... 1,894
Depreciation and amortization....................... 1,721 617 2,959 1,357
Interest............................................ 6,649 2,552 12,403 7,421
General and administrative.......................... 984 281 1,652 378
------- ------ ------- ------
11,248 3,450 17,014 9,156
------- ------ ------- ------
Net income (loss) before income taxes and
extraordinary charge from prepayment of debt........ 1,118 (86) (2) (658)
Provision for income taxes:
Current............................................. 211 48 202
Deferred............................................ 469 80 509 168
------- ------ ------- ------
680 128 711 168
------- ------ ------- ------
Net income (loss) before extraordinary charge for
prepayment of debt.................................. 438 (214) (713) (826)
Extraordinary charge from prepayment of debt, less
deferred income taxes of $421....................... (1,561) -- -- --
------- ------ ------- ------
Net loss.............................................. $(1,123) $ (214) $ (713) $ (826)
======= ====== ======= ======
</TABLE>
See accompanying notes.
F-6
<PAGE> 61
PRINCIPAL HEALTHCARE FINANCE LIMITED
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED AUGUST 31, 1997 AND 1996 AND THREE-MONTHS
ENDED NOVEMBER 30, 1997 (UNAUDITED)
<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 for year............. (713)
----- --- ----- ---- ------- ------- ----
Balance at August 31, 1997...... 4,000 $65 6,000 $ 96 $14,472 $(1,697) $ 66
Net loss (unaudited)............ (1,123)
Foreign currency translation
adjustment (unaudited)........ 421
----- --- ----- ---- ------- ------- ----
Balance at November 30, 1997
(unaudited)................... 4,000 $65 6,000 $ 96 $14,472 $(2,820) $487
===== === ===== ==== ======= ======= ====
</TABLE>
See accompanying notes.
F-7
<PAGE> 62
PRINCIPAL HEALTHCARE FINANCE LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
NOVEMBER 30 YEAR ENDED AUGUST 31
---------------------- ---------------------
1997 1996 1997 1996
---- ---- ---- ----
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Net income (loss) before extraordinary
charge from early payment of debt (which
did not involve a cash outlay)............ $ 438 $ (214) $ (713) $ (826)
Adjustments to reconcile net income (loss)
to cash provided by operating activities
Depreciation and amortization............. 1,757 617 2,959 1,357
Deferred tax liability.................... 469 80 509 168
Change in operating assets and liabilities
Accounts receivable.................... (1,552) (103) (2,572) (888)
Accounts payable and accruals.......... 2,292 1,253 2,542 930
Foreign currency translation gain........... 220 96 120 7
-------- ------- --------- ---------
Cash provided by operating activities....... 3,624 1,729 2,845 748
INVESTING ACTIVITIES
Acquisition of real estate.................. (69,828) (6,344) (60,716) (91,071)
Quality Care Homes Plc acquisition.......... (54,728)
Other investments -- Net.................... (1,409) (6,566)
Increase in restricted cash on deposit...... 928 1,243
Issuance of mortgage notes.................. (9,851)
-------- ------- --------- ---------
Cash used in investing activities........... (70,309) (6,344) (120,767) (100,922)
FINANCING ACTIVITIES
Issuance of common stock.................... 13,311 13,472 2,317
Proceeds from borrowings.................... 186,949 59,958 92,670
Early extinguishment of debt................ (59,278)
Short term borrowings from (payments of
borrowings to) Omega Healthcare Investors,
Inc....................................... (56,372) (6,986) 50,875 7,398
Payments of other borrowings................ (2,642)
Dividends paid.............................. (158)
Cost of raising capital..................... (2,976) (634) (1,614)
-------- ------- --------- ---------
Cash provided by financing activities....... 65,681 6,325 123,513 100,771
-------- ------- --------- ---------
Increase (Decrease) in cash and cash
equivalents............................... (2,154) 1,710 5,591 597
Cash and cash equivalents at beginning
of period................................. 6,188 597 597
-------- ------- --------- ---------
Cash and cash equivalents at end of
period.................................... $ 5,184 $ 2,307 $ 6,188 $ 597
======== ======= ========= =========
</TABLE>
See accompanying notes.
F-8
<PAGE> 63
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. Beginning November 1, 1997 the
consolidated financial statements also include Baneberry Healthcare Limited
("Baneberry"). Baneberry's revenues and expenses are reported separately in the
Consolidated Statements of Operations. Baneberry's identifiable assets
approximate 1% of total assets. For the quarter ended November 30, 1997 all of
the earnings before income taxes relate to the real estate leasing segment
(unaudited).
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 40 to 50 year estimated useful lives.
The Company provides reserves for potential losses based upon management's
periodic review of its assets and classifies these reserves as reductions to the
related assets.
COST IN EXCESS OF TANGIBLE ASSETS ACQUIRED
The excess of the sum of the purchase cost plus the deferred tax liability
recognized over the fair value of real estate and other assets acquired in
connection with the purchase of Quality Care Homes plc is amortized on a
straight-line basis over a 40-year period.
IMPAIRMENT OF ASSETS
Impairment losses related to long lived assets, certain intangible assets
and goodwill related to those assets, are recognized when expected future cash
flows are less than the carrying value of the assets. If indicators of
impairment are present, the Company evaluates the carrying value of the related
real estate investments in relationship to the future undiscounted cash flows of
the underlying operations. The Company adjusts the net book value of the leased
assets and other long lived assets to fair value if the sum of the expected
future cash flows is less than book value.
F-9
<PAGE> 64
PRINCIPAL HEALTHCARE FINANCE LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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%.
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. Purchase options are generally either at fair market value
or at original purchase price increased by a stipulated annual percentage or by
reference for annual increases in a price index. 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). There are no
provisions for payment of contingent rentals by tenants. 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
NOVEMBER 30 -------------------
1997 1997 1996
----------- ---- ----
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
Buildings...................................... $304,159 $233,736 $78,830
Land........................................... 53,675 41,246 13,965
-------- -------- -------
357,834 274,982 92,795
Less accumulated depreciation.................. 6,269 4,294 1,357
-------- -------- -------
Total.......................................... $351,565 $270,688 $91,438
======== ======== =======
</TABLE>
F-10
<PAGE> 65
PRINCIPAL HEALTHCARE FINANCE LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. REAL ESTATE PROPERTIES (CONTINUED)
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
Additions for three-month period (unaudited):
Real estate acquisitions............................. 69,445
Provision charged to operations...................... 1,635
Other................................................ 13,407 340
-------- ------
Balance at November 30, 1997 (unaudited)............... $357,834 $6,269
======== ======
</TABLE>
The future minimum rentals expected to be received at August 31, 1997 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. This temporary loan was made in anticipating a
purchase leaseback transaction to be consummated with the operator before
December 1996. The loan amount approximated the fair value of the property
acquired. In October, 1996 the Company converted the loan by taking title by
purchase of the property at the original amount of the loan. The lease agreement
with the operator has terms similar to all other leases with the operator. At
the date of conversion, the operator was current in its payments and there were
no events of default.
4. INVESTMENT CONCENTRATIONS
As of August 31, 1997, all of the Company's real estate investments related
to long-term care facilities. The Company's real estate investments are operated
by 8 companies, including Exceler Healthcare Services Limited (30% of amount
invested), and Tamaris Plc (46% of amount invested). The Company's facilities
are
F-11
<PAGE> 66
PRINCIPAL HEALTHCARE FINANCE LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. INVESTMENT CONCENTRATIONS (CONTINUED)
located in England (92% of amount invested) and Scotland (8% of amount
invested). The following is a summary of the amounts originally invested and the
number of facilities owned 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 -- --
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>
As of November 30, 1997, Exceler Healthcare Services Limited operated
facilities representing 24% of the total investments and Tamaris plc operated
facilities representing 35% of the total investments (unaudited).
F-12
<PAGE> 67
PRINCIPAL HEALTHCARE FINANCE LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. INVESTMENT CONCENTRATIONS (CONTINUED)
Pursuant to leases the Company's tenants provide liquidity deposits and
letters of credit which generally represent monthly rent for a period of six
months. Additional security from operators is provided by covenants regarding
minimum working capital and net worth, liens on other operating assets of the
operators, provisions for cross default and by corporate guarantees.
Additional security with respect to the lease with Exceler Health Services
Limited is provided in the form of a six-month letter of credit and a six-month
payment guarantee by its ultimate parent, Sun Healthcare Group, Inc. (Sun),
which is a public company and NYSE listed. Sun files annual, quarterly and
current reports, proxy statements and other information with the Securities and
Exchange Commission. Following is condensed consolidated information derived
from filings with the Securities and Exchange Commission by Sun for the periods
ended September 30, 1997 and December 31, 1996.
<TABLE>
<CAPTION>
NINE MONTHS YEAR ENDED
SEPTEMBER 30, 1997 DECEMBER 31, 1996
------------------ -----------------
UNAUDITED
(IN THOUSANDS)
<S> <C> <C>
Cash flows from:
Operating Activities...................................... $ 62,946 26,812
Financing Activities...................................... 217,918 107,619
Investing Activities...................................... (292,731) (142,189)
Net Revenues................................................ 1,332,354 1,316,308
Net Earnings................................................ 53,179 21,536
</TABLE>
<TABLE>
<CAPTION>
AS OF AS OF
SEPTEMBER 30, 1997 DECEMBER 31, 1996
------------------ -----------------
UNAUDITED
(IN THOUSANDS)
<S> <C> <C>
Current Assets.............................................. $ 430,254 $ 363,148
Current Liabilities......................................... 194,210 151,566
Total Assets................................................ 1,712,428 1,229,426
Total Liabilities........................................... 1,080,248 654,592
Shareholders' Equity........................................ 629,852 572,137
</TABLE>
F-13
<PAGE> 68
PRINCIPAL HEALTHCARE FINANCE LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. INVESTMENT CONCENTRATIONS (CONTINUED)
The following condensed information derived from audited financial
statements of Exceler prepared in accordance with accounting standards generally
accepted in the United States (except as set forth below) for the six month
period ended June 30, 1997 and year ended December 31, 1996.
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
------------- -----------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
Cash flows for the year ended December 31, 1996:
Operating Activities....................................................... $ 4,166
Financing Activities....................................................... --
Investing Activities....................................................... (4,298)
Net Revenues................................................ $12,107 23,046
Net Earnings................................................ 913 1,884
Balance Sheet data as of December 31, 1996:
Current Assets............................................................... $ 7,793
Current Liabilities.......................................................... 11,886
Total Assets................................................................. 14,938
Total Liabilities............................................................ 11,906
Shareholders' Equity......................................................... 3,032
</TABLE>
Exceler's financial information presented in accordance with US GAAP does
not reflect certain "push-down" adjustments associated with purchased business
combinations which occurred prior to December 31, 1996. Such adjustments, if
quantifiable, would increase reported assets and equity as of December 31, 1996,
and decrease reported earnings for the year then ended. However, the adjustment
would not affect reported cash flow from operating activities for 1996.
5. BORROWING ARRANGEMENTS
The loans payable to Omega Healthcare Investors, Inc. at August 31, 1997
consists of a short-term loan of $59,537,000 which bears interest at 9.25%, and
a $24,208,500 subordinated loan which bears interest at 11.83% and matures in
December 31, 2000. In connection with the subordinated loan, the Company
provided warrants to acquire 10,000,000 shares of stock at L1.50 (approximately
$2.40) per share. These warrants expire June 30, 2001.
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>
Secured bank loan......................................... $ 64,556 $62,548
Commercial mortgages...................................... 34,588 --
Acquisition finance loan.................................. 55,245 --
Loan notes and guarantees................................. 18,087 --
Collateralized bank term loan............................. 18,181 --
Overdrafts................................................ 6,854 --
Subordinated loans........................................ 8,070 7,819
-------- -------
$205,581 $70,367
======== =======
</TABLE>
F-14
<PAGE> 69
PRINCIPAL HEALTHCARE FINANCE LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. BORROWING ARRANGEMENTS (CONTINUED)
Substantially all of the real estate properties are collateralized by
commercial mortgages and bank loans.
The secured 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 10).
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 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.
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 collateralized bank term loan matures on October 1, 2001.
The subordinated loan is due for repayment on December 31, 2000 and bears
interest over the remaining term of the loans at rates ranging from 11.8% to
12.9%. In connection with the loans, the Company provided warrants to acquire
3,333,333 shares of stock at L1.50. These warrants expire June 30, 2001.
The principal payments for each of the five years following August 31, 1997
is set forth below:
<TABLE>
<S> <C>
1998........................................................ $ 87,104
1999........................................................ 6,918
2000........................................................ 79,544
2001........................................................ 25,099
2002........................................................ 6,916
--------
$205,581
========
</TABLE>
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. PURCHASE OF QUALITY CARE HOMES PLC NURSING HOME FACILITIES
On June 30, 1997 the Company acquired all of the nursing home facilities of
Quality Care Homes plc through the purchase of all of its outstanding common
stock. The purchase price for net assets totaled $73,818,000, and it was funded
by acquisition financing of $55,245,000, the issue of loan notes for $18,087,000
and cash. 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
Quality Care Homes, the predecessor operator of the
F-15
<PAGE> 70
PRINCIPAL HEALTHCARE FINANCE LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. QUALITY CARE HOMES PLC ACQUISITION (CONTINUED)
facilities. The assets which are being held for sale (started at the lower of
carrying amount or fair value) 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>
The disposal of these assets will involve a concurrent execution of
long-term triple-net operating leases with the purchaser. Subsequent to year
end, the leases were consummated and assets were sold. The assets acquired and
liabilities assumed recorded at their estimated fair values as of June 30, 1997
follow (in thousands):
<TABLE>
<S> <C>
Investment properties....................................... $ 116,969
Accounts receivable and inventory........................... 3,194
Cost in excess of tangible assets acquired.................. 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>
7. CAPITAL STOCK
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 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.
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. (See Note 10).
F-16
<PAGE> 71
PRINCIPAL HEALTHCARE FINANCE LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. CAPITAL STOCK (CONTINUED)
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 (pound)1.00 December 31, 2000
750,000 (pound)1.10 December 31, 2000
3,333,333 (pound)1.50 June 30, 2001
Class B ordinary shares............................. 1,000,000 (pound)1.00 December 31, 2000
10,000,000 (pound)1.50 June 30, 2001
</TABLE>
As to the warrants which expire in December, 2000, no value was assigned at
the date of issuance because the underlying securities were issued at their fair
value at that date. As to the warrants which expire in June, 2001, the Company
believes that the coupon rate for the subordinated debt was the prevailing
market rate on the date of the loan, and therefore the face amount of the
subordinated loans approximated its fair value on the date of issuance. In
addition, the exercise price on these warrants significantly exceeded the fair
value of the stock on the date of issuance since the warrants enabled the
purchase of shares at L1.50, while the current value of the shares at that time
was approximately L1.00. Based on these factors at the date of the borrowing, no
value was ascribed to the warrants when they were issued.
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. 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
F-17
<PAGE> 72
PRINCIPAL HEALTHCARE FINANCE LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. RELATED PARTY TRANSACTIONS (CONTINUED)
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.
10. 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 (see Note 5). As a result of the repayment of the
bank loan, the Company paid prepayment fees of approximately $1,980,000 and
recorded such amount as an extraordinary charge from prepayment of debt.
On November 1, 1997, the Company acquired 30 facilities with 1,400 beds in
Northern Ireland for a total purchase price of approximately $61,000,000. Under
the terms of the lease for these facilities annual rent totals $6,588,000, and
the lessee is responsible for all maintenance, repairs, taxes and insurance on
the properties. The 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 in which it intends to secure an additional $8,000,000 of funding
payable to former owners of the real estate.
On December 12, 1997, the Company completed a $253,000,000 (L150,000,000)
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. Following the refinancings
described above, the Company had the following debt amounts outstanding (in
thousands):
<TABLE>
<S> <C>
1998........................................................ $ 91,775
1999........................................................ 7,166
2000........................................................ 24,010
2001........................................................ 25,207
2002........................................................ 7,165
Thereafter.................................................. 252,660
--------
$407,983
========
</TABLE>
At a special meeting held January 15, 1998, the Shareholders approved a
recapitalization under which the Class B nonvoting stock was eliminated.
F-18
<PAGE> 73
REPORT OF INDEPENDENT ACCOUNTANTS TO THE BOARD OF DIRECTORS
AND SHAREHOLDERS OF TAMARIS PLC
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF TAMARIS PLC
TAMARIS PLC ("THE COMPANY") AND ITS SUBSIDIARIES ("THE GROUP")
We have audited the accompanying consolidated balance sheets of Tamaris Plc
and its subsidiaries as at 31 March 1997 and 1996 and the related consolidated
profit and loss accounts and consolidated cash flow statements for the two years
ended 31 March, 1997.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
The Company's Directors are responsible for the preparation of the
financial statements. It is our responsibility to form an independent opinion,
based on our audit, on those financial statements and to report our opinion to
you.
BASIS OF OPINION
We conducted our audit in accordance with Auditing Standards generally
accepted in the United Kingdom and the United States. An audit includes
examination, on a test basis, of evidence relevant to the amounts and
disclosures in the financial statements. It also includes an assessment of the
significant estimates and judgements made by the Directors in the preparation of
the financial statements, and of whether the accounting policies are appropriate
to the circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.
OPINION
In our opinion the financial statements give a true and fair view of the
state of the affairs of the Company and the Group as at 31 March 1997 and 1996
and of the profit of the Group for the two years then ended and have been
properly prepared in accordance with accounting principles generally accepted in
the United Kingdom and the Companies Act of 1985.
United Kingdom accounting standards vary in certain important respects from
accounting principles generally accepted in the United States. The application
of the latter would have affected the determination of consolidated net profit
for the two years ended 31 March, 1997 and the determination of consolidated
shareholders' equity and consolidated financial position as at 31 March, 1997
and 1996 to the extent summarised in note 36 to the consolidated financial
statements.
Grant Thornton
Registered Auditors
Chartered Accountants
London
16 June 1997
(Except for Note 36
as to which the date
is 3 March 1998)
F-19
<PAGE> 74
TAMARIS PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 MARCH 1997
<TABLE>
<CAPTION>
AUDITED
YEAR ENDED UNAUDITED
31 MARCH SIX MONTHS
---------------- ENDED
1997 1996 30 SEPTEMBER 1997
NOTES (pound)'000 (pound)'000 (pound)'000
----- ----------- ----------- -----------------
<S> <C> <C> <C> <C>
TURNOVER............................................. 2
Continuing operations................................ 11,851 9,508 14,978
Acquisitions......................................... 7,273 -- 493
------- ------ ------
19,124 9,508 15,471
Staff costs.......................................... 5 (10,995) (5,278) (8,389)
Depreciation......................................... (332) (207) (203)
Other operating charges.............................. (6,474) (2,706) (5,881)
------- ------ ------
OPERATING PROFIT..................................... 3
Continuing operations................................ 945 1,317 928
Acquisitions......................................... 378 -- 70
------- ------ ------
1,323 1,317 998
Share of profits of associated undertaking........... 13 -- 3 --
Profit on sale of fixed assets....................... 4 1,622 295 --
------- ------ ------
2,945 1,615 998
Net interest......................................... 7 (293) (505) (77)
------- ------ ------
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION........ 2 2,652 1,110 921
Taxation............................................. 8 (359) (142) (274)
------- ------ ------
PROFIT FOR THE FINANCIAL YEAR........................ 9 2,293 968 647
Dividends............................................ 10 (480) (353) (211)
------- ------ ------
PROFIT TRANSFERRED TO RESERVES....................... 22 1,813 615 436
======= ====== ======
EARNINGS PER ORDINARY SHARE.......................... 11 0.46P 0.23p 0.11P
======= ====== ======
</TABLE>
There were no recognised gains or losses other than the profit for the financial
year.
The accompanying accounting policies and notes form an integral part of these
financial statements.
F-20
<PAGE> 75
TAMARIS PLC
NOTE OF HISTORICAL COST PROFITS AND LOSSES
FOR THE YEAR 31 MARCH 1997
<TABLE>
<CAPTION>
AUDITED
YEAR ENDED
31 MARCH
----------------------------
1997 1996
(pound)'000 (pound)'000
----------- -----------
<S> <C> <C>
Profit on ordinary activities before taxation............... 2,652 1,110
Realisation of revaluation surplus.......................... 472 --
Difference between historical cost depreciation charge and
depreciation charge based on revalued amounts............. 8 10
----- -----
Historical cost profit on ordinary activities before
taxation.................................................. 3,132 1,120
===== =====
Historical cost profit transferred to reserves.............. 2,293 625
===== =====
</TABLE>
The accompanying accounting policies and notes form an integral part of these
financial statements.
F-21
<PAGE> 76
TAMARIS PLC
CONSOLIDATED BALANCE SHEET
AT 31 MARCH 1997
<TABLE>
<CAPTION>
AUDITED
YEAR ENDED
31 MARCH
-------------------------- UNAUDITED
1997 1996 30 SEPTEMBER 1997
NOTES (pound)'000 (pound)'000 (pound)'000
----- ----------- ----------- -----------------
<S> <C> <C> <C> <C>
FIXED ASSETS
Tangible assets....................................... 12 7,995 13,416 18,241
Investments........................................... 13 427 112 736
------ ------ -------
Current Assets........................................ 8,422 13,528 18,977
Investments........................................... -- -- 325
Debtors: amounts falling due after more than one
year................................................ 15 852 1,979 852
Debtors............................................... 14 4,167 1,321 7,565
Cash at bank and on deposit........................... 4,701 333 3,581
------ ------ -------
9,720 3,633 12,323
CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR........ 16 (4,915) (2,994) (6,534)
------ ------ -------
NET CURRENT ASSETS.................................... 4,805 639 5,789
------ ------ -------
TOTAL ASSETS LESS CURRENT LIABILITIES................. 13,227 14,167 24,766
CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE
YEAR................................................ 17 (4,116) (7,571) (10,325)
------ ------ -------
NET ASSETS............................................ 9,111 6,596 14,441
====== ====== =======
CAPITAL AND RESERVES
Called up share capital............................... 21 1,333 1,170 1,933
Share premium account................................. 22 4,582 3,910 9,137
Revaluation reserve................................... 22 -- 480 --
Other reserve......................................... 22 715 848 454
Profit and loss account............................... 22 2,481 188 2,917
------ ------ -------
SHAREHOLDERS' FUNDS................................... 23 9,111 6,596 14,441
====== ====== =======
</TABLE>
The accompanying accounting policies and notes form an integral part of these
financial statements.
F-22
<PAGE> 77
TAMARIS PLC
COMPANY BALANCE SHEET
AT 31 MARCH 1997
<TABLE>
<CAPTION>
1997 1996
NOTES (pound)'000 (pound)'000
----- ----------- -----------
<S> <C> <C> <C>
FIXED ASSETS
Tangible assets............................................. 12 476 426
Investments................................................. 13 4,675 2,924
------ -----
5,151 3,350
------ -----
CURRENT ASSETS
Debtors: amounts falling due after more than one year....... 15 -- 1,600
Debtors..................................................... 14 2,506 1,886
Cash at bank and on deposit................................. 1,441 55
------ -----
3,947 3,541
CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR.............. 16 (1,167) (657)
------ -----
NET CURRENT ASSETS.......................................... 2,780 2,884
------ -----
TOTAL ASSETS LESS CURRENT LIABILITIES....................... 7,931 6,234
CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR..... 17 (74) (98)
------ -----
NET ASSETS.................................................. 7,857 6,136
====== =====
CAPITAL AND RESERVES
Called up share capital..................................... 21 1,333 1,170
Share premium account....................................... 22 4,582 3,910
Merger reserve.............................................. 22 1,742 875
Profit and loss account..................................... 22 200 181
------ -----
SHAREHOLDERS' FUNDS......................................... 7,857 6,136
====== =====
</TABLE>
The accompanying accounting policies and notes form an integral part of these
financial statements.
F-23
<PAGE> 78
TAMARIS PLC
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 MARCH 1997
<TABLE>
<CAPTION>
1997 1996
NOTES (pound)'000 (pound)'000
----- ----------- -----------
<S> <C> <C> <C>
NET CASH INFLOW FROM OPERATING ACTIVITIES................... 25 1,782 925
------ ------
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
Interest paid............................................... (750) (642)
Interest element of hire purchase agreements................ (12) (4)
Interest received........................................... 469 141
------ ------
NET CASH OUTFLOW FROM RETURNS ON INVESTMENTS AND SERVICING
OF FINANCE................................................ (293) (505)
------ ------
TAXATION
Tax recovered/(paid)........................................ 52 (25)
------ ------
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT
Payments to acquire tangible fixed assets................... (1,301) (8,524)
Loan to associated undertaking.............................. -- (1,600)
Purchase of investments..................................... (325) (21)
Receipts from sales of tangible fixed assets net of
expenses.................................................. 13,714 9,480
------ ------
NET CASH INFLOW/(OUTFLOW) FROM CAPITAL EXPENDITURE AND
FINANCIAL INVESTMENT...................................... 12,088 (665)
------ ------
ACQUISITIONS AND DISPOSALS
Purchase of subsidiary undertaking.......................... 28 (1,054) (286)
Net overdraft on purchase of subsidiary undertaking......... -- (2,391)
Purchase of care home businesses............................ (4,588) --
------ ------
NET CASH OUTFLOW FROM ACQUISITIONS AND DISPOSALS............ (5,642) (2,677)
------ ------
EQUITY DIVIDENDS PAID....................................... (374) (100)
------ ------
MANAGEMENT OF LIQUID RESOURCES
Deposits.................................................... 19e (2,830) --
------ ------
FINANCING
Capital element of hire purchase agreements................. (57) 119
Receipts from borrowing..................................... 1,000 97
Repayment of borrowing...................................... (4,480) --
Issued ordinary share capital............................... 801 2,200
Expenses of share issue..................................... (99) (453)
------ ------
NET CASH (OUTFLOW)/INFLOW FROM FINANCING.................... (2,835) 1,963
------ ------
INCREASE/(DECREASE) IN CASH................................. 1,948 (1,084)
====== ======
</TABLE>
The accompanying accounting policies and notes form an integral part of these
financial statements.
F-24
<PAGE> 79
TAMARIS PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 1997
1. ACCOUNTING POLICIES
A) ACCOUNTING CONVENTION
The financial statements are prepared under the historical cost convention,
except in respect of revalued assets sold during the year.
B) ACCOUNTING STANDARDS
The financial statements have been prepared in accordance with applicable
accounting standards. The principal accounting policies of the Group have
remained unchanged from the previous year and are set out below.
C) BASIS OF CONSOLIDATION
The Group financial statements consolidate the financial statements of the
Company and its subsidiary undertakings (see note 13). The results of subsidiary
undertakings acquired during the year are included from the date of acquisition.
On acquisition of a subsidiary, all of the subsidiary's assets and liabilities
which exist at the date of acquisition are recorded at their fair values
reflecting their condition at that date.
The Company takes advantage of merger relief offered by Section 131 of the
Companies Act 1985 in respect of the consideration received in excess of the
nominal value of the equity shares issued in connection with the acquisitions of
Laudcare Limited, Maldcare Limited and Torrcare Limited.
The Company has taken advantage of the exemption permitted by Section 230
of the Companies Act 1985 and has not published its own profit and loss account
in the financial statements.
D) ASSOCIATED UNDERTAKINGS
Undertakings, other than subsidiary undertakings, in which the Group has a
long term investment representing at least 20% of the voting rights and over
which it exerts significant influence, are treated as associated undertakings.
The Group's share of the profits less losses are included in the Group profit
and loss account.
The Group balance sheet includes the investment in the associated
undertaking at the Group's share of net assets. The Company balance sheet shows
the investment in the associated undertaking at cost.
E) INVESTMENTS
Investments are included at cost.
F) TANGIBLE FIXED ASSETS
Fixed assets are included at cost less depreciation.
The Group capitalises, as short leasehold interests, the costs associated
with the acquisition of the operating leases of the care home businesses that
comprise the continuing ordinary activities of the Group.
F-25
<PAGE> 80
TAMARIS PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
1. ACCOUNTING POLICIES (CONTINUED)
G) DEPRECIATION
Depreciation is provided on tangible fixed assets less estimated residual
values over their estimated useful lives at the following annual rates:
<TABLE>
<S> <C>
Freehold properties.................................... 50 years
Short leasehold interests.............................. period of lease
Plant and equipment.................................... 5% on net book value
Furniture and fittings................................. 15% on net book value
Office equipment....................................... 10% on net book value
Motor vehicles......................................... 25% on cost
</TABLE>
H) HIRE PURCHASE AND LEASING CONTRACTS
Assets held under finance lease and hire purchase contracts are capitalised
in the balance sheet and depreciated over their useful lives. The interest
element of leasing payments represents a consistent proportion of the capital
balance outstanding and is charged to the profit and loss account over the
period of the agreement.
All other leases are regarded as operating leases and the payments made
under them are charged to the profit and loss account on a straight line basis
over the lease term.
I) GOODWILL
When a subsidiary company or business is acquired the difference at the
date of acquisition between the fair value of tangible assets and liabilities
acquired and the consideration is written off directly to reserves.
J) DEFERRED TAXATION
Deferred taxation is provided to take account of timing differences between
the treatment of certain items for accounts purposes and for taxation purposes,
only to the extent it is probable that a liability or asset will crystallise in
the foreseeable future.
K) PENSION COSTS
No Group or Company pension scheme exists. Where payments to an employee's
own pension scheme have been agreed the cost is charged to the profit and loss
account when incurred.
L) TURNOVER
Turnover represents the amount receivable for services provided.
M) INTERIM FINANCIAL INFORMATION
The Consolidated Financial Information for the six months ended 30
September 1997 is unaudited. In the opinion of management, all adjustments
necessary for a fair statement of the results of this interim period have been
included. All such interim adjustments are of a normal recurring nature. Results
for the six months ended 30 September 1997 are not necessarily indicative of
results for the entire year.
F-26
<PAGE> 81
TAMARIS PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
2. TURNOVER AND PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION
The Group's turnover and results before taxation are principally
attributable to one activity, the provision and management of long term
facilities for the elderly and for the physically and mentally disabled.
The turnover arises solely from activities in the United Kingdom.
The amounts shown for continuing operations include the following in
respect of acquisitions:
<TABLE>
<CAPTION>
1997
(pound)'000
-----------
<S> <C>
Staff costs................................................. 4,048
Depreciation................................................ 75
Other operating charges..................................... 2,772
-----
6,895
=====
</TABLE>
3. OPERATING PROFIT IS STATED AFTER CHARGING
<TABLE>
<CAPTION>
1997 1996
(pound)'000 (pound)'000
----------- -----------
<S> <C> <C>
Auditors' remuneration:
Audit services............................................ 50 20
Non audit services........................................ 152 30
Less capitalised amounts on acquisitions.................. (98) --
Operating lease rentals: land and buildings................. 3,056 801
Operating lease rentals: other.............................. 58 26
</TABLE>
4. EXCEPTIONAL ITEMS
<TABLE>
<CAPTION>
1997 1996
(pound)'000 (pound)'000
----------- -----------
<S> <C> <C>
Profit on sale of fixed assets in continuing operations --
see note 12............................................... 1,622 295
</TABLE>
Details of the properties sold are given at note 12.
F-27
<PAGE> 82
TAMARIS PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
5. STAFF COSTS
<TABLE>
<CAPTION>
1997 1996
(pound)'000 (pound)'000
----------- -----------
<S> <C> <C>
Employee costs including Directors' emoluments during the
year were:
Salaries and wages.......................................... 10,375 4,971
Social security costs....................................... 578 284
Pension costs............................................... 42 23
------ -----
10,995 5,278
====== =====
</TABLE>
<TABLE>
<CAPTION>
NUMBER NUMBER
------ ------
<S> <C> <C>
The average numbers of staff employed during the year:
Management and administration............................... 72 24
Nursing and ancillary services.............................. 1,431 744
----- ---
1,503 768
===== ===
</TABLE>
6. DIRECTORS' EMOLUMENTS
The information given in this note also constitutes part of the Report of
the Remuneration Committee.
<TABLE>
<CAPTION>
SALARY PENSIONS
BENEFITS ANNUAL CONTRIBUTIONS
AND FEES BONUS TOTAL TOTAL -------------------------
1997 1997 1997 1996 1997 1996
(pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000
------------ ------------- ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Executive Directors
W. Fitch -- highest paid................. 108 175 283 190 -- --
B. A. Maxwell............................ 88 85 173 108 33 12
G. Willis................................ -- -- -- -- -- --
Non-Executive Directors -- fees
B. McFadzean............................. 25 -- 25 16 -- --
R. Pears................................. 25 -- 25 16 -- --
--- --- --- --- --- ---
246 260 506 330 33 12
=== === === === === ===
</TABLE>
The salary for Miss Maxwell includes benefits in kind valued at L8,000 in
respect of company car, insurance, permanent health insurance and personal
accident and life cover. Her pension contributions, which are to a money
purchase scheme, include L20,000 from bonus allocation.
F-28
<PAGE> 83
TAMARIS PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
6. DIRECTORS' EMOLUMENTS (CONTINUED)
Mr. Willis was appointed a director on 19 March 1997 and none of his
remuneration paid as an employee in the year is considered to be emoluments as a
Director.
<TABLE>
<CAPTION>
NUMBER OF DATE OF DATE OF EXERCISE
SHARE OPTIONS SHARES GRANT EXERCISE PRICE(P)
------------- --------- ------- -------- --------
<S> <C> <C> <C> <C>
William Fitch................................ 3,536,570 9/9/1993 10/9/1995 2
to 9/9/1998
CAP Investments Ltd.......................... 3,536,570 9/9/1993 10/9/1995 2
(a company controlled by Barry McFadzean) to 9/9/1998
Barbara-Ann Maxwell.......................... 3,536,570 9/9/1993 10/9/1996 2.25
to 9/9/2003
Graeme Willis (granted as an employee)....... 125,000 23/6/1995 26/4/98 2
to 23/6/2005
</TABLE>
Further information regarding options is given at notes 21(i) and 21(ii).
The market price of the shares at the year end was 3.0 pence per share and
the market price fluctuated from 2.25 pence per share to 3.25 pence per share
during the year.
A new bonus scheme was introduced with effect from 1 April 1996. The
remuneration committee initiated a bonus pool from which Crosshaven would
receive five parts and Miss Maxwell would receive three parts, paid as follows:
(1) an on account payment, representing 50% of the anticipated annual bonus,
would be made on publication of the interim results; and (2) the balance
immediately after the publication of the audited accounts. The pool is to be
funded by reference to a sliding scale based on the increase in the earnings per
share of the Company in any year, adjusted by the increase in RPI in the
previous calendar year. There is a cap on the pool of L300,000. In addition the
pool will receive L20,000 if the Price to Earnings ratio of the Company at the
end of the second working day following publication of its annual results is
more than 110% of the average of the Price to Earnings ratio of the five to ten
most comparable quoted companies in the opinion of the Company's brokers.
Conversely if the Price to Earnings ratio is less than 90% L20,000 will be
withdrawn from the bonus pool.
In respect of the Directors, no options were granted, exercised or lapsed
during the year nor were there any changes between the year end and 16 June
1997, except for the exercise by CAP Investments Limited of its option over
3,536,570 shares on 11 June 1997.
7. NET INTEREST
<TABLE>
<CAPTION>
1997 1996
(pound)'000 (pound)'000
----------- -----------
<S> <C> <C>
Bank loans, overdrafts...................................... 587 480
Hire purchase interest...................................... 12 4
Other loan interest......................................... 163 162
---- ----
762 646
Interest receivable......................................... (469) (141)
---- ----
Net interest payable........................................ 293 505
==== ====
</TABLE>
F-29
<PAGE> 84
TAMARIS PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
8. TAXATION ON ORDINARY ACTIVITIES
<TABLE>
<CAPTION>
1997 1996
(pound)'000 (pound)'000
----------- -----------
<S> <C> <C>
The tax charge is based on the profit for the year and
represents:
Corporation tax at 33% (1996 -- 33%)........................ 359 142
</TABLE>
The taxation charge for the year has been reduced by accelerated capital
allowances, loss relief and other timing differences.
9. PROFIT FOR THE FINANCIAL YEAR
<TABLE>
<CAPTION>
1997 1996
(pound)'000 (pound)'000
----------- -----------
<S> <C> <C>
Dealt with in the accounts of the holding Company........... 499 1,066
Dealt with by subsidiary undertakings....................... 1,794 (101)
Dealt with by associated undertakings....................... -- 3
----- -----
2,293 968
===== =====
</TABLE>
10. DIVIDENDS
<TABLE>
<CAPTION>
1997 1996
(pound)'000 (pound)'000
----------- -----------
<S> <C> <C>
Ordinary shares
Interim dividend of 0.024610p (1996: 0.021375p) per share
paid 12 February 1997..................................... 121 100
Proposed final dividend of 0.05663p (1996: 0.051482p) per
share..................................................... 359 253
--- ---
480 353
=== ===
</TABLE>
The proposed final dividend will be payable on the shares in issue on 4
July 1997.
11. EARNINGS PER ORDINARY SHARE
The calculation of the earnings per share is based on the profits after
taxation of L2,293,000 (1996 -- L968,000) and the weighted average of
501,068,052 ordinary shares (1996: -- 426,892,000 ordinary shares) in issue
during the year. The fully diluted earnings per share is not materially
different to the basic calculation.
F-30
<PAGE> 85
TAMARIS PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
12. TANGIBLE FIXED ASSETS
<TABLE>
<CAPTION>
SHORT
FREEHOLD LAND LEASEHOLD PLANT FIXTURES
AND BUILDINGS INTERESTS AND FITTINGS MOTOR VEHICLES TOTAL
GROUP (pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000
----- --------------- ----------- ------------ -------------- -------------
<S> <C> <C> <C> <C> <C>
Cost or valuation
At 1 April 1996................... 11,969 624 1,164 123 13,880
Additions......................... 196 509 537 59 1,301
Acquisitions...................... 1,146 4,566 -- -- 5,712
Disposals......................... (12,125) -- (299) -- (12,424)
------- ----- ----- --- -------
Cost at 31 March 1997............... 1,186 5,699 1,402 182 8,469
------- ----- ----- --- -------
Depreciation
At 1 April 1996................... 119 13 299 33 464
Provided in year.................. 115 64 140 13 332
Disposals......................... (210) -- (112) -- (322)
------- ----- ----- --- -------
At 31 March 1997.................... 24 77 327 46 474
------- ----- ----- --- -------
Net book value at 31 March 1997..... 1,162 5,622 1,075 136 7,995
------- ----- ----- --- -------
Net book value at 31 March 1996..... 11,850 611 865 90 13,416
------- ----- ----- --- -------
</TABLE>
<TABLE>
<CAPTION>
PLANT FIXTURES
AND FITTINGS MOTOR VEHICLES TOTAL
COMPANY (pound)'000 (pound'000 (pound)'000
------- -------------- -------------- -----------
<S> <C> <C> <C>
Cost
At 1 April 1996........................................... 497 100 597
Additions................................................. 34 53 87
Disposals................................................. -- -- --
--- --- ---
At 31 March 1997............................................ 531 153 684
--- --- ---
Depreciation
At 1 April 1996........................................... 142 29 171
Provided in year.......................................... 28 9 37
--- --- ---
At 31 March 1997............................................ 170 38 208
--- --- ---
Net book value at 31 March 1997............................. 361 115 476
--- --- ---
Net book value at 31 March 1996............................. 355 71 426
--- --- ---
</TABLE>
Certain Group properties, including those revalued in 1994 and 1995, were
sold during the year under sale and leaseback arrangements. The profits realised
were as follows:
<TABLE>
<CAPTION>
TOTAL
(pound)'000
-----------
<S> <C>
Freehold properties held at revaluation, less
depreciation.............................................. 5,100
Freehold properties held at cost, less depreciation......... 6,815
------
11,915
Sale proceeds, net of expenses.............................. 13,540
------
Profit on sale -- see note 4................................ 1,625
======
</TABLE>
The revaluation of L480,000 has been released to profit and loss
account -- see note 22.
F-31
<PAGE> 86
TAMARIS PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
12. TANGIBLE FIXED ASSETS (CONTINUED)
The figures stated above include assets held under hire purchase contracts,
as follows:
<TABLE>
<CAPTION>
THE GROUP THE COMPANY
-------------------------- --------------------------
PLANT, FIXTURES MOTOR PLANT, FIXTURES MOTOR
AND FITTINGS VEHICLES AND FITTINGS VEHICLES
(pound)'000 (pound)'000 (pound)'000 (pound)'000
--------------- ----------- -------------- -----------
<S> <C> <C> <C> <C>
Net book amount at 31 March 1997................... 160 69 112 57
--- -- --- --
Net book amount at 31 March 1996................... 125 29 125 12
--- -- --- --
Depreciation provided in the year.................. 15 13 13 8
=== == === ==
</TABLE>
13. FIXED ASSET INVESTMENTS
<TABLE>
<CAPTION>
COST COST
1996 ADDITIONS DISPOSALS 1997
(pound)'000 (pound)'000 (pound)'000 (pound)'000
GROUP ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Own shares held through Tamerise Limited.................... 104 (2) -- 102
Interest in associated undertakings......................... 8 749 (757) --
Other investment (unlisted)................................. -- 325 -- 325
--- ----- ---- ---
112 1,072 (757) 427
=== ===== ==== ===
</TABLE>
<TABLE>
<CAPTION>
COST COST
1996 ADDITIONS DISPOSALS 1997
(pound)'000 (pound)'000 (pound)'000 (pound)'000
COMPANY ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Shares in subsidiaries...................................... 2,815 1,433 -- 4,248
Shares in associates........................................ 5 749 (754) --
Other investment (unlisted)................................. -- 325 -- 325
Own shares held through Tamerise Limited.................... 104 (2) -- 102
----- ----- ---- -----
2,924 2,505 (754) 4,675
===== ===== ==== =====
</TABLE>
TAMERISE LIMITED
Tamerise Limited was incorporated in January 1991 and became the trustee of
The Tamaris Employees Share Option Scheme Trust ("the Trust") in the following
month. It is a wholly owned subsidiary of Tamaris plc but no director of Tamaris
is a director of Tamerise. Under the terms of the Trust, Tamerise may acquire
ordinary shares in Tamaris from time to time, either in the market, or by
subscription. Benefits may be conferred on selected employees of Tamaris and/or
its subsidiaries (both current and future subsidiaries) at the discretion of the
trustee by methods including a direct bonus payment in cash or in shares with no
payment required from the employee, a direct transfer of shares with payment of
all or part required by the employee or the transfer of shares to an employee
who exercises an option under Tamaris' existing share option schemes.
Tamerise Limited has bought the following Tamaris shares.
<TABLE>
<CAPTION>
YEAR ENDED (pound)
---------- ---------
<S> <C>
31 March 1991............................................... 1,500,000
31 March 1994............................................... 2,917,684
31 March 1996............................................... 883,536
---------
5,301,220
=========
</TABLE>
F-32
<PAGE> 87
TAMARIS PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
13. FIXED ASSET INVESTMENTS (CONTINUED)
All acquisitions have been funded by non-interest bearing loans from
Tamaris plc. The total Tamerise holding of shares represents 0.93% of Tamaris'
current issued ordinary share capital. The market value of the shares held by
Tamerise at 31 March 1997 was L159,000, calculated at 3p per share. Options
granted to Group employees under Tamaris' Approved Share Option Scheme will be
satisfied by the transfer of shares held by Tamerise, pursuant to the employees'
trust. Details of the options granted to date are detailed in note 21(i).
The dividends payable to Tamerise were credited against the cost of
investment. Any costs involved in the administration of Tamerise are charged to
the general overheads of Tamaris.
INTERESTS IN ASSOCIATED UNDERTAKING
On 27 March 1997, Tamaris disposed of its 49.99% holding in Triasma Homes
Limited, a property company incorporated in England, at par value.
On 11 June 1996, Tamaris subscribed L449 for 49.9% of the shares in a newly
formed company, Continental Shelf 55 Limited, which on the same day acquired the
entire issued capital of Lodge Care PLC. Tamaris later increased its investment
in Continental Shelf 55 Limited to L748,500 to finalise the acquisition of Lodge
Care PLC. On 27 March 1997, Tamaris disposed of its 49.9% holding in Continental
Shelf 55 Limited at par value.
OTHER INVESTMENTS (UNLISTED)
Tamaris has advanced L325,000 for subscription to the ordinary share
capital of GIO Limited ("GIO"), a property investment company, registered in the
Isle of Man. The money has been utilised in placing a deposit on a property
portfolio but GIO has not yet commenced trading. GIO is seeking a NASDAQ
quotation at which time it is expected that the Company's interest will be less
than 10%. However the offer document has yet to be published.
F-33
<PAGE> 88
TAMARIS PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
13. FIXED ASSET INVESTMENTS (CONTINUED)
INVESTMENT IN SUBSIDIARIES
The following were wholly owned subsidiary companies at 31 March 1997, all
of which have been consolidated in the Group financial statements. The share
capital of these companies was held either directly or indirectly (*) via an
intermediate holding company. All were 100% owned by the Group.
<TABLE>
<CAPTION>
CLASS PRINCIPAL COUNTRY
NAME OF SUBSIDIARY OF SHARES OF OPERATION
------------------ --------- -----------------
<S> <C> <C>
NURSING HOME OPERATING COMPANIES
Belmont Nursing Home Limited, The................. Ordinary England
Bewick Waverley Limited........................... Ordinary England
Cedarhurst Lodge Limited.......................... Ordinary Northern Ireland
Chapelfield View Limited.......................... Ordinary England
Chestnut Lodge Limited............................ Ordinary Northern Ireland
Doulton Court Limited............................. Ordinary England
Duncare Limited*#................................. Ordinary and preference Scotland
Edgewater Lodge Limited........................... Ordinary Northern Ireland
Guthrie Court Limited............................. Ordinary Scotland
Keslaw Limited.................................... Ordinary England
Laudcare Limited.................................. Ordinary England
Leeland Limited................................... Ordinary England
Lisnisky Limited (formerly Tamaris (Ulster)
Limited)........................................ Ordinary Northern Ireland
Lodge Care Services Limited....................... Ordinary England
Lunan House Limited............................... Ordinary Scotland
Maldcare Limited.................................. Ordinary England
Osborne Limited................................... Ordinary Northern Ireland
Rosevale Lodge Limited............................ Ordinary Northern Ireland
Saintfield Limited................................ Ordinary Northern Ireland
Tamaris (England) Limited (formerly Ross Pear
Limited)........................................ Ordinary England
Tamaris (Scotland) Limited#....................... Ordinary and convertible Scotland
preference
Tamaris (South East) Limited...................... Ordinary England
Tamaris (Ulster) Limited+......................... Ordinary Northern Ireland
Torrcare Limited.................................. Ordinary England
Westview Lodge Limited............................ Ordinary England
INVESTMENT AND INTERMEDIATE HOLDING COMPANY
Lifecare International Plc........................ Ordinary and preference England
TRUSTEE FOR ESST
Tamerise Limited.................................. Ordinary England
</TABLE>
All companies were incorporated in England and Wales except where
indicated: # registered in Scotland, + registered in Northern Ireland
F-34
<PAGE> 89
TAMARIS PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
14. DEBTORS
<TABLE>
<CAPTION>
1997 1996
----------------------- -------------------------
GROUP COMPANY GROUP COMPANY
(pound)'000 (pound)'000 (pound)'000 (pound)'000
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Trade debtors.................................. 1,433 36 565 43
Other debtors.................................. 1,660 549 151 94
Amount owed by Group undertakings.............. -- 1,488 -- 1,537
Prepayments and accrued income................. 1,074 433 605 212
----- ----- ----- -----
4,167 2,506 1,321 1,886
===== ===== ===== =====
</TABLE>
Group and Company prepayments include costs of L279,000 (1996: L132,000)
incurred on anticipated future care home acquisitions.
15. DEBTORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
<TABLE>
<CAPTION>
1997 1996
------------------------ --------------------------
GROUP COMPANY GROUP COMPANY
(pound)'000 (pound)'000 (pound)'000 (pound)'000
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Other debtors.................................. 852 -- 1,979 1,600
</TABLE>
A loan of L1.6m was made to Triasma Homes Limited, an associated
undertaking, during the previous year. It was originally not expected to be
recovered within the next eight years. However, this loan was repaid on the sale
of the investment in Triasma Homes Limited.
The remaining debts relate to rent deposits which are not expected to be
recovered within a period of twenty years.
16. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
<TABLE>
<CAPTION>
1997 1996
-------------------------- --------------------------
GROUP COMPANY GROUP COMPANY
(pound)'000 (pound)'000 (pound)'000 (pound)'000
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Bank loans and overdrafts...................... 1,032 -- 1,442 --
Trade creditors................................ 443 100 204 59
Amount owed to Group undertakings.............. -- -- -- 56
Corporation tax................................ 679 202 230 73
Other taxes and social security costs.......... 217 14 170 --
Proposed dividends............................. 359 359 253 253
Hire purchase agreements....................... 49 43 28 28
Accruals and deferred income................... 2,136 449 667 188
----- ----- ----- ---
4,915 1,167 2,994 657
===== ===== ===== ===
</TABLE>
Details of the security provided for bank loans and overdrafts are given in
note 19.
Further details of the repayment periods of borrowings are given in note
18.
F-35
<PAGE> 90
TAMARIS PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
17. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
<TABLE>
<CAPTION>
1997 1996
------------------------- --------------------------
GROUP COMPANY GROUP COMPANY
(pound)'000 (pound)'000 (pound)'000 (pound)'000
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Hire purchase agreements.................................... 123 74 98 98
Bank loans.................................................. 954 -- 4,434 --
Unsecured loan notes........................................ 3,000 -- 3,000 --
Unsecured loan.............................................. 39 -- 39 --
----- -- ----- --
4,116 74 7,571 98
===== == ===== ==
</TABLE>
Details of the security provided for bank loans and overdrafts are given in
note 19.
Further details of the repayment periods of borrowings are given in note
18.
18. BORROWINGS
<TABLE>
<CAPTION>
1997 1996
------------------------- -------------------------
GROUP COMPANY GROUP COMPANY
(pound)'000 (pound)'000 (pound)'000 (pound)'000
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Within one year
Hire purchase agreements.................................... 49 43 28 28
Bank loans and overdrafts................................... 1,032 -- 1,442 --
After one and within two years
Hire purchase agreements.................................... 49 44 31 31
Bank loans.................................................. 52 -- 239 --
After two years and within five years
Hire purchase agreements.................................... 74 30 67 67
Bank loans.................................................. 175 -- 756 --
Unsecured loan notes........................................ 3,000 -- 3,000 --
Unsecured loan.............................................. 39 -- 39 --
After five years
Bank loans.................................................. 727 -- 3,439 --
----- --- ----- ---
5,197 117 9,041 126
===== === ===== ===
</TABLE>
19. SECURED CREDITORS
A) LLOYDS BANK PLC
The loan secured by a first fixed and floating charge over the assets and
business of the subsidiary company, the Belmont Nursing Home Limited, was repaid
during the year.
B) MIDLAND BANK PLC
The loan secured by a fixed and floating charge over the assets and
business of Tamaris (South East) Limited was repaid during the year.
F-36
<PAGE> 91
TAMARIS PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
19. SECURED CREDITORS (CONTINUED)
c) ULSTER BANK LIMITED
Ulster Bank Limited has, as security for overdraft facilities of L223,000
for Edgewater Lodge Limited and L156,000 for Rosevale Lodge Limited, limited
guarantees from Tamaris plc. The guarantees at the year end were L188,000 in
respect of Edgewater Lodge and L116,000 for Rosevale Lodge and were increased to
L223,000 and L156,000 respectively on 29 April 1997.
d) BARCLAYS BANK PLC
i) Barclays Bank has a floating charge over the assets and business
of the subsidiary company Lunan House Limited as its security for the loan
facility of L1,200,000. The period remaining for the repayment of the loan
is 15 years and the loan carries interest at 2.0% over the Bank's base
lending rate. The indebtedness to Barclays at the year end was L1,000,000
ii) Laudcare Limited has an overdraft facility of L250,000 from
Barclays Bank that is guaranteed by Tamaris plc. Barclays also has a
floating charge over Laudcare's undertakings, property and assets.
iii) Westview Lodge Limited has an overdraft facility of L120,000 from
Barclays Bank that is guaranteed by Tamaris plc. Barclays also has a
floating charge over Westview Lodge's undertakings, property and assets.
e) CLYDESDALE BANK PLC
Clydesdale Bank has a fixed and floating charge over the assets of Tamaris
(Scotland) Limited as its security for the guarantee facility of up to
L3,080,000 made available to Tamaris (Scotland) Limited. A deposit of L2,830,000
has been made with Clydesdale Bank plc. It is included under current assets but
is not available for Group use unless replaced by comparable security.
20. PROVISION FOR LIABILITIES AND CHARGES
The deferred taxation not provided for in the financial statements is set
out below and represents a contingent liability at the balance sheet date and is
calculated using tax rates of 33% for the Group. There are no unprovided amounts
for the Company.
<TABLE>
<CAPTION>
GROUP
UNPROVIDED
--------------
1997 1996
(pound)'000 (pound)'000
----------- -----------
<S> <C> <C>
Accelerated capital allowances.............................. 60 153
Other timing differences.................................... -- 20
--- ----
60 173
Less: Trading losses........................................ (60) 173)
--- ----
-- --
=== ====
</TABLE>
No provision has been made for the taxation that arises on the chargeable
profits from the sale of the Group's properties as it is the Directors'
intention to claim roll-over relief on the acquisition of replacement assets.
The estimated amount of tax not provided is L1,300,000.
F-37
<PAGE> 92
TAMARIS PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
21. CALLED UP SHARE CAPITAL
<TABLE>
<CAPTION>
ORDINARY SHARES OF 0.25P NUMBER (pound)'000
------------------------ ------ -----------
<S> <C> <C>
Authorised
At beginning of year................................... 640,000,000 1,600
Increase............................................... 160,000,000 400
----------- -----
At end of year........................................... 800,000,000 2,000
=========== =====
Allotted called up and fully paid
At beginning of year................................... 467,829,821 1,170
Allotment of new ordinary shares....................... 65,331,429 163
----------- -----
At end of year........................................... 533,161,250 1,333
=========== =====
</TABLE>
Allotments during the year:
Pursuant to shareholders' authority, given at the Annual General
Meeting of shareholders on 31 July, 1995, 23,600,000 new ordinary shares of
0.25p each were allotted by a Placing on 8 May 1996 at 2.0p per share. The
difference between the total consideration of L472,000 and the nominal
value of the allotted new shares of L59,000 was, after deduction of
expenses, credited to the share premium account.
Pursuant to shareholders' authority, given at the Extraordinary
General Meeting of shareholders on 3 October 1996, regarding the
acquisition of the investments of Speciality Care Plc, 28,571,429 new
ordinary shares of 0.25p each were allotted on 9 December 1996 at 3.5p per
share. The difference between the allotment value of the shares, totalling
L1,000,000 and their par value of L71,429 was transferred to merger
reserve.
Pursuant to shareholders' authority, given at the Annual General
Meeting of shareholders on 31 July 1996, 13,160,000 new ordinary shares of
0.25p each were allotted by a Placing on 7 January 1997 at 2.5p per share.
The difference between the total consideration of L329,000 and the nominal
value of the allotted new shares of L32,900 was, after deduction of
expenses, credited to the share premium account.
A total of 10,909,710 options over the company's 0.25p ordinary shares have
been granted, as follows:
(i) Under the Company's Approved Executive Share Option Scheme,
options will be satisfied by the transfer of existing shares held by
Tamerise Limited pursuant to the Employees Trust:
<TABLE>
<CAPTION>
DATE OF DATE OF EXERCISE
NUMBER OF OPTIONS GRANT EXERCISE PRICE (P)
----------------- ------- -------- ---------
<S> <C> <C> <C>
3,536,570................................ 9/9/1993 10/9/1996 to 2.25
9/9/2003
100,000.................................. 8/10/1993 9/10/1996 to 2
8/10/2003
200,000.................................. 23/6/1995 24/6/1998 to 2
23/6/2005
</TABLE>
(ii) William Fitch and Barry McFadzean entered into option agreements
with the Company on 9 September 1993 under which they were each granted
options over 3,536,570 ordinary shares at a price of 2p per share,
exercisable at any time after the period of two years from the date of
grant (but not later than five years from the date of grant) or within a
period of six months in the event of death, cessation as a Director, change
of control of the Company or it undergoing a scheme of arrangement. Barry
McFadzean subsequently assigned the benefit of his option agreement to CAP
Investments Limited, a company controlled by him.
F-38
<PAGE> 93
TAMARIS PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
21. CALLED UP SHARE CAPITAL (CONTINUED)
During the year the Group acquired the Lodge Care Homes (see note 28) under
operating leases from Principal Healthcare Finance Limited ("Principal"). As
part of that transaction, on 1 August 1996, Tamaris issued to Principal a
warrant to subscribe up to 25,116,976 ordinary shares at an exercise price of
3.9p per share. The warrant may be exercised in whole or in part at any time
between the first and tenth anniversary of the issue of the warrant. The warrant
is transferable in whole or in part without restriction.
ALLOTMENTS SINCE THE YEAR END:
Pursuant to shareholders' authority, given at the Annual General
Meeting of shareholders on 31 July 1996, 35,000,000 new ordinary shares of
0.25p each were allotted by a Placing on 19 May 1997 at 2.7p per share. The
difference between the total consideration of L945,000 and the nominal
value of the allotted new shares of L87,500 will, after deduction of
expenses, be credited to the share premium account.
Pursuant to the exercise of an option granted to Barry McFadzean, a
Director, on 9 September 1993 and subsequently assigned to CAP Investments
Limited (a company controlled by Barry McFadzean) 3,536,570 new ordinary
shares of 0.25p each were allotted on 11 June 1997 at 2.0p each. The
difference between the total consideration of L70,731 and the nominal value
of the allotted new shares of L8,841 will, after deduction of expenses, be
credited to the share premium account.
22. SHARE PREMIUM ACCOUNT AND RESERVES
<TABLE>
<CAPTION>
SHARE PREMIUM REVALUATION OTHER MERGER PROFIT AND
ACCOUNT RESERVE RESERVE RESERVE LOSS ACCOUNT
GROUP (pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000
----- ------------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
At beginning of year...................... 3,910 480 848 -- 188
Arising on share allotments............... 709 -- -- 929 --
Share issue expenses...................... (37) -- -- (62) --
Goodwill written off...................... -- -- -- (1,000) --
Reserve movement.......................... -- (480) (133) 133 480
Profit for year........................... -- -- -- -- 1,813
----- ---- ---- ------ -----
At 31 March 1997.......................... 4,582 -- 715 -- 2,481
===== ==== ==== ====== =====
</TABLE>
The Other reserve represents a capital reserve arising on acquisition of
subsidiary companies in previous years.
The cumulative amount of goodwill arising from acquisitions in current and
prior years which has been written off to Group reserves, net of goodwill on
acquired interests since disposed of, is L2,074,000 (1996: L1,074,000).
<TABLE>
<CAPTION>
SHARE PREMIUM MERGER PROFIT AND
ACCOUNT RESERVE LOSS ACCOUNT
COMPANY (pound)'000 (pound)'000 (pound)'000
------- ------------- ----------- ------------
<S> <C> <C> <C>
At beginning of year.......................... 3,910 875 181
Arising on share allotments................... 709 929 --
Share issue expenses.......................... (37) (62) --
Profit for year............................... -- -- 19
----- ----- ---
At 31 March 1997.............................. 4,582 1,742 200
===== ===== ===
</TABLE>
F-39
<PAGE> 94
TAMARIS PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
23. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
<TABLE>
<CAPTION>
1997 1996
GROUP GROUP
(pound)'000 (pound)'000
----------- -----------
<S> <C> <C>
Retained profit for the financial year...................... 1,813 615
New ordinary share capital subscribed....................... 1,801 3,200
Costs of issue.............................................. (99) (453)
Goodwill written off........................................ (1,000) (1,044)
------ ------
2,515 2,318
Opening shareholders' funds................................. 6,596 4,278
------ ------
Closing shareholders' funds................................. 9,111 6,596
====== ======
</TABLE>
24. COMMITMENTS UNDER OPERATING LEASES
The Company and Group have commitments under operating leases in respect of
land and buildings for payments of L6,461,000 (1996: L1,680,000) in the year to
31 March 1998. The leases to which these amounts relate all expire after more
than five years.
25. NET CASH INFLOW FROM OPERATING ACTIVITIES
<TABLE>
<CAPTION>
1997 1996
(pound)'000 (pound)'000
---------- -----------
<S> <C> <C>
Operating profit............................................ 1,323 1,317
Depreciation charges........................................ 332 207
Increase in debtors......................................... (1,533) (697)
Increase in creditors....................................... 1,648 98
------ -----
Net cash inflow from operating activities................... 1,770 925
====== =====
</TABLE>
26. RECONCILIATION OF NET CASHFLOW TO MOVEMENT IN NET DEBT
<TABLE>
<CAPTION>
1997 1996
(pound)'000 (pound)'000
----------- -----------
<S> <C> <C>
Increase/(decrease) in cash in the year..................... 1,948 (1,084)
Cash outflow/(inflow) from financing........................ 3,537 (97)
------ ------
Change in net debt resulting from cash flows................ 5,485 (1,181)
Inception of hire purchase agreements....................... (103) (119)
Loan notes/unsecured loan issued for non cash
consideration............................................. -- (3,039)
------ ------
Movement in net debt in the year............................ 5,382 (4,339)
Net debt at 1 April 1996.................................... (8,708) (4,369)
------ ------
Net debt at 31 March 1997................................... (3,326) (8,708)
====== ======
</TABLE>
F-40
<PAGE> 95
TAMARIS PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
27. ANALYSIS OF CHANGES IN NET DEBT
<TABLE>
<CAPTION>
AT 1 APRIL NON-CASH AT 31 MARCH
1996 CASH FLOW ITEMS 1997
(pound)'000 (pound)'000 (pound)'000 (pound)'000
----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Cash at bank and in hand............. 333 1,538 -- 1,871
Bank overdrafts and short term
loans.............................. (1,442) 410 -- (1,032)
------ ----- ---- ------
(1,109) 1,948 -- 839
Bank loans........................... (4,434) 3,480 -- (954)
Hire purchase agreements............. (126) 57 (103) (172)
Loan notes........................... (3,000) -- -- (3,000)
Other loans.......................... (39) -- -- (39)
------ ----- ---- ------
(8,708) 5,485 (103) (3,326)
====== ===== ==== ======
</TABLE>
28. ACQUISITIONS
During the year the group acquired a number of care homes and, with one
exception, entered into simultaneous sale and leaseback arrangements. Details of
the capitalised values of each transaction are given below. In each case the
businesses concerned formed part of businesses where only certain assets were
acquired. In these circumstances, it is not practical to provide details of
profits or losses for these businesses for financial periods before acquisition.
Details of the contribution to and utilisation of Group cash flow is given at
note 29.
LODGE CARE HOMES
On 11 June 1996, Tamaris subscribed L499 for 49.9% of the shares in a newly
formed company, Continental Shelf 55 Limited ("CS55"). On the same day CS55
acquired the entire issued share capital of Lodge Care PLC, a company owning and
operating six care homes, 257 beds, registered for the care of the frail
elderly.
The freehold properties, related fixed assets and business of the Lodge
Care PLC homes were then purchased by three newly incorporated wholly owned
Tamaris subsidiaries Doulton Court Limited, Keslaw Limited and Leeland Limited
with the freeholds being simultaneously sold to and leased back from Principal
Healthcare Finance Limited ("Principal") on 30 year operating leases.
The assets acquired were as follows:
<TABLE>
<CAPTION>
BOOK VALUE
AND FAIR VALUE
(pound)'000
--------------
<S> <C>
Freehold land and buildings................................. 5,847
Fixtures and fittings within the homes...................... 611
------
6,458
Sale proceeds............................................... (5,500)
------
958
Costs of acquisition........................................ 178
------
Net assets acquired -- Short leasehold interest............. 1,136
======
Satisfied by:
Cash........................................................ 1,136
======
</TABLE>
F-41
<PAGE> 96
TAMARIS PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
28. ACQUISITIONS (CONTINUED)
PARKLANDS CARE HOMES
In June 1996, two newly incorporated wholly owned Tamaris subsidiaries,
Bewick Waverley Limited and Chapelfield View Limited acquired the freehold land
and buildings, related fixed assets and business of four homes, 170 beds, from
Parklands Care Homes Limited for an aggregate consideration of L5,000,000. The
homes were simultaneously sold to Principal for L4.5m and leased back on 30 year
operating leases.
The assets acquired were as follows:
<TABLE>
<CAPTION>
BOOK VALUE
AND FAIR VALUE
(pound)'000
--------------
<S> <C>
Purchase consideration...................................... 5,000
Sale proceeds............................................... (4,500)
------
500
Costs of acquisition........................................ 606
------
Net assets acquired -- Short leasehold interest............. 1,106
======
Satisfied by:
Cash........................................................ 1,036
Amounts due at year end..................................... 70
------
1,106
======
</TABLE>
SPECIALITY CARE HOMES
With effect from 12 September 1996, Tamaris subscribed L500,000 and
Speciality Care L1,000,000 for respective 33.3% and 66.7% holdings in three
newly formed companies, Laudcare Limited, Maldcare Limited and Torrcare Limited.
The subscription monies of L1,500,000 were used to purchase the business and
assets (other than leasehold property) of six leased care homes from Speciality
Care Limited subsidiaries, as follows:
<TABLE>
<CAPTION>
ORDINARY
SHARES OF
(pound)1 EACH BUSINESS AND ASSETS CONSIDERATION
SUBSCRIBED OF CARE HOME ACQUIRED (pound)'000
---------- --------------------- -------------
<S> <C> <C> <C>
Laudcare Limited................. 1,063 Blackwell Vale................... 319
Millbrow......................... 224
Stanton Lodge.................... 291
Willoughby Grange................ 229
----- -----
1,063 1,063
Maldcare Limited................. 157 Stanton Grove.................... 157
Torrcare Limited................. 280 Lakeside Gardens................. 280
----- -----
1,500 1,500
===== =====
</TABLE>
The operating leases on these six care homes were then assigned to
Laudcare, Maldcare and Torrcare. Immediately thereafter, Tamaris acquired the
Speciality Care holding in the above companies for L1,000,000, satisfied by the
issue of 28,571,429 new ordinary shares at a deemed price of 3.5p.
The purchase of Laudcare Limited, Maldcare Limited and Torrcare Limited has
been dealt with by the acquisition method of accounting. Advantage has been
taken of Section 131 of the Companies Act in respect of the premium on the issue
of shares to finance the acquisition.
F-42
<PAGE> 97
TAMARIS PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
28. ACQUISITIONS (CONTINUED)
The assets and liabilities of Laudcare Limited, Maldcare Limited and
Torrcare Limited were as follows:
<TABLE>
<CAPTION>
BOOK VALUE
AND FAIR VALUE
(pound)'000
--------------
<S> <C>
Short leasehold interests................................... 500
Costs of acquisition........................................ 554
-----
1,054
Purchased goodwill.......................................... 1,000
-----
2,054
-----
Satisfied by:
Cash........................................................ 1,054
Shares...................................................... 1,000
-----
2,054
=====
</TABLE>
The goodwill of L1,000,000 has been written off against merger reserve and
the remaining costs and short leasehold interest have been capitalised at
L1,054,000.
Under the terms of the acquisition agreement, Tamaris may be liable to pay
up to a further L220,000 satisfied by the issue to Speciality Care Limited of up
to 6,285,174 new ordinary shares at a deemed issue price of 3.5p, dependent on
the amount of post tax profits of the above homes in the period 1 April 1997 to
31 March 1998. However, the Directors are strongly of the opinion that no
further consideration will be payable based on the current trading position of
those homes.
GUTHRIE COURT NURSING HOME
With effect from 17 September 1996, Continental Shelf 64 Limited, ("CS64"),
a wholly owned Tamaris subsidiary, acquired the business and assets of Guthrie
Court Nursing Home for L4,000,000. The home was subsequently sold to and leased
back from Principal for L3,800,000 on a 30 year operating lease. CS64 changed
its name to Guthrie Court Limited on 19 September 1996.
The assets acquired were as follows:
<TABLE>
<CAPTION>
BOOK VALUE AND
FAIR VALUE
(pound)'000
--------------
<S> <C>
Purchase consideration...................................... 4,000
Sale proceeds............................................... (3,800)
------
200
Costs of acquisition........................................ 140
------
Net assets acquired -- Short leasehold interest............. 340
======
Satisfied by:
Cash...................................................... 340
======
</TABLE>
F-43
<PAGE> 98
TAMARIS PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
28. ACQUISITIONS (CONTINUED)
LUNAN HOUSE NURSING HOME
On 27 November 1996, Lunan House Limited, a wholly owned Tamaris
subsidiary, acquired the freehold property, related fixed assets and business of
Lunan House Nursing Home for L1,146,000 financed by a loan facility of up to
L1,280,000 from Barclays Bank Plc.
The assets acquired were as follows:
<TABLE>
<CAPTION>
BOOK VALUE AND
FAIR VALUE
(pound)'000
--------------
<S> <C>
Tangible fixed assets....................................... 1,146
=====
Satisfied by:
Cash...................................................... 1,146
=====
</TABLE>
PEAR TREE HOUSE RESIDENTIAL CARE HOME
ROSS WYLD LODGE NURSING HOME
With effect from 21 March 1997, Ross Pear Limited, a wholly owned
subsidiary of Tamaris, agreed to purchase the freehold properties, related fixed
assets and business of Pear Tree House Residential Care Home (55 beds) and Ross
Wyld Lodge Nursing Home (57 beds) for L2,400,000 and L3,500,000 respectively.
The homes were simultaneously sold to and leased back from IHP Limited on 21
year operating leases.
<TABLE>
<CAPTION>
BOOK VALUE AND
FAIR VALUE
(pound)'000
--------------
<S> <C>
Purchase consideration...................................... 5,900
Sale proceeds............................................... (5,900)
------
0
Costs of acquisition........................................ 67
------
Net assets acquired -- Short leasehold interest............. 67
======
Satisfied by:
Cash...................................................... 67
======
</TABLE>
TRIASMA HOMES
With effect from 27 March 1997, three wholly owned Tamaris subsidiaries,
Edgewater Lodge Limited, Rosevale Lodge Limited and Westview Lodge Limited
acquired the freehold interests in the properties from which they trade, from
Triasma Homes Limited, a property company in which Tamaris held 49.99% of the
ordinary share capital.
The freehold properties were simultaneously sold to and leased back from
Nursing Home Properties Plc for L6,581,000 on 25 year operating leases. The sale
price for Rosevale Lodge and Westview Lodge includes deferred consideration of
L264,000 and L130,000 respectively, dependent on those homes achieving occupancy
rates in excess of 90% for three consecutive months.
F-44
<PAGE> 99
TAMARIS PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
28. ACQUISITIONS (CONTINUED)
The assets acquired were as follows:
<TABLE>
<CAPTION>
BOOK VALUE AND
FAIR VALUE
(pound)'000
--------------
<S> <C>
Purchase consideration...................................... 7,227
Sale proceeds (including deferred consideration)............ (6,581)
------
646
Costs of acquisition........................................ 217
------
Net assets acquired -- Short leasehold interest............. 863
======
Satisfied by:
Cash...................................................... 863
======
</TABLE>
]29. CASH FLOW FROM ACQUISITIONS
The business undertakings acquired during the year made the following
contribution to and utilisation of Group cash flow.
<TABLE>
<CAPTION>
(pound)'000
-----------
<S> <C>
Net cash inflow from operating activities................... 494
Returns on investment and servicing of finance.............. (42)
Capital expenditure and financial investment................ (214)
----
238
====
</TABLE>
Operating activities excludes central overhead.
As all businesses were acquired by newly formed companies there were no
cash or bank balances or borrowings taken over. The total cash consideration of
L5,642,000 was the only outflow in respect of the purchase of these businesses.
30. PENSION CONTRIBUTIONS
Contributions to employees' own pension schemes are accrued and payable
during the term of employment.
31. CAPITAL COMMITMENTS
The Company and Group had contracted capital commitments at the year end of
L394,000 (1996: Lnil).
F-45
<PAGE> 100
TAMARIS PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
32. CONTINGENT LIABILITIES
Tamaris and/or its subsidiaries have given charges, guarantees or cross
guarantees to lessors and bankers to assist the trading of other Group
companies. Liabilities and commitments covered by these guarantees are all
reported within these financial statements.
There is a contingent liability to deferred taxation as set out in note 20.
33. RELATED PARTY TRANSACTIONS
There were no transactions with Directors or related companies during the
year other than as disclosed as Directors Emoluments in note 6.
34. POST BALANCE SHEET EVENTS
As of 17 May 1997 the Company entered into an agreement with Principal
Healthcare Finance Limited (Principal) to take a 50% interest in a joint venture
company formed to facilitate the acquisition of certain assets and leasing of
care homes of Quality Care Homes plc. Following completion of the acquisition of
Quality Care Homes plc on 30 June 1997, the Company assumed responsibility
through a management agreement executed by a subsidiary for the operation of the
care homes. Subsequently, the Company acquired Principal's interest in the joint
venture company, and simultaneously the latter was granted operating leases of
care homes and acquired the assets of associated businesses previously owned and
operated by Quality Care Homes plc.
On 30 April 1997 the Company entered into a conditional agreement to
acquire the business and assets of Bearehill Nursing & Residential Home,
comprising 60 beds, in Brechin for a consideration of L1,625,000 to be satisfied
by way of a vendor placing of 65,000,000 ordinary shares at 2.5p per share.
35. POST BALANCE SHEET EVENTS (UNAUDITED)
On 25 July 1997 the Company entered into a conditional agreement to acquire
the entire issued share capital of Caledonian Care Limited, an operator of two
care homes in Scotland comprising 114 beds, for a consideration of L1,200,000 to
be satisfied by the allotment of 43,636,364 Ordinary Shares at 2.75p per share.
On 15 August 1997 the Company subscribed for a 34 per cent. interest in The
Nunnery Limited, an Isle of Man Company, which owns the freehold and leasehold
interests of a property called The Nunnery, located in Douglas, Isle of Man, for
a cash consideration of L855,000. On 27 October 1997 the Company disposed of 182
ordinary shares of The Nunnery Limited (which represented 10 per cent. of the
issued share capital) for a cash consideration of L250,000.
On 12 September 1997 Shareholder approval was given for the acquisition of
a commercial property portfolio from Colegate Management Limited for L8,923,000,
satisfied as to L6,375,000 in cash and L2,548,000 by the issue of 92,654,545
Ordinary Shares at 2.75p per share on 24 September 1997.
On 29 October 1997 The Company entered into a conditional subscription
agreement with Roseview International Limited, a Singapore based company,
pursuant to which Roseview agreed to subscribe for 114,545,455 Ordinary Shares
at 2.75p per share. This agreement became unconditional on 14 January 1998.
On 13 December 1997 the Company and two wholly owned subsidiaries entered
into conditional agreements with Westminster Health Care Limited for the
acquisition and sale and leaseback of 12 care home businesses. The consideration
for the seven homes in England to be satisfied by the issue and allotment to
Westminster of either 4,000,000 Preference Shares at par and 18,181,818 Ordinary
Shares at 2.75p per share or 4,500,000 Preference Shares, and by the payment at
completion of L6.5 million in cash. The consideration for the five homes in
Northern Ireland to be satisfied by a payment at completion of L9.05 million in
cash. The
F-46
<PAGE> 101
TAMARIS PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
cash consideration in both cases to be financed by sale and subsequent leaseback
of the properties. These agreements were completed on 23 January 1998.
The following share issues were made in the period 1 April 1997 to 30
September 1997.
i) 35,000,000 Ordinary Shares of 0.25p each on 19 May 1997 at 2.7p per
share.
ii) 3,536,570 Ordinary Shares of 0.25p each on 11 June 1997 at 2p per
share.
iii) 65,000,000 Ordinary Shares of 0.25p each on 18 June 1997 at 2.5p
each, for the acquisition of Bearehill referred to above.
iv) 43,636,364 Ordinary Shares of 0.25p each on 25 July 1997 at 2.75p
each, for the acquisition of Caledonian Care Limited as referred to above.
v) 92,654,545 Ordinary Shares of 0.25p each on 24 September 1997 at
2.75p each in part consideration for the acquisition of the Colegate
property portfolio as referred to above.
All of these issues of shares are reflected, after deduction of issue
expenses, in the unaudited interim financial statements.
36. RECONCILIATION TO US GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (US GAAP)
<TABLE>
<CAPTION>
YEAR ENDED 31
MARCH
----------------------- SIX MONTHS TO
1997 1996 30 SEPTEMBER 1997
(pound)'000 (pound)'000 (pound)'000
----------- ----------- -----------------
AUDITED UNAUDITED
<S> <C> <C> <C>
Net profit before dividends per UK GAAP..................... 2,293 968 647
Capitalised short leasehold interests(1).................... (5,011) (296) (902)
Amortisation of goodwill(2)................................. (104) (54) (58)
Revalued assets(3).......................................... 480 10 --
Deferred taxation(4)........................................ (725) (575) --
------ ----- ------
Net profit (loss) per US GAAP............................... (3,067) 53 (313)
====== ===== ======
Closing shareholders' equity per UK GAAP.................... 9,111 6,596 14,441
Capitalised short leasehold interests(1).................... (5,622) (611) (6,524)
Capitalisation and amortisation of goodwill(2).............. 1,915 1,019 2,564
Revalued assets(3).......................................... -- (480) --
Deferred taxation(4)........................................ (1,300) (575) (1,300)
------ ----- ------
Closing shareholders' equity per US GAAP.................... 4,104 5,949 9,181
====== ===== ======
Changes in shareholders' equity on a US GAAP basis:
Shareholders' equity at beginning of period................. 5,949 3,502 4,104
Net profit (loss)........................................... (3,067) 53 (313)
Dividends................................................... (480) (353) (211)
New ordinary shares issued (net of issue costs)............. 1,702 2,747 5,601
------ ----- ------
Shareholders' equity at the end of period................... 4,104 5,949 9,181
====== ===== ======
</TABLE>
The following are descriptions of US GAAP reconciling items:
(1) Under UK GAAP, the group capitalise, as short leasehold interests,
the costs associated with the acquisition of care home operating leases
that comprise the continuing ordinary activities of the
F-47
<PAGE> 102
TAMARIS PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
36. RECONCILIATION TO US GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (US GAAP)
(CONTINUED)
group. Such costs are amortised over the period of the lease to which they
relate. Under US GAAP, such costs are expensed in the period incurred.
(2) Under UK GAAP, prior to the introduction of Financial Reporting
Standard No. 10, goodwill arising on acquisition could be written off
immediately to reserves. Under US GAAP, goodwill is amortised over the
estimated economic life of the asset which has been determined to be 20
years.
(3) Under UK GAAP, the Companies Act permits the inclusion of certain
assets at a revaluation or on a current cost basis. Under US GAAP, fixed
assets are stated at historical cost.
(4) Under UK GAAP, deferred taxation is provided only to the extent
that a liability or asset will crystallise in the foreseeable future
(partial provision basis). Under US GAAP, a full provision basis is adopted
for both deferred tax liabilities and assets. Deferred tax assets not
expected to be utilised are reserved for with a valuation allowance.
Additional disclosures are as follows:
1. Under UK GAAP returns on investment and servicing of finance,
taxation, dividends paid and financial investment are shown as separate
activities in the consolidated statement of cash flows. Under US GAAP,
changes to such balances are generally included in operating activities as
to returns on investment, servicing of finance and taxation, with the
remaining items shown as financing activities. Under UK GAAP, capital
expenditure and acquisitions and disposals are shown as separate
activities. Under US GAAP, changes to such balances are generally included
in investing activities. The sum of cash flows stemming from operating
activities, returns on investment and servicing of finance and taxation
under UK GAAP is the same in all material respects to cash flows from
operating activities under US GAAP.
2. For US GAAP purposes, the company adopted SFAS 121, "Accounting for
the Long-Lived Assets and for Long-Lived Assets to be Disposed of", as of 1
April 1996. The effect of adoption of SFAS 121 was not material.
3. For US GAAP purposes, disclosures required under SFAS 123,
"Accounting for Stock-Based Compensation" have not been determined. The
option schemes are not compensatory under SFAS 123.
4. In June 1997 the Financial Accounting Standards Board issued SFAS
130 "Reporting Comprehensive Income", SFAS 130 is effective for fiscal
years beginning after December 15, 1997. The company has considered the
effects of this statement and does not believe to have any comprehensive
income as defined by this statement.
5. In May 1997 the Financial Accounting Standards Board issued SFAS
131 "Disclosure about Segments of an Enterprise and Related Information" is
effective for fiscal years beginning after December 15, 1997. The company
believes that the effect of adoption of SFAS 131 will not be material.
6. During the unaudited six months ended 30 September 1997 a total of
239,827,479 Ordinary Shares of 0.25p each were issued at between 2p and
2.75p per share for a gross amount of L6,389,000. The aggregate issue costs
were L788,000.
F-48
<PAGE> 103
======================================================
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.......................... 14
The Company........................... 18
The Rights Offering................... 18
The Distribution...................... 23
Use of Proceeds....................... 27
Capitalization........................ 28
Dividend Policy....................... 28
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 29
Business.............................. 30
Taxation of the Company and its
Shareholders........................ 35
Management............................ 38
Principal and Selling Shareholders.... 43
Certain Transactions.................. 44
Description of Omega Worldwide
Stock............................... 44
Certain Antitakeover Provisions....... 47
Experts............................... 53
Legal Matters......................... 53
Index to Financial Statements......... F-1
</TABLE>
------------------------
UNTIL APRIL 21, 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.
10,250,000 SHARES OF COMMON STOCK
2,250,000 RIGHTS TO PURCHASE
SHARES OF COMMON STOCK
------------------
PROSPECTUS
------------------
======================================================
<PAGE> 104
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..................................... $ 13,386
Listing Fee.............................................. $ 75,000
Transfer Agent's and Related Fee......................... $ 25,000
Printing and Engraving Fees.............................. $ 75,000
Legal Fees and Expenses.................................. $ 250,000
Accounting Fees and Expenses............................. $ 200,000
Miscellaneous............................................ $ 111,614
---------
Total.................................................. $ 750,000
=========
</TABLE>
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 contains
such a provision which eliminates such liability to the maximum extent permitted
by Maryland law.
The Charter authorizes the Company, 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 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 (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
II-1
<PAGE> 105
(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 him 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, real estate
investment trust, 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.
The Company has entered into indemnification agreements with each of its
officers and directors. The indemnification agreements require, among other
things, that the Company 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. This issuance and sale of common stock is 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> 106
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <C> <S>
3.1 -- Form of Articles of Amendment and Restatement
3.2 -- Form of Amended and Restated Bylaws
3.3 -- Form of Articles Supplementary for the Series B Preferred
Stock
3.4 -- Form of Articles Supplementary for the Series A Preferred
Stock (included as part of Exhibit 10.6)
4.1 -- Specimen stock certificate
5 -- Opinion of Mayer, Brown & Platt as to the legality of the
Common Stock and Rights being registered
8 -- Tax Opinion of Mayer, Brown & Platt
10.1 -- Form of Stock Option and Restricted Stock Plan
10.2 -- Form of Opportunity Agreement, dated as of April 1, 1998,
between Omega and the Company
10.3 -- Form of Services Agreement, dated as of April 1, 1998,
between Omega and the Company
10.4 -- Form of Contribution Agreement, dated as of April 1, 1998
between Omega and the Company
10.5 -- Amended and Restated Advisory Agreement, dated as of July
21, 1995, between the Company (successor by assignment to
Omega) and Principal
10.6 -- Form of Rights Agreement, dated as of April 1, 1998, between
the Company and Chicago Trust Company of New York
10.7 -- Form of Indemnification Agreements
10.8 -- Form of Rights Investors Agreement, dated as of April 1,
1998, between the Company and the Rights Investors
21 -- List of Subsidiaries
23.1 -- Consent of Ernst & Young
23.2 -- Consent of Ernst & Young LLP
23.3 -- Consent of Grant Thornton
23.5 -- Consent of Mayer, Brown & Platt (included as part of Exhibit
5 and Exhibit 8)
99.1 -- Form of Rights Certificate
99.2 -- Form of Notice of Guaranteed Delivery
</TABLE>
(b) Financial Statement Schedules.
Not applicable.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
1. To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
a. To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
b. To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no
II-3
<PAGE> 107
more than 20 percent change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the effective
registration statement.
c. To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
2. That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
3. To remove from registration by means of post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
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-4
<PAGE> 108
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 March 25, 1998.
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 Officer
Essel W. Bailey, Jr. and Director March 25, 1998
/s/ DAVID A. STOVER Vice President and Chief Financial
- ------------------------------------------------ Officer (Principal Financial and
David A. Stover Accounting Officer) March 25, 1998
</TABLE>
II-5
<PAGE> 109
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <C> <S>
3.1 -- Form of Articles of Amendment and Restatement
3.2 -- Form of Amended and Restated Bylaws
3.3 -- Form of Articles Supplementary for the Series B Preferred
Stock
3.4 -- Form of Articles Supplementary for the Series A Preferred
Stock (included as part of Exhibit 10.6)
4.1 -- Specimen stock certificate
5 -- Opinion of Mayer, Brown & Platt as to the legality of the
Common Stock and Rights being registered
8 -- Tax Opinion of Mayer, Brown & Platt
10.1 -- Form of Stock Option and Restricted Stock Plan
10.2 -- Form of Opportunity Agreement, dated as of April 1, 1998,
between Omega and the Company
10.3 -- Form of Services Agreement, dated as of April 1, 1998,
between Omega and the Company
10.4 -- Form of Contribution Agreement, dated as of April 1, 1998
between Omega and the Company
10.5 -- Amended and Restated Advisory Agreement, dated as of July
21, 1995, between the Company (successor by assignment to
Omega) and Principal
10.6 -- Form of Rights Agreement, dated as of April 1, 1998, between
the Company and Chicago Trust Company of New York
10.7 -- Form of Indemnification Agreements
10.8 -- Form of Rights Investors Agreement, dated as of April 1,
1998, between the Company and the Rights Investors
21 -- List of Subsidiaries
23.1 -- Consent of Ernst & Young
23.2 -- Consent of Ernst & Young LLP
23.3 -- Consent of Grant Thornton
23.5 -- Consent of Mayer, Brown & Platt (included as part of Exhibit
5 and Exhibit 8)
99.1 -- Form of Rights Certificate
99.2 -- Form of Notice of Guaranteed Delivery
</TABLE>
<PAGE> 1
EXHIBIT 3.1
ARTICLES OF AMENDMENT AND RESTATEMENT
OF
OMEGA WORLDWIDE, INC.
FIRST: Omega Worldwide, Inc., a Maryland corporation (the
"Corporation"), desires to amend and restate its charter as currently in effect
and as hereinafter amended.
SECOND: The following provisions are all the provisions of the charter
currently in effect and as hereinafter amended:
ARTICLE I
INCORPORATOR
The undersigned, Steven L. Scesa, whose address is Mayer, Brown &
Platt, 190 South LaSalle Street, Chicago, Illinois 60603, being at least
eighteen (18) years of age, does hereby form a corporation under the general
laws of the State of Maryland.
ARTICLE II
NAME
The name of this corporation (the "Corporation") is Omega Worldwide,
Inc.
ARTICLE III
PURPOSES
The purposes for which this Corporation are formed is to engage in
management activities related to ownership of real property and mortgages
secured by interests in real property and in any other lawful act or activity
for which corporations may be organized under the Maryland General Corporation
Law ("MGCL") as now or hereafter in force.
ARTICLE IV
PRINCIPAL OFFICE IN STATE AND RESIDENT AGENT
The address of the principal office of the corporation in the State of
Maryland is c/o The Corporation Trust Incorporated, 32 South Street, Baltimore,
Maryland 21202. The name of the resident agent of the corporation in the State
of Maryland is The Corporation Trust Incorporated, and its address is 32 South
Street, Baltimore, Maryland 21202, but this corporation may maintain an office
or offices in such other place or places as may be, from time to time, fixed by
its Board of Directors or as may be fixed by the Bylaws of the Corporation.
<PAGE> 2
ARTICLE V
STOCK
Section 5.1. Authorized Shares. The total number of shares of
capital stock which the Corporation shall have authority to issue is Sixty
Million (60,000,000), of which Fifty Million (50,000,000) shall be shares of
Common Stock having a par value of $0.10 per share and Ten Million (10,000,000)
shall be shares of Preferred Stock having a par value of $1.00 per share. The
aggregate par value of all of said shares shall be Fifteen Million Dollars
($15,000,000). If shares of one class of stock are classified or reclassified
into shares of another class of stock pursuant to Sections 5.2, 5.3 or 5.4 of
this Article V, the number of authorized shares of the former class shall be
automatically decreased and the number of shares of the latter class shall be
automatically increased, in each case by the number of shares so classified or
reclassified, so that the aggregate number of shares of stock of all classes
that the Corporation has authority to issue shall not be more than the total
number of shares of stock set forth in the first sentence of this paragraph. To
the extent permitted by Maryland law from time to time, the Board of Directors,
without any action by the stockholders of the Corporation, may amend the
charter from time to time to increase or decrease the aggregate number of shares
of stock or the number of shares of stock of any class or series that the
Corporation has authority to issue.
Section 5.2. Common Stock. Each share of Common Stock shall
entitle the holder thereof to one (1) vote. The Board of Directors may
reclassify any unissued shares of Common Stock from time to time in one or more
classes or series of stock.
Section 5.3. Preferred Stock. The Board of Directors may classify
any unissued shares of Preferred Stock and reclassify any previously classified
but unissued shares of Preferred Stock of any series from time to time, in one
or more classes or series of stock.
Section 5.4. Authorization by Board of Stock Issuance. The Board
of Directors shall have the authority to authorize the issuance of Common Stock
or Preferred Stock from time to time in one or more classes or series, and in
such amounts and for such consideration as the Board of Directors shall deem
appropriate. Prior to issuance of classified or reclassified shares of any
class or series, the Board of Directors by resolution shall: (a) designate that
class or series to distinguish it from all other classes and series of stock of
the Corporation; (b) specify the number of shares to be included in the class
or series; (c) set or change, subject to the provisions of Article IX and
subject to the express terms of any class or series of stock of the Corporation
outstanding at the time, the preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends or other distributions,
qualifications and terms and conditions of redemption for each class or series;
and (d) cause the Corporation to file articles supplementary with the State
Department of Assessments and Taxation of Maryland ("SDAT"). Any of the terms
of any class or series of stock set or changed pursuant to clause (c) of this
Section 5.4 may be made dependent upon facts or events ascertainable outside
the charter (including determinations by the Board of Directors or other facts
or events within the control of the Corporation) and may vary among holders
thereof, provided that the manner in which such facts, events or variations
shall operate upon the terms of such class or series of stock is clearly and
expressly set forth in the articles supplementary filed with the SDAT.
2
<PAGE> 3
Section 5.5. Preemptive Rights. No holder of shares of stock of
the Corporation shall, as such holder, have any preemptive or other right to
purchase or subscribe for any shares of the stock of the Corporation or any
other security of the Corporation which it may issue or sell (whether out of
the number of shares authorized by this charter, or out of any shares of the
stock of the Corporation acquired by it after the issue thereof, or otherwise)
other than such right, if any, as the Board of Directors, in its discretion,
may determine.
ARTICLE VI
DEFINING, LIMITING AND REGULATING POWERS OF THE CORPORATION
AND THE BOARD OF DIRECTORS AND SHAREHOLDERS
Section 6.1. Number and Classification of Directors. The business
and affairs of the Corporation shall be managed under the direction of the
Board of Directors. Subject to any rights of holders of one or more classes or
series of Preferred Stock to elect or remove one or more Directors, the number
of Directors of the Corporation shall be nine (9) , which number may be
increased or decreased pursuant to the Bylaws of the Corporation; provided,
however, that the number of Directors shall never be less than the minimum
number required by the MGCL. The names of the Directors who shall serve
effective immediately until the next annual meeting of stockholders and until
their successors are elected and qualify are:
3
<PAGE> 4
Essel W. Bailey, Jr.
James E. Eden
Thomas F. Franke
Harold J. Kloosterman
Bernard J. Korman
Edward Lowenthal
Robert L. Parker
The Directors may increase the number of Directors and may fill any vacancy ,
whether resulting from an increase in the number of Directors or otherwise, on
the Board of Directors occurring before the next annual meeting of stockholders
in the manner provided in the Bylaws.
The Directors (other than any Director elected solely by holders of
one or more classes or series of Preferred Stock) shall be classified, with
respect to the terms for which they severally hold office, into three classes,
as nearly equal in number as possible, one class to hold office initially for a
term expiring at the next succeeding annual meeting of stockholders, another
class to hold office initially for a term expiring at the second succeeding
annual meeting of stockholders and another class to hold office initially for a
term expiring at the third succeeding annual meeting of stockholders, with the
members of each class to hold office until their successors are duly elected
and qualify. At each annual meeting of the stockholders, the successors to the
class of Directors whose term expires at such meeting shall be elected to hold
office for a term expiring at the annual meeting of stockholders held in the
third year following the year of their election. The terms of Messrs. Essel W.
Bailey, Jr, Harold J. Kloosterman and Robert L. Parker shall expire at the
1999 annual meeting of stockholders; the terms of Messrs. James E. Eden and
Bernard J. Korman shall expire at the 2000 annual meeting of stockholders; and
the terms of Messrs. Thomas F. Franke and Edward Lowenthal shall expire at the
2001 annual meeting of the stockholders.
Section 6.2. Extraordinary Actions. Except as specifically
provided in Section 9.2, notwithstanding any provision of law requiring any
action to be taken or authorized by the affirmative vote of the holders of
shares entitled to cast a greater proportion of the votes, any such action
shall be effective and valid if taken or approved by the affirmative vote of
holders of shares entitled to cast a majority of all the votes entitled to be
cast on the matter.
Section 6.3. Applicability of Elective Statutes. The provisions
of Subtitles 6 (Special Voting Requirements) and 7 (Voting Rights of Certain
Control Shares) of Title 3 of the MGCL shall not apply to this Corporation
unless the Board of Directors elects by resolution to be subject, in whole or
in part, specifically, generally or generally by types, as to specifically
identified or unidentified stockholders, to the provisions of either or both
Subtitles and shall not apply with respect to transactions by Omega Healthcare
Investors, Inc., a Maryland corporation ("Omega"), or any subsidiaries or
affiliates controlled by Omega.
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Section 6.4. Removal of Directors. Subject to the rights of
holders of one or more classes or series of Preferred Stock to elect or remove
one or more Directors, any Director, or the entire Board of Directors, may be
removed from office at any time, but only for cause and then only by the
affirmative vote of at least eighty percent (80%) of the votes entitled to be
cast generally in the election of directors, voting together as a single class.
For the purpose of this paragraph, "cause" shall mean with respect to any
particular Director, a conviction of a felony or a final judgment of a court of
competent jurisdiction holding that such director caused demonstrable, material
harm to the Corporation through bad faith or active and deliberate dishonesty.
Section 6.5. Advisor Agreements. Subject to such approval of
stockholders and other conditions, if any, as may be required by any applicable
statute, rule or regulation, the Board of Directors may authorize the execution
and performance by the Corporation of one or more agreements with any person,
corporation, association, company, trust, partnership (limited or general) or
other organization whereby, subject to the supervision and control of the Board
of Directors, any such other person, corporation, association, company, trust,
partnership (limited or general) or other organization shall render or make
available to the Corporation managerial, investment, advisory and/or related
services, office space and other services and facilities (including, if deemed
advisable by the Board of Directors, the management or supervision of the
investments of the Corporation) upon such terms and conditions as may be
provided in such agreement or agreements (including, if deemed fair and
equitable by the Board of Directors, the compensation payable thereunder by the
Corporation).
Section 6.6. Determinations by Board. The determination as to any
of the following matters, made in good faith by or pursuant to the
direction of the Board of Directors consistent with this charter and in the
absence of actual receipt of an improper benefit in money, property or services
or active and deliberate dishonesty established by a court, shall be final and
conclusive and shall be binding upon the Corporation and every holder of shares
of its stock: the amount of the net income of the Corporation for any period
and the amount of assets at any time legally available for the payment of
dividends, redemption of its stock or the payment of other distributions on its
stock; the amount of paid-in surplus, net assets, other surplus, annual or
other net profit, net assets in excess of capital, undivided profits or excess
of profits over losses on sales of assets; the amount, purpose, time of
creation, increase or decrease, alteration or cancellation of any reserves or
charges and the propriety thereof (whether or not any obligation or liability
for which such reserves or charges shall have been created shall have been paid
or discharged); the fair value, or any sale, bid or asked price to be applied
in determining the fair value, of any asset owned or held by the Corporation;
any matter relating to the acquisition, holding and disposition of any assets
by the Corporation; or any other matter relating to the business and affairs of
the Corporation.
Section 6.7. Business Combination Approval. The affirmative vote
of the holders of not less than eighty percent (80%) of the outstanding shares
of "voting stock" (as hereinafter defined) of the Corporation shall be required
for the approval or authorization of any "Business Combination" (as hereinafter
defined) of the Corporation with any "Related Person" (as hereinafter defined).
However, such eighty percent (80%) voting requirement shall not be applicable
if: (i) the Board of
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Directors of the Corporation by unanimous vote or written consent shall have
expressly approved in advance the acquisition of outstanding shares of voting
stock of the Corporation that caused the Related Person to become a Related
Person or shall have approved the Business Combination prior to the Related
Person involved in the Business Combination having become a Related Person; or
(ii) the Business Combination is solely between the Corporation and another
Corporation, one hundred percent (100%) of the voting stock of which is owned
directly or indirectly by the Corporation. For purposes of this Section 6.7:
a. The term "Business Combination" shall mean (i) any merger or
consolidation of the Corporation 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" (as
hereinafter defined) of the assets of the Corporation
(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
Corporation, (iv) any sale, lease, exchange, transfer or other
disposition of all or any Substantial Part of the assets of a
Related Person to the Corporation, (v) the issuance of any
securities (other than by way of pro rata distribution to all
shareholders) of the Corporation 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.
b. The term "Related Person" shall mean and include 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 ten percent
(10%) or more of the outstanding voting stock of the
Corporation, and any Affiliate or Associate of the
Corporation but shall not include Omega or any subsidiaries or
affiliates controlled by Omega.
c. The term "Substantial Part" shall mean more than ten percent
(10%) of the book value of the total assets of the Corporation
or a Related Person, as the case may be, as of the end of its
most recent fiscal year ending prior to the time the
determination is being made.
d. The term "voting stock" shall mean the outstanding shares of
stock of the Corporation entitled to vote generally in
the election of Directors. In a vote required by or provided
for in this Section 6.7, each share of voting stock shall have
the number of votes granted to it generally in the election of
Directors.
e. Without limitation, any shares of Common Stock of the
Corporation 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.
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ARTICLE VII
LIMITATION OF LIABILITY AND INDEMNIFICATION
Section 7.1. Limitation of Liability. To the maximum extent that
Maryland law in effect from time to time permits limitation of the liability of
directors and officers of a corporation, no Director or officer of the
Corporation shall be liable to the Corporation or its stockholders for money
damages. This limitation on liability applies to events occurring at the time
a person serves as a Director or officer of the Corporation, whether or not such
person is a Director or officer at the time of any proceeding in which
liability is asserted.
Section 7.2. Indemnification. The Corporation shall have the
power, to the maximum extent permitted by Maryland law in effect from time to
time, to obligate itself to indemnify, and to pay or reimburse reasonable
expenses in advance of final disposition of a proceeding to, (i) any individual
who is a present or former Director or officer of the Corporation or (ii) any
individual who, while a Director of the Corporation and at the request of the
Corporation, serves or has served as a director, officer, partner or trustee of
another foreign or domestic corporation, real estate investment trust,
partnership, joint venture, trust, employee benefit plan or any 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 Corporation. The Corporation
shall have the power, with the approval of the Board of Directors, to provide
such indemnification and advancement of expenses to a person who served a
predecessor of the Corporation in any of the capacities described in (i) or
(ii) above and to any employee or agent of the Corporation or a predecessor of
the Corporation.
Section 7.3. Insurance. The Corporation, or a subsidiary or an
affiliate of the Corporation, shall have the power to purchase and maintain
insurance on behalf of any person who is or was a Director, officer, employee
or agent of the Corporation, or who, while a Director, officer, employee or
agent of the Corporation, is or was serving at the request of the Corporation
as a director, officer, partner, trustee, employee or agent of another foreign
or domestic corporation, real estate investment trust, partnership, joint
venture, trust, employee benefit plan or any other enterprise, 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 Corporation would
have the power to indemnify against such liability under the provisions of
Section 2-418 of the MGCL.
Section 7.4. Amendment. References to the MGCL in this Article
are to that law as from time to time amended. Neither the amendment nor repeal
of this Article, nor the adoption or amendment of any other provision of this
charter or Bylaws inconsistent with this Article, shall apply to or affect in
any respect the applicability of the preceding sentence with respect to any act
or failure to act which occurred prior to such amendment, repeal or adoption.
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ARTICLE VIII
RIGHTS AGREEMENT
The Board of Directors shall have the authority to approve a Rights
Agreement ("Rights Agreement") under which purchase rights shall be issued
entitling their recipients to purchase capital stock of the Corporation. The
Board of Directors shall have the authority to fix the rights, powers,
restrictions and other terms and conditions of the rights as set forth in the
Rights Agreement. The provisions of the Rights Agreement shall not apply to
Omega or any subsidiaries or affiliates controlled by Omega.
ARTICLE IX
AMENDMENTS
Section 9.1. Reservation of Right. The Corporation reserves the
right from time to time to amend, alter or repeal any provision contained in
this charter in the manner now or hereafter prescribed by statute, including
any amendment which alters the contract rights of any class of outstanding
stock as expressly set forth herein. All rights and powers conferred herein on
stockholders, Directors and officers are granted subject to this reservation.
Section 9.2. Certain Sections. Notwithstanding any of the
provisions of this charter or the Bylaws of the Corporation (and
notwithstanding the fact that a lesser percentage may be specified by law, this
charter or the Bylaws of the Corporation), the affirmative vote of the holders
of at least eighty percent (80%) of the "voting stock" (as defined in Section
6.7) of the Corporation, voting together as a single class, shall be required to
repeal or amend Sections 6.1, 6.3, 6.4 or 6.7, this Section 9.2 or Article VIII
of this charter or amend this charter in any manner inconsistent with any of
such provisions.
ARTICLE X
PERPETUAL EXISTENCE
The period of the existence of the Corporation is to be perpetual.
THIRD: The amendment to and restatement of the charter as hereinabove
set forth have been duly advised by the Board of Directors and approved by the
stockholders of the Corporation as required by law.
FOURTH: The current address of the principal office of the Corporation
in the State of Maryland is as set forth in Article IV of the foregoing
amendment and restatement of the charter.
FIFTH: The name and address of the Corporation's current resident
agent is as set forth in Article IV of the foregoing amendment and restatement
of the charter.
SIXTH: The number of Directors of the Corporation and the names of
those currently in office are as set forth in Article VI of the foregoing
amendment and restatement of the charter.
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SEVENTH: The undersigned President acknowledges these Articles of
Amendment and Restatement to be the corporate act of the Corporation and as to
all matters or facts required to be verified under oath, the undersigned
President acknowledges that to the best of his knowledge, information and
belief, these matters and facts are true in all material respects and that this
statement is made under the penalties for perjury.
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IN WITNESS WHEREOF, the Corporation has caused these Articles of
Amendment and Restatement to be signed in its name and on its behalf by its
President and attested to by its Secretary on this ___ day of ________ 1998.
OMEGA WORLDWIDE, INC.
By:
-------------------------------
Essel W. Bailey, Jr.
President
ATTEST:
[seal]
- -------------------------------
Susan A. Kovach
Secretary
<PAGE> 1
EXHIBIT 3.2
AMENDED AND RESTATED BYLAWS
OF
OMEGA WORLDWIDE, INC.
_____________, 1998
ARTICLE I
OFFICES
Section 1. Principal Office. The principal office of the Corporation
shall be located and maintained at 905 West Eisenhower Circle, Suite 101, Ann
Arbor, Michigan 48103 or at such place or places as the Board of Directors may
designate.
Section 2. Registered Office. The registered office of the Corporation
shall be established and maintained at the office of The Corporation Trust
Incorporated, 32 South Street, Baltimore, Maryland 21202, and said The
Corporation Trust Incorporated be the registered agent of this corporation in
charge thereof.
Section 3. Other Offices. The Corporation may establish such other
offices, within or without the State of Maryland, at such place or places as the
Board of Directors from time to time may designate, or which the business of the
Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Annual Meetings. Annual meetings of stockholders for the
election of Directors and for such other business as may be stated in the
notice of the meeting shall be held on a date and at a time during the month of
April in each year designated by the Board of Directors and at such place,
within the United States, as the Board of Directors by resolution shall
determine, and as set forth in the notice of the meeting. If the date of the
annual meeting shall fall on a legal holiday of the state in which the meeting
is to be held, the meeting shall be held on the next succeeding business day.
Any business of the Corporation may be transacted at an annual meeting of
stockholders without being specifically designated in the notice, except such
business as is required by any statute to be stated in such notice.
Section 2. Special Meetings. Except as otherwise required by law and
subject to the rights of the holders of any Preferred Stock, special meetings of
the stockholders, for any purpose or purposes, may be called by the Chairman,
the President, or by a majority of the Board of Directors and shall be called by
the Secretary of the Corporation upon the written request of stockholders
holding in the aggregate not less than fifty percent (50%) of the outstanding
shares entitled to vote on the business proposed to be transacted thereat. Such
request shall state the purpose of such meeting and the matters proposed to be
acted on at such meeting. No business shall be transacted
<PAGE> 2
at a special meeting of stockholders except as specifically designated in the
notice. The Secretary shall inform such stockholders of the reasonably
estimated cost of preparing and mailing notice of the meeting and, upon payment
to the Corporation by such stockholders of such costs, the Secretary shall give
notice to each stockholder entitled to notice of the meeting. Such meetings may
be held at such time and place, within or without the State of Maryland, as
shall be stated in the notice of the meeting. The call of a special meeting
shall state the nature of the business to be transacted and no other businesses
shall be considered at the meeting. A special meeting may be called for the
purpose of removing a Director.
Section 3. Notice of Meetings. Written or printed notice, stating the
place, date and time of the meeting, and, in the case of a special meeting, the
purpose or purposes for which the meeting is called, shall be delivered to each
stockholder entitled to vote thereat and to each stockholder not entitled to
vote who is entitled to notice of the meeting at his address as it appears on
the records of the Corporation, by United States mail, postage prepaid, not less
than twenty (20) nor more than sixty (60) days before the date of the meeting.
No business other than that stated in the notice shall be transacted at any
meeting without the unanimous consent of all stockholders entitled to vote
thereat. Such notice shall be deemed to be given when deposited in the United
States mail addressed to the stockholder at his post office address as it
appears on the records of the Corporation, with postage thereon prepaid.
Section 4. Proxies. Each stockholder entitled to vote, in accordance
with the terms of the Charter and the provisions of these Bylaws, shall be
entitled to one vote, in person or by proxy, for each share of stock entitled to
vote held by such stockholder, but no proxy shall be voted after eleven (11)
months from its date unless such proxy provides for a longer period. In no case
shall any proxy be given for a period in excess of ten (10) years from the date
of its execution.
Section 5. Organization. At every meeting of stockholders, the
Chairman, if there be one, shall conduct the meeting or, in the case of vacancy
in office or absence of the Chairman, one of the following officers present
shall conduct the meeting in the order stated: the Vice Chairman, if there be
one, the President, the Vice Presidents in their order of rank and seniority, or
a chairman chosen by the stockholders entitled to cast a majority of the votes
which all stockholders present in person or by proxy are entitled to cast, shall
act as chairman, and the Secretary, or, in his absence, an Assistant Secretary,
or in the absence of both the Secretary and Assistant Secretaries, a person
appointed by the Chairman shall act as secretary.
Section 6. Quorum. Any number of stockholders together holding a
majority of the stock issued and outstanding and entitled to vote thereat, who
shall be present in person or represented by proxy at any meeting duly called,
shall constitute a quorum for the transaction of business. If, at any meeting,
less than a quorum shall be present or represented, those present, either in
person or by proxy, shall have the power to adjourn the meeting from time to
time to a date not more than one hundred twenty (120) days after the original
record date, without notice other than announcement at the meeting. At such
adjourned meeting at which a quorum shall be present, any business may be
transacted which might have been transacted at the meeting as originally
notified.
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Section 7. Voting. At each annual meeting the stockholders entitled to
vote shall elect successors to the class of Directors whose term expires at such
meeting. The vote for Directors, and, upon the demand of any stockholder, the
vote upon any question before the meeting, shall be by ballot. Unless otherwise
provided by the Charter or by the laws of the State of Maryland, all elections
of Directors shall be by a plurality of the votes cast, all substantive
questions shall be decided by a majority of all the votes entitled to be cast on
the matter, and all procedural questions shall be decided by the Chairman or
Parliamentarian of the meeting. Unless otherwise provided in the Charter, each
outstanding share, regardless of class, shall be entitled to one vote on each
matter submitted to a vote at a meeting of stockholders.
Section 8. Voting of Stock by Certain Holders. Stock of the
Corporation registered in the name of a corporation, partnership, trust or other
entity, if entitled to be voted, may be voted by the president or a vice
president, a general partner or trustee thereof, as the case may be, or a proxy
appointed by any of the foregoing individuals, unless some other person who has
been appointed to vote such stock pursuant to a bylaw or a resolution of the
governing body of such corporation or other entity or agreement of the partners
of a partnership presents a certified copy of such bylaw, resolution or
agreement, in which case such person may vote such stock. Any director or other
fiduciary may vote stock registered in his name as such fiduciary, either in
person or by proxy.
Shares of stock of the Corporation directly or indirectly owned by it
shall not be voted at any meeting and shall not be counted in determining the
total number of outstanding shares entitled to be voted at any given time,
unless they are held by it in a fiduciary capacity, in which case they may be
voted and shall be counted in determining the total number of outstanding shares
at any given time.
The Board of Directors may adopt by resolution a procedure by which a
stockholder may certify in writing to the Corporation that any shares of stock
registered in the name of the stockholder are held for the account of a
specified person other than the stockholder. The resolution shall set forth the
class of stockholders who may make the certification, the purpose for which the
certification may be made, the form of certification and the information to be
contained in it; if the certification is with respect to a record date or
closing of the stock transfer books, the time after the record date or closing
of the stock transfer books within which the certification must be received by
the Corporation; and any other provisions with respect to the procedure which
the Board of Directors considers necessary or desirable. On receipt of such
certification, the person specified in the certification shall be regarded as,
for the purposes set forth in the certification, the stockholder of record of
the specified stock in place of the stockholder who makes the certification.
Section 9. Inspectors. At any meeting of stockholders, the chairman of
the meeting may appoint one or more persons as inspectors for such meeting. Such
inspectors shall ascertain and report the number of shares represented at the
meeting based upon their determination of the validity and effect of proxies,
count all votes, report the results and perform such other acts as are proper to
conduct the election and voting with impartiality and fairness to all the
stockholders.
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Each report of an inspector shall be in writing and signed by him or
by a majority of them if there is more than one inspector acting at such
meeting. If there is more than one inspector, the report of a majority shall be
the report of the inspectors. The report of the inspector or inspectors on the
number of shares represented at the meeting and the results of the voting shall
be prima facie evidence thereof.
Section 10. Nominations and Proposals by Stockholders.
(a) Annual Meetings of Stockholders. (1) Nominations of persons for
election to the Board of Directors and the proposal of business to be considered
by the stockholders may be made at an annual meeting of stockholders (i)
pursuant to the Corporation's notice of meeting, (ii) by or at the direction of
the Board of Directors or (iii) by any stockholder of the Corporation who was a
stockholder of record both at the time of giving of notice provided for in this
Section 10(a) and at the time of the annual meeting, who is entitled to vote at
the meeting and who complied with the notice procedures set forth in this
Section 10(a).
(2) For nominations or other business to be properly brought
before an annual meeting by a stockholder pursuant to clause (iii) of paragraph
(a)(1) of this Section 10, the stockholder must have given timely notice thereof
in writing to the Secretary of the Corporation and such other business must
otherwise be a proper matter for action by stockholders. To be timely, a
stockholder's notice shall be delivered to the Secretary at the principal
executive offices of the Corporation not later than the close of business on the
sixtieth (60th) day nor earlier than the close of business on the ninetieth
(90th) day prior to the first anniversary of the preceding year's annual
meeting; provided, however, that in the event that the date of the annual
meeting is advanced by more than thirty (30) days or delayed by more than sixty
(60) days from such anniversary date or if the Corporation has not previously
held an annual meeting, notice by the stockholder to be timely must be so
delivered not earlier than the close of business on the 90th day prior to such
annual meeting and not later than the close of business on the later of the 60th
day prior to such annual meeting or the tenth (10th) day following the day on
which public announcement of the date of such meeting is first made by the
Corporation. In no event shall the public announcement of a postponement or
adjournment of an annual meeting to a later date or time commence a new time
period for the giving of a stockholder's notice as described above. Such
stockholder's notice shall set forth (i) as to each person whom the stockholder
proposes to nominate for election or reelection as a Director all information
relating to such person that is required to be disclosed in solicitations of
proxies for election of directors in an election contest, or is otherwise
required, in each case pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended (the "Exchange Act") (including such person's written
consent to being named in the proxy statement as a nominee and to serving as a
Director if elected); (ii) as to any other business that the stockholder
proposes to bring before the meeting, a brief description of the business
desired to be brought before the meeting, the reasons for conducting such
business at the meeting and any material interest in such business of such
stockholder and of the beneficial owner, if any, on whose behalf the proposal is
made; and (iii) as to the stockholder giving the notice and the beneficial
owner, if any, on whose behalf the nomination or proposal is made, (x) the name
and address of such stockholder, as they appear on the
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Corporation's books, and of such beneficial owner and (y) the number of shares
of each class of stock of the Corporation which are owned beneficially and of
record by such stockholder and such beneficial owner.
(3) Notwithstanding anything in the second sentence of paragraph
(a)(2) of this Section 10 to the contrary, in the event that the number of
Directors to be elected to the Board of Directors is increased and there is no
public announcement by the Corporation naming all of the nominees for director
or specifying the size of the increased Board of Directors at least seventy (70)
days prior to the first anniversary of the preceding year's annual meeting, a
stockholder's notice required by this Section 10(a) shall also be considered
timely, but only with respect to nominees for any new positions created by such
increase, if it shall be delivered to the Secretary at the principal executive
offices of the Corporation not later than the close of business on the tenth
(10th) day following the day on which such public announcement is first made by
the Corporation.
(b) Special Meetings of Stockholders. Only such business shall be
conducted at a special meeting of stockholders as shall have been brought before
the meeting pursuant to the Corporation's notice of meeting. Nominations of
persons for election to the Board of Directors may be made at a special meeting
of stockholders at which directors are to be elected (i) pursuant to the
Corporation's notice of meeting, (ii) by or at the direction of the Board of
Directors or (iii) provided that the Board of Directors has determined that
directors shall be elected at such special meeting, by any stockholder of the
Corporation who is a stockholder of record both at the time of giving of notice
provided for in this Section 10(b) and at the time of the special meeting, who
is entitled to vote at the meeting and who complied with the notice procedures
set forth in this Section 10(b). In the event the Corporation calls a special
meeting of stockholders for the purpose of electing one or more Directors to the
Board of Directors, any such stockholder may nominate a person or persons (as
the case may be) for election to such position as specified in the Corporation's
notice of meeting, if the stockholder's notice containing the information
required by paragraph (a)(2) of this Section 10 shall be delivered to the
Secretary at the principal executive offices of the Corporation not earlier than
the close of business on the ninetieth (90th) day prior to such special meeting
and not later than the close of business on the later of the sixtieth (60th) day
prior to such special meeting or the tenth (10th) day following the day on which
public announcement is first made of the date of the special meeting and of the
nominees proposed by the Board of Directors to be elected at such meeting. In no
event shall the public announcement of a postponement or adjournment of a
special meeting to a later date or time commence a new time period for the
giving of a stockholder's notice as described above.
(c) General. (1) Only such persons who are nominated in
accordance with the procedures set forth in this Section 10 shall be eligible to
serve as Directors and only such business shall be conducted at a meeting of
stockholders as shall have been brought before the meeting in accordance with
the procedures set forth in this Section 10. The chairman of the meeting shall
have the power and duty to determine whether a nomination or any business
proposed to be brought before the meeting was made or proposed, as the case may
be, in accordance with the procedures set forth in this Section 10 and, if any
proposed nomination or business is not in compliance with this Section 10, to
declare that such nomination or proposal shall be disregarded.
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(2) For purposes of this Section 10, "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable news service or in a document publicly filed by
the Corporation with the Securities and Exchange Commission pursuant to Section
13, 14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this Section 10,
a stockholder shall also comply with all applicable requirements of state law
and of the Exchange Act and the rules and regulations thereunder with respect to
the matters set forth in this Section 10. Nothing in this Section 10 shall be
deemed to affect any right of stockholders to request inclusion of a proposal
in, or any right of the Corporation to omit a proposal from, the Corporation's
proxy statement pursuant to Rule 14a-8 under the Exchange Act.
Section 11. Action Only With Meeting. Any action required or permitted
to be taken by the stockholders of the Corporation must be effected at a duly
called annual or special meeting of the stockholders and may not be effected by
any consent in writing by the stockholders.
ARTICLE III
DIRECTORS
Section 1. General Powers. The business and affairs of the Corporation
shall be managed under the direction of its Board of Directors.
Section 2. Number, Term and Qualifications. The number of Directors of
the Corporation shall be nine (9). Subject to any rights of holders of Preferred
Stock to elect additional Directors, at any regular meeting or at any special
meeting called for that purpose, a majority of the entire Board of Directors may
increase or decrease the number of Directors, provided that the number thereof
shall never be less than the minimum number required by the Maryland General
Corporation Law, nor more than 10, and further provided that the tenure of
office of a Director shall not be affected by any decrease in the number of
Directors. Directors need not be stockholders.
Section 3. Staggered Board of Directors. The Directors (other than any
Director elected solely by holders of one or more classes or series of Preferred
Stock) shall be classified, with respect to the terms for which they severally
hold office, into three classes, as nearly equal in number as possible, one
class to hold office initially for a term expiring at the next succeeding annual
meeting of stockholders, another class to hold office initially for a term
expiring at the second succeeding annual meeting of stockholders and another
class to hold office initially for a term expiring at the third succeeding
annual meeting of stockholders, with the members of each class to hold office
until their successors are duly elected and qualify. At each annual meeting of
the stockholders, the successors to the class of Directors whose term expires at
such meeting shall be elected to hold office for a term expiring at the annual
meeting of stockholders held in the third year following the year of their
election.
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Section 4. Annual and Regular Meetings. An annual meeting of the Board
of Directors shall be held immediately after and at the same place as the annual
meeting of stockholders, no notice other than this Bylaw being necessary. The
Board of Directors may provide, by resolution, the time and place, either within
or without the State of Maryland, for the holding of regular meetings of the
Board of Directors without other notice than such resolution.
Section 5. Special Meetings. Special meetings of the Board of
Directors may be called by the Chairman, the Chief Executive Officer, the
President or by the Secretary. The person or persons authorized to call special
meetings of the Board of Directors may fix any place, either within or without
the State of Maryland, as the place for holding any special meeting of the Board
of Directors called by them.
Section 6. Notice. Notice of any special meeting of the Board of
Directors shall be delivered personally or by telephone, facsimile transmission,
United States mail or courier to each Director at his business or residence
address. Notice by personal delivery, by telephone or a facsimile transmission
shall be given at least twenty-four (24) hours prior to the meeting. Notice by
mail shall be given at least four (4) days prior to the meeting and shall be
deemed to be given when deposited in the United States mail properly addressed,
with postage thereon prepaid. Telephone notice shall be deemed to be given when
the Director is personally given such notice in a telephone call to which he is
a party. Facsimile transmission notice shall be deemed to be given upon
completion of the transmission of the message to the number given to the
Corporation by the Director and receipt of a completed answer-back indicating
receipt. Neither the business to be transacted at, nor the purpose of, any
annual, regular or special meeting of the Board of Directors need be stated in
the notice, unless specifically required by statute or these Bylaws. The
transactions of any meeting of the Board of Directors, however called and
noticed or wherever held, shall be as valid as though had at a meeting duly held
after regular call and notice if a quorum be present and if, either before or
after the meeting, each of the Directors not present signs a written waiver of
notice, a consent to holding the meeting or an approval of the minutes thereof.
The waiver of notice or consent need not specify the purpose of the meeting. All
such waivers, consents and approvals shall be filed with the corporate records
or made a part of the minutes of the meeting. Notice of a meeting need not be
given to any Director who attends the meeting without protesting, prior thereto
or at its commencement, the lack of notice to such Director.
Section 7. Quorum. A majority of the Directors shall constitute a
quorum for the transaction of business. If, at any meeting of the Board of
Directors, there shall be less than a quorum present, a majority of those
present may adjourn the meeting, from time to time, until a quorum is obtained,
and no further notice thereof need be given other than by announcement at said
meeting which shall be so adjourned. The Directors present at a meeting which
has been duly called and convened may continue to transact business until
adjournment, notwithstanding the withdrawal of enough Directors to leave less
than a quorum.
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Section 8. Voting. The action of the majority of the Directors present
at a meeting at which a quorum is present shall be the action of the Board of
Directors, unless the concurrence of a greater proportion is required for such
action by applicable statute.
Section 9. Action Without Meeting. Any action required or permitted to
be taken at any meeting of the Board of Directors, or any committee thereof, may
be taken without a meeting if, prior to such action, a written consent thereto
is signed by all members of the Board or of such committee, as the case may be,
and such written consent is filed with the minutes of the proceedings of the
Board of Directors or committee.
Section 10. Telephonic Meetings. Unless otherwise restricted by the
Charter or these Bylaws, members of the Board of Directors, or any committee
designated by the Board of Directors, may participate in a meeting of the Board
of Directors, or any committee, by means of conference telephone of similar
communications equipment by means of which all persons participating in the
meeting can hear each other at the same time. Participation in a meeting by
these means shall constitute presence in person at such meeting.
Section 11. Vacancies. If for any reason any or all the Directors
cease to be Directors, such event shall not terminate the Corporation or affect
these Bylaws or the powers of the remaining Directors hereunder (even if fewer
than three (3) Directors remain). Any vacancy on the Board of Directors for any
cause other than an increase in the number of Directors shall be filled by a
majority of the remaining Directors, even if such majority is less than a
quorum. Any vacancy in the number of Directors created by an increase in the
number of Directors may be filled by a majority of the entire Board of
Directors. Any individual so elected as Director shall hold office until the
next annual meeting of stockholders and until his successor is elected and
qualifies.
Section 12. General Powers of Directors. Each Director, officer,
employee and agent of the Corporation shall, in the performance of his duties
with respect to the Corporation, be entitled to rely upon the books and records
of the Corporation, and upon information, opinions, reports, or statements,
including financial statements and other financial data, prepared or presented
by officers or employees of the Corporation believed to be reliable and
competent in the matters presented, or by counsel, independent accountants, or
other persons as to matters which the Board of Directors believes to be within
such person's professional or expert competence, regardless of whether such
counsel or expert may also be a Director.
Section 13. Specific Powers of Directors. Without prejudice to such
general powers, it hereby is expressly declared that the Board of Directors
shall have the following powers:
(a) To make and change regulations, not inconsistent with these
Bylaws, for the management of the business and affairs of the Corporation.
(b) To purchase or otherwise acquire for the Corporation any property,
rights or privileges which the Corporation is authorized to acquire.
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(c) To pay for any property purchased for the Corporation, either
wholly or partly in money, stock, bonds, debentures or other securities of
the Corporation.
(d) To borrow money and make and issue notes, bonds and other
negotiable and transferable instruments, mortgages, deeds of trust and
trust agreements, and to do every act and thing necessary to effectuate the
same.
(e) If it in its judgment finds that the best interests of the
Corporation will be served, to remove any officer for cause, or any officer
summarily, without cause, and, in its discretion, from time to time to
devolve the powers and duties of any officer upon any other person for the
time being.
(f) To appoint and remove or suspend subordinate officers or agents as
it may deem necessary, and to determine its duties, and to fix and from
time to time to change their salaries or remuneration, and to require
security as and when it thinks fit.
(g) To confer upon any officer of the Corporation the power to
appoint, remove and suspend subordinate officers and agents.
(h) To determine who shall be authorized, on behalf of the
Corporation, to make and sign bills, notes, acceptances, endorsements,
contracts and other instruments.
(i) To determine who shall be entitled, in the name and on behalf of
the Corporation, to vote upon or to assign and transfer any shares of
stock, bonds or other securities of other Corporations held by this
Corporation.
(j) To the extent permitted by law, to delegate any of the powers of
the Board of Directors, in relation to the ordinary business of the
Corporation, to any standing or special committee, or to any officer or
agent (with power to sub-delegate), upon such terms as they deem fit.
(k) To call special meetings of the stockholders for any purpose or
purposes.
(l) To appoint the accountants and attorneys for the Corporation.
Section 14. Compensation. Directors shall receive a stated salary for
their services as Directors and, by resolution of the Board, a fixed fee and
expenses of attendance for attendance of each meeting. Directors may participate
in retirement plans, stock option and restricted stock plans and other employee
benefit plans of the Corporation which specifically permit participation by
Directors.
Nothing herein contained shall be construed to preclude any Director
from serving the Corporation in any other capacity as an officer, agent or
otherwise.
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Section 15. Removal and Resignation. At a meeting of stockholders
expressly called for such purpose, any or all members of the Board of Directors
may be removed from office at any time, but only for cause and then only by the
affirmative vote of at least eighty percent (80%) of the votes entitled to be
cast generally in the election of Directors, voting together as a single class.
For the purpose of this paragraph, "cause" shall mean with respect to any
particular director a final judgment of a court of competent jurisdiction
holding that such director caused demonstrable, material harm to the Corporation
through bad faith or active and deliberate dishonesty. Any Director of the
Corporation may resign at any time by giving written notice of his resignation
to the Board of Directors, the Chairman, the President or the Secretary. Any
resignation shall take effect at any time subsequent to the time specified
therein or, if the time when it shall become effective is not specified therein,
immediately upon its receipt. The acceptance of a resignation shall not be
necessary to make it effective unless otherwise stated in the resignation.
ARTICLE IV
COMMITTEES
Section 1. Appointments and Powers. The standing committees of the
Board of Directors shall be the Audit Committee, the Compensation Committee and
the Nominating Committee. The number of members of each such committee shall be
fixed by the Board of Directors from time to time by resolution. The members of
each such committee shall be elected by the Board of Directors from among the
members of the Board of Directors. The Board of Directors may designate one or
more Directors as alternate members of a committee who may replace any absent or
disqualified member at any meeting of the committee. Such alternate members
shall, for purposes of determining a quorum, be counted in the place of the
absent or disqualified member. A Director may concurrently serve on more than
one committee. The Board of Directors may, by resolution or resolutions passed
by a majority of the whole Board, designate one or more other committees. Such
committee or committees shall have such name or names as may be stated in these
Bylaws or as may be determined from time to time by resolution adopted by the
Board of Directors. The powers and duties of the committees shall be determined
from time to time by the Board of Directors.
Section 2. Meetings. Notice of committee meetings shall be given in
the same manner as notice for special meetings of the Board of Directors. A
majority of the members of the committee shall constitute a quorum for the
transaction of business at any meeting of the committee. The act of a majority
of the committee members present at a meeting shall be the act of such
committee. The Board of Directors may designate a chairman of any committee, and
such chairman or any two members of any committee (if there are at least two
members of the committee) may fix the time and place of its meeting unless the
Board shall otherwise provide.
Section 3. Minutes. Committees shall keep regular minutes of their
proceedings, and report the same to the Board of Directors when required.
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Section 4. Vacancies. Subject to the provisions hereof, the Board of
Directors shall have the power at any time to change the membership of any
committee, to fill all vacancies, to designate alternate members to replace any
absent or disqualified member or to dissolve any such committee.
Section 5. Audit Committee. The Audit Committee shall select and
engage in behalf of the Corporation, and fix the compensation of, a firm of
certified public accountants whose duty it shall be to audit the books and
accounts of the Corporation and its subsidiaries for the fiscal year in which
they are appointed, and who shall report to such Committee. The Audit Committee
shall confer with the auditors and shall determine, and from time to time shall
report to the Board of Directors upon the scope of the auditing of the books and
accounts of the Corporation and its subsidiaries. The Audit Committee shall also
be responsible for determining that the business practices and conduct of
employees and other representatives of the Corporation and its subsidiaries
comply with the policies and procedures of the Corporation. None of the members
of the Audit Committee shall be officers or employees of the Corporation.
ARTICLE V
OFFICERS
Section 1. Officers. The officers shall include a Chairman, a
Chief Executive Officer, a President, a Secretary and a Treasurer and one or
more Vice Presidents. The Board of Directors may appoint such other officers and
agents as it may deem advisable, who shall hold office for such terms and shall
exercise such powers and perform such duties as shall from time to time be
determined by the Board of Directors. Any two or more offices except President
and Vice President may be held by the same person. Election of an officer or
agent shall not of itself create contract rights between the Corporation and
such officer or agent.
Section 2. Removal and Resignation. Any officer or agent of the
Corporation may be removed by the Board of Directors if in its judgment the best
interests of the Corporation would be served thereby, but such removal shall be
without prejudice to the contract rights, if any, of the person so removed. Any
officer of the Corporation may resign at any time by giving written notice of
his resignation to the Board of Directors, the Chairman, the President or the
Secretary. Any resignation shall take effect at any time subsequent to the time
specified therein or, if the time when it shall become effective is not
specified therein, immediately upon its receipt. The acceptance of a resignation
shall not be necessary to make it effective unless otherwise stated in the
resignation. Such resignation shall be without prejudice to the contract rights,
if any, of the Corporation.
Section 3. Vacancies. A vacancy in any office may be filled by the
Board of Directors for the balance of the term.
Section 4. Chairman. The Chairman, if one be elected, shall preside at
all meetings of the Board of Directors and stockholders, and he shall have and
perform such other duties as from time to time may be assigned to him by the
Board of Directors.
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Section 5. Chief Executive Officer. The Chief Executive Officer shall
have the general powers and duties of supervision and management usually vested
in the office of Chief Executive Officer of a corporation. He shall have general
supervision, direction and control of the business of the Corporation. Except as
the Board of Directors shall authorize the execution thereof in some other
manner, he shall execute deeds, bonds, mortgages and other contracts on behalf
of the Corporation.
Section 6. Chief Operating Officer. The Board of Directors may
designate a Chief Operating Officer. The Chief Operating Officer shall have the
responsibilities and duties as set forth by the Board of Directors or the Chief
Executive Officer.
Section 7. Chief Financial Officer. The Board of Directors may
designate a Chief Financial Officer. The Chief Financial Officer shall have the
responsibilities and duties as set forth by the Board of Directors or the Chief
Executive Officer.
Section 8. President. The President shall have the general powers and
duties of supervision and management usually vested in the office of President
of a corporation. He shall have general supervision, direction and control of
the business of the Corporation. Except as the Board of Directors shall
authorize the execution thereof in some other manner, he shall execute deeds,
bonds, mortgages and other contracts on behalf of the Corporation.
Section 9. Vice Presidents. In the absence of the President or in the
event of a vacancy in such office, the Vice President (or in the event there be
more than one Vice President, the Vice Presidents in the order designated at the
time of their election or, in the absence of any designation, then in the order
of their election) shall perform the duties of the President and when so acting
shall have all the powers of and be subject to all the restrictions upon the
President; and shall perform such other duties as from time to time may be
assigned to him by the President or by the Board of Directors. The Board of
Directors may designate one or more Vice Presidents as Executive Vice President
or as Vice President for particular areas of responsibility.
Section 10. Secretary. The Secretary shall give, or cause to be given,
notice of all meetings of stockholders and Directors, and all other notices
required by law or by these Bylaws, and, in case of his absence or refusal or
neglect so to do, any such notice may be given by any person thereunto directed
by the Chairman, the Chief Executive Officer, the President, the Board of
Directors or the stockholders, upon whose requisition the meeting is called as
provided in these Bylaws. He shall record all proceedings of meetings of the
stockholders and of the Board of Directors in a book to kept for that purpose,
and shall perform such other duties as may be assigned to him by the Directors
or the President.
Section 11. Treasurer. The Treasurer shall have the custody of the
corporate funds and securities, and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation. He shall
deposit all monies and other valuables in the name and to the credit of the
Corporation in such depositories as may be designated by the Board of Directors.
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In the absence of a designation of a Chief Financial Officer by the Board of
Directors, the Treasurer shall be the Chief Financial Officer of the
Corporation.
The Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors or the President, taking proper vouchers for
such disbursements. He shall render to the President and the Board of Directors,
at the regular meetings of the Board, or whenever they may request it, an
accounting of all his transactions as Treasurer, and of the financial condition
of the Corporation.
If required by the Board of Directors, the Treasurer shall give the
Corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors for the faithful performance of the
duties of his office and for the restoration to the Corporation, in case of his
death, resignation, retirement or removal from office, of all books, papers,
vouchers, moneys and other property of whatever kind in his possession or under
his control belonging to the Corporation.
Section 12. Assistant Secretaries and Assistant Treasurers. Assistant
Secretaries and Assistant Treasurers, if any, shall be appointed by the Board of
Directors or by the Chief Executive Officer, the President or Vice President and
shall have such powers and shall perform such duties as shall be assigned to
them, respectively, by the Secretary and by the Treasurer. The Assistant
Treasurers shall, if required by the Board of Directors, give bonds for the
faithful performance of their duties in such sums and with such surety or
sureties as shall be satisfactory to the Board of Directors.
Section 13. General Powers. In addition to the rights and duties set
forth in this Article V, the Chief Executive Officer, President, Secretary or
any other officer of the Corporation shall be authorized and empowered to take
such actions and to execute such documents on behalf of the Corporation as may,
from time to time, be required.
Section 14. Salaries. The salaries and other compensation of the
officers shall be fixed from time to time by the Board of Directors and no
officer shall be prevented from receiving such salary or other compensation by
reason of the fact that he is also a Director.
ARTICLE VI
CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 1. Contracts. The Board of Directors may authorize any officer
or agent to enter into any contract or to execute and deliver any instrument in
the name of and on behalf of the Corporation and such authority may be general
or confined to specific instances. Any agreement, deed, mortgage, lease or other
document executed by one or more of the Directors or by an authorized person
shall be valid and binding upon the Board of Directors and upon the Corporation
when authorized or ratified by action of the Board of Directors.
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Section 2. Checks and Drafts. All checks, drafts or other orders for
the payment of money, notes or other evidences of indebtedness issued in the
name of the Corporation shall be signed by such officer or agent of the
Corporation in such manner as shall from time to time be determined by the Board
of Directors.
Section 3. Deposits. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
in such banks, trust companies or other depositories as the Chief Financial
Officer may designate.
ARTICLE VII
STOCK
Section 1. Certificates. Each stockholder shall be entitled to a
certificate or certificates which shall represent and certify the number of
shares of each class of stock held by him in the Corporation. Each certificate
shall be signed by the Chief Executive Officer, the President or a Vice
President and countersigned by the Secretary or an Assistant Secretary or the
Treasurer or an Assistant Treasurer and may be sealed with the seal, if any, of
the Corporation.
Section 2. Transfers. Upon surrender to the Corporation or the
transfer agent of the Corporation of a stock certificate duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, the Corporation shall issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
The Corporation shall be entitled to treat the holder of record of any
share of stock as the holder in fact thereof and, accordingly, shall not be
bound to recognize any equitable or other claim to or interest in such share or
on the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by the laws of the State of
Maryland.
Notwithstanding the foregoing, transfers of shares of any class of
stock will be subject in all respects to the Charter of the Corporation and all
of the terms and conditions contained therein.
Section 3. Replacement Certificate. Any officer designated by the
Board of Directors may direct a new certificate to be issued in place of any
certificate previously issued by the Corporation alleged to have been lost,
stolen or destroyed upon the making of an affidavit of that fact by the person
claiming the certificate to be lost, stolen or destroyed. When authorizing the
issuance of a new certificate, an officer designated by the Board of Directors
may, in his discretion and as a condition precedent to the issuance thereof,
require the owner of such lost, stolen or destroyed certificate or the owner's
legal representative to advertise the same in such manner as he shall require
and/or to give bond, with sufficient surety, to the Corporation to indemnify it
against any loss or claim which may arise as a result of the issuance of a new
certificate.
Section 4. Closing of Transfer Books or Fixing of Record Date.
The Board of Directors may set, in advance, a record date for the purpose of
determining stockholders entitled to
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notice of or to vote at any meeting of stockholders or determining stockholders
entitled to receive payment of any dividend or the allotment of any other
rights, or in order to make a determination of stockholders for any other proper
purpose. Such date, in any case, shall not be prior to the close of business on
the day the record date is fixed and shall be not more than ninety (90) days
and, in the case of a meeting of stockholders, not less than ten (10) days,
before the date on which the meeting or particular action requiring such
determination of stockholders of record is to be held or taken.
In lieu of fixing a record date, the Board of Directors may provide
that the stock transfer books shall be closed for a stated period but not longer
than twenty (20) days. If the stock transfer books are closed for the purpose of
determining stockholders entitled to notice of or to vote at a meeting of
stockholders, such books shall be closed for at least ten (10) days before the
date of such meeting.
If no record date is fixed and the stock transfer books are not closed
for the determination of stockholders, (a) the record date for the determination
of stockholders entitled to notice of or to vote at a meeting of stockholders
shall be at the close of business on the day on which the notice of meeting is
mailed or the thirtieth (30th) day before the meeting, whichever is the closer
date to the meeting; and (b) the record date for the determination of
stockholders entitled to receive payment of a dividend or an allotment of any
other rights shall be the close of business on the day on which the resolution
of the directors, declaring the dividend or allotment of rights, is adopted.
When a determination of stockholders entitled to vote at any meeting
of stockholders has been made as provided in this section, such determination
shall apply to any adjournment thereof, except when (i) the determination has
been made through the closing of the transfer books and the stated period of
closing has expired or (ii) the meeting is adjourned to a date more than one
hundred twenty (120) days after the record date fixed for the original meeting,
in either of which case a new record date shall be determined as set forth
herein.
Section 5. Stock Ledger. The Corporation shall maintain at its
principal office or at the office of its counsel, accountants or transfer agent,
an original or duplicate share ledger containing the name and address of each
stockholder and the number of shares of each class held by such stockholder.
Section 6. Fractional Stock; Issuance of Units. The Board of Directors
may issue fractional stock or provide for the issuance of scrip, all on such
terms and under such conditions as they may determine. Notwithstanding any other
provision of the Charter or these Bylaws, the Board of Directors may issue units
consisting of different securities of the Corporation. Any security issued in a
unit shall have the same characteristics as any identical securities issued by
the Corporation, except that the Board of Directors may provide that for a
specified period securities of the Corporation issued in such unit may be
transferred on the books of the Corporation only in such unit.
ARTICLE VIII
ACCOUNTING YEAR
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The Board of Directors shall have the power, from time to
time, to fix the fiscal year of the Corporation by a duly adopted resolution.
ARTICLE IX
DISTRIBUTIONS
Section 1. Authorization. Dividends and other distributions upon the
stock of the Corporation may be authorized and declared by the Board of
Directors, subject to the provisions of law and the Charter of the Corporation.
Dividends and other distributions may be paid in cash, property or stock of the
Corporation, subject to the provisions of law and the Charter.
Section 2. Contingencies. Before payment of any dividends or other
distributions, there may be set aside out of any assets of the Corporation
available for dividends or other distributions such sum or sums as the Board of
Directors may from time to time, in its absolute discretion, think proper as a
reserve fund for contingencies, for equalizing dividends or other distributions,
for repairing or maintaining any property of the Corporation or for such other
purpose as the Board of Directors shall determine to be in the best interest of
the Corporation, and the Board of Directors may modify or abolish any such
reserve in the manner in which it was created.
ARTICLE X
INVESTMENT POLICY
Subject to the provisions of the Charter of the Corporation,
the Board of Directors may from time to time adopt, amend, revise or terminate
any policy or policies with respect to investments by the Corporation as it
shall deem appropriate in its sole discretion.
ARTICLE XI
SEAL
Section 1. Seal. The Board of Directors may authorize the
adoption of a seal by the Corporation. The seal shall contain the name of the
Corporation and the year of its incorporation and the words "Incorporated
Maryland." The Board of Directors may authorize one or more duplicate seals and
provide for the custody thereof.
Section 2. Affixing Seal. Whenever the Corporation is permitted or
required to affix its seal to a document, it shall be sufficient to meet the
requirements of any law, rule or regulation relating to a seal to place the word
"(SEAL)" adjacent to the signature of the person authorized to execute the
document on behalf of the Corporation.
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ARTICLE XII
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Section 1. Indemnification. To the maximum extent permitted by
Maryland law in effect from time to time, the Corporation shall indemnify and,
without requiring a preliminary determination of the ultimate entitlement to
indemnification, shall pay or reimburse reasonable expenses in advance of final
disposition of a proceeding to (i) any individual who is a present or former
Director or officer of the Corporation and 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 Corporation and at the request of the Corporation, serves or has
served as a director, officer, partner or trustee of 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 Corporation shall have
the power, with the approval of the Board of Directors, to provide such
indemnification and advancement of expenses to a person who served a predecessor
of the Corporation in any of the capacities described in (i) or (ii) above and
to any employee or agent of the Corporation or a predecessor of the Corporation.
Neither the amendment nor repeal of this Article, nor the adoption or amendment
of any other provision of the Bylaws or charter of the Corporation inconsistent
with this Article, shall apply to or affect in any respect the applicability of
the preceding paragraph with respect to any act or failure to act which occurred
prior to such amendment, repeal or adoption.
Section 2. Provisions Not Exclusive. This Article shall not be
construed as a limitation upon the power of the Corporation to enter into
contracts or undertakings of indemnity with a Director, officer, employee or
agent of the Corporation, nor shall it be construed as a limitation upon any
rights to which a person seeking indemnification may be entitled under any
agreement, vote of stockholders or disinterested directors or otherwise, both as
to actions in his official capacity and as to action in another capacity while
holding office.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
Section 1. Corporate Records. The Corporation shall keep correct and
complete books of account and minutes of the proceedings of its stockholders and
Directors.
The Corporation shall keep and maintain at its principal offices a
certified copy of its Charter and all amendments thereto, a certified copy of
its Bylaws and all amendments thereto.
The Directors shall take all reasonable steps to assure that a full
and correct annual statement of the affairs of the Corporation is prepared
annually, including a balance sheet and a financial statement of operations for
the preceding fiscal year which shall be certified by independent certified
public accountants, and distributed to stockholders within one hundred twenty
(120) days
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after the close of the Corporation's fiscal year and a reasonable period of time
prior to the annual meeting of stockholders. The Directors shall also be
responsible for scheduling the annual meeting of stockholders.
Section 2. Notice and Waiver of Notice. Whenever, pursuant to the laws
of the State of Maryland, the Charter or these Bylaws, any notice is required to
be given, personal notice is not meant unless expressly so stated, and any
notice so required shall be deemed to be sufficient if given by depositing the
same in the United States mail, postage prepaid, addressed to the person
entitled thereto at his address as it appears on the records of the Corporation,
and such notice shall be deemed to have been given on the day of such mailing.
Stockholders not entitled to vote shall not be entitled to receive notice of any
meetings except as otherwise provided by statute.
Any notice required to be given may be waived, in writing, by the
person or persons entitled thereto, whether before or after the time stated
therein. Neither the business to be transacted at nor the purpose of any meeting
need be set forth in the waiver of notice, unless specifically required by
statute. The attendance of any person at any meeting shall constitute a waiver
of notice of such meeting, except where such person attends a meeting for the
express purpose of objecting to the transaction of any business on the ground
that the meeting is not lawfully called or convened.
Section 3. Transactions with Officers and Directors. The Corporation
shall not engage in any purchase, sale or lease of property or other business
transaction in which an officer or Director of the Corporation has a direct or
indirect material interest without the approval by resolution of a majority of
those Directors who do not have an interest in such transaction.
ARTICLE XIV
AMENDMENTS TO BYLAWS
The Board of Directors shall have the exclusive power to adopt, alter
or repeal any provision of these Bylaws and to make new Bylaws.
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EXHIBIT 3.3
OMEGA WORLDWIDE, INC.
ARTICLES SUPPLEMENTARY
SERIES B PREFERRED STOCK
Omega Worldwide, Inc., a Maryland corporation (the "Corporation"),
hereby certifies to the State Department of Assessments and Taxation of
Maryland pursuant to Sections 2-105(a)(9) and 2-208(a) of the Maryland
General Corporation Law ("MGCL") that:
FIRST: Under a power contained in Section 5.3 of the charter of the
Corporation (the "Charter"), the Board of Directors as required by Section
2-208(a) of the MGCL pursuant to a written consent dated ____________, 1998 has
classified and designated 5,000,000 unissued shares of the Preferred Stock of
the Corporation as shares of Series B Preferred Stock with the preferences,
conversion and other rights, voting powers, restrictions, limitations as to
dividends and other distributions, qualifications, and terms and conditions of
redemption as follows, which upon any restatement of the Charter shall be made
part of Article V of the Charter, with any necessary or appropriate changes to
the numeration or lettering of the provisions hereof:
Section 1. Designation and Amount. There shall be a series of preferred
stock of the Corporation, $1.00 par value per share, which shall be designated
"Series B Preferred Stock," $1.00 par value per share (the "Series B Preferred
Shares"), and the number of shares constituting that series shall be 5,000,000.
Such number of shares may be increased or decreased by resolution of the Board
of Directors and by the filing of articles supplementary in accordance with the
MGCL stating that such increase or reduction has been so authorized; provided,
however, that a decrease shall neither reduce the number of Series B Preferred
Shares to a number less than the number of Series B Preferred Shares then
outstanding nor prevent the Corporation from automatically issuing Series B
Preferred Shares under the Contribution Agreement by and between the
Corporation and Omega dated __________, 1998.
Section 2. Definitions. For purposes of the Series B Preferred Shares,
the following terms shall have the meanings indicated:
"Accrued Dividend Amount" shall have the meaning set forth in
Section 7(A).
"Board of Directors" shall mean the Board of Directors of the
Corporation or any committee authorized by such Board of Directors to
perform any of its responsibilities with respect to the Series B
Preferred Shares.
"Business Day" shall mean any day, other than a Saturday or
Sunday, that is neither a legal holiday nor a day on which banking
institutions in New York City are authorized or required by law,
regulation or executive order to close.
<PAGE> 2
"Common Shares" shall mean the shares of common stock, par
value $0.10 per share, of the Corporation.
"Current Market Price" of publicly traded Common Shares or any
other class of shares of stock or other security of the Corporation or
any other issuer for any day shall mean the last reported sales price,
regular way, on such day, or, if no sale takes place on such day, the
average of the reported closing bid and asked prices on such day,
regular way, in either case as reported on the New York Stock Exchange
("NYSE") or, if such security is not listed or admitted for trading on
the NYSE, on the principal national securities exchange on which such
security is listed or admitted for trading or, if not listed or
admitted for trading on any national securities exchange, on the
Nasdaq National Market ("NASDAQ") or, if such security is not quoted
on NASDAQ, the average of the closing bid and asked prices on such day
in the over-the-counter market as reported by the National Association
of Securities Dealers, Inc. (the "NASD") or, if bid and asked prices
for such security on such day shall not have been reported through the
NASD, the average of the bid and asked prices on such day as furnished
by any NYSE member firm regularly making a market in such security
selected for such purpose by the Board of Directors.
"Divided Payment Date" shall have the meaning set forth in
Section 3(A).
"Omega" shall mean Omega Healthcare Investors, Inc., a
Maryland corporation.
"Series B Liquidation Value" shall mean $10.00 per share.
"Series B Preferred Shares" shall have the meaning set forth
in Section 1.
"Trading Day" shall mean any day on which the securities in
question are traded on the NYSE, or if such securities are not listed
or admitted for trading on the NYSE, on the principal national
securities exchange on which such securities are listed or admitted, or
if not listed or admitted for trading on any national securities
exchange, on NASDAQ, or if such securities are not quoted on NASDAQ, in
the securities market in which the securities are traded.
Section 3. Dividends and Distributions.
(A) Subject to the prior and superior rights of the holders of any
shares of any class or series of preferred shares of the Corporation ranking
prior and superior to the Series B Preferred Shares with respect to dividends,
the holders of Series B Preferred Shares shall be entitled to receive, when, as
and if authorized by the Board of Directors out of funds legally available for
the purpose, annual dividends payable in cash to holders of record on the last
Business Day of February in each year (each such date being referred to herein
as a "Dividend Payment Date"), (commencing on the first Dividend Payment Date
after the first issuance of a Series B Preferred Share) in an amount per share
(rounded to the nearest cent) equal to 8.0% per annum of the Series B
Liquidation Value thereof (calculated on the basis of a year of 360 days
consisting of twelve 30-day months). Such dividends shall accrue whether or not
- 2 -
<PAGE> 3
they have been declared and whether or not there are profits, surplus or other
funds of the Corporation legally available for the payment of the dividends.
(B) The Board of Directors shall authorize a dividend or distribution
on the Series B Preferred Shares as provided in paragraph (A) above at the
time it authorizes a dividend or distribution on the Common Shares (other than a
dividend payable in Common Shares).
(C) No dividend or distribution (other than a dividend or distribution
payable in Common Shares) shall be paid or payable to the holders of Common
Shares unless, prior thereto, all accrued but unpaid dividends to the date of
that dividend or distribution shall have been paid to the holders of Series B
Preferred Shares.
(D) Dividends shall begin to accrue and be cumulative on outstanding
Series B Preferred Shares from the Dividend Payment Date next preceding the date
of issuance of such Series B Preferred Shares, unless the date of issuance of
such shares is prior to the record date for the first Dividend Payment Date, in
which case dividends on such shares shall begin to accrue and be cumulative from
the date of issuance of such shares, or unless the date of issuance is a
Dividend Payment Date or is a date after the record date for the determination
of holders of Series B Preferred Shares entitled to receive an annual dividend
and before such Dividend Payment Date, in either of which events such dividends
shall begin to accrue and be cumulative from such Dividend Payment Date. Accrued
but unpaid dividends shall not bear interest. Dividends paid on the Series B
Preferred Shares in an amount less than the total amount of such dividends at
the time accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding.
Section 4. Voting Rights. The holders of Series B Preferred Shares
shall not have voting rights, except as provided in Section 10 hereof.
Section 5. Certain Restrictions.
(A) Whenever any dividends or other dividends or distributions
payable on the Series B Preferred Shares as provided in Section 3 are in
arrears, then, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on Series B Preferred Shares outstanding
shall have been paid in full, the Corporation shall not:
(i) declare or pay dividends on, make any other distributions
on, or redeem or purchase or otherwise acquire for consideration any
shares ranking junior (either as to dividends
- 3 -
<PAGE> 4
or upon liquidation, dissolution or winding up) to the Series B
Preferred Shares, other than dividends paid or payable in such junior
shares;
(ii) declare or pay dividends on or make any other
distributions on any shares ranking on a parity (either as to dividends
or upon liquidation, dissolution or winding up) with the Series B
Preferred Shares, except dividends paid ratably on the Series B
Preferred Shares and all such parity shares on which dividends are
payable or in arrears in proportion to the total amounts to which the
holders of all such shares are then entitled; or
(iii) redeem or purchase or otherwise acquire for
consideration shares ranking on a parity (either as to dividends or
upon liquidation, dissolution or winding up) with the Series B
Preferred Shares, provided that the Corporation may at any time redeem,
purchase or otherwise acquire any such parity shares in exchange for
shares of the Corporation ranking junior (either as to dividends or
upon dissolution, liquidation or winding up) to the Series B Preferred
Shares.
(B) The Corporation shall not permit any subsidiary of the Corporation
to purchase or otherwise acquire for consideration any shares of the Corporation
unless the Corporation could, under paragraph (A) of this Section, purchase or
otherwise acquire such shares at such time and in such manner.
Section 6. Conversion. Each Series B Preferred Share sold, transferred,
distributed or otherwise disposed of by Omega, the initial holder of the Series
B Preferred Shares, shall automatically convert into one Common Share.
Section 7. Liquidation, Dissolution or Winding Up.
(A) Upon any voluntary liquidation, dissolution or winding up of the
Corporation, no distribution shall be made to the holders of shares ranking
junior (either as to dividends or upon liquidation, dissolution or winding up)
to the Series B Preferred Shares unless, prior thereto, the holders of Series B
Preferred Shares shall have received an amount in cash equal to the aggregate
Series B Liquidation Value of all shares held by such holder, plus an amount
equal to accrued and unpaid dividends and distributions thereon, whether or not
declared, to the date of such payment (the "Accrued Dividend Amount"). Following
the payment of the full amount of the Series B Liquidation Value and the Accrued
Dividend Amount, no additional distributions shall be made to the holders of
Series B Preferred Shares.
(B) In the event, however, that there are not sufficient assets
available to permit payment in full of the Series B Liquidation Value and the
Accrued Dividend Amount and the liquidation preferences of all other series of
preferred shares, if any, which rank on a parity with the Series B Preferred
Shares, then such remaining assets shall be distributed ratably to the holders
of the Series B Preferred Shares and such parity shares in proportion to their
respective liquidation preferences.
(C) In determining whether a distribution (other than upon voluntary or
involuntary liquidation), by dividend, redemption or other acquisition of shares
of stock of the Corporation or otherwise, is permitted under the MGCL, amounts
that would be needed, if the Corporation were to be dissolved at the time of
the distribution, to satisfy the preferential rights upon dissolution of
holders of Series B Preferred Shares will not be added to the Corporation's
total liabilities.
- 4 -
<PAGE> 5
Section 8. Redemption. The Series B Preferred Shares shall not be
redeemable by the Corporation. The preceding sentence shall not limit the
ability of the Corporation to purchase or otherwise deal in such shares to the
extent permitted by law.
Section 9. Ranking. The Series B Preferred Shares shall rank on parity
with all other series of the Corporation's preferred stock (whether with or
without par value) as to the payment of dividends and the distribution of
assets, unless the terms of any such series shall provide otherwise.
Section 10. Amendment. The Charter shall not be amended in any
manner which would materially and adversely alter or change the powers,
preferences or special rights of the Series B Preferred Shares, as set forth
herein, without the affirmative vote of the holders of a majority or more of
the outstanding Series B Preferred Shares, voting separately as a class.
Section 11. Fractional Shares. Series B Preferred Shares may not be
issued in fractions of a share. No fractional shares or scrip representing
fractions of Common Shares shall be issued upon conversion of the Series B
Preferred Shares. Instead of any fractional interest in a Common Share that
would otherwise be deliverable upon the conversion of a Series B Preferred
Share, the Corporation shall pay to the holder of such share an amount in cash
based upon the Current Market Price of the Common Shares on the Trading Day
immediately preceding the date of conversion. If more than one share shall be
surrendered for conversion at one time by the same holder, the number of full
Common Shares issuable upon conversion thereof shall be computed on the basis of
the aggregate number of Series B Preferred Shares so surrendered.
SECOND: These Articles Supplementary have been approved by the Board of
Directors in the manner and by the vote required by law.
THIRD: The undersigned officer acknowledges these Articles
Supplementary to be the corporate act of the Corporation and, as to all matters
or facts required to be verified under oath, such officer acknowledges that to
the best of his knowledge, information and belief, these matters and facts
are true in all material respects and that this statement is made under the
penalties for perjury.
- 5 -
<PAGE> 6
IN WITNESS WHEREOF, these Articles Supplementary have been duly
executed by the undersigned officer this ____ day of _________________, 1998.
OMEGA WORLDWIDE, INC.
By:____________________________
Name:__________________________
Title:_________________________
[SEAL]
Attest:
By:____________________________
Name:__________________________
Title:_________________________
<PAGE> 1
EXHIBIT 4.1
BACK
OMEGA WORLDWIDE, INC.
Omega Worldwide, Inc. is authorized to issue two classes of shares,
Common and Preferred, and the Preferred may be issued in one or more series. The
Corporation will furnish to any stockholder on request and without charge, a
statement of the designations, preferences, conversions and other rights, voting
powers, restrictions, limitations as to dividends, qualifications and terms and
conditions of redemption of the stock of each class, or series, which the
Corporation is authorized to issue and any other information required by Section
2-211 of the Corporations and Associations Article of the Annotated Code of
Maryland. The board of directors of the corporation has authority to fix all or
any of the dividend rights, dividend rate, conversion rights, voting rights,
rights and terms of redemption (including sinking fund provisions), the
redemption price or prices, and the liquidation preferences of any wholly
unissued Preferred shares or of any wholly unissued series of Preferred shares,
the number of shares constituting any unissued series of Preferred shares, and
the designations of such series.
KEEP THIS CERTIFICATE IN A SAFE PLACE. IF IT IS LOST, STOLEN, OR
DESTROYED THE CORPORATION WILL REQUIRE A BOND OF INDEMNITY AS A CONDITION TO THE
ISSUANCE OF A REPLACEMENT CERTIFICATE.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S><C>
TEN COM - as tenants in common UNIF GIFT MIN ACT - ........... Custodian ................
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act..............................
in common (State)
UNIF TRF MIN ACT - .........Custodian (until age ..........)
(Cust)
.................... under Uniform Transfers
(Minor)
to Minors Act .............................
(State)
Additional abbreviations may also be used though not in the above list.
</TABLE>
FOR VALUE RECEIVED,_________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
_________________________________
| |
|_______________________________|
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
________________________________________________________________________________
________________________________________________________________________________
__________________________________________________________________________Shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
________________________________________________________________________Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated_____________________
X ____________________________
X ____________________________
NOTICE: THE SIGNATURE(S) TO THIS
ASSIGNMENT MUST CORRESPOND WITH
THE NAME(S) AS WRITTEN UPON THE
FACE OF THE CERTIFICATE IN
EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT OR
ANY CHANGE WHATEVER.
Signature(s) Guaranteed
By__________________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS
AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP
IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM),
PURSUANT TO S.E.C. RULE 17Ad-15.
_____________________________________________________
|AMERICAN BANK NOTE COMPANY MAR 6, 1998fm |
|3604 ATLANTIC AVENUE |
|SUITE 18 |
|LONG BEACH, CA 90807 055566bk |
|(602)859-2338 |
|(FAX) (602) 426-7450 Proof_________REV 1 |
____________________________________________________|
<PAGE> 2
<TABLE>
<S><C>
FRONT
OW
INCORPORATED UNDER THE LAWS [OMEGA WORLDWIDE INC. LOGO] THE SHARES EVIDENCED HEREBY ARE
OF THE STATE OF MARYLAND SUBJECT TO RESTRICTIONS ON OWNERSHIP
AND TRANSFER AS MORE FULLY DESCRIBED
ON THE REVERSE SIDE HEREOF.
CUSIP 68210B 10 8
This certifies that
is the record holder of
FULLY PAID AND NONASSESSABLE SHARES OF THE COMMON STOCK, PAR VALUE $.10 PER SHARE OF
OMEGA WORLDWIDE, INC.
(the "Corporation"), transferable only on the books of the Corporation by the holder hereof in person or by duly authorized
attorney upon surrender of this Certificate properly endorsed. This Certificate and the shares represented hereby are issued
and shall be held subject to all of the provisions of the Amended and Restated Articles of Incorporation and Articles
Supplementary (the "Charter"), and its Bylaws, to all of which the holder, by acceptance hereof, assents. This Certificate
is not valid unless countersigned and registered by the Transfer Agent and Registrar. In witness whereof, the said Corporation
has caused this Certificate to be signed by its duly authorized officers.
Dated:
Essel W. Bailey Jr. Susan Allene Kovach COUNTERSIGNED AND REGISTERED:
PRESIDENT SECRETARY FIRST CHICAGO TRUST COMPANY
OF NEW YORK
TRANSFER AGENT AND REGISTRAR,
BY
SIG ?
AUTHORIZED SIGNATURE
</TABLE>
_____________________________________________________
|AMERICAN BANK NOTE COMPANY MAR 24, 1998 fm |
|3504 ATLANTIC AVENUE |
|SUITE 12 |
|LONG BEACH, CA 90807 055566fc |
|(602) 980-6333 |
|(FAX) (602) 426-7460 7B REV 2 |
|___________________________________________________|
<PAGE> 1
EXHIBIT 5
March 25, 1998
Omega Worldwide, Inc.
905 West Eisenhower Circle
Suite 101
Ann Arbor, Michigan 48103
Re: Omega Worldwide, Inc.
Registration Statement on Form S-1
Ladies and Gentlemen:
We have acted as counsel to Omega Worldwide, Inc., a Maryland
corporation (the "Company"), in connection with the registration of 11,250,000
shares (the "Shares") of Common Stock, $0.10 par value, of the Company pursuant
to a Registration Statement on Form S-1 (Registration No. 333-43417) under
the Securities Act of 1933 (as amended, the "Registration Statement").
Based upon our examination of the originals or copies of such
documents, corporate records, certificate of officers of the Company and other
instruments as we have deemed necessary and upon the laws as presently in
effect, we are of the opinion that the Shares have been duly authorized for
issuance by the Company, and that upon issuance and delivery in accordance with
the Registration Statement, the shares will be validly issued, fully paid and
nonassessable.
This opinion is limited to the laws of the State of Maryland and the
federal laws of the United States.
We hereby consent to the filing of this opinion as Exhibit 5 to the
Registration Statement and to the references to us under the heading "Legal
Matters" in the Prospectus forming part of the Registration Statement.
Very truly yours,
/s/ Mayer, Brown & Platt
<PAGE> 1
EXHIBIT 8
[Mayer, Brown & Platt Letterhead]
March 25, 1998
Omega Worldwide, Inc.
905 West Eisenhower Circle, Suite 101
Ann Arbor, Michigan 48103
Ladies and Gentlemen:
We have acted as counsel to Omega Worldwide, Inc. in connection with
the preparation and filing of, and the transactions contemplated in,
the prospectus (the "Prospectus") included as part of the registration
statement (the "Registration Statement") on Form S-1 (registration no.
333-43417). You have requested that we provide a legal opinion regarding the
accuracy of the tax disclosure under certain captions in the Prospectus.
This opinion is based on current provisions of the Code, the Treasury
regulations promulgated thereunder, and the interpretation of the Code and such
regulations by the courts and the Internal Revenue Service, all as they
are in effect and exist at the date of this opinion. It should be noted that
statutes, regulations, judicial decisions and administrative interpretations
are subject to change at any time and, in some circumstances, with retroactive
effect. A material change that is made after the date hereof in any of the
foregoing bases for our opinion could adversely affect our conclusion. In
providing this opinion, we have relied on the description of the transactions
as set forth in the Prospectus.
Based upon and subject to the foregoing, it is our opinion that the
summaries of Federal income tax consequences set forth in the Prospectus under
the headings "The Rights Offering -- Federal Tax Consequences of the Rights
Offering", "The Distribution -- Federal Income Tax Consequences of the
Distribution" and "Taxation of Omega Worldwide and its Shareholders" are
accurate in all material respects as to matters of law and legal conclusions.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to all references to this firm under the headings
"The Rights Offering -- Federal Income Tax Consequences of the Rights
Offering", "The Distribution -- Federal Income Tax Consequences of the
Distribution" and "Taxation of Omega Worldwide and its Shareholders" in the
Prospectus.
Sincerely,
/s/ MAYER, BROWN & PLATT
MGR
<PAGE> 1
EXHIBIT 10.1
OMEGA WORLDWIDE, INC.
1997 STOCK OPTION AND RESTRICTED STOCK PLAN
1. PURPOSE
The purpose of the Omega Worldwide, Inc. 1997 Stock Option and
Restricted Stock Plan (the "Plan") is to strengthen Omega Worldwide, Inc. (the
"Corporation") and those corporations which are or hereafter become subsidiary
corporations (the "Subsidiary" or "Subsidiaries") by providing additional means
of attracting and retaining competent managerial personnel and by providing to
participating directors, officers and employees added incentive for high levels
of performance and for unusual efforts to increase the earnings, value and
distributions of the Corporation and any Subsidiaries. The Plan seeks to
accomplish these purposes and achieve these results by providing a means whereby
such directors, officers and employees may receive Stock Options and/or shares
of Restricted Stock in accordance with this Plan.
Stock Options granted pursuant to this Plan are intended to be
Incentive Stock Options or Non-Qualified Stock Options, as shall be determined
and designated by the Plan Committee upon the grant of each Stock Option
hereunder.
2. DEFINITIONS
For purposes of this Plan, the following terms shall have the following
meanings:
(a) Common Stock. This term shall mean shares of the Corporation's
common stock, $.10 par value, subject to adjustment pursuant to Section 18
(Adjustment Upon Changes in Capitalization) thereunder.
(b) Corporation. This term shall mean Omega Worldwide, Inc., a Maryland
corporation.
(c) Eligible Participants. This term shall mean all directors of the
Corporation or any Subsidiary, and all officers or employees (whether or not
they are also directors) of the Corporation or any Subsidiary.
(d) Fair Market Value. This term shall mean the fair market value of
the Common Stock as determined in accordance with any reasonable
valuation method selected by the Plan Committee, including the valuation
methods described in Treasury Regulations Section 20.2031-2. Unless determined
otherwise by the Plan Committee, "fair" market "value" shall be as applied to
any date specified in the Plan, the closing price of a share of Common Stock
<PAGE> 2
as reported in the Wall Street Journal on such date, or, if no such sales were
made on such date, the closing price of such share as reported in the Wall
Street Journal on the next preceding date on which there were such sales.
(e) Grantee. This term shall mean any Eligible Participant to whom
Restricted Stock has been granted pursuant to this Plan.
(f) Incentive Stock Option. This term shall mean a Stock Option which
is an "incentive stock option" within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended.
(g) Non-Qualified Stock Option. This term shall mean a Stock Option
which is not an Incentive Stock Option.
(h) Option Shares. This term shall mean Common Stock covered by and
subject to any outstanding unexercised Stock Option granted pursuant to this
Plan.
(i) Optionee. This term shall mean any Eligible Participant to whom a
Stock Option has been granted pursuant to this Plan, provided that at least part
of the Stock Option is outstanding and unexercised.
(j) Plan. This term shall mean the Omega Worldwide, Inc. 1997 Stock
Option and Restricted Stock Plan, as embodied herein and as may be amended from
time to time in accordance with the terms hereof and applicable law.
(k) Plan Committee. The Compensation Committee of the Board of
Directors of the Corporation shall constitute the Plan Committee and have full
authority to act in the matter. The Plan Committee shall consist at all times of
a committee of two or more non-employee directors. All references in the Plan to
the "Plan Committee" shall be deemed to refer to the Compensation Committee of
the Board of Directors. The Board of Directors of the Corporation shall have the
right, in its sole and absolute discretion, to remove or replace any person from
or on the Compensation Committee at any time for any reason whatsoever.
(l) Restricted Stock. This term shall mean shares of Common Stock of
the Company granted without cost to the Participant pursuant to Section 7, and
subject to the terms of Section 8.
2
<PAGE> 3
(m) Stock Option. This term shall mean the right to purchase Common
Stock under this Plan in a specified number of shares, at a price and upon the
terms and conditions as specified in this Plan or as determined by the Plan
Committee.
(n) Subsidiary. This term shall mean each "subsidiary corporation"
(treating the Corporation as the employer corporation) as defined in Section
425(f) of the Internal Revenue Code of 1986, as amended.
3. ADMINISTRATION
(a) Administration of the Plan. This Plan shall be administered by the
Plan Committee. Any action of the Plan Committee with respect to the
administration of the Plan shall be taken pursuant to a majority vote, or
pursuant to the unanimous written consent, of its members. Any such action taken
by the Plan Committee in the administration of this Plan shall be valid and
binding, so long as the same is not inconsistent with the terms and conditions
of this Plan. To the extent consistent with the availability to the Plan of Rule
16b-3 under the Securities Exchange Act of 1934 as amended, and subject to
compliance with the terms, conditions and restrictions set forth in this Plan,
the Plan Committee shall have 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 Plan, including, without limitation, the
power to determine the duration and purposes, if any, of leaves of absence which
may be permitted to holders of unexercised, unexpired Stock Options without such
constituting a termination under the 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 hereunder.
(b) Decisions and Determinations. Subject to the express provisions of
this Plan, the Plan Committee shall have the authority to construe and interpret
this Plan, to define the terms used herein, to prescribe, amend, and rescind
rules and regulations relating to the administration of the Plan, and to make
all other determinations necessary or advisable for administration of the Plan.
Determinations of the Plan Committee on matters referred to in this Section 3
shall be final and conclusive so long as the same are not inconsistent with the
terms of this Plan.
4. SHARES SUBJECT TO THE PLAN.
Subject to adjustments as provided in Section 18 hereof, the maximum
number of shares of Common Stock which may be issued as Restricted Stock or upon
exercise of all
3
<PAGE> 4
Stock Options granted under this Plan is limited to seven hundred fifty thousand
(750,000) shares in the aggregate.
If for any reason, unreleased shares of Restricted Stock do not vest,
said shares shall again be available for grants of Restricted Stock or Stock
Options under this Plan. If any Stock Option shall be canceled, surrendered, or
expire for any reason without having been exercised in full, the Shares
represented thereby shall again be available for grants of Restricted Stock or
Stock Options under this Plan.
5. ELIGIBILITY
Only Eligible Participants shall be eligible to receive grants of
Restricted Stock or Stock Options under this Plan.
6. FORMULA AWARDS OF STOCK OPTIONS TO NON-EMPLOYEE DIRECTORS
Initial Stock Option grants with respect to 10,000 shares shall be made
to each non-employee director. Additional Stock Option grants with respect to
1,000 shares shall be made to each non-employee director on or after each
anniversary of the initial grant.
Non-employee directors are not eligible for further grants of Stock
Options.
7. DISCRETIONARY AWARDS OF RESTRICTED STOCK AND STOCK OPTIONS
The Plan Committee, in its sole and absolute discretion, subject to the
provisions of the Plan, may grant Restricted Stock to any Eligible Participant
including a non-employee director. The Plan Committee, in its sole and absolute
discretion, subject to the provisions of the Plan, may grant Stock Options to
any Eligible Participant other than a non-employee director (whose Stock Option
Awards are specifically provided in Section 6 hereof), at such time and in such
amounts and on such terms and conditions as it deems advisable and specifies in
the respective grants.
8. RESTRICTED STOCK AND FORFEITURE RESTRICTIONS
(a) Certain Terms. The shares of Restricted Stock granted to a
Participant shall be released to him in accordance with such schedule as the
Plan Committee, in its sole discretion, shall determine at the time of grant but
in no event less than six (6) months from the date of the grant. All shares of
Restricted Stock shall be fully released not later than ten years from the date
of grant. Except for normal retirement, or pursuant to the terms of the
4
<PAGE> 5
written agreement with a non-employee director, the Grantee shall have no vested
interest in the unreleased stock of any grant in the event of his termination
with the Corporation for any reason (unless the Plan Committee in its sole
discretion decides to terminate the forfeiture restrictions following the
termination of such Grantee) and the unreleased stock certificates shall be
canceled. During the Grantee's continued employment or affiliation, however, he
shall have the right to vote all shares and to receive all dividends as though
all shares granted were his without restrictions.
(b) Written Agreement. The details of each grant regarding shares of
Restricted Stock shall be evidenced by a written agreement covering terms and
conditions, not inconsistent with the Plan, as the Plan Committee shall approve.
Such agreement shall be promptly delivered by Management of the Corporation to
each Grantee.
9. STOCK OPTIONS
(a) Designation as Incentive or Nonqualified Options. The Plan
Committee shall designate in each grant of a Stock Option whether the Stock
Option is an Incentive Stock Option or a Non-Qualified Stock Option. The terms
upon which and the times at which, or the periods within which, the Option
Shares subject to such Stock Options may become acquired or such Stock Options
may be acquired and exercised shall be as set forth in the Plan and the related
Stock Option Agreements.
(b) Date of Grant and Rights of Optionees. The determination of the
Plan Committee to grant a Stock Option shall not in any way constitute or be
deemed to constitute an obligation of the Corporation, or a right of the
Eligible Participant who is the proposed subject of the grant, and shall not
constitute or be deemed to constitute the grant of a Stock Option hereunder
unless and until both the Corporation and the Eligible Participant have executed
and delivered to the other a Stock Option Agreement in the form then required by
the Plan Committee as evidencing the grant of the Stock Option, together with
such other instrument or instruments as may be required by the Plan Committee
pursuant to this Plan; provided, however, that the Plan Committee may fix the
date of grant as any date on or after the date of its final determination to
grant the Stock Option (or if no such date is fixed, then the date of grant
shall be the date on which the determination was finally made by the Plan
Committee to grant the Stock Option), and such date shall be set forth in the
Stock Option Agreement. The date of grant as so determined shall be deemed the
date of grant of the Stock Option for purposes of this Plan.
(c) 10% Shareholder. A Stock Option granted hereunder to an Eligible
Participant who owns, directly or indirectly, at the date of the grant of the
Stock Option, more than ten
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percent (10%) of the total combined voting power of all classes of capital stock
of the Corporation or a Subsidiary shall not qualify as an Incentive Stock
Option unless: (i) the purchase price of the Option Shares subject to said Stock
Option is at least one hundred and ten percent (110%) of the Fair Market Value
of the Option Shares, determined as of the date said Stock Option is granted;
and (ii) the Stock Option by its terms is not exercisable after five (5) years
from the date that it is granted. The attribution rules of Section 425(d) of the
Internal Revenue Code of 1986, as amended, shall apply in the determination of
indirect ownership of stock.
(d) Maximum Value of Stock Options. No grant of Incentive Stock Options
hereunder may be made when the aggregate fair market value of Option Shares with
respect to which Incentive Stock Options (pursuant to this Plan or any other
Incentive Stock Option Plan of the Corporation or any Subsidiary) are
exercisable for the first time by the Eligible Participant during any calendar
year exceeds $100,000.
(e) Non-Qualified Stock Options. Stock Options granted by the Plan
Committee shall be deemed Non-Qualified Stock Options under this Plan if they:
(i) are designated at the time of grant as Incentive Stock Options but do not so
qualify under the provisions of Section 422 of the Code or any regulations or
rulings issued by the Internal Revenue Service for any reason; (ii) are not
granted in accordance with the provisions of Section 9(c); (iii) are in excess
of the fair market value limitations set forth in Section 9(d); (iv) are granted
to an Eligible Participant who is not an employee of the Corporation or any
Subsidiary; or (v) are designated at the time of grant as Non-Qualified Stock
Options. Non-Qualified Stock Options granted hereunder shall be so designated in
the Stock Option Agreement entered into between the Corporation and the
Optionee.
10. STOCK OPTION EXERCISE PRICE
The exercise price of Option Shares shall be determined by the
Committee at the date of grant, except that the exercise price of any Option
Shares designated as Incentive Stock Options shall be one hundred percent (100%)
of the Fair Market Value of the Common Stock represented by the Option Shares on
the date of grant.
The exercise price of Option Shares granted to non-employee directors
shall in all cases be one hundred percent (100%) of the Fair Market Value of the
Common Stock represented by the Option Shares on the date of grant.
11. EXERCISE OF STOCK OPTIONS
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(a) Exercise. Except as otherwise provided elsewhere herein, if an
Optionee shall not in any given period exercise any part of a Stock Option which
has become exercisable during that period, the Optionee's right to exercise such
part of the Stock Option shall continue until expiration of the Stock Option or
any part thereof as may be provided in the related Stock Option Agreement. No
Stock Option shall, except as provided in Section 19 hereof, become exercisable
until one (1) year following the date of grant, and (i) as to non-employee
directors, a Stock Option first becomes exercisable as to one third (1/3) of the
Option Shares called for thereby during the second year following the date of
the grant, as to an additional one-third (1/3) during the third year and as to
the remaining one third (1/3) during the fourth year, and (ii) as to all other
Eligible Participants, Stock Options shall be exercisable as set forth by the
Committee. No Stock Option or part thereof shall be exercisable except with
respect to whole shares of Common Stock, and fractional share interests shall be
disregarded except that they may be accumulated.
(b) Prior Outstanding Incentive Stock Options. Incentive Stock Options
granted to an Optionee under the Plan shall be exercisable even while such
Optionee has outstanding and unexercised any Incentive Stock Option previously
granted to him or her pursuant to this Plan or any other Incentive Stock Option
Plan of the Corporation or any Subsidiary. An Incentive Stock Option shall be
treated as outstanding until it is exercised in full or expires by reason of
lapse of time, or is otherwise canceled by mutual action of the Optionee and the
Corporation.
(c) Notice and Payment. Stock Options granted hereunder shall be
exercised by written notice delivered to the Corporation specifying the number
of Option Shares with respect to which the Stock Option is being exercised,
together with concurrent payment in full of the exercise price as hereinafter
provided. If the Stock Option is being exercised by any person or persons other
than the Optionees, said notice shall be accompanied by proof, satisfactory to
the counsel for the Corporation, of the right of such person or persons to
exercise the Stock Option.
(d) Payment of Exercise Price. The exercise price of any Option Shares
purchased upon the proper exercise of a Stock Option shall be paid in full at
the time of each exercise of a Stock Option in cash or check and/or in Common
Stock of the Corporation which, when added to the cash payment, if any, has an
aggregate Fair Market Value equal to the full amount of the exercise price of
the Stock Option, or part thereof, then being exercised. Payment by an Optionee
as provided herein shall be made in full concurrently with the Optionee's
notification to the Corporation of his intention to exercise all or part of a
Stock Option. If all or any part of a payment is made in shares of Common Stock
as heretofore provided, such payment shall be deemed to have been made only upon
receipt by the
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corporation of all required share certificates and all stock power and all other
required transfer documents necessary to transfer the shares of Common Stock to
the Corporation. In addition, Options may be exercised and payment made by
delivering a properly executed exercise notice together with irrevocable
instructions to a broker or bank to promptly deliver to the Corporation the
amount of sale proceeds necessary to pay the exercise price and any applicable
tax withholding. The date of exercise shall be deemed to be the date the
Corporation receives the notice.
12. [RESERVED]
13. NONTRANSFERABILITY
Except as otherwise provided herein each Stock Option and all
unreleased shares of Restricted Stock shall, be their terms, be nontransferable
by the Optionee other than by will or the laws of descent and distribution, or
pursuant to a qualified domestic relations order as defined by the Internal
Revenue Code of 1986, as amended, or Title I of the Employee Retirement Income
Security Act, or the rules thereunder. Notwithstanding the above, a Stock Option
may be transferred to an inter vivos trust, provided the transferor of the Stock
Option is both a trustor and a trustee of the trust.
14. AFFILIATION
Nothing contained in this Plan (or in any Stock Option or Restricted
Stock Agreement) shall obligate the Corporation or any Subsidiary to employ or
continue to employ or remain affiliated with any Participant for any period of
time or interfere in any way with the right of the Corporation or a Subsidiary
to reduce or increase the Participant's compensation.
Except as provided in Section 15 hereof, if , for any reason other than
disability or death, an Optionee ceases to be affiliated with the Corporation or
a Subsidiary, the Stock Options granted to such Optionee shall expire on the
expiration dates specified for said Stock Options at the time of their grant, or
three (3) months after the Optionee ceases to be so affiliated, whichever is
earlier. During such period after cessation of affiliation, such Stock Options
shall be exercisable only as to those increments, if any, which had become
exercisable as of the date on which such Optionee ceased to be affiliated with
the Corporation or the Subsidiary, and any Stock Options or increments which had
not become exercisable as of such date shall expire automatically on such date.
15. TERMINATION FOR CAUSE
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If the Stock Option Agreement so provides and if an Optionee's
employment by or affiliation with the Corporation or a Subsidiary is terminated
for cause, the Stock Options granted to such Optionee shall automatically expire
and terminate in their entirety immediately upon such termination; provided,
however, that the Plan Committee may, in its sole discretion, within thirty (30)
days of such termination, reinstate such Stock Options by giving written notice
of such reinstatement to the Optionee. In the event of such reinstatement, the
Optionee may exercise the Stock Options only to such extent, for such time, and
upon such terms and conditions as if the Optionee had ceased to be employed by
or affiliated with the Corporation or a Subsidiary upon the date of such
termination for a reason other than cause, disability or death. Termination for
cause shall include, but shall not be limited to termination for malfeasance or
gross misfeasance in the performance of duties or conviction of illegal activity
in connection therewith and, in any event, the determination of the Plan
Committee with respect thereto shall be final and conclusive.
16. DEATH OF OPTIONEE
If an Optionee dies while employed by or affiliated with the
Corporation or a Subsidiary, or during the three-month period referred to in
Section 14, hereof, the Stock Options granted to such Optionee shall expire on
the expiration dates specified for said Stock Options at the time of their
grant, or one (1) year after the date of such death, whichever is earlier. After
such death, but before such expiration, subject to the terms and provisions of
the Plan and the related Stock Option Agreement, the person or persons to whom
such Optionee's rights under the Stock Options shall have passed by will or by
the applicable laws of descent and distribution, or the executor or
administrator of the Optionee's estate, shall have the right to exercise such
Stock Options to the extent that increments, if any, had become exercisable as
of the date on which the Optionee died.
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17. DISABILITY OF OPTIONEE
If an Optionee is disabled while employed by or affiliated with the
Corporation or a Subsidiary or during the three-month period referred to in
Section 14 hereof, the Stock Options granted to such Optionee shall expire on
the expiration dates specified for said Stock Options at the time of their
grant, or one (1) year after the date such disability occurred, whichever is
earlier. After such disability occurs, but before such expiration, the Optionee
or the guardian or conservator of the Optionee's estate, as duly appointed by a
court of competent jurisdiction, shall have the right to exercise such Stock
Options to the extent that increments, if any, had become exercisable as of the
date on which the Optionee became disabled or ceased to be employed by or
affiliated with the Corporation or a Subsidiary as a result of the disability.
An Optionee shall be deemed to be "disabled" if it shall appear to the Plan
Committee, upon written certification delivered to the Corporation of a
qualified licensed physician, that the Optionee has become permanently and
totally unable to engage in any substantial gainful activity by reason of a
medically determinable physical or mental impairment which can be expected to
result in the Optionee's death, or which has lasted or can be expected to last
for a continuous period of not less than 12 months.
18. ADJUSTMENT UPON CHANGES IN CAPITALIZATION
If the outstanding shares of Common Stock of the Corporation are
increased, decreased, or changed into or exchanged for a different number or
kind of shares or securities of the Corporation, through a reorganization,
merger, recapitalization, reclassification, stock split, stock dividend, stock
consolidation, or otherwise, without consideration to the Corporation, or if
there is a spin-off or other distribution of stock or property with respect to
the holders of the Common Stock other than normal cash dividends, an appropriate
and proportionate adjustment shall be made in the number and kind of shares as
to which Stock Options may be granted. A corresponding adjustment changing the
number or kind of Option Shares and the exercise prices per share allocated to
unexercised Stock Options, or portions thereof, which shall have been granted
prior to any such change, shall likewise be made. Such adjustments shall be made
without change in the total price applicable to the unexercised portion of the
Stock Option, but with a corresponding adjustment in the price of each share
subject to the Stock Option. Adjustments under this Section shall be made by the
Plan Committee, whose determination as to what adjustments shall be made, and
the extent thereof, shall be final and conclusive. No fractional shares of stock
shall be issued or made available under the Plan on account of such adjustments,
and fractional share interests shall be disregarded, except that they may be
accumulated.
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19. TERMINATING EVENTS
Upon consummation of a plan of dissolution or liquidation of the
Corporation, or upon consummation of a plan or reorganization, merger or
consolidation of the Corporation with one or more corporations, as a result of
which the Corporation is not the surviving entity, or upon the sale of all or
substantially all the assets of the Corporation to another corporation, the Plan
shall automatically terminate and all unreleased shares of Restricted Stock
shall be released (but in no event during the first six months after the date of
grant of such shares of Restricted Stock if Rule 16b-3, or any successor
thereto, so provides) under such circumstances, and all Stock Options
theretofore granted shall be terminated, subject to provisions of the
immediately following paragraph in this Section 19, unless provision is made in
connection with such transaction for assumption of Stock Options theretofore
granted, or substitution for such Stock Options with new options covering stock
of a successor employer corporation, or a parent subsidiary corporation thereof,
solely at the discretion of such successor corporation, or parent or subsidiary,
corporation, with appropriate adjustments as to number and kind of shares and
prices.
Notwithstanding the immediately preceding paragraph and/or any
provision in any Stock Option pertaining to the time of exercise of a Stock
Option, or part thereof upon adoption by the requisite holders of the
outstanding shares of Common Stock of any plan of dissolution, liquidation,
reorganization, merger consolidation or sale of all or substantially all of the
assets of the Corporation to another corporation which would, upon consummation,
result in termination of a Stock Option, all Stock Options previously granted
shall become immediately exercisable (but in no event shall be exercisable
during the first six months after they are granted if Rule 16b-3, or any
successor thereto, so provides) as to all unexercised Shares for such period of
time as may be determined by the Plan Committee, but in any event not less than
30 days, on the conditions that the terminating event is consummated. If such
terminating event is not consummated, Stock Options granted pursuant to the Plan
shall be exercisable in accordance with the terms of their respective Stock
Option Agreement.
Notwithstanding any other provision of this Plan, in the event of a
Change of Control as hereinafter defined, all shares of Restricted Stock shall
immediately vest but not prior to six months after the date of grant, and all
outstanding options shall be immediately exercisable in full but not prior to
one year after the date of grant with respect to Incentive Stock Options, and
not prior to six months after the date of grant with respect to nonqualified
options. Change of Control shall mean a change in control of the Company of a
nature that would be required to be reported in response to Item 6(e) of
Schedule 14A, Regulation 240, 14a-101, promulgated under the Securities Exchange
Act of 1934, or, if Item 6(e) is no longer in effect, any regulation issued by
the Securities and Exchange Commission pursuant to the Securities Exchange Act
of 1934 which serves similar purposes; provided that, without limitation, a
Change of Control shall be deemed to have occurred if and when (a) any "person"
(as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange
Act of 1934) is or becomes a beneficial owner, directly or indirectly, of
securities of the Company representing fifty percent (50%) or more of the
combined voting power of the Company's then outstanding securities, (b)
individuals who are members of the Board immediately prior to a meeting of the
shareholders of the Company involving a contest for the election of directors
shall not constitute a majority of the Board following such election, or (c) a
merger in which the Company is not the surviving corporation, and the
shareholders of the Company immediately prior to the merger do not own at least
a majority of the outstanding shares of the surviving corporation.
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20. AMENDMENT AND TERMINATION
The Board of Directors of the Corporation may at any time and from time
to time suspend, amend, or terminate the Plan. However, except as permitted
under the provisions of Section 18 hereof, to the extent then required by Rule
16b-3 to secure benefits thereunder or to avoid liability under Section 16 of
the Exchange Act (the Rules thereunder) or required under the provisions of the
Internal Revenue Code for qualification of Incentive Stock Options, or as
required by any applicable law, or deemed necessary or advisable by the Board,
such amendment shall be subject to shareholder approval.
The provisions of this Plan shall not be amended more than once every
six months, other than to comport with changes in the Internal Revenue Code, the
Employee Retirement income Security Act, or the rules thereunder.
No Stock Option and no shares of Restricted Stock may be granted during
any suspension of the Plan or after termination of the Plan. Amendment,
suspension, or termination of the Plan shall not (except as otherwise provided
in Section 19 hereof), without the consent of the Participant, alter or impair
any rights or obligations theretofore granted.
21. RIGHTS OF ELIGIBLE PARTICIPANTS
No Eligible Participant or other person shall have any claim or right
to be granted Restricted Stock or Stock Options under this Plan, and neither
this Plan nor any action taken hereunder shall be deemed to give or be construed
as giving any Eligible Participant or other person any right to be retained in
the employ of the Corporation or any subsidiary. Without limiting the generality
of the foregoing, no person shall have any rights as a result of his or her
classification as an Eligible Participant, such classification being made solely
to describe, define and limit those persons who are eligible for consideration
for privileges under the Plan.
22. PRIVILEGES OF STOCK OWNERSHIP; REGULATORY LAW COMPLIANCE; NOTICE OF
SALE
No Optionee shall be entitled to the privileges of stock ownership as
to any shares not actually issued and delivered. No shares may be purchased upon
the exercise of a Stock Option unless and until all then applicable requirements
of all regulatory agencies having jurisdiction and all applicable requirements
of the securities exchanges upon which securities of the Corporation are listed
(if any) shall have been fully complied with.
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23. EFFECTIVE DATE OF THE PLAN
The Plan was adopted by the Board of Directors on December 1, 1997 and
effective as of that date subject to the approval within twelve (12) months
thereof, by the holders of at least a majority of the Corporation=s outstanding
shares of Common Stock.
24. TERMINATION
Unless previously terminated as aforesaid, the Plan shall terminate on
the date which is ten (10) years from the date of adoption of the Plan by the
Board of Directors. No Stock Options or shares of Restricted Stock shall be
granted under the Plan thereafter, but such termination shall not affect any
Stock Option or grant of Restricted Stock theretofore granted.
25. STOCK OPTION PERIOD
Each Stock Option and all rights and obligations thereunder shall
expire on such date as the Plan Committee may determine, but not later than ten
(10) years from the date such Stock Option is granted in the case of Incentive
Stock Options and eleven (11) years from the date of grant in the case of
Non-Qualified Stock Options, and each Stock Option shall be subject to earlier
termination as provided elsewhere in this Plan.
26. EXCULPATION AND INDEMNIFICATION OF PLAN COMMITTEE
The present, former and future members of the Plan Committee, and each
of them, who is or was a director, officer or employee of the Corporation shall
be indemnified by the Corporation to the extent authorized in and permitted by
the Corporation=s Certificate of Incorporation, and/or Bylaws in connection with
all actions, suits and proceedings to which they or any of them may be a party
by reason of any act or omission of any member of the Plan Committee under or in
connection with the Plan or any Stock Option granted thereunder.
27. COMPLIANCE WITH LAW AND REPRESENTATIONS OF PARTICIPANT
No shares of Common Stock shall be issued upon exercise of any Stock
Option, and an Optionee shall have no right or claim to such shares, unless and
until: (i) payment in full has been received by the Corporation with respect to
the exercise of any Stock Option; (ii) in the opinion of the counsel for the
Corporation, all applicable requirements of law and of regulatory bodies having
jurisdiction over such issuance and delivery have been fully complied with; and
(iii) if required by federal or state law or regulation, the Optionee shall have
paid to the Corporation the amount, if any, required to be withheld on the
amount deemed to be compensation to the Optionee as a result of the exercise of
his or her Stock
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Option, or made other arrangement satisfactory to the Corporation, in its sole
discretion, to satisfy applicable income tax withholding requirements.
Unless the shares of Common Stock covered by this Plan have been
registered with the Securities and Exchange Commission pursuant to the
registration requirements under the Securities Act of 1933, each Participant
shall: (i) by and upon accepting shares of Restricted Stock or a Stock Option,
represent and agree in writing, that the Stock will be acquired for investment
purposes and not for resale or distribution; and (ii) by and upon the exercise
of a Stock Option, or a part thereof, furnish evidence satisfactory to counsel
for the Corporation, including written and signed representations to the effect
that the Shares are being acquired for investment purposes and not for resale or
distribution, and that the Shares being acquired shall not be sold or otherwise
transferred by the Participant except in compliance with the registration
provisions under the Securities Act of 1933, as amended, or an applicable
exemption therefrom. Furthermore, the Corporation, at its sole discretion, to
assure itself that any sale or distribution by the Participant complies with
this Plan and any applicable federal or state securities laws, may take all
reasonable steps, including placing stop transfer instructions with the
Corporation's transfer agent prohibiting transfers in violation of the Plan and
affixing the following legend (and/or such other legend or legends as the Plan
Committee shall require) on certificates evidencing the shares:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR OFFERED FOR SALE IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT WITH RESPECT TO THEM
UNDER THE ACT OR A WRITTEN OPINION OF COUNSEL FOR THE HOLDER THEREOF,
WHICH OPINION SHALL BE ACCEPTABLE TO OMEGA WORLDWIDE, INC., THAT
REGISTRATION IS NOT REQUIRED."
28. NOTICES
All notices and demands of any kind which the Plan Committee, or any
Participant, or other person may be required or desires to give under the terms
of this Plan shall be in writing and shall be delivered in hand to the person or
persons to whom addressed (in the case of the Plan Committee, with the Chairman,
Chief Executive Officer, Chief Financial Officer, Treasurer, any Vice President
or Secretary or any Assistant Secretary of the Corporation), by leaving a copy
of such notice or demand at the address of such person or persons as may be
reflected in the records of the Corporation, or by mailing a copy thereof,
properly addressed as above, by certified or registered mail, postage prepaid,
with return
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receipt requested. Delivery by mail shall be deemed made upon
receipt by the notifying party of the return receipt acknowledging receipt of
the notice or demand.
29. LIMITATION ON OBLIGATIONS OF THE CORPORATION
All obligations of the Corporation arising under or as a result of this
Plan or Stock Options or Restricted Stock granted hereunder shall constitute the
general unsecured obligations of the Corporation, and neither the Plan Committee
nor any member thereof, nor any officer of the Corporation, nor any other person
or any Subsidiary, shall be liable for any debt, obligation, cost or expense
hereunder.
30. LIMITATION OF RIGHTS
Except as otherwise provided by the terms of the Plan, the Plan
Committee, in its sole and absolute discretion, is entitled to determine who, if
anyone, is an Eligible Participant under this Plan, and which, if any, Eligible
Participant shall receive any grant. No oral or written agreement by any other
person not acting on behalf of the Plan Committee relating to this Plan is
authorized, and such may not bind the Corporation or the Plan Committee to make
any grant to any person.
31. SEVERABILITY
If any provision of this Plan as applied to any person or to any
circumstance shall be adjudged by a court of competent jurisdiction to be void,
invalid, or unenforceable, the same shall in no was affect any other provision
hereof, the application of any such provision in any other circumstances, or the
validity or enforceability hereof.
32. CONSTRUCTION
Where the context or construction requires, all words applied in the
plural herein shall be deemed to have been used in the singular and vice versa,
and the masculine gender shall include the feminine and the neuter and vice
versa.
33. HEADINGS
The headings of the several paragraphs herein are inserted solely for
convenience of reference and are not intended to form a part of and are not
intended to govern, limit or aid in the construction of any term or provision
hereof.
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34. SUCCESSORS
This Plan shall be binding upon the respective successors, assigns,
heirs, executors, administrators, guardians and personal representatives of the
Corporation and Participants.
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EXHIBIT 10.2
OPPORTUNITY AGREEMENT
THIS OPPORTUNITY AGREEMENT (this "Agreement") is entered into as of
April , 1998 between Omega Healthcare Investors, Inc., a Maryland
corporation ("Omega"), and Omega Worldwide, Inc., a Maryland corporation
("Omega Worldwide").
The circumstances underlying the execution and delivery of this
Agreement are as follows:
A. Capitalized terms used but not otherwise defined herein have the
respective meanings given them in Article I below.
B. Omega is a REIT and, as such, principally pursues REIT Opportunities
that are passive investments producing current interest or rental income for
distribution to its shareholders. Nevertheless, Omega also desires to make other
investments, within or outside of the United States, if its investment
objectives can be satisfied.
C. Omega Worldwide (which is not a REIT and therefore is not limited in
the nature of the investment opportunities that it may pursue by Sections 856
though 860 of the Code) has been formed by Omega to provide Omega's shareholders
the opportunity to benefit from Worldwide Opportunities, which generally are not
well-suited to Omega because of its REIT status, investment approach and capital
structure. Specifically, Omega Worldwide has been formed to pursue healthcare
investment and operating opportunities and active advisory management
opportunities. Its investment strategy typically will not result in investments
producing a significant current yield for distribution to its shareholders;
rather, its investment strategy contemplates investments that will produce
long-term appreciation in the value of Omega Worldwide's stock.
D. In order to further its investment strategy, Omega Worldwide
requires a source of investment, operations and management expertise and
experience and other services. Pursuant to a Services Agreement of even date
herewith, Omega has agreed to provide to Omega Worldwide a number of services,
including without limitation the investment, operations and management expertise
and experience of the executives and other employees of Omega.
E. Omega would not have formed Omega Worldwide, and would not enter
into the Services Agreement with Omega Worldwide, but for Omega Worldwide's
agreement that Omega be provided with the first opportunity to pursue REIT
Opportunities and the opportunity to pursue Worldwide Opportunities that Omega
Worldwide declines to pursue. Omega Worldwide would not agree to provide Omega
with the first opportunity to pursue REIT Opportunities and the opportunity to
pursue Worldwide Opportunities that Omega Worldwide declines to pursue but for
Omega's agreement that Omega Worldwide be provided with the first opportunity to
pursue Worldwide Opportunities and the opportunity to pursue REIT Opportunities
that Omega declines to pursue.
<PAGE> 2
F. In order to further their respective investment strategies, each of
Omega and Omega Worldwide may desire to pursue jointly certain Opportunities
that each would be unable or unwilling to pursue individually.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained in this Agreement and other good and valuable
consideration, the receipt and adequacy of which hereby are acknowledged, the
parties agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINITIONS. The following terms shall have the respective
meanings given them below:
"Act" means the Securities Exchange Act of 1934, as amended
from time to time.
"Affiliate" means, with respect to a Person, any Person that
controls, is controlled by or is under common control with such Person.
For purposes of this definition, "control" means, with respect to a
Person, the power to direct the management and policies of the Person,
directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise, and the terms "affiliated,"
"controlling" and "controlled" have meanings correlative to the
foregoing.
"Change of Control" means a change in control of either party
of a nature that would be required to be reported in response to Item
6(e) of Schedule 14A, Regulation 240, 14a-101, promulgated under the
Act, or, if Item 6(e) is no longer in effect, any regulation issued by
the SEC pursuant to the Act that serves similar purposes; provided
that, without limitation, a Change of Control shall be deemed to have
occurred if and when (a) any "person" (as defined in Sections 13(d) and
14(d)(2) of the Act) is or becomes a beneficial owner, directly or
indirectly, of securities of such company representing 50% or more of
the combined voting power of such company's then outstanding
securities, (b) individuals who are members of the board of directors
immediately prior to a meeting of the shareholders of such company
involving a contest for the election of directors shall not constitute
a majority of the board of directors following such election, or (c) a
merger in which such company is not the surviving corporation, and the
shareholders of such company immediately prior to such merger do not
own at least a majority of the outstanding shares of the surviving
corporation.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time.
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"Independent Directors" means the members of the board of
directors of Omega who are not, and are not associates (as defined in
Rule 12b-2 promulgated under the Act) of, a direct, indirect or
beneficial stockholder, director, officer, employee or Affiliate of
Omega Worldwide, and the members of the board of directors of Omega
Worldwide who are not, and are not associates (as defined in Rule 12b-2
promulgated under the Act) of, a direct, indirect or beneficial
stockholder, director, officer, employee or Affiliate of Omega.
"Omega Notice" means a written notice that (a) describes an
Opportunity of which Omega Worldwide has become aware, including
whether the Opportunity is a REIT Opportunity or a Worldwide
Opportunity, and (b) if the Opportunity is a Worldwide Opportunity,
sets forth Omega Worldwide's determination to decline the Opportunity
or Omega Worldwide's request to pursue the Opportunity jointly with
Omega.
"Opportunity" means either a REIT Opportunity or a Worldwide
Opportunity.
"Person" means any individual, corporation, proprietorship,
firm, partnership, limited partnership, limited liability company,
trust, association or other entity.
"REIT" means a real estate investment trust under Sections 856
through 860 of the Code.
"REIT Opportunity" means any opportunity within the United
States to (a) make any investment in real estate, real estate
mortgages, real estate derivatives or entities that invest exclusively
in or have a substantial portion of their assets in any of the
foregoing, so long as such investment would be consistent with the
requirements of the Code and regulations relating to Omega's status as
REIT; or (b) to make any REIT Qualified Investment.
"REIT Qualified Investment" means an investment which, if made
by a REIT, would not result in the termination of the REIT's status as
a REIT pursuant to Sections 856 through 860 of the Code.
"SEC" means the Securities and Exchange Commission.
"Worldwide Notice" means a written notice that (a) describes
an Opportunity of which Omega has become aware, including whether the
Opportunity is a Worldwide Opportunity or a REIT Opportunity, and (b)
if the Opportunity is a REIT Opportunity, sets forth Omega's
determination to decline the Opportunity or Omega's request to pursue
the Opportunity jointly with Omega Worldwide.
"Worldwide Opportunity" means any opportunity to (a) provide
advisory services and/or management services to any person; (b) acquire
or make debt and/or equity investments (through a joint venture or
otherwise) in any healthcare
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investor or in healthcare real estate related assets outside
the United States; (c) make investments in any entity conducting
healthcare operations; or (d) make any other real estate, finance or
other investments not customarily undertaken by a qualified REIT.
ARTICLE II
RELATIONSHIP BETWEEN OMEGA
AND OMEGA WORLDWIDE
SECTION 2.1 OFFER OF OPPORTUNITIES TO OMEGA WORLDWIDE. Omega promptly
shall give Omega Worldwide a Worldwide Notice if (a) Omega becomes aware of a
Worldwide Opportunity or (b) Omega becomes aware of a REIT Opportunity and
determines, in its sole discretion, either that Omega does not desire to pursue
the REIT Opportunity or that Omega desires to pursue the REIT Opportunity
jointly with Omega Worldwide. Omega Worldwide shall, within ten (10) business
days after receipt of the Worldwide Notice, notify Omega in writing of Omega
Worldwide's determination as to whether Omega Worldwide desires to pursue the
Opportunity described in the Worldwide Notice. The failure of Omega Worldwide to
so notify Omega within the ten-day period described above shall be deemed an
election by Omega Worldwide to decline the Opportunity. If Omega Worldwide
notifies Omega that Omega Worldwide has determined not to pursue the
Opportunity, or if Omega Worldwide is deemed to have declined the Opportunity,
Omega shall have the right to pursue the Opportunity itself or to offer the
Opportunity to any Person.
SECTION 2.2 OFFER OF OPPORTUNITIES TO OMEGA. Omega Worldwide promptly
shall give Omega an Omega Notice if (a) Omega Worldwide becomes aware of a
Worldwide Opportunity or (b) Omega Worldwide becomes aware of a REIT Opportunity
and determines, in its sole discretion, either that Omega Worldwide does not
desire to pursue the Opportunity or Omega Worldwide desires to pursue the
Opportunity jointly with Omega. Omega shall, within ten (10) business days
after receipt of the Omega Notice, notify Omega Worldwide in writing of Omega's
determination as to whether Omega desires to pursue the Opportunity described in
the Omega Notice. The failure of Omega to so notify Omega Worldwide
within the ten-day period described above shall be deemed an election by Omega
to decline the Opportunity. If Omega notifies Omega Worldwide that Omega has
determined not to pursue the Opportunity or if Omega is deemed to have declined
the Opportunity, Omega Worldwide shall have the right to pursue the Opportunity
itself or to offer the Opportunity to any Person.
SECTION 2.3 DETERMINATION AS TO WHETHER TO PURSUE OPPORTUNITY. Each of
Omega and Omega Worldwide shall have the right, in its sole discretion, to
determine whether to pursue any REIT Opportunity and Worldwide Opportunity,
respectively. Omega shall not be obligated to notify Omega Worldwide of any REIT
Opportunity that Omega determines to pursue, and Omega Worldwide shall not be
obligated to notify Omega of any Worldwide Opportunity that Omega Worldwide
determines to pursue. The determination
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by Omega or Omega Worldwide as to whether to pursue individually a REIT
Opportunity or a Worldwide Opportunity, respectively, shall be made by the
affirmative votes of the Independent Director(s) of the board of directors of
Omega or Omega Worldwide, as the case may be. Each of Omega and Omega Worldwide
agrees that it will appoint, within ninety (90) days after the date of this
Agreement, and that it will thereafter maintain at all times during the term of
this Agreement, at least one (1) Independent Director.
SECTION 2.4 JOINT PURSUIT OF OPPORTUNITIES. Each of Omega and Omega
Worldwide may participate jointly with the other in Opportunities that either
Omega or Omega Worldwide declines to pursue individually. The terms upon which
each of Omega and Omega Worldwide may participate jointly in such Opportunities
will be negotiated in good faith on arm's length terms mutually acceptable to
the respective boards of directors of each of Omega and Omega Worldwide, with
the affirmative votes of the Independent Directors of the respective boards of
directors of Omega and Omega Worldwide.
ARTICLE III
MISCELLANEOUS
SECTION 3.1 TERM AND TERMINATION.
(a) This Agreement shall terminate on , 2008, subject to
renewal by mutual agreement of the parties for successive five-year terms.
(b) Notwithstanding Section 3.1(a), if either Omega or Omega
Worldwide is in default under this Agreement in any material respect and such
default remains uncured for a period of fifteen (15) days after receipt by the
defaulting party of written notice thereof, the other party may terminate this
Agreement by giving written notice to the defaulting party.
(c) Notwithstanding Section 3.1(a), this Agreement
automatically shall terminate upon a Change of Control of either party.
SECTION 3.2 ACKNOWLEDGMENTS.
( a) Each party acknowledges that the obligations undertaken
by it pursuant to this Agreement are unique and that the other party will not
have an adequate remedy at law if it shall fail to perform its obligations of
this Agreement in any material respect. Accordingly, each party agrees that (i)
the other shall have the right to specific performance of the terms of this
Agreement, (ii) the right of each party to specific performance of the terms of
this Agreement is essential to protect the rights and interests of the parties
and (iii) each party shall have the right to obtain preliminary and permanent
injunctive relief to secure specific performance and to prevent a breach or
contemplated breach of this Agreement by the other party.
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(b) If the performance of any provision of this Agreement, at
the time such performance shall be due, shall transcend the limit of validity
prescribed by law, then the obligation to be performed shall be reduced to the
limit of such validity; and if any clause or provision contained in this
Agreement operates or would invalidate this Agreement, in whole or in part, then
such clause or provision only shall be held ineffective, as though not herein
contained, and the remainder of this Agreement shall remain operative and in
full force and effect. The parties shall negotiate in good faith a replacement
clause or provision as consistent with the ineffective clause or provision as is
practicable under the law.
SECTION 3.3 SUBSIDIARIES. If either party elects to pursue any
Opportunity that is offered to it, it may elect to have a subsidiary pursue the
Opportunity on its behalf.
SECTION 3.4 CONTRACTUAL RESTRICTIONS. No party shall be required to
comply with the notification rights set forth in Article II of this Agreement if
such compliance would violate any confidentiality or other contractual
restriction binding on such party.
SECTION 3.5 INTENTIONALLY DELETED.
SECTION 3.6 AMENDMENT. This Agreement may be amended, modified or
supplemented only in writing signed by each of the parties hereto; provided,
however, that any such amendment, modification or supplement shall be approved
by the respective boards of directors of Omega and Omega Worldwide.
SECTION 3.7 NOTICES. Any notice, request, instruction or other document
given hereunder by a party hereto shall be in writing and shall be deemed to
have been given (i) when received if given in person or by courier or
courier service, (ii) on the date of transmission if sent by facsimile or other
wire transmission, or (iii) three business days (seven business days for
overseas mail) after being deposited in the U.S. mail, certified or registered
mail, postage prepaid:
(a) If to Omega, addressed as follows:
Omega Healthcare Investors, Inc.
905 West Eisenhower Circle
Suite 110
Ann Arbor, Michigan 48103
Attention: Chief Financial Officer
Facsimile No.: (734) 996-0020
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<PAGE> 7
(b) If to Omega Worldwide, addressed as follows:
Omega Worldwide, Inc.
905 West Eisenhower Circle
Suite 101
Ann Arbor, Michigan 48103
Attention: Vice President and Secretary
Facsimile No.: (734) 996-0020
or to such other individual or address as a party hereto may designate for
itself by notice given as herein provided.
SECTION 3.8 WAIVERS. The delay or failure of a party hereto at any time
or times to require performance of any provision hereof shall in no manner
affect its right at a later time to enforce the same. No waiver by a party of
any condition or of any breach of any term, covenant, representation or warranty
contained in this Agreement shall be effective unless in writing, and no waiver
in any one or more instances shall be deemed to be a further or continuing
waiver of any such condition or breach in other instances or a waiver of any
other condition or breach of any other term, covenant, representation or
warranty. Either party may waive in writing participation in any Opportunity,
whether a REIT Opportunity or a Worldwide Opportunity, and such waiver shall be
binding in the absence of fraud.
SECTION 3.9 COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
SECTION 3.10 INTERPRETATION. The headings preceding the text of
Articles and Sections included in this Agreement are for convenience only and
shall not be deemed part of this Agreement or be given any effect in
interpreting this Agreement. The use of the masculine, feminine or neuter gender
herein shall not limit any provision of this Agreement. The use of the terms
"including" or "include" shall in all cases mean "including, without limitation"
or "include, without limitation," respectively. Underscored references to
Articles, Sections or Exhibits shall refer to those portions of this Agreement.
SECTION 3.11 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF MICHIGAN, WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
SECTION 3.12 ASSIGNMENT. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns. Except as otherwise specifically provided in this Agreement, no
assignment of any rights or obligations shall be made by any party without the
written consent of the other party.
SECTION 3.13 NO THIRD PARTY BENEFICIARIES. This Agreement is solely for
the
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benefit of the parties hereto, and no provision of this Agreement shall be
deemed to confer upon third parties any remedy, claim, liability, reimbursement,
cause of action or other right.
SECTION 3.14 REMEDIES CUMULATIVE. The remedies provided in this
Agreement shall be cumulative and shall not preclude the assertion or exercise
of any other rights or remedies available by law, in equity or otherwise.
SECTION 3.15 ENTIRE UNDERSTANDING. This Agreement sets forth the entire
agreement and understanding of the parties hereto with respect to the matters
set forth herein and supersedes any and all prior agreements, arrangements and
understandings between the parties.
SECTION 3.16 NO PRESUMPTION AGAINST DRAFTER. Each of the parties hereto
has participated in the negotiation and drafting of this Agreement. In the event
of any ambiguity or a question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the parties, and no
presumption or burden of proof shall arise favoring either party by virtue of
the authorship of any of the provisions of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered as of the date first above written.
OMEGA HEALTHCARE INVESTORS, INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
OMEGA WORLDWIDE, INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
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<PAGE> 1
EXHIBIT 10.3
SERVICES AGREEMENT
This Services Agreement (this "Agreement") is made as of this ___ day of
March 1998 (the "Effective Date"), by and between Omega Healthcare
Investors, Inc., a Maryland corporation ("Omega"), and Omega Worldwide, Inc., a
Maryland corporation ("Omega Worldwide").
WHEREAS, Omega intends to consolidate its healthcare management business
and international operations and assets into Omega Worldwide and distribute
certain of the outstanding Common Stock of Omega Worldwide on a pro rata basis
to the holders of the Common Stock of Omega and sell some of the outstanding
Common Stock of Omega Worldwide to institutional investors; and
WHEREAS, Omega Worldwide wishes to purchase and acquire from Omega certain
administrative services, as more fully described in Exhibit A hereto (the
"Services"), designed to assist Omega Worldwide in the cost-efficient
administration of Omega Worldwide's corporate and business affairs, in the
manner and pursuant to terms and conditions as more specifically described
herein; and
WHEREAS, Omega desires to provide or cause to be provided the Services
specified in this Agreement under the terms and conditions specified herein.
NOW THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements set forth herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:
Section 1. Disinterested Directors.
As used herein, the term "Disinterested Directors" means the member(s) of
Omega Worldwide's Board of Directors who are not, and are not associates of, a
direct, indirect or beneficial stockholder, director, officer, employee or
affiliate of Omega or any of its affiliates. For purposes of this Section, the
terms "associate" and "affiliate" shall have the respective meanings given them
in Rule 12b-2 promulgated under the Securities Exchange Act of 1934, as
amended.
Section 2. Services.
2.1 Subject to the terms of this Agreement, Omega shall render to
Omega Worldwide those routine and ordinary Services listed on Exhibit A,
attached hereto and made a part hereof. Omega Worldwide shall give
Omega written notice of its intent to terminate any Service at least 10 days
prior to the termination of the Service.
<PAGE> 2
2.2 From time to time, Omega Worldwide may desire additional
services not specifically addressed in Exhibit A. The provision of any such
additional services by Omega, and the amount of compensation therefor, shall,
if material, be approved by a majority of the Board of Directors (including
a majority of the Disinterested Directors, if any) and the rates for such
compensation shall be the rates which allow Omega to recover the direct
cost for such services. For purposes of this subsection 2.2, the term
"material" shall mean an amount expected to be equal to or in excess of $50,000
in any calendar year.
2.3 In providing the Services Omega shall not be obligated to (i)
hire any additional employees; (ii) maintain the employment of any specific
current Omega employee; (iii) purchase, please or license any additional
equipment or software; or (iv) pay any costs related to the transfer or
conversion of Omega Worldwide's data to Omega Worldwide or any alternate
supplier of administrative services. Upon the termination of any of the
Services, Omega Worldwide shall be obligated to return to Omega, as soon as
practicable, any equipment or other property of Omega relating to the
Services which is owned or leased by Omega and is or was in Omega Worldwide's
possession or control.
2.4 Omega Worldwide shall compensate Omega quarterly for Omega's
costs for rendering such Services (including, without limitation, overhead
expenses such as salary expenses, rent, heating and air conditioning,
electricity, and other similar expenses). Omega's costs for providing the
Services shall be determined at the end of each fiscal quarter by (i)
dividing Omega Worldwide's assets at the end of such fiscal quarter by the
sum of Omega's assets at the end of such fiscal quarter and Omega
Worldwide's assets, and (ii) multiplying the quotient by the amount of Omega's
overhead expenses.
2.5 Omega shall bill Omega Worldwide within 30 days of the end of
each fiscal quarter for the amount due to Omega for Services provided
for such fiscal quarter. All such bills shall contain reasonable detail with
respect to the calculation of the fee and shall be due 30 days after receipt.
The failure of Omega Worldwide to pay any bill within 30 days of receipt
shall result in Omega Worldwide owing Omega an additional handling charge
equal to 1-1/4% per month of the amount due from the date due to the payment
date.
Section 3. Term.
The initial term of this Agreement shall commence on the date hereof and
shall extend through March ___, 2000 (the "Initial Term"). Thereafter,
this Agreement shall be renewed for consecutive one (1) year terms (each, a
"Renewal Term"), provided that Omega and Omega 4. Worldwide mutually
consent to each such renewal not less than ninety (90) days prior to the
end of the current term. A majority of the Board of Directors
(including a majority of the Disinterested Directors, if any) must approve
each renewal of this Agreement and approve the compensation payable by
Omega Worldwide during such Renewal Term for the Services.
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Section 4. Confidentiality.
Any and all information which is not generally known to the public
which is exchanged between the parties in connection with this Agreement,
whether of a technical or business nature, shall be considered to be
confidential. The parties agree that confidential information shall not be
disclosed to any third party or parties without the written consent of the
other party. Each party shall take reasonable measures to protect against
nondisclosure of confidential information by its officers and employees.
Confidential information shall not include any information (i) which is or
becomes part of the public domain, (ii) which is obtained from third parties
who are not bound by confidentiality obligations, or (iii) which is required to
be disclosed by law or the rules of any state or Federal regulatory agency, any
national securities exchange or the NASDAQ National Market System. The
provisions of this Section shall survive the termination of this Agreement.
Section 5. Indemnification.
5.1 Omega Worldwide shall indemnify, defend and hold Omega,
and its directors, officers, and employees harmless from and against all
damages, losses and out-of-pocket expenses (including fees) incurred by them in
the course of performing the duties prescribed hereby, except for matters
covered by subsection 8.2 hereof.
5.2 Omega shall indemnify, defend and hold Omega Worldwide,
its directors, officers and employees harmless from and against all damages,
losses and out-of-pocket expenses (including fees) caused by or arising out of
any willful misconduct or gross negligence in the performance of any obligation
or agreement of Omega herein.
5.3 Except as otherwise provided in subsection 8.2 hereof,
Omega does not assume any responsibility under this Agreement other than to
render the Services called for under this Agreement in good faith. Omega
Worldwide's sole remedy on account of the failure of Omega to render the
Services as and when required hereunder shall be to procure services
elsewhere and to charge Omega the difference between the reasonable increased
cost, if any, to procure new services, and the current cost to Omega Worldwide
to procure Services under this Agreement.
Section 6. Notices.
All notices, requests, demands, waivers and other communications
(hereafter "notices") required or permitted to be given pursuant to this
Agreement shall be in writing and shall be deemed to have been duly given (i)
at the time of delivery, if delivered by hand, (ii) on the date of termination,
if sent by telegrams, telex or telecopy or (iii) three business days after
mailing, if mailed registered or certified first- class mail, postage prepaid,
return receipt requested. Notices shall be delivered or sent, as the case may
be, to the following addresses or to such other addresses as the parties may
hereafter designate by like notice similarly provided:
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<PAGE> 4
If to Omega Worldwide: Omega Worldwide, Inc.
905 West Eisenhower Circle
Suite 101 Ann Arbor,
Michigan 48103
Attention: Chief Financial Officer
If to Omega: Omega Healthcare Investors, Inc.
905 West Eisenhower Circle
Suite 110 Ann
Arbor, Michigan 48103
Attention: Vice President and Secretary
Section 7. Force Majeure.
Anything else in this Agreement notwithstanding, Omega shall be excused
from performance hereunder while, and to the extent that, its performance is
prevented by fire, drought, explosion, flood, invasion, rebellion, earthquake,
civil commotion, strike or labor disturbance, governmental or military
authority, act of God, mechanical failure or any other event or casualty beyond
the reasonable control of Omega , whether similar or dissimilar to those
enumerated in this paragraph (hereafter a "Casualty"). In the event of a
Casualty, Omega Worldwide shall be responsible for making its own alternative
arrangements with respect to the interrupted Services.
Section 8. Independent Contractor.
The relationship of Omega to Omega Worldwide which is created hereunder
is that of an independent contractor. This Agreement is not intended to created
and shall not be construed as creating between Omega Worldwide and Omega the
relationship of affiliate, principal and agent, joint venture, partnership, or
any other similar relationship, the existence of which is hereby expressly
denied.
Section 9. Waiver, Amendment or Modification.
No waiver, amendment or modification of this Agreement shall be valid
unless in writing and duly executed by the party to be charged therewith.
Section 10. Assignment; Third Party Beneficiaries.
This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto, each of their respective successors and permitted assigns,
but may not be assigned by either party without the prior written consent of
the other party, and no other persons shall have or derive any right,
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<PAGE> 5
benefit or obligation hereunder. Omega shall not be liable to any third party
in any way for any obligations or commitment pursuant to this Agreement or for
any act or omission hereunder.
Section 11. Headings.
The headings and titles of the various paragraphs of this Agreement are
inserted merely for the purpose of convenience, and do not expressly or by
implication limit, define, extend or affect the meaning or interpretation of
this Agreement or the specific terms or text of the paragraph so designated.
Section 12. Severability.
If any provision of this Agreement shall be held invalid by a court with
jurisdiction over the parties to this Agreement, then and in that event such
provision shall be deleted from the Agreement, which shall then be construed to
give effect to the remaining provisions thereof. If any one or more of the
provisions contained in this Agreement or in any other instrument referred to
herein shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, then in that event, to the maximum extent permitted by law,
such invalidity, illegality or enforceability shall not affect any other
provisions of this Agreement or any other such instrument.
Section 13. Counterparts.
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which taken together shall be
considered one and the same instrument.
Section 14. Governing Law.
Despite any different result required by any conflicts of law
provisions, this Agreement shall be governed by the laws of the State of
Maryland.
Section 15. Entire Agreement.
This Agreement, together with the Exhibits hereto, constitutes and
sets forth the entire agreement and understanding of the parties pertaining to
the subject matter hereof, and no prior or contemporaneous written or oral
agreements, understandings, undertakings, negotiations, promises, discussions,
warranties or covenants not specifically referred to or contained herein or
attached hereto shall be valid and enforceable. No supplement, modification,
termination in whole or in part, or waiver of this Agreement shall be binding
unless executed in writing by the party to be bound thereby. No waiver of any
of the provisions of this Agreement shall be deemed, or shall constitute, a
waiver of any other provision hereof (whether or not similar), nor shall any
such waiver constitute a continuing waiver unless otherwise expressly provided.
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<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the day and year first above written.
OMEGA HEALTHCARE INVESTORS, INC.
By:_____________________________________
Name:
Title:
OMEGA WORLDWIDE, INC.
By:_____________________________________
Name:
Title:
<PAGE> 7
EXHIBIT A
SERVICES TO BE PROVIDED BY OMEGA
1. Corporate Accounting Services for:
Payroll and related items; payment of operating expenses; payment of
development costs; payment of mortgages and notes payable; collection
of mortgages and notes receivable; payment of real estate, local
privilege, sales, use, personal property taxes; over the counter
deposits; cash management; investment of excess funds; coverage of
controlled disbursement accounts; wire transfers in and out; bank
account maintenance; bank account reconciliations; opening/closing of
operating, security deposit, local depository and petty cash accounts;
maintaining bank relationships; monitoring balances for bank
compensation purposes; obtaining FEIN's; maintaining FEIN information;
providing FEIN's to vendors and tenants; processing property insurance
claims; maintenance of tax returns; labor allocations and related
recoveries; travel and entertainment reimbursements; employee W-2's;
tracking of pending deal expenses; tracking of relocation expenses;
tracking of interviewing expenses; general accounting system
maintenance; identification of ERISA issues; tracking benefit hours;
tracking and paying wage garnishments and related orders; union
reporting; dealing with investment houses for 401(k) plan; paying
employee/employer match for 401(k); payroll bank account
reconciliations; retirement plan discrimination tests; dealing with
outside/tenant auditors for labor accounting; billing reports for
employee insurance; dealing with taxing jurisdictions for state,
federal and local employer taxes; dealing with payroll service bureau;
dealing with insurance agency regarding employee/employer share of
insurance payments; auto and equipment leasing; title and license
propriety; taxable aspect of leased autos and gas; ad hoc reports
concerning year-to-date overhead, projected overhead, direct payroll
by company, department, etc.; corporate budget monitoring; maintenance
of intercompany notes and related interest; workers' compensation
billings and audits; head counts for fidelity bonds.
2. Management Personnel Services for:
Market evaluation; strategic and long range planning -- interfacing
with leasing, operations and development to improve property
performance; personnel training and development; strategic
advertising for certain properties; property training seminars and
conferences; collateral material resources; hiring and terminating
property personnel; property purchasing, contracts, payables and
receivables; planning and executing special events; advertising
campaigns; public relations including crisis communications training
and management; designing and executing visual displays; merchant
communication and meetings.
A-1
<PAGE> 8
3. Human Resources Services for:
Coordination of recruitment (sourcing and interviewing) and staffing
needs; temporary usage; outplacement; employee and labor relations
including statutory compliance, affirmative action, workforce
demographics and utilization and EEO -- charges and annual reporting
requirements; compensation administration; office services; Human
Resources Information Systems; development of employment policies and
procedures; personnel administration -- processing of new hires,
terminations, transfers, leaves of absence, and miscellaneous status
changes; unemployment; workers compensation; employee assistance
program; training and development including new employee orientation,
supervisory skills and management development; employee relocation;
health and welfare programs -- group health, dental, life insurance,
disability, accidental death (AD&D), supplemental life insurance;
qualified plans including 401(k) and cash balance; miscellaneous
employee benefits -- tuition reimbursement, key employee medical;
employee communications; desktop publishing; design and print material
coordination.
4. Operations Services for:
Coordination of mail in/out and messenger/overnight mail; coordination
of supply orders, copy services, records storage, facsimile services
and office maintenance.
5. Computer Services for:
Bookkeeping; accounts payable and cash disbursement systems (including
fraud control); cash management system; wire transfers; short-term
investments; tax and regulatory reporting; auditor support; payroll
and personnel related systems support; litigation management system;
national retail reporting; capital projects system; telephone services
and maintenance; telephone rate negotiation; telephone services
consultation; configuring telephone systems for malls; mainframe
computer operation and support; local area network and wide area
network communications support; personal computer setup and
distribution; personal computer maintenance and repair; hotline desk
with hardware, commercial software and proprietary program support;
training and orientation of new employees; advanced training;
documentation support; volume purchase discounts; electronic mail for
internal and external communications; broker communication support;
maintenance of broker names and mailing addresses.
6. Financial Reporting/Asset Accounting for:
Training and staffing; hiring and reviews; general ledger review and
maintenance; outside manager relations/recording/reporting; budget
review and approval; cash/tax/GAAP variance analysis -- asset review;
cash flow, income tax and GAAP projections; cash generated
A-2
<PAGE> 9
analysis and reporting; periodic historical cash/tax/GAAP financial
reporting; audit support; investor reporting; technical review of SEC
filings including EDGAR support; acquisition/disposition analysis,
cutoff, prorations, reports and reviews; depreciation and amortization
lapsing schedules; profit and loss calculations; distribution
allocations; preference return calculations; lender statements;
contingent interest reports; escalation billing statements/audits;
maintenance of intercompany advances; maintenance of investment and
capital account records.
7. Legal Services for:
Coordination of litigation of various forms; corporate and
regulatory records and filings; legal aspects of operational
issues and questions; equity offerings and debt financings; contract
disputes; other miscellaneous matters.
8. Insurance Services for:
Claims handling; processing property insurance claims; premiums/policy
renewals; loss prevention and other miscellaneous administrative
functions.
A-3
<PAGE> 1
EXHIBIT 10.4
CONTRIBUTION AGREEMENT
This CONTRIBUTION AGREEMENT (this "Agreement") is made as of
April __, 1998, by and between Omega Healthcare Investors, Inc., a Maryland
corporation ("Omega"), and Omega Worldwide, Inc., a Maryland corporation (the
"Company").
WHEREAS, the Company is a newly formed corporation and a wholly-owned
subsidiary of Omega.
WHEREAS, Omega desires to contribute to the Company all of Omega's
right, title and interest in and to certain of the assets of the business of
Omega in exchange for certain shares of common stock, $0.10 par value per share
of the Company (the "Common Stock"), and a contingent right to receive shares
of Series B Preferred Stock, $1.00 par value per share, of the Company (the
"Series B Preferred") in a transaction intended to qualify as tax-free under
Section 351 of the Internal Revenue Code of 1986, as amended.
NOW THEREFORE, in consideration of the premises, mutual covenants and
agreements contained in this Agreement and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:
1. Contribution of Assets. Subject to the terms hereof, Omega
hereby contributes the following assets to the Company and the Company hereby
accepts such assets (the "Assets"):
(a) 3,337,500 ordinary shares of Principal Healthcare Finance
Limited, a private company incorporated with limited liability in the Isle of
Jersey ("Principal");
(b) Warrants to purchase (i) 10,000,000 ordinary shares of
Principal expiring June 30, 2001 at an exercise price of Pound 1.50
(approximately $2.40) per share and (ii) 554,583 ordinary shares of Principal
expiring December 31, 2000 at an exercise price of Pound 1.00 (approximately
$1.60) per share;
(c) Subordinated debt in the amount of Pound 15,000,000
(approximately $24,000,000) provided by Omega to Principal maturing on
December 31, 2000;
(d) A ten-year British pound currency swap contract for the right
to exchange Pound 20,000,000 (approximately $32,000,000) for $31,740,000 on
October 15, 2007;
(e) An Amended and Restated Advisory Agreement by and between
Principal and Omega dated as of July 21, 1995;
(f) ____ voting ordinary shares of Omega (UK) Limited, a United
Kingdom corporation, representing all the issued and outstanding shares of Omega
(UK) Limited; and
(g) Such other assets of Omega set forth on Schedule I having an
aggregate carrying value of not more than $150,000.
<PAGE> 2
2. Payment of Purchase Price. In exchange for the Assets, the
Company shall issue 6,399,000 shares of Common Stock and agrees to
automatically issue for no additional consideration 65,000 shares of the Series
B Preferred to Omega for each $0.0625 above $8.625 per share of the Company's
Common Stock that more than 12,000 shares of the Company's Common Stock are
traded on any single day prior to May 2, 1998; provided, however, that the
Company shall not cumulatively issue more than 5,000,000 shares of the Series
B Preferred to Omega under this Agreement.
3. Representations and Warranties. Each party hereto represents
to the other party that it is a corporation duly incorporated and validly
existing under the laws of its state of incorporation and that it has the
requisite power and authority to enter into this Agreement and to carry out its
obligations hereunder. Omega represents and warrants that it has good and
marketable title to the Assets and owns such Assets free and clear of all
liens, encumbrances, claims, security interests and defects. The Company
represents that the Common Stock and the Series B Preferred have been duly
issued and will be outstanding as fully-paid and non-assessable stock of the
Company. Each party hereto represents to the other that this Agreement has
been duly authorized, executed and delivered by each of the parties hereto and
constitutes the valid and binding agreement, enforceable against such party in
accordance with its terms, except to the extent that enforceability may be
limited by applicable bankruptcy, insolvency, reorganization or other laws
affecting the enforcement of creditors' rights generally or by general
equitable principles.
4. Further Assurances. Each of Omega and the Company shall do
such acts and shall execute such further documents, conveyances, deeds,
assignments, transfers and the like, and will cause the doing of such acts and
will cause the execution of such further documents as are within its power as
the other party may at any time and from time to time reasonably request be
done or executed, in order to give full effect to the provisions of this
Agreement.
5. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective heirs,
successors, assigns and affiliates, but shall not be assignable by any party
hereto without the prior written consent of the other party hereto.
6. Headings. The section headings of this Agreement are for
convenience only and in no way limit or enlarge the scope or meaning of the
language hereof.
7. Governing Law. This Agreement shall, in all respects, be
governed, construed, applied and enforced in accordance with the law of the
State of Michigan excluding the effect of principles of conflicts of laws.
8. Entire Agreement and Amendments. This Agreement embodies the
entire agreement between the parties and supersedes all prior agreements and
understandings relating to this transaction. This Agreement may be amended or
supplemented only by an instrument in writing executed by the party against
whom enforcement is sought.
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<PAGE> 3
9. Execution in Counterparts. This Agreement may be executed in
any number of counterparts, each of which shall be deemed to be an original,
and all of such counterparts together shall constitute one and the same
original Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered as of the date first above written.
OMEGA HEALTHCARE INVESTORS, INC.
By:____________________________
Name:__________________________
Title:_________________________
OMEGA WORLDWIDE, INC.
By:____________________________
Name:__________________________
Title:_________________________
<PAGE> 1
EXHIBIT 10.5
AMENDED AND RESTATED ADVISORY AGREEMENT
BETWEEN
PRINCIPAL HEALTHCARE FINANCE LIMITED
AND
OMEGA HEALTHCARE INVESTORS, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
1. DUTIES OF THE ADVISOR. .............................................1
2. NO PARTNERSHIP OR JOINT VENTURE......................................3
3. RECORDS..............................................................3
4. BANK ACCOUNTS........................................................3
5. BOND.................................................................4
6. INFORMATION FURNISHED ADVISOR........................................4
7. CONSULTATION AND ADVICE..............................................4
8. ANNUAL BUSINESS PLAN AND BUDGET......................................4
9. DEFINITIONS..........................................................5
10. INVESTED ASSETS FEE; INCENTIVE FEE..................................6
11. STATEMENTS..........................................................7
12. COMPENSATION FOR ADDITIONAL SERVICES................................7
13. EXPENSES OF THE ADVISOR.............................................7
14. EXPENSES OF THE COMPANY.............................................8
15. OTHER ACTIVITIES OF ADVISOR.........................................9
16. TERM; TERMINATION OF AGREEMENT.....................................10
17. AMENDMENTS.........................................................11
18. DEFAULT, BANKRUPTCY, ETC...........................................11
19. ASSIGNMENT.........................................................11
20. ACTION UPON TERMINATION............................................12
</TABLE>
2
<PAGE> 3
<TABLE>
<S> <C> <C>
21. LIMITS OF ADVISOR RESPONSIBILITY...................................12
22. NOTICES............................................................13
23. HEADINGS...........................................................14
24. GOVERNING LAW; CONSENT TO JURISDICTION.............................14
25. JOINDER............................................................15
26. ENTIRE AGREEMENT...................................................15
</TABLE>
3
<PAGE> 4
THE ADVISORY AGREEMENT ("Agreement") dated as of July 21, 1995 between
PRINCIPAL HEALTHCARE FINANCE LIMITED, a company incorporated with limited
liability under the laws of Jersey (the "Company"), and OMEGA HEALTHCARE
INVESTORS, INC., a Maryland corporation (the "Advisor") is hereby amended and
restated effective as of November __, 1997 in its entirety to read as follows:
RECITALS:
A. The Company is a limited liability company under the laws of Jersey,
formed to acquire real estate in the United Kingdom to be used for the provision
of health care services, which real estate will be leased to and operated by
independent health care operators.
B. The Advisor is engaged in the United States in the business of
owning and leasing health care facilities to third party operators and in making
mortgage loans to such third party operators.
C. The Advisor and its employees have extensive experience in the
administration of real estate assets used to provide health care services and
the origination, structuring and evaluation of real estate and mortgage
investments and leasing activities related to the health care industry.
D. The Company and the Advisor have agreed to amend certain of the
terms of the Agreement, and in connection therewith, to amend and restate the
Agreement in its entirety.
NOW THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties agree as follows:
1. DUTIES OF THE ADVISOR. The Advisor shall provide such services and
activities relating to the assets, operations and business plans of the Company
as may be appropriate, including:
(a) assisting in the preparation of annual budgets and business
plans for approval by the Board of Directors of the Company (the "Business
Plans");
(b) using its best efforts to present to the Company a continuing
investment program consistent with the investment policies and objectives of the
Company as set forth in the Business Plans;
(c) using its best efforts to present to the Company investment
opportunities consistent with the Business Plans and such investment program as
the Board of Directors may adopt from time to time;
<PAGE> 5
(d) furnishing or obtaining and supervising the performance of the
ministerial functions in connection with the administration of the day-to-day
operations of the Company, including the investment of reserve funds and surplus
cash in short-term money market investments;
(e) serving as one of the Company's investment and financial
advisors and providing research, economic, and statistical data in connection
with the Company's investments and investment and financial policies;
(f) assisting the Company in investigating, selecting and
negotiating with borrowers, lenders, mortgagors, brokers, investors, builders,
developers and others;
(g) consulting with the Directors of the Company and furnishing the
Directors with advice and recommendations with respect to the making, acquiring
(by purchase, investment, exchange, or otherwise), holding, and disposition
(through sale, exchange, or otherwise) of investments consistent with the
Business Plans of the Company;
(h) advising the Directors of the Company with respect to such
services as may be required in acquiring and disposing of investments,
disbursing and collecting the funds of the Company, paying the debts and
fulfilling the obligations of the Company, and handling, prosecuting, and
settling any claims of the Company, including foreclosing and otherwise
enforcing leases and mortgages and other liens securing investments;
(i) assisting the Company in obtaining such services as may be
required for property management, loan disbursements, and other activities
relating to the investments of the Company, provided, however, the compensation
for such services shall be agreed to by the Company and the service provider;
(j) advising the Company in connection with capital market
activities, but in no event in such a way that the Advisor could be deemed to be
acting as a broker-dealer or underwriter or subject to the jurisdiction of any
governmental authority;
(k) quarterly, and at any time requested by the Board of Directors
of the Company, making reports to the Board of Directors of the Company
regarding the Company's performance to date in relation to the Company's current
approved Business Plan and its various components, as well as the Advisor's
performance of its services under this Agreement;
(l) making or providing appraisal reports, where appropriate, on
investments or contemplated investments of the Company;
(m) assisting in preparation of reports and other documents
necessary to satisfy the reporting and other requirements of any governmental
bodies or agencies and assisting in maintaining effective communications with
shareholders of the Company; and
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<PAGE> 6
(n) doing all things necessary to ensure its ability to render the
services contemplated herein, including providing office space and office
furnishings, computing and accounting equipment and personnel necessary for the
performance of the foregoing services as Advisor, all at its own expense, except
as otherwise expressly provided for herein.
In performing its services under this Agreement, the Advisor acknowledges
that it is doing so pursuant to a delegation of day to day management by the
Board of Directors of the Company, which delegation remains under the
supervision and control of the Board of Directors of the Company, and further
that the Board of Directors of the Company and not the Advisor maintains
ultimate authority for the conduct of the business of the Company. The Company
acknowledges that the Advisor shall perform its services under this Agreement
primarily through facilities, personnel and support services located at its
United States offices through personnel of Advisor's selection.
In performing its services under this Agreement, the Advisor may utilize
facilities, personnel and support services of various of its Affiliates, whether
located within or outside of the United Kingdom. The Advisor shall reimburse
such Affiliates for their services and facilities out of the compensation
provided for in Section 10 hereof. Notwithstanding the above, the Company may
request, and will pay for the direct costs of, additional services (as described
in Section 12 of this Agreement). As set forth in Section 15 of this Agreement,
the Advisor will engage in numerous other activities related to real estate and
not related to the Company or its assets.
2. NO PARTNERSHIP OR JOINT VENTURE. The Company and the Advisor are not
partners or joint venturers with each other, and nothing herein shall be
construed so as to make them such partners or joint venturers or impose any
liability as such on either of them. Nothing contained in this Agreement shall
authorize either party to act as agent or representative of the other party or
to authorize either party to create any obligation on behalf of the other party.
3. RECORDS. At all times the Advisor shall keep proper books of account and
records of the Company's affairs which shall be accessible for inspection by the
Company at the Advisor's principal office in the United States and in at any
time during ordinary business hours.
4. BANK ACCOUNTS. The Advisor may establish and maintain one or more bank
accounts in its own name, and may collect and deposit into any such account or
accounts, and disburse from any such account or accounts, any money on behalf of
the Company, under such terms and conditions as the Board of Directors of the
Company may approve, provided that no funds in any such account shall be
commingled with funds of the Advisor or another party; and the Advisor shall
from time to time render appropriate accounting of such collections and payments
to the Board of Directors of the Company and to the auditors of the Company.
3
<PAGE> 7
5. BOND. If required by the Board of Directors of the Company, the Advisor
shall maintain a fidelity bond with a responsible surety company in such amount
as may be required by the Board of Directors of the Company from time to time,
covering all directors, officers, employees, and agents of the Advisor handling
funds of the Company and any investment documents or records pertaining to
investments of the Company. Such bond shall inure to the benefit of the Company
in respect to losses of any such property from acts of such directors, officers,
employees, and agents through theft, embezzlement, fraud, negligence, error, or
omission or otherwise, the premium for said bond to be at the expense of the
Company. If any director of the Company is an Affiliate of the Advisor, the
approval of a majority of the Board of Directors of the Company who are not so
affiliated shall be required for the Company to require such a bond for the
Advisor.
6. INFORMATION FURNISHED ADVISOR. The Board of Directors of the Company
shall have the right to change a Business Plan at any time. The Board of
Directors of the Company shall promptly furnish a copy of any changes to any
Business Plan to the Advisor. The Company shall furnish the Advisor with a
certified copy of all financial statements, a signed copy of each report
prepared by independent certified public accountants, and such other information
with regard to the Company's affairs as the Advisor may from time to time
reasonably request.
7. CONSULTATION AND ADVICE. In addition to the services described above,
the Advisor shall consult with the Board of Directors of the Company, and shall,
at the request of the Board of Directors, furnish advice and recommendations
with respect to any aspect of the business and affairs of the Company, including
any factors that in the Advisor's best judgment should influence the policies of
the Company. The Advisor and the Company shall confer as required concerning the
Advisor's staffing and personnel assigned to perform the services of the Advisor
hereunder, with the goal that the Advisor employ highly qualified professional
staff, in whom both the Advisor and the Company repose confidence and trust.
8. ANNUAL BUSINESS PLAN AND BUDGET. The Advisor shall assist the Company in
the preparation of a Business Plan for each Fiscal Year of the Company for
submission to the Board of Directors of the Company. Such Business Plan shall
include a twelve-month projection of operations and cash flow with explicit
assumptions and a general plan for asset sales or acquisitions, leasing,
lending, foreclosure and borrowing activity, other investments or ventures and
proposed securities offerings or repurchases or any proposed restructuring of
the Company. To the extent possible, the Business Plan shall set forth the
Advisor's recommendations and the basis therefor with respect to all material
investments of the Company. Upon approval by the Board of Directors of the
Company, the Advisor shall advise and assist in the conduct of the business of
the Company in accordance with the explicit provisions of the Business Plan,
specifically including the borrowing, leasing, maintenance, capital
improvements, renovations and sale of investments set forth in the Business
Plan. Within forty five (45) days of the end of each calendar quarter, the
Advisor shall provide the Board of Directors of the Company with a report
comparing the Company's actual performance for such quarter against the Business
Plan.
4
<PAGE> 8
9. DEFINITIONS. As used herein, the following terms shall have the meanings
set forth below:
(a) "Adjusted Consolidated Net Income" shall mean for any fiscal
period, the consolidated net income for the Company and its consolidated
subsidiaries, (i) increased by (x) the amount of income allocable to such fiscal
period from zero-coupon investments or similar deferred payment investments and
(y) the amount of any increase in appraisal write-up valuation of assets of the
Company and its consolidated subsidiaries as reported in annual valuations for
such fiscal period and decreased by the amount of any reduction in appraisal of
assets of the Company and its consolidated subsidiaries as reported in annual
valuations for such fiscal period.
(b) "Aggregate Book Value of Invested Assets" shall mean the Book
Value of Invested Assets for all of the following as a group: (i) the Company;
(ii) each Person that is an Affiliate of the Company; and (iii) each
Securitization Entity.
(c) "Affiliate" shall mean, as to any Person, any other Person
which owns beneficially, directly, or indirectly, 10% or more of the outstanding
capital stock, shares or equity interests of such Person or of any other Person
which controls, is controlled by, or is under common control with such Person or
is an officer, retired officer, director, employee, or partner of such Person or
of any other Person which controls, is controlled by, or is under common control
with, such Person.
(d) "Book Value" of an asset or assets shall mean the value of such
asset or assets as recorded on the books of any Person, (i) before any appraisal
write-up in accordance with United Kingdom GAAP; (ii) before provision for
amortization, depreciation, depletion or valuation reserves; and (iii) deducting
any indebtedness or other liability in respect thereof.
(e) "Book Value of Invested Assets" shall mean the Book Value of
the total assets of any nature or description owned, leased, managed or operated
by any Person (without deduction of any liabilities), but excluding (i) goodwill
and other intangible assets, (ii) cash, and (iii) cash equivalent investments
with terms which mature in one year or less, and increased by the amount of any
increase in appraisal write-up of assets of the Company and its consolidated
subsidiaries as reported in annual valuations for such fiscal period and
decreased by the amount of any reduction in appraisal of assets of the Company
and its consolidated subsidiaries as reported in annual valuations for such
fiscal period.
(f) "Business Plan" shall mean the Company's investment policies
and objectives and the capital and operating budget based thereon for the
relevant fiscal year of the Company as approved by the Board of Directors of the
Company, as thereafter modified or amended.
(g) "Change of Control" shall mean, as to the Advisor, (i) the
election to the board of directors of the Advisor in a contested election of
directors of individuals comprising a majority of directors who, immediately
prior to the contested election, were not members of the
5
<PAGE> 9
board of directors of the Advisor, or (ii) a change in the duties of the
Chairman and/or the Chief Executive Officer of the Advisor, which change
precludes the active involvement of such officer or officers of the Advisor in
the performance of the Advisor's services under this Agreement.
(h) "Earnings per Share" shall mean the Adjusted Consolidated Net
Income of the Company for any fiscal period, divided -by the weighted average
number of ordinary shares outstanding for such fiscal period.
(i) "Invested Assets" shall mean the assets of any Person which are
managed by the Advisor.
(j) "Leases" shall mean all leases and subleases from the Company
and its Affiliates to third party lessees and sublessees.
(k) "Mortgage Loans" shall mean notes, debentures, bonds, and other
evidences of indebtedness or obligations, whether negotiable or non-negotiable,
and which are secured or collateralized by mortgages, including first,
wraparound, construction and development, and junior mortgages.
(l) "Person" shall mean and include individuals, corporations,
limited partnerships, general partnerships, limited liability companies, joint
stock companies or associations, joint ventures, associations, companies,
trusts, banks, trust companies, land trusts, business trusts, or other entities
and governments and agencies and political subdivisions thereof.
(m) "Real Property" shall mean and include land, rights in land,
leasehold interests (including but not limited to interests of a lessor or
lessee therein), and any buildings, structures, improvements, fixtures, and
equipment located on or used in connection with land, leasehold interests, and
rights in land or interests therein.
(n) "Securitization Entity" shall mean any Person formed or availed
of for the purposes of financing and/or acquiring assets now owned, leased,
managed and/or operated by or to be owned, leased, managed and/or operated by
the Company or any Affiliate of the Company.
All calculations made pursuant to this Agreement shall be based on
statements (which may be unaudited, except as provided herein) prepared on an
accrual basis consistent with United Kingdom generally accepted accounting
principles, regardless of whether the Company may also prepare statements on a
different basis.
10. INVESTED ASSETS FEE; INCENTIVE FEE. On or before the twenty-eighth day
of each month during the term hereof, the Company shall pay to the Advisor, as
compensation for the management and advisory services rendered to the Company
hereunder, a fee at the rate of 0.075% per month of the average of the Aggregate
Book Value of the Invested Assets ("Invested Assets Fee") at the beginning and
at the end of the next preceding calendar month.
6
<PAGE> 10
The annual rate of the Invested Assets Fee shall be 0.90% per annum.
Notwithstanding the foregoing, to the extent Invested Assets include assets held
by a Securitization Entity, the Invested Assets Fee with respect to such assets
shall accrue monthly and be paid semi-annually (i) in advance on the date of
closing of the securitization and (ii) thereafter on the date the Securitization
Entity makes a regularly scheduled payment of interest and/or principal.
On or before the first day of the third calendar month following the
Company's receipt of its audited financial statements for the prior fiscal year,
the Company's auditors (or other third party acceptable to the Advisor and the
Company) shall determine whether the Earnings Per Share for the fiscal year then
ended based on fully diluted weighted shares outstanding exceeded by at least
twenty percent (20%) the Earnings Per Share for the preceding fiscal year (the
"Target Earnings Per Share"). In the event the Company shall have achieved
Target Earnings Per Share for any Fiscal Year, then the Company shall pay to the
Advisor an Incentive Fee equal to two-tenths of one percent (0.2%) of the
average of Aggregate Book Value of Invested Assets. For purposes of the
Incentive Fee, the average of Aggregate Book Value of Invested Assets shall be
determined as the average of the Aggregate Book Value of Invested Assets on the
first day of the fiscal year and the Aggregate Book Value of Invested Assets on
the last day of the fiscal year.
Certain expenses and reimbursements described in Sections 13 and 14 of
this Agreement may be allocated in part to the account of the Advisor and in
part to the account of the Company, as may be agreed by the parties hereto.
11. STATEMENTS. Upon request, the Advisor shall furnish to the Company not
later than the tenth (10th) day of each calendar month, beginning with the
second (2nd) calendar month of the term of this Agreement, a statement showing
the computation of the fees, if any, payable in respect to the next preceding
calendar month.
12. COMPENSATION FOR ADDITIONAL SERVICES. If and to the extent that the
Company shall request the Advisor or any director, officer, partner, or employee
of the Advisor or Affiliates of the Advisor to render services for the Company
other than those required to be rendered by the Advisor hereunder, such
additional services, if performed, will be compensated separately on terms to be
agreed upon between such party and the Company from time to time.
13. EXPENSES OF THE ADVISOR. The Advisor shall bear the following
expenses, (subject to the allocation provisions of Section 10 of this
Agreement):
(a) employment expenses of the personnel employed by the Advisor
including, but not limited to, fees, salaries, wages, payroll taxes, travel
expenses, and the cost of employee benefit plans and temporary help expenses
(including fees, salaries, and expenses paid to directors, officers, and
employees of the Advisor who are also directors, officers or employees of the
Company, when acting in such capacities as directors, officers or employees of
the Advisor);
7
<PAGE> 11
(b) advertising and promotional expenses incurred in seeking
investments for the Company;
(c) rent, telephone, utilities, office furniture and furnishings,
and other office expenses of the Advisor;
(d) the cost of any internal accounting, statistical, bookkeeping
or computer equipment or computer time necessary for maintaining the books and
records of the Company; and
(e) miscellaneous administrative expenses relating to performance
by the Advisor of its functions hereunder.
14. EXPENSES OF THE COMPANY. The Company shall pay all of its expenses not
assumed by or allocated to the Advisor, including without limitation, the
following expenses:
(a) the cost of money borrowed by the Company;
(b) income taxes, taxes and assessments on real property, and all
other taxes applicable to the Company;
(c) legal, auditing, accounting (other than internal accounting),
preparing all tax returns, underwriting, brokerage, listing, registration and
other fees, printing, and engraving and other expenses, and taxes incurred in
connection with the issuance, distribution, transfer, registration, and stock
exchange listing of the Company's securities;
(d) fees, salaries, and expenses paid to directors, officers, and
employees of the Company;
(e) fees and expenses paid to independent advisors, independent
contractors, mortgage services, consultants, managers, local property managers
or management firms, accountants, attorneys and other agents employed by or on
behalf of the Company;
(f) expenses directly connected with the origination or purchase of
Mortgage Loans and with the acquisition, disposition, and ownership of real
estate equity interests, Leases or other property, including the costs of
foreclosure, insurance, legal, protective, brokerage, maintenance, repair, and
property improvement services;
(g) expenses of maintaining and managing real estate equity
interests;
(h) insurance, as required by the Board of Directors of the Company
(including Board of Directors' liability insurance for the Directors);
8
<PAGE> 12
(i) the expenses of organizing, revising, amending, converting,
modifying, or terminating the Company;
(j) expenses connected with payments of dividends or interest or
distributions in cash or any other form made or caused to be made by the Board
of Directors of the Company to holders of securities of the Company;
(k) all expenses connected with communications to holders of
securities of the Company and the other bookkeeping and clerical work necessary
in maintaining relations with holders of securities, including the cost of
printing and mailing certificates for securities and proxy solicitation
materials and reports to holders of the Company's securities;
(l) the cost of any outside auditing necessary for maintaining the
books and records of the Company and the costs for preparing and filing all
required tax returns;
(m) transfer agent's, registrar's, and indenture trustee's fees and
charges;
(n) legal, accounting, investment banking, and auditing fees and
expenses charged by independent parties for services provided to the Company;
(o) out of pocket expenses incurred by the Advisor, arising from
the sales of Company properties, including those expenses related to carrying
out foreclosure and lease termination proceedings;
(p) costs and expenses associated with risk management (i.e.
insurance relating to the Company's assets);
(q) loan refinancing compensation; and
(r) expenses associated with special services requested by the
Board of Directors of the Company pursuant to Section 12 hereof.
15. OTHER ACTIVITIES OF ADVISOR. Except as provided in the last sentence
of this paragraph of this Section 15, the Advisor, its officers, directors, or
employees or any of its Affiliates (and such Affiliate's officers, directors, or
employees) may engage in other business activities related to real estate
investments or act as advisor to any other Person, including those with
investment policies similar to the Company, and the Advisor and its officers,
directors, or employees and any of its Affiliates (and such Affiliate's
officers, directors, or employees) shall be free from any obligation to present
to the Company any particular investment opportunity that comes to the Advisor
or such persons, regardless of whether such opportunity is in accordance with
the Company's Business Plans. In addition, nothing herein shall prevent any
director, officer or employee of the Advisor, or any Affiliate (and such
Affiliate's officers, directors, or
9
<PAGE> 13
employees) from engaging in any other business or from rendering services of any
kind to any other Person (including competitive business activities).
Notwithstanding the foregoing, neither the Company nor its Affiliates, nor their
respective directors, officers, or employees, shall act as an advisor to, or
agree to act as an advisor to, any other Person with respect to real property
located in the United Kingdom and used for health care purposes, without the
prior written consent of the Board of Directors of the Company.
Directors, officers, employees and agents of the Advisor or of its
affiliates may serve as directors, employees, agents, nominees or signatories of
the Company. When executing documents or otherwise acting in such capacities for
the Company, such persons shall use their respective titles in the Company.
16. TERM; TERMINATION OF AGREEMENT. This Agreement shall commence on the
date hereof (the "Effective Date") and, subject to the automatic extension and
early termination provisions of this Agreement, shall continue until December
31, 2000, and continue thereafter unless terminated by either party as set forth
below. Beginning on January 1, 1998 and continuing as of each January 1
thereafter, the Term of this Agreement shall automatically be extended for one
additional year unless either party exercises the early termination rights
described in the following sentence. By written notice delivered to the other
party not later than November 15 of any calendar year, either party may elect to
avoid the automatic extension of the term. For example, if a party gives notice
on or before November 15, 1998 of its election to avoid the automatic extension
provision of this Agreement, the term of this Agreement would end on December
31, 2001.
During the ninety (90) day period following a Change in Control, the
Company shall have the right to elect to terminate this Agreement, by notice
given to the Advisor. Such termination shall be effective one hundred eighty
(180) days following the Advisor's receipt of notice of termination from the
Company.
If any director of the Company is an Affiliate of the Advisor, the
approval of a majority of the Board of Directors of the Company who are not so
affiliated shall be required for the Company to make the election described in
the preceding paragraph. If this Agreement is terminated pursuant to this
Section 16, such termination shall be without further liability or obligation of
either party to the other as of the Termination Date, except as provided in
Section 20 hereof; provided however, that in no event shall such termination
limit the Advisor's right to indemnification pursuant to Section 21 hereof with
respect to any acts or omission undertaken by Advisor prior to such termination.
17. AMENDMENTS. This Agreement shall not be changed, modified, terminated
or discharged in whole or in part except by an instrument in writing signed by
both parties hereto, or their respective successors or assigns, or otherwise as
provided herein. If any director of the Company is an Affiliate of the Advisor,
the approval of a majority of the Board of Directors of
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<PAGE> 14
the Company who are not so affiliated shall be required for the Company to amend
this Agreement.
18. DEFAULT, BANKRUPTCY, ETC. At the option solely of the Board of
Directors of the Company, this Agreement shall be and become terminated
immediately upon written notice of termination from the Board of Directors of
the Company to the Advisor if any of the following events shall occur:
(a) If the Advisor shall violate any provision of this Agreement,
and after notice of such violation shall not cure such default within thirty
(30) days, or, such longer period as may be appropriate if not susceptible of
being cured within the thirty (30) days; or
(b) If the Advisor shall be adjudged bankrupt or insolvent by a
court of competent jurisdiction, or an order shall be made by a court of
competent jurisdiction for the appointment of a receiver, liquidator, or trustee
of the Advisor or of all or substantially all of its property by reason of the
foregoing, or approving any petition filed against the Advisor for its
reorganization, and such adjudication or order shall remain in force or unstayed
for a period of sixty (60) days; or
(c) If the Advisor shall institute proceedings for voluntary
bankruptcy or shall file a petition seeking reorganization under the Federal
bankruptcy laws, or for relief under any law for the relief of debtors, or shall
consent to the appointment of a receiver of itself or of all or substantially
all its property, or shall make a general assignment for the benefit of its
creditors, or shall admit in writing its inability to pay its debts generally,
as they become due.
The Advisor agrees that if any of the events specified in subsections (b)
and (c) of this Section 18 shall occur, it will give written notice thereof to
the Board of Directors of the Company within seven (7) days after the occurrence
of such event. If any director of the Company is an Affiliate of the Advisor,
the approval of a majority of the Board of Directors of the Company who are not
so affiliated shall be required for the Company to give any notice described in
this Section.
19. ASSIGNMENT. The Advisor may assign this Agreement to any Affiliate of
the Advisor, provided that at the time of the assignment the assignee (x)
assumes and agrees to be bound by this Agreement and (y) is controlled by a
board of directors, a majority of whom are members of the Board of Directors of
the Advisor and (z) has as its chief executive officer the individual who is
Chief Executive Officer or Chairman of the Advisor. Such an assignment or any
other assignment of this Agreement by the Advisor shall bind the assignee
thereunder in the same manner as the Advisor is bound hereunder. The Advisor may
also assign this Agreement to a corporation, association, trust, or other
successor organization which may take over the property and carry on the affairs
of the Advisor, provided that following such assignment the persons who
controlled the operations of the Advisor immediately prior to the assignment
shall control the operation of the successor organization, including the
performance of its duties under this Agreement, and they shall be bound by the
same restrictions by which they were bound to
11
<PAGE> 15
such assignment. This Agreement shall not otherwise be assignable by the Advisor
without the prior written consent of the Company. This Agreement shall not be
assignable by the Company without the prior written consent of the Advisor,
except in the case of any assignment by the Company to a corporation or other
organization which is the successor to the Company, in which case such successor
shall be bound hereby and by the terms of said assignment in the same manner and
to the same extent as the Company is bound hereby.
20. ACTION UPON TERMINATION. From and after the effective date of
termination of this Agreement, pursuant to Sections 16, 18 or 19 hereof, the
Advisor shall not be entitled to compensation for further services hereunder but
shall be paid all compensation accruing to the date of termination. The Advisor
shall be deemed to have earned one-twelfth of the Incentive Fee for each full
calendar month during which it provides services to the Company under this
Agreement. The Advisor shall forthwith upon such termination:
(a) pay over to the Company all monies collected and held for the
account of the Company pursuant to this Agreement;
(b) deliver to the Board of Directors of the Company a full
accounting, including a statement showing all payments collected by it and a
statement of any monies held by it, covering the period following the date of
the last accounting furnished to the Board of Directors of the Company; and
(c) deliver to the Board of Directors of the Company all property
and documents of the Company then in the custody of the Advisor.
For a period of one year following the date of termination of this
Agreement, neither the Company nor any Affiliate of the Company shall, directly
or indirectly, offer employment (including, but not limited to consulting
arrangements) to any employee of the Advisor or any Affiliate of the Advisor
without the prior written consent of the Advisor, which consent may be freely
withheld.
21. LIMITS OF ADVISOR RESPONSIBILITY. The Advisor assumes no
responsibility other than to render the services described herein in good faith
and shall not be responsible for any action of the Company in following or
declining to follow any advice or recommendation of the Advisor. The Advisor,
its shareholders, directors, officers, agents, employees and Affiliates will not
be liable to the Company, its shareholders, or others, except by reason of acts
constituting bad faith, willful or wanton misconduct or gross negligence. The
Company shall reimburse, indemnify and hold harmless the Advisor, its
shareholders, directors, officers, agents and employees and its Affiliates for
and from any and all expenses, losses, damages, liabilities, demands, charges
and claims of any nature whatsoever in respect to or arising from any acts or
omissions of the Advisor undertaken in good faith and in accordance with the
standard set forth above pursuant to the authority granted to it by this
Agreement.
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<PAGE> 16
22. NOTICES. Any notice, report, or other communication required or
permitted to be given hereunder shall be in writing unless some other method of
giving such notice, report, or other communication is accepted by the party to
whom it is given, and shall be effective when transmitted by telecopier,
delivered or, in the case of a mailed notice or notice sent by overnight
courier, upon receipt thereof as conclusively evidenced by the signed receipt
therefor by being delivered at the following addresses of the parties hereto:
The Board of Directors of the Company and/or the Company:
Principal Healthcare Finance Limited
c/o Omega Healthcare Investors, Inc.
905 W. Eisenhower Circle, Suite 110
Ann Arbor, MI 48103
Attention: Managing Director
Telephone: (313) 747-9790
Fax: (313) 996-0020
with a copy to:
Principal Healthcare Finance Limited
P.O. Box 404
Pirouet House
Union Street
St. Helier, Jersey JE4 9WG
Channel Islands
Telephone: 011 44 153 450-4401
Fax: 011 44 153 435-328
with an additional copy to:
Gottesman Jones & Partners
Aldwych House
Aldwych
London WC2B 4HN
England
Telephone: (0171) 242-8953
Fax: (0171) 405-3190
(0171) 405-0527
The Advisor:
Omega Healthcare Investors, Inc.
905 W. Eisenhower Circle, Suite 110
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<PAGE> 17
Ann Arbor, MI 48103
Attention: Essel W. Bailey, Jr.
President
Telephone: (313) 747-9790
Fax: (313) 996-0020
with a copy to:
Argue Pearson Harbison & Myers, LLP
801 South Flower Street
Suite 500
Los Angeles, California 90017-4699
Attention: William A. Jones
Telephone: (213) 622-3100
Fax: (213) 622-7881
Either party may at any time give notice in writing to the other party of a
change of its address for the purpose of this Section 22.
23. HEADINGS. The section headings hereof have been inserted for
convenience of reference only and shall not be construed to affect the meaning,
construction, or effect of this Agreement.
24. GOVERNING LAW; CONSENT TO JURISDICTION. This agreement shall be
governed and controlled as to validity, enforcement, interpretation,
construction, effect and in all other respects by the statutes, laws and
decisions of the state of Michigan. The Company consents to in personam
jurisdiction before the state and federal courts in the state of Michigan and
agrees that all disputes concerning this agreement may be litigated, in
Advisor's sole discretion and at Advisor's sole election, only in courts located
in the state of Michigan. The Company agrees that service of process may be
effected upon it under any method permissible under the laws of the state of
Michigan and irrevocably waives any objection to venue in the state or federal
courts of the state of Michigan.
25. JOINDER. The Company shall cause each Affiliate and Securitization
Entity to join in this Agreement for purposes of determining the Invested Assets
Fees and Incentive Fees payable to the Advisor under this Agreement.
26. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of
the parties hereto with respect to the subject matter hereof and supersedes and
cancels any pre-existing agreements with respect to such subject matter.
14
<PAGE> 18
IN WITNESS WHEREOF, PRINCIPAL HEALTHCARE FINANCE LIMITED and OMEGA
HEALTHCARE INVESTORS, INC. by their duly authorized representatives, have signed
these presents all as of November __, 1997.
PRINCIPAL HEALTHCARE FINANCE LIMITED
By: /s/ J. G. West
Name: J. G. West
Title: Chairman
OMEGA HEALTHCARE INVESTORS, INC.
By: /s/ James P. Flaherty
Name: James P. Flaherty
Title: Vice President--International
15
<PAGE> 1
or endorsements printed thereon as the Corporation may deem appropriate and as
are not inconsistent with the provisions of this Agreement, or as may be
required to comply with any applicable law or with any rule or regulation made
pursuant thereto or with any rule or regulation of any stock exchange on which
the Rights may from time to time be listed, or to conform to usage. Subject to
the provisions of Section 11 and Section 22 hereof, the Right Certificates shall
entitle the holders thereof to purchase such number of one one-hundredths of a
Preferred Share as shall be set forth therein at the price per one one-hundredth
of a Preferred Share set forth therein (the "Purchase Price"), but the amount
and type of securities purchasable upon the exercise of each Right and the
Purchase Price thereof shall be subject to adjustment as provided herein.
(b) Any Right Certificate issued pursuant to Section 3(a) or Section
22 hereof that represents Rights beneficially owned by: (i) an Acquiring Person
or any Associate or Affiliate of an Acquiring Person, (ii) a transferee of an
Acquiring Person (or any Associate or Affiliate) who becomes a transferee after
the Acquiring Person becomes an Acquiring Person, or (iii) a transferee of an
Acquiring Person (or any Associate or Affiliate) who becomes a transferee prior
to or concurrently with the Acquiring Person becoming such and receives such
Rights pursuant to either (A) a transfer (whether or not for consideration) from
the Acquiring Person to holders of equity interests in such Acquiring Person or
to any Person with whom the Acquiring Person has any continuing agreement,
arrangement or understanding, whether written or oral, regarding the transferred
Rights or (B) a transfer which is part of a plan, arrangement or understanding,
whether written or oral, which has as a primary purpose or effect the avoidance
of Section 7(e) hereof, and any Right Certificate issued pursuant to Section 6
or Section 11 hereof upon transfer, exchange, replacement or adjustment of any
other Right Certificate referred to in this sentence, shall contain (to the
extent feasible and otherwise reasonably identifiable as such) the following
legend:
The Rights represented by this Right Certificate are or were
beneficially owned by a Person who was or became an Acquiring
Person or an Affiliate or Associate of an Acquiring Person (as
such terms are defined in the Rights Agreement). Accordingly,
this Right Certificate and the Rights represented hereby may
become void in the circumstances specified in Section 7(e) of
such Agreement.
The provisions of Section 7(e) shall apply whether or not any Right Certificate
actually contains the foregoing legend.
Section 5. Countersignature and Registration. The Right Certificates
shall be executed on behalf of the Corporation by the Chairman of the Board, the
President, any of its Vice Presidents, or its Secretary, either manually or by
facsimile signature, shall have affixed thereto the Corporation's seal or a
facsimile thereof, and shall be attested by the Secretary or an Assistant
Secretary of the Corporation, either manually or by facsimile signature. The
Right Certificates shall be manually countersigned by the Rights Agent and shall
not be valid for any purpose unless countersigned. In case any officer of the
Corporation who shall have signed any
7
<PAGE> 2
of the Right Certificates shall cease to be such officer of the Corporation
before countersignature by the Rights Agent and issuance and delivery by the
Corporation, such Right Certificates, nevertheless, may be countersigned by the
Rights Agent and issued and delivered by the Corporation with the same force and
effect as though the person who signed such Right Certificates had not ceased to
be such officer of the Corporation; and any Right Certificate may be signed on
behalf of the Corporation by any person who, at the actual date of the execution
of such Right Certificate, shall be a proper officer of the Corporation to sign
such Right Certificate, although at the date of the execution of this Rights
Agreement any such person was not such an officer.
Following the Distribution Date, the Rights Agent will keep or cause to
be kept, at its office designated for such purpose, books for registration and
transfer of the Right Certificates issued hereunder. Such books shall show the
names and addresses of the respective holders of the Right Certificates, the
number of Rights represented on its face by each of the Right Certificates and
the date of each of the Right Certificates.
Section 6. Transfer, Division, Combination and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates. Subject
to the provisions of Sections 4(b), 7(e), 14 and 24 hereof, at any time after
the close of business on the Distribution Date, and at or prior to the close of
business on the earlier of the Redemption Date or the Final Expiration Date, any
Right Certificate or Right Certificates may be transferred, divided, combined or
exchanged for another Right Certificate or Right Certificates, entitling the
registered holder to purchase a like number of Preferred Shares (or, following a
Triggering Event, Common Shares or other securities or property, as the case may
be) as the Right Certificate or Right Certificates surrendered then entitled
such holder to purchase. Any registered holder desiring to transfer, divide,
combine or exchange any Right Certificate or Right Certificates shall make such
request in writing delivered to the Rights Agent, and shall surrender the Right
Certificate or Right Certificates to be transferred, divided, combined or
exchanged at the office of the Rights Agent designated for such purpose. Neither
the Rights Agent nor the Corporation shall be obligated to take any action
whatsoever with respect to the transfer of any such surrendered Right
Certificate until the registered holder shall have completed and signed the
certificate contained in the form of assignment on the reverse side of such
Right Certificate and the Corporation shall have been provided with such
additional evidence of the identity of the Beneficial Owner (or former
Beneficial Owner) or Affiliates or Associates thereof as the Corporation shall
reasonably request. Thereupon the Rights Agent shall, subject to Sections 4 and
7 hereof, countersign and deliver to the person entitled thereto a Right
Certificate or Right Certificates, as the case may be, as so requested. The
Corporation may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer,
division, combination or exchange of Right Certificates.
Upon receipt by the Corporation and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Right Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to them, and, at the Corporation's request,
reimbursement to the Corporation and the Rights Agent of all reasonable
8
<PAGE> 3
expenses incidental thereto, and upon surrender to the Rights Agent and
cancellation of the Right Certificate if mutilated, the Corporation will make
and deliver a new Right Certificate of like tenor to the Rights Agent for
countersignature and delivery to the registered holder in lieu of the Right
Certificate so lost, stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of
Rights.
(a) Subject to Section 7(e) hereof, the registered holder of any
Right Certificate may exercise the Rights represented thereby (except as
otherwise provided herein) in whole or in part at any time after the
Distribution Date upon surrender of the Right Certificate, with the form of
election to purchase on the reverse side thereof duly executed, to the Rights
Agent at the office of the Rights Agent designated for such purpose, together
with payment of the Purchase Price with respect to each surrendered Right for
the total number of Preferred Shares (or Common Shares or other securities or
property, as the case may be) as to which the Rights are exercised, at or prior
to the earliest of (i) the close of business on _______, 2008 (the "Final
Expiration Date"), (ii) the time at which the Rights are redeemed as provided in
Section 23 hereof (the "Redemption Date") or (iii) the time at which such Rights
are exchanged as provided in Section 24 hereof.
(b) The Purchase Price for each one one-hundredth of a Preferred
Share pursuant to the exercise of a Right shall initially be $40.00, shall be
subject to adjustment from time to time as provided in Sections 11 and 13 hereof
and shall be payable in lawful money of the United States of America in
accordance with paragraph (c) below.
(c) Upon receipt of a Right Certificate representing exercisable
Rights, with the form of election to purchase and the certificate on the reverse
side of the Right Certificate duly executed, accompanied by payment of the
Purchase Price for the Preferred Shares (or Common Shares or other securities or
property, as the case may be) to be purchased and an amount equal to any
applicable transfer tax required to be paid by the holder of such Right
Certificate in accordance with Section 9 hereof by certified check, cashier's
check or money order payable to the order of the Corporation, the Rights Agent
shall thereupon promptly (i) (A) requisition from any transfer agent of the
Preferred Shares (or make available, if the Rights Agent is the transfer agent
of the Preferred Shares) certificates for the number of Preferred Shares to be
purchased and the Corporation hereby irrevocably authorizes its transfer agent
to comply with all such requests, or (B) if the Corporation shall have elected
to deposit the Preferred Shares issuable upon exercise of the Rights with a
depositary agent, requisition from the depositary agent depositary receipts
representing such number of one one-hundredths of a Preferred Share as are to be
purchased (in which case certificates for the Preferred Shares represented by
such receipts shall be deposited by the transfer agent with the depositary
agent) and the Corporation will direct the depositary agent to comply with such
request, (ii) when appropriate, requisition from the Corporation the amount of
cash to be paid in lieu of issuance of fractional shares in accordance with
Section 14 hereof, (iii) after receipt of such certificates or depositary
receipts, cause the same to be delivered to or upon the order of the registered
holder of such Right Certificate, registered in such name or names as may be
designated by such holder, and (iv) when
9
<PAGE> 4
appropriate, after receipt, deliver such cash to or upon the order of the
registered holder of such Right Certificate. In the event that the Corporation
is obligated to issue other securities (including Common Shares) of the
Corporation, pay cash and/or distribute other property pursuant to Section 11(a)
hereof, the Corporation will make all arrangements necessary so that such other
securities, cash and/or property are available for distribution by the Rights
Agent, if and when appropriate.
(d) In case the registered holder of any Right Certificate shall
exercise less than all the Rights represented thereby, a new Right Certificate
representing Rights equivalent to the Rights remaining unexercised shall be
issued by the Rights Agent and delivered to the registered holder of such Right
Certificate or to his duly authorized assigns, subject to the provisions of
Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary, from
and after the occurrence of a Triggering Event, any Rights beneficially owned by
(i) an Acquiring Person or an Associate or Affiliate of an Acquiring Person,
(ii) a transferee of an Acquiring Person (or of any such Associate or Affiliate)
who becomes a transferee after the Acquiring Person becomes an Acquiring Person
or (iii) a transferee of an Acquiring Person (or any Associate or Affiliate) who
becomes a transferee prior to or concurrently with the Acquiring Person becoming
an Acquiring Person and receives such Rights pursuant to either (x) a transfer
(whether or not for consideration) from the Acquiring Person to holders of
equity interests in such Acquiring Person or to any Person with whom the
Acquiring Person has any continuing agreement, arrangement or understanding,
whether written or oral, regarding the transferred Rights or (y) a transfer
which the Board of Directors otherwise concludes in good faith is part of a
plan, arrangement or understanding, whether written or oral, which has as a
primary purpose or effect the avoidance of this Section 7(e), shall become null
and void without any further action, and any holder of such Rights shall
thereupon have no rights whatsoever with respect to such Rights, whether under
any provision of this Agreement or otherwise, from and after the occurrence of a
Triggering Event. The Corporation shall use all reasonable efforts to insure
that the provisions of this Section 7(e) hereof are complied with, but shall
have no liability to any holder of Rights for the inability to make any
determinations with respect to an Acquiring Person or its Affiliates, Associates
or transferees hereunder.
(f) Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Corporation shall be obligated to undertake any
action with respect to a registered holder upon the occurrence of any purported
exercise as set forth in this Section 7 unless the certificate contained in the
form of election to purchase set forth on the reverse side of the Right
Certificate surrendered for such exercise shall have been completed and signed
by the registered holder thereof and the Corporation shall have been provided
with such additional evidence of the identity of the Beneficial Owner (or former
Beneficial Owner) or Affiliates or Associates thereof as the Corporation shall
reasonably request.
(g) The Corporation covenants and agrees that it will cause to be
reserved and kept available out of its authorized and unissued Preferred Shares
(and, following the occurrence of
10
<PAGE> 5
a Triggering Event, Common Shares and/or other securities), the number of
Preferred Shares (and, following the occurrence of a Triggering Event, Common
Shares and/or other securities) that will be sufficient to permit the exercise
in full of all outstanding Rights.
Section 8. Cancellation and Destruction of Right Certificates. All
Right Certificates surrendered for the purpose of exercise, transfer, division,
combination or exchange shall, if surrendered to the Corporation or to any of
its agents, be delivered to the Rights Agent for cancellation or in cancelled
form, or, if surrendered to the Rights Agent, shall be cancelled by it, and no
Right Certificates shall be issued in lieu thereof except as expressly permitted
by any of the provisions of this Rights Agreement. The Corporation shall deliver
to the Rights Agent for cancellation and retirement, and the Rights Agent shall
so cancel and retire, any other Right Certificate purchased or acquired by the
Corporation otherwise than upon the exercise thereof. The Rights Agent shall
deliver all cancelled Right Certificates to the Corporation, or shall, at the
written request of the Corporation, destroy such cancelled Right Certificates,
and in such case shall deliver a certificate of destruction thereof to the
Corporation.
Section 9. Availability of Preferred Shares. The Corporation covenants
and agrees that it will take all such action as may be necessary to ensure that
all Preferred Shares (and, following the occurrence of a Triggering Event,
Common Shares and/or other securities) delivered upon exercise of Rights shall,
at the time of delivery of the certificates for such Preferred Shares (and,
following the occurrence of a Triggering Event, Common Shares and/or other
securities), subject to payment of the Purchase Price, be duly and validly
authorized and issued and fully paid and nonassessable.
The Corporation further covenants and agrees that it will pay when due
and payable any and all federal and state transfer taxes and charges which may
be payable in respect of the issuance or delivery of the Right Certificates or
of any Preferred Shares (or Common Shares and/or other securities, as the case
may be) upon the exercise of Rights. The Corporation shall not, however, be
required to pay any transfer tax which may be payable in respect of any transfer
or delivery of Right Certificates to a person other than, or the issuance or
delivery of certificates or depositary receipts for the Preferred Shares (or
Common Shares and/or other securities, as the case may be) in a name other than
that of, the registered holder of the Right Certificate representing Rights
surrendered for exercise or to issue or to deliver any certificates or
depositary receipts for Preferred Shares (or Common Shares and/or other
securities, as the case may be) upon the exercise of any Rights until any such
tax shall have been paid (any such tax being payable by the holder of such Right
Certificate at the time of surrender) or until it has been established to the
Corporation's reasonable satisfaction that no such tax is due.
Section 10. Preferred Shares Record Date. Each person in whose name any
certificate for Preferred Shares (or Common Shares and/or other securities, as
the case may be) is issued upon the exercise of Rights shall for all purposes be
deemed to have become the holder of record of the shares or securities
represented thereby on, and such certificate shall be dated, the date upon which
the Right Certificate representing such Rights was duly surrendered and
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<PAGE> 6
payment of the Purchase Price (and any applicable transfer taxes) was made;
provided, however, that if the date of such surrender and payment is a date upon
which the Preferred Shares (or Common Shares and/or other securities, as the
case may be) transfer books of the Corporation are closed, such person shall be
deemed to have become the record holder of such shares or securities on, and
such certificate shall be dated, the next succeeding Business Day on which the
Preferred Shares (or Common Shares and/or other securities, as the case may be)
transfer books of the Corporation are open. Prior to the exercise of the Rights
represented thereby, the holder of a Right Certificate shall not be entitled to
any rights of a holder of Preferred Shares (or Common Shares and/or other
securities, as the case may be) for which the Rights shall be exercisable,
including, without limitation, the right to vote, to receive dividends or other
distributions or to exercise any preemptive rights, and shall not be entitled to
receive any notice of any proceedings of the Corporation, except as provided
herein.
Section 11. Adjustment of Purchase Price, Number of Shares or Number of
Rights. The Purchase Price, the number of Preferred Shares covered by each Right
and the number of Rights outstanding are subject to adjustment from time to time
as provided in this Section 11.
(a) (i) In the event the Corporation shall at any time after the date
of this Agreement (A) declare or pay a dividend on the Preferred Shares payable
in Preferred Shares, (B) subdivide the outstanding Preferred Shares, (C) combine
the outstanding Preferred Shares into a smaller number of Preferred Shares or
(D) issue any of its shares in a reclassification of the Preferred Shares
(including any such reclassification in connection with a consolidation or
merger in which the Corporation is the continuing or surviving entity), except
as otherwise provided in this Section 11(a) and Section 7(e) hereof, the
Purchase Price in effect at the time of the record date for such dividend or of
the effective date of such subdivision, combination or reclassification, and the
number and kind of shares issuable on such date, shall be proportionately
adjusted so that the holder of any Right exercised after such time shall be
entitled to receive the aggregate number and kind of shares which, if such Right
had been exercised immediately prior to such date and at a time when the
Preferred Shares transfer books of the Corporation were open, he would have
owned upon such exercise and been entitled to receive by virtue of such
dividend, subdivision, combination or reclassification; provided, however, that
in no event shall the consideration to be paid upon the exercise of one Right be
less than the aggregate par value of the shares of the Corporation issuable upon
exercise of one Right. If an event occurs which would require an adjustment
under both Section 11(a)(i) and Section 11(a)(ii), the adjustment provided for
in this Section 11(a)(i) shall be in addition to, and shall be made prior to,
any adjustment required pursuant to Section 11(a)(ii).
(ii) Subject to Section 24 of this Agreement, in the event any
Person becomes an Acquiring Person, each holder of a Right, except as provided
below and in Section 7(e) hereof, shall thereafter have a right to receive, upon
exercise thereof at a price equal to the then current Purchase Price multiplied
by the number of one one-hundredths of a Preferred Share for which a Right is
then exercisable, in accordance with the terms of this Agreement and in lieu of
Preferred Shares, such number of Common Shares of the Corporation as shall equal
the result obtained by (A) multiplying the then current Purchase Price by the
number of one
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<PAGE> 7
one-hundredths of a Preferred Share for which a Right is then exercisable and
dividing that product by (B) 50% of the then current per share market price of
the Corporation's Common Shares (determined pursuant to Section 11(d) hereof) on
the date of the occurrence of such event. In the event that any Person shall
become an Acquiring Person and the Rights shall then be outstanding, the
Corporation shall not take any action which would eliminate or diminish the
benefits intended to be afforded by the Rights.
(iii) In lieu of issuing Common Shares of the Corporation in
accordance with Section 11(a)(ii) hereof, the Corporation may, in the sole
discretion of the Board of Directors, elect to (and, in the event that the Board
of Directors has not exercised the exchange right contained in Section 24 hereof
and there are not sufficient authorized but unissued Common Shares to permit the
exercise in full of the Rights in accordance with the foregoing subparagraph
(ii), the Corporation shall) take all such action as may be necessary to
authorize, issue or pay, upon the exercise of the Rights, cash (including by way
of a reduction of the Purchase Price), property, other securities or any
combination thereof having an aggregate value equal to the value of the Common
Shares of the Corporation which otherwise would have been issuable pursuant to
Section 11(a)(ii), which aggregate value shall be determined by the Board of
Directors. For purposes of the preceding sentence, the value of the Common
Shares shall be determined pursuant to Section 11(d) hereof and the value of any
equity securities which the Board of Directors determines to be equivalent to a
Common Share (including the Preferred Shares, in such ratio as the Board of
Directors shall determine) shall be deemed to have the same value as the Common
Shares. Any such election by the Board of Directors must be made and publicly
announced within 60 days following the date on which the event described in
Section 11(a)(ii) shall have occurred. Following the occurrence of the event
described in Section 11(a)(ii), the Board of Directors then in office may
suspend the exercisability of the Rights for a period of up to 60 days following
the date on which the event described in Section 11(a)(ii) shall have occurred
to the extent that the Board of Directors has not determined whether to exercise
the Corporation's right of election under this Section 11(a)(iii). In the event
of any such suspension, the Corporation shall issue a public announcement
stating that the exercisability of the Rights has been temporarily suspended.
(b) In case the Corporation shall fix a record date for the issuance
of rights, options or warrants to all holders of Preferred Shares entitling them
(for a period expiring within 45 calendar days after such record date) to
subscribe for or purchase Preferred Shares (or shares having the same rights,
privileges and preferences as the Preferred Shares ("equivalent preferred
shares")) or securities convertible into Preferred Shares or equivalent
preferred shares at a price per Preferred Share or equivalent preferred share
(or having a conversion price per share, if a security convertible into
Preferred Shares or equivalent preferred shares) less than the then current per
share market price of the Preferred Shares (as defined in Section 11(d)) on such
record date, the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the number of
Preferred Shares outstanding on such record date plus the number of Preferred
Shares which the aggregate offering price of the total number of
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<PAGE> 8
Preferred Shares and/or equivalent preferred shares so to be offered (and/or the
aggregate initial conversion price of the convertible securities so to be
offered) would purchase at such current market price and the denominator of
which shall be the number of Preferred Shares outstanding on such record date
plus the number of additional Preferred Shares and/or equivalent preferred
shares to be offered for subscription or purchase (or into which the convertible
securities so to be offered are initially convertible); provided, however, that
in no event shall the consideration to be paid upon the exercise of one Right be
less than the aggregate par value of the shares of the Corporation issuable upon
exercise of one Right. In case such subscription price is paid in a
consideration part or all of which shall be in a form other than cash, the value
of such consideration shall be as determined in good faith by a majority of the
members of a committee of the Board of Directors of the Corporation consisting
of the Continuing Directors of the Corporation, whose determination shall be
described in a statement filed with the Rights Agent and shall be binding on the
Rights Agent. Such adjustment shall be made successively whenever such a record
date is fixed; and in the event that such rights, options or warrants are not so
issued, the Purchase Price shall be adjusted to be the Purchase Price which
would then be in effect if such record date had not been fixed.
(c) In case the Corporation shall fix a record date for the making of
a distribution to all holders of the Preferred Shares (including any such
distribution made in connection with a consolidation or merger in which the
Corporation is the continuing or surviving entity) of evidences of indebtedness
or assets (other than a regular periodic cash dividend or a dividend payable in
Preferred Shares) or subscription rights or warrants (excluding those referred
to in Section 11(b) hereof), the Purchase Price to be in effect after such
record date shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the then current per share market price of the Preferred Shares on such
record date, less the fair market value (as determined in good faith by a
majority of the members of a committee of the Board of Directors of the
Corporation consisting of the Continuing Directors of the Corporation, whose
determination shall be described in a statement filed with the Rights Agent and
shall be binding on the Rights Agent) of the portion of the assets or evidences
of indebtedness so to be distributed or of such subscription rights or warrants
attributable to one Preferred Share and the denominator of which shall be such
current per share market price of the Preferred Shares; provided, however, that
in no event shall the consideration to be paid upon the exercise of one Right be
less than the aggregate par value of the shares of the Corporation to be issued
upon exercise of one Right. Such adjustments shall be made successively whenever
such a record date is fixed; and in the event that such distribution is not so
made, the Purchase Price shall again be adjusted to be the Purchase Price which
would then be in effect if such record date had not been fixed.
(d) (i) For the purpose of any computation hereunder, other than
under Section 11(a)(iii) hereof, the "current per share market price" of any
security (a "Security" for the purpose of this Section 11(d)(i)) on any date
shall be deemed to be the average of the daily closing prices per share of such
Security for the 30 consecutive Trading Days (as such term is
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<PAGE> 9
hereinafter defined) immediately prior to such date, and for the purpose of any
computation under Section 11(a)(iii) hereof, the "current per share market
price" of a Security on any date shall be deemed to be the average of the daily
closing prices per share of such Security for 30 consecutive Trading Days
immediately following such date; provided, however, that in the event that the
current per share market price of the Security is determined during a period
following the announcement by the issuer of such Security of (A) a dividend or
distribution on such Security payable in shares of such Security or securities
convertible into such shares (other than the Rights), or (B) any subdivision,
combination or reclassification of such Security and prior to the expiration of
30 Trading Days after the ex-dividend date for such dividend or distribution, or
the record date for such subdivision, combination or reclassification, then, and
in each such case, the "current per share market price" shall be appropriately
adjusted to reflect the current market price per share equivalent (ex-dividend)
of such Security. The closing price for each day shall be the last sale price,
regular way, or, in case no such sale takes place on such day, the average of
the closing bid and asked prices, regular way, in either case as reported in
the principal consolidated transaction reporting system with respect to
securities listed or admitted to trading on the New York Stock Exchange or, if
the Security is not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting
system with respect to securities listed on the principal national securities
exchange on which the Security is listed or admitted to trading or, if the
Security is not listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average of the high
bid and low asked prices in the over-the-counter market, as reported by the
National Association of Securities Dealers, Inc. Automated Quotation System
("NASDAQ") or such other system then in use, or, if on any such date the
Security is not quoted by any such organization, the average of the closing bid
and asked prices as furnished by a professional market maker making a market in
the Security selected by a majority of the members of a committee of the Board
of Directors of the Corporation consisting of the continuing Directors of the
Corporation. If on any such date no market maker is making a market in the
Security, the fair value of such Security on such date (as determined in good
faith by the Board of Directors of the Corporation) shall be used. The term
"Trading Day" shall mean a day on which the principal national securities
exchange on which the Security is listed or admitted to trading is open for the
transaction of business or, if the Security is not listed or admitted to
trading on any national securities exchange, a Business Day.
(ii) For the purpose of any computation hereunder, the "current
per share market price" of the Preferred Shares shall be determined in
accordance with the method set forth in Section 11(d)(i). If the Preferred
Shares are not publicly traded, the "current per share market price" of the
Preferred Shares shall be conclusively deemed to be the current per share market
price of the Common Shares of the Corporation as determined pursuant to Section
11(d)(i) (appropriately adjusted to reflect any share split, share dividend or
similar transaction occurring after the date hereof), multiplied by one hundred.
If neither the Common Shares of the Corporation nor the Preferred Shares are
publicly held or so listed or traded, "current per share market price" shall
mean the fair value per share as determined in good faith by a majority of the
members of a committee of the Board of Directors of the Corporation
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<PAGE> 10
consisting of the continuing Directors of the Corporation, whose determination
shall be described in a statement filed with the Rights Agent.
(e) Anything herein to the contrary notwithstanding, no adjustment in
the Purchase Price shall be required unless such adjustment would require an
increase or decrease of at least 1% in the Purchase Price; provided, however,
that any adjustments which by reason of this Section 11(e) are not required to
be made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 11 shall be made to the nearest
cent or to the nearest one one-millionth of a Preferred Share or one
ten-thousandth of any other share or security, as the case may be.
Notwithstanding the first sentence of this Section 11(e), any adjustment
required by this Section 11 shall be made no later than the earlier of (i) three
yearsfrom the date of the transaction which requires such adjustment or (ii) the
date of the expiration of the right to exercise any Rights.
(f) If as a result of an adjustment made pursuant to Section 11(a) or
Section 13(a) hereof, the holder of any Right thereafter exercised shall become
entitled to receive any shares of the Corporation other than Preferred Shares,
thereafter the number of such other shares so receivable upon exercise of any
Right shall be subject to adjustment from time to time in a manner and on terms
as nearly equivalent as practicable to the provisions with respect to the
Preferred Shares contained in this Section 11, and the provisions of Sections 7,
9, 10, 13 and 14 with respect to the Preferred Shares shall apply on like terms
to any such other shares.
(g) All Rights originally issued by the Corporation subsequent to any
adjustment made to the Purchase Price hereunder shall represent the right to
purchase, at the adjusted Purchase Price, the number of one one-hundredths of a
Preferred Share purchasable from time to time hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.
(h) Unless the Corporation shall have exercised its election as
provided in Section 11(i), upon each adjustment of the Purchase Price as a
result of the calculations made in Sections 11(b) and (c), each Right
outstanding immediately prior to the making of such adjustment shall thereafter
represent the right to purchase, at the adjusted Purchase Price, that number of
one one-hundredths of a Preferred Share (calculated to the nearest one
one-millionth of a Preferred Share) obtained by (i) multiplying (A) the number
of one one-hundredths of a Preferred Share covered by a Right immediately prior
to such adjustment by (B) the Purchase Price in effect immediately prior to such
adjustment of the Purchase Price and (ii) dividing the product so obtained by
the Purchase Price in effect immediately after such adjustment of the Purchase
Price.
(i) The Corporation may elect on or after the date of any adjustment
of he Purchase Price to adjust the number of Rights, in substitution for any
adjustment in the number of one one-hundredths of a Preferred Share purchasable
upon the exercise of a Right. Each of the Rights outstanding after such
adjustment of the number of Rights shall be exercisable for the number of one
one-hundredths of a Preferred Share for which a Right was exercisable
16
<PAGE> 11
immediately prior to such adjustment. Each Right held of record prior to such
adjustment of the number of Rights shall become that number of Rights
(calculated to the nearest one ten- thousandth) obtained by dividing the
Purchase Price in effect immediately prior to adjustment of the Purchase Price
by the Purchase Price in effect immediately after adjustment of the Purchase
Price. The Corporation shall make a public announcement of its election to
adjust the number of Rights, indicating the record date for the adjustment, and,
if known at the time, the amount of the adjustment to be made. This record date
may be the date on which the Purchase Price is adjusted or a ny day thereafter,
but, if the Right Certificates have been issued, shall be at least 10 days later
than the date of the public announcement. If Right Certificates have been
issued, upon each adjustment of the number of Rights pursuant to this Section
11(i), the Corporation shall, as promptly as practicable, cause to be
distributed to holders of record of Right Certificates on such record date Right
Certificates representing, subject to Section 14 hereof, the additional Rights
to which such holders shall be entitled as a result of such adjustment, or, at
the option of the Corporation, shall cause to be distributed to such holders of
record in substitution and replacement for the Right Certificates held by such
holders prior to the date of adjustment, and upon surrender thereof, if required
by the Corporation, new Right Certificates representing all the Rights to which
such holders shall be entitled after such adjustment. Right Certificates so to
be distributed shall be issued, executed and countersigned in the manner
provided for herein and shall be registered in the names of the holders of
record of Right Certificates on the record date specified in the public
announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or
the number of one one-hundredths of a Preferred Share issuable upon the exercise
of the Rights, the Right Certificates theretofore and thereafter issued may
continue to express the Purchase Price and the number of one one-hundredths of a
Preferred Share which were expressed in the initial Right Certificates issued
hereunder.
(k) Before taking any action that would cause an adjustment reducing
the Purchase Price below one one-hundredth of the then par value, if any, of the
Preferred Shares issuable upon exercise of the Rights, the Corporation shall
take any action which may, in the opinion of its counsel, be necessary in order
that the Corporation may validly and legally issue fully paid and nonassessable
Preferred Shares at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Corporation may elect to defer until the occurrence of such
event the issuance to the holder of any Right exercised after such record date
of the Preferred Shares and other securities of the Corporation, if any,
issuable upon such exercise over and above the Preferred Shares and other
securities of the Corporation, if any, issuable upon such exercise on the basis
of the Purchase Price in effect prior to such adjustment; provided, however,
that the Corporation shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to receive such additional
shares upon the occurrence of the event requiring such adjustment.
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<PAGE> 12
(m) Anything in this Section 11 to the contrary notwithstanding, the
Corporation shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that it in its sole discretion shall determine to be advisable in
order that any consolidation or subdivision of the Preferred Shares, issuance
wholly for cash of any Preferred Shares at less than the current market price,
issuance wholly for cash of Preferred Shares or securities which by their terms
are convertible into or exchangeable for Preferred Shares, dividends on
Preferred Shares payable in Preferred Shares or issuance of rights, options or
warrants referred to hereinabove in Section 11(b), hereafter made by the
Corporation to holders of its Preferred Shares shall not be taxable to such
shareholders.
(n) In the event that at any time after the date of this Agreement
and prior to the Distribution Date, the Corporation shall (i) declare or pay any
dividend on the Common Shares payable in Common Shares or (ii) effect a
subdivision, combination or consolidation of the Common Shares (by
reclassification or otherwise than by payment of dividends in Common Shares)
into a greater or lesser number of Common Shares, then in any such case (x) the
number of one one-hundredths of a Preferred Share purchasable after such event
upon proper exercise of each Right shall be determined by multiplying the number
of one one-hundredths of a Preferred Share so purchasable immediately prior to
such event by a fraction, the numerator of which is the number of Common Shares
outstanding immediately before such event and the denominator of which is the
number of Common Shares outstanding immediately after such event, and (y) each
Common Share outstanding immediately after such event shall have issued with
respect to it that number of Rights which each Common Share outstanding
immediately prior to such event had issued with respect to it. The adjustments
provided for in this Section 11(n) shall be made successively whenever such a
dividend is declared or paid or such a subdivision, combination or consolidation
is effected.
(o) So long as the shares issuable upon the exercise of the Rights
may be listed on any national securities exchange, the Corporation shall use its
best efforts to cause, from and after such time as the Rights become
exercisable, all shares reserved for such issuance to be listed on such exchange
upon official notice of issuance upon such exercise.
(p) The Corporation shall use its best efforts to (i) file, as soon
as practicable following the first occurrence of a Triggering Event, a
registration statement under the Securities Act with respect to the securities
purchasable upon exercise of the Rights on an appropriate form, (ii) cause such
registration statement to become effective as soon as practicable after such
filing, and (iii) cause such registration statement to remain effective (with a
prospectus at all times meeting the requirements of the Securities Act) until
the date of the expiration of the Rights. The Corporation will also take such
action as may be appropriate under the blue sky laws of the various states. The
Corporation may temporarily suspend, for a period of time not to exceed 90 days,
the exercisability of the Rights in order to prepare and file such registration
statement or in order to comply with such blue sky laws. Upon any such
suspension, the Corporation shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended.
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<PAGE> 13
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.
Whenever an adjustment is made as provided in Section 11 or 13 hereof, the
Corporation shall promptly (a) prepare a certificate setting forth such
adjustment, and a brief statement of the facts accounting for such adjustment,
(b) file with the Rights Agent and with each transfer agent for the Common
Shares or the Preferred Shares a copy of such certificate and (c) mail a brief
summary thereof to each holder of a Right Certificate in accordance with Section
25 hereof. The Rights Agent shall be fully protected in relying on any such
certificate and on any adjustment therein contained and may assume that no
adjustment has been made unless and until it shall have received such
certificate.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
Earning Power.
(a) If after the Shares Acquisition Date, directly or indirectly, (x)
the Corporation shall consolidate with, or merge with and into, any other Person
other than Omega Healthcare, (y) any Person other than Omega Healthcare shall
consolidate with the Corporation, or merge with and into the Corporation and the
Corporation shall be the continuing or surviving entity of such merger and, in
connection with such merger, all or part of the Common Shares shall be changed
into or exchanged for stock or other securities of any other Person (or the
Corporation) or cash or any other property, or (z) the Corporation shall sell or
otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise
transfer), in one or more transactions, assets or earning power aggregating 50%
or more of the assets or earning power of the Corporation and its Subsidiaries
(taken as a whole) to any Person or Persons other than Omega Healthcare, the
Corporation or one or more of its wholly-owned Subsidiaries, then, and in each
such case, proper provision shall be made so that (i) each holder of a Right
(except as otherwise provided herein) shall thereafter have the right to
receive, upon the exercise thereof at a price equal to the then current Purchase
Price multiplied by the number of one one-hundredths of a Preferred Share for
which a Right is then exercisable, in accordance with the terms of this
Agreement and in lieu of Preferred Shares, such number of validly authorized and
issued, fully paid, non-assessable and freely tradeable common shares of the
Principal Party (as hereinafter defined), free and clear of all liens, rights of
call or first refusal, encumbrances or other adverse claims, as shall equal the
result obtained by (A) multiplying the then current Purchase Price by the number
of one one-hundredths of a Preferred Share for which a Right is then exercisable
(or, if such Right is not then exercisable for a number of one one-hundredths of
a Preferred Share, the number of such fractional shares for which it was
exercisable immediately prior to an event described under Section 11(a)(ii)
hereof) and dividing that product by (B) 50% of the then current per share
market price of the common shares of such Principal Party (determined pursuant
to Section 11(d) hereof) on the date of consummation of such consolidation,
merger, sale or transfer; (ii) such Principal Party shall thereafter be liable
for, and shall assume, by virtue of such consolidation, merger, sale or
transfer, or otherwise, all the obligations and duties of the Corporation
pursuant to this Agreement; (iii) the term "Corporation" shall thereafter be
deemed to refer to such Principal Party and (iv) such Principal Party shall take
such steps (including, but not limited to, the reservation of a sufficient
number of its common shares in accordance with Section 9 hereof) in connection
with such consummation as may be necessary
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<PAGE> 14
to assure that the provisions hereof shall thereafter be applicable, as nearly
as reasonably may be, in relation to its common shares thereafter deliverable
upon the exercise of the Rights.
(b) "Principal Party" shall mean:
i. In the case of any transaction described in (x) or
(y) of the first sentence of Section 13(a), the
Person that is the issuer of any securities into
which Common Shares of the Corporation are converted
in such merger or consolidation, and if no securities
are so issued, the Person that is the surviving
entity of such merger or consolidation (including the
Corporation if applicable); and
ii. in the case of any transaction described in (z) of
the first sentence in Section 13(a), the Person that
is the party receiving the greatest portion of the
assets or earning power transferred pursuant to such
transaction or transactions;
provided, however, that in any such case described in clauses (b)(i) and
(b)(ii): (1) if the common shares of such Person are not at such time and have
not been continuously over the preceding 12-month period registered under
Section 12 of the Exchange Act, and such Person is a direct or indirect
Subsidiary of another Person the common shares of which are and have been so
registered, "Principal Party" shall refer to such other Person; (2) in case such
Person is a Subsidiary, directly or indirectly, of more than one Person, the
common shares of two or more of which are and have been so registered,
"Principal Party" shall refer to whichever of such Persons is the issuer of the
common shares having the greatest aggregate market value; and (3) in case such
Person is owned, directly or indirectly, by a joint venture formed by two or
more Persons that are not owned, directly or indirectly, by the same Person, the
rules set forth in (1) and (2) above shall apply to each of the chains of
ownership having an interest in such joint venture as if such party were a
"Subsidiary" of both or all of such joint venturers and the Principal Parties in
each such chain shall bear the obligations set forth in this Section 13 in the
same ratio as their direct or indirect interests in such Person bear to the
total of such interests.
(c) The Corporation shall not consummate any such consolidation,
merger, sale or transfer unless the Principal Party shall have sufficient common
shares authorized to permit the full exercise of the Rights and prior thereto
the Corporation and such Principal Party shall have executed and delivered to
the Rights Agent a supplemental agreement providing for the terms set forth in
paragraphs (a) and (b) of this Section 13 and further providing that, as soon as
practicable after the date of any consolidation, merger or sale of assets
mentioned in paragraph (a) of this Section 13, the Principal Party will:
(i) prepare and file a registration statement under the
Securities Act, with respect to the Rights and the securities
purchasable upon exercise of the Rights on an appropriate form, and
will use its best efforts to cause such registration statement to (A)
become effective as soon as practicable after such filing and (B)
remain effective (with a
20
<PAGE> 15
prospectus at all times meeting the requirements of the Securities Act)
until the Expiration Date;
(ii) deliver to holders of the Rights historical financial
statements for the Principal Party and each of its Affiliates which
comply in all respects with the requirements for registration on Form
10 under the Exchange Act; and
(iii) take such actions as may be necessary or appropriate
under the blue sky laws of the various states.
The provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers. In the event that one of the
transactions described in this Section 13(a) shall occur at any time after the
occurrence of a transaction described in Section 11(a)(ii) hereof, the Rights
which have not theretofore been exercised shall thereafter become exercisable in
the manner described in Section 13(a).
Section 14. Fractional Rights and Fractional Shares.
(a) The Corporation shall not be required to issue fractions of
Rights or to distribute Right Certificates which represent fractional Rights. In
lieu of such fractional Rights, there may be paid to the registered holders of
the Right Certificates with regard to which such fractional Rights would
otherwise be issuable, an amount in cash equal to the same fraction of the
current market value of a whole Right. For the purposes of this Section 14(a),
the current market value of a whole Right shall be the closing price of the
Rights for the Trading Day immediately prior to the date on which such
fractional Rights would have been otherwise issuable. The closing price for any
day shall be the last sale price, regular way, or, in case no such sale takes
place on such day, the average of the closing bid and asked prices, regular way,
in either case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the New York
Stock Exchange or, if the Rights are not listed or admitted to trading on the
New York Stock Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national
securities exchange on which the Rights are listed or admitted to trading or, if
the Rights are not listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average of the high
bid and low asked prices in the over-the-counter market, as reported by NASDAQ
or such other system then in use or, if on any such date the Rights are not
quoted by any such organization, the average of the closing bid and asked prices
as furnished by a professional market maker making a market in the Rights
selected by a majority of the Continuing Directors of the Corporation. If on any
such date no such market maker is making a market in the Rights, the fair value
of the Rights on such date as determined in good faith by a majority of the
Continuing Directors of the Corporation shall be used.
(b) The Corporation shall not be required to issue fractions of
Preferred Shares (other than fractions which are integral multiples of one
one-hundredth of a Preferred Share)
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<PAGE> 16
upon exercise of the Rights or to distribute certificates which represent
fractional Preferred Shares (other than fractions which are integral multiples
of one one-hundredth of a Preferred Share). Fractions of Preferred Shares in
integral multiples of one one-hundredth of a Preferred Share may, at the
election of the Corporation, be represented by depositary receipts, pursuant to
an appropriate agreement between the Corporation and a depositary selected by
it; provided, that such agreement shall provide that the holders of such
depositary receipts shall have all the rights, privileges and preferences to
which they are entitled as beneficial owners of the Preferred Shares represented
by such depositary receipts. In lieu of fractional Preferred Shares that are not
integral multiples of one one-hundredth of a Preferred Share, the Corporation
may, to the extent necessary to reduce such fraction to an integral multiple of
one one-hundredth, pay to the registered holders of Right Certificates at the
time such Rights are exercised as herein provided an amount in cash equal to the
same fraction of the current market value of one one-hundredth of a Preferred
Share. For the purposes of this Section 14(b), the current market value of one
one-hundredth of a Preferred Share shall be one one-hundredth of the closing
price of a Preferred Share (as determined pursuant to the second sentence of
Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of
such exercise.
(c) Following the occurrence of a Triggering Event, the Corporation
shall not be required to issue fractions of Common Shares upon exercise of the
Rights or to distribute certificates which represent fractional Common Shares.
In lieu of fractional Common Shares, the Corporation may pay to the registered
holders of Right Certificates at the time such Rights are exercised as herein
provided an amount in cash equal to the same fraction of the current market
value of one Common Share. For purposes of this Section 14(c), the current
market value of one Common Share shall be the closing price of one Common Share
(as determined pursuant to the second sentence of Section 11(d)(i) hereof) for
the Trading Day immediately prior to the date of such exercise.
(d) The holder of a Right by the acceptance of the Right expressly
waives his right to receive any fractional Rights or any fractional shares upon
exercise of a Right (except as provided above).
Section 15. Rights of Action. All rights of action in respect of this
Agreement, excepting the rights of action given to the Rights Agent under
Section 18 hereof, are vested in the respective registered holders of the Right
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Shares); and any registered holder of any Right Certificate (or, prior to
the Distribution Date, of the Common Shares), without the consent of the Rights
Agent or of the holder of any other Right Certificate (or, prior to the
Distribution Date, of the Common Shares), may, in his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Corporation to enforce, or otherwise act in respect of, his right to
exercise the Rights represented by such Right Certificate in the manner provided
in such Right Certificate and in this Agreement. Without limiting the foregoing
or any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this
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<PAGE> 17
Agreement and will be entitled to specific performance of the obligations under,
and injunctive relief against actual or threatened violations of the obligations
of any Person subject to, this Agreement.
Section 16. Agreement of Right Holders. Every holder of a Right, by
accepting the same, consents and agrees with the Corporation and the Rights
Agent and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of the Common Shares;
(b) after the Distribution Date, the Right Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the principal office of the Rights Agent, duly endorsed or accompanied by a
proper instrument of transfer;
(c) the Corporation and the Rights Agent may deem and treat the
person in whose name the Right Certificate (or, prior to the Distribution Date,
the associated Common Shares certificate) is registered as the absolute owner
thereof and of the Rights represented thereby (notwithstanding any notations of
ownership or writing on the Right Certificates or the associated Common Shares
certificate made by anyone other than the Corporation or the Rights Agent) for
all purposes whatsoever, and neither the Corporation nor the Rights Agent shall
be affected by any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the contrary,
neither the Corporation nor the Rights Agent shall have any liability to any
holder of a Right or any other Person as a result of its inability to perform
any of its obligations under this Agreement by reason of any preliminary or
permanent injunction or other order, decree or ruling issued by a court of
competent jurisdiction or by a governmental, regulatory or administrative agency
or commission, or any statute, rule, regulation or executive order promulgated
or enacted by any governmental authority prohibiting or otherwise restraining
performance of such obligation.
Section 17. Right Certificate Holder Not Deemed a Shareholder. No
holder, as such, of any Right Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the Preferred Shares or any
other securities of the Corporation which may at any time be issuable on the
exercise of the Rights represented thereby, nor shall anything contained herein
or in any Right Certificate be construed to confer upon the holder of any Right
Certificate, as such, any of the rights of a shareholder of the Corporation or
any right to vote for the election of trustees or upon any matter submitted to
shareholders at any meeting thereof, or to give or withhold consent to any trust
action, or to receive notice of meetings or other actions affecting shareholders
(except as provided in Section 25 hereof), or to receive dividends or
subscription rights, or otherwise, until the Right or Rights represented by such
Right Certificate shall have been exercised in accordance with the provisions
hereof.
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<PAGE> 18
Section 18. Concerning the Rights Agent. The Corporation agrees to pay
to the Rights Agent reasonable compensation for all services rendered by it
hereunder and, from time to time, on demand of the Rights Agent, its reasonable
expenses and counsel fees and other disbursements incurred in the administration
and execution of this Agreement and the exercise and performance of its duties
hereunder. The Corporation also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability, or expense, incurred without
negligence, bad faith or willful misconduct on the part of the Rights Agent, for
anything done or omitted by the Rights Agent in connection with the acceptance
and administration of this Agreement, including the costs and expenses of
defending against any claim of liability in the premises.
The Rights Agent shall be protected and shall incur no liability for,
or in respect of any action taken, suffered or omitted by it in connection with,
its administration of this Agreement in reliance upon any Right Certificate or
certificate for the Preferred Shares or Common Shares or for other securities of
the Corporation, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent, certificate,
statement, or other paper or document believed by it to be genuine and to be
signed, executed and, where necessary, verified or acknowledged, by the proper
person or persons, or otherwise upon the advice of counsel as set forth in
Section 20 hereof.
Section 19. Merger or Consolidation or Change of Name of Rights Agent.
Any corporation into which the Rights Agent or any successor Rights Agent may be
merged or with which it may be consolidated, or any corporation resulting from
any merger or consolidation to which the Rights Agent or any successor Rights
Agent shall be a party, or any corporation succeeding to the stock transfer or
corporate trust business of the Rights Agent or any successor Rights Agent,
shall be the successor to the Rights Agent under this Agreement without the
execution or filing of any paper or any further act on the part of any of the
parties hereto; provided, that such corporation would be eligible for
appointment as a successor Rights Agent under the provisions of Section 21
hereof. In case at the time such successor Rights Agent shall succeed to the
agency created by this Agreement, any of the Right Certificates shall have been
countersigned but not delivered; any such successor Rights Agent may adopt the
countersignature of the predecessor Rights Agent and deliver such Right
Certificates so countersigned; and in case at that time any of the Right
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Right Certificates either in the name of the predecessor Rights
Agent or in the name of the successor Rights Agent; and in all such cases such
Right Certificates shall have the full force provided in the Right Certificates
and in this Agreement.
In case at any time the name of the Rights Agent shall be changed and
at such time any of the Right Certificates shall have been countersigned but not
delivered, the Rights Agent may adopt the countersignature under its prior name
and deliver Right Certificates so countersigned; and in case at that time any of
the Right Certificates shall not have been countersigned, the Rights Agent may
countersign such Right Certificates either in its prior name or in its changed
name; and in all such cases such Right Certificates shall have the full force
provided in the Right Certificates and in this Agreement.
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<PAGE> 19
Section 20. Duties of Rights Agent. The Rights Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Corporation and the holders of Right
Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Corporation), and the opinion of such counsel shall be full and
complete authorization and protection to the Rights Agent as to any action taken
or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement
the Rights Agent shall deem it necessary or desirable that any fact or matter be
proved or established by the Corporation prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by any one of the Chairman of the Board, the
President, any Vice President, or the Secretary of the Corporation and delivered
to the Rights Agent; and such certificate shall be full authorization to the
Rights Agent for any action taken or suffered in good faith by it under the
provisions of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder to the Corporation and
any other Person only for any and all losses, liabilities, costs, damages and
expenses (including attorneys' fees) arising out of or in connection with the
Rights Agent's negligence, bad faith or willful misconduct. Anything in this
Agreement to the contrary notwithstanding, in no event shall the Rights Agent be
liable for special, indirect or consequential loss or damage of any kind
whatsoever (including but not limited to lost profits), even if the Rights Agent
has been advised of the likelihood of such loss or damage and regardless of the
form of the action.
(d) The Rights Agent shall not be liable for or by reason of any of
the statements of fact or recitals contained in this Agreement or in the Right
Certificates (except its countersignature thereof) or be required to verify the
same, but all such statements and recitals are and shall be deemed to have been
made by the Corporation only.
(e) The Rights Agent shall not be under any responsibility in respect
of the validity of this Agreement or the execution and delivery hereof (except
the due execution hereof by the Rights Agent) or in respect of the validity or
execution of any Right Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Corporation of any covenant or
condition contained in this Agreement or in any Right Certificate; nor shall it
be responsible for any change in the exercisability of the Rights (including the
Rights becoming void pursuant to Section 7(e) hereof) or any adjustment in the
terms of the Rights (including the manner, method or amount thereof) provided
for in Section 3, 11, 13, 23 or 24, or the ascertaining of the existence of
facts that would require any such change or adjustment (except with respect to
the exercise of Rights represented by Right Certificates after receipt of a
certificate furnished pursuant to Section 12 describing a change or adjustment);
nor shall
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<PAGE> 20
it by any act hereunder be deemed to make any representation or warranty as to
the authorization or reservation of any Preferred Shares or Common Shares t o be
issued pursuant to this Agreement or any Right Certificate or as to whether any
Preferred Shares or Common Shares will, when issued, be validly authorized and
issued, fully paid and nonassessable.
(f) The Corporation agrees that it will perform, execute, acknowledge
and deliver or cause to be performed, executed, acknowledged and delivered all
such further and other acts, instruments and assurances as may reasonably be
required by the Rights Agent for the carrying out or performing by the Rights
Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
one of the Chairman of the Board, the President, any Vice President or the
Secretary of the Corporation, and to apply to such officers for advice or
instructions in connection with its duties, and it shall not be liable for any
action taken or suffered by it in good faith in accordance with instructions of
any such officer or for any delay in acting while waiting for those
instructions. Any application by the Rights Agent for written instructions from
the Corporation may, at the option of the Rights Agent, set forth in writing any
action proposed to be taken or omitted by the Rights Agent under this Agreement
and the date on and/or after which such action shall be taken or such omission
shall be effective. The Rights Agent shall not be liable for any action taken
by, or omission of, the Rights Agent in accordance with a proposal included in
any such application on or after the date specified in such application (which
date shall not be less than five Business Days after the date any officer of the
Corporation actually receives such application, unless any such officer shall
have consented in writing to an earlier date) unless, prior to taking any such
action (or the effective date in the case of an omission), the Rights Agent
shall have received written instructions in response to such application
specifying the action to be taken or omitted.
(h) The Rights Agent and any stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Corporation or its Subsidiaries or become pecuniarily
interested in any transaction in which the Corporation or its Subsidiaries may
be interested, or contract with or lend money to the Corporation or its
Subsidiaries or otherwise act as fully and freely as though it were not Rights
Agent under this Agreement. Nothing herein shall preclude the Rights Agent from
acting in any other capacity for the Corporation or its Subsidiaries or for any
other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Corporation resulting from any such act, default,
neglect or misconduct, provided reasonable care was exercised in the selection
and continued employment thereof.
(j) If, with respect to any Rights Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to
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<PAGE> 21
purchase, as the case may be, has either not been completed or indicates an
affirmative response to clause 1 and/or 2 thereof, the Rights Agent shall not
take any further action with respect to such requested exercise of transfer
without first consulting with the Corporation.
Section 21. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon 30 days' notice in writing mailed to the Corporation and to each transfer
agent of the Common Shares or Preferred Shares by registered or certified mail,
and to the holders of the Right Certificates by first-class mail. The
Corporation may remove the Rights Agent or any successor Rights Agent upon 30
days' notice in writing, mailed to the Rights Agent or successor Rights Agent,
as the case may be, and to each transfer agent of the Common Shares or Preferred
Shares by registered or certified mail, and to the holders of the Right
Certificates by first-class mail. If the Rights Agent shall resign or be removed
or shall otherwise become incapable of acting, the Corporation shall appoint a
successor to the Rights Agent. If the Corporation shall fail to make such
appointment within a period of 30 days after giving notice of such removal or
after it has been notified in writing of such resignation or incapacity by the
resigning or incapacitated Rights Agent or by the holder of a Right Certificate
(who shall, with such notice, submit his Right Certificate for inspection by the
Corporation), then the registered holder of any Right Certificate may apply to
any court of competent jurisdiction for the appointment of a new Rights Agent.
Any successor Rights Agent, whether appointed by the Corporation or by such a
court, shall be (i) a corporation or bank organized and doing business under the
laws of the United States or of any other state of the United States, which is
authorized under such laws to exercise corporate trust or stock transfer powers
and is subject to supervision or examination by federal or state authority and
which has at the time of its appointment as Rights Agent a combined capital and
surplus of at least $100 million, or (ii) an affiliate of an entity described in
clause (i). After appointment, the successor Rights Agent shall be vested with
the same powers, rights, duties and responsibilities as if it had been
originally named as Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment the Corporation shall file
notice thereof in writing with the predecessor Rights Agent and each transfer
agent of the Common Shares or Preferred Shares, and mail a notice thereof in
writing to the registered holders of the Right Certificates. Failure to give any
notice provided for in this Section 21, however, or any defect therein, shall
not affect the legality or validity of the resignation or removal of the Rights
Agent or the appointment of the successor Rights Agent, as the case may be.
Section 22. Issuance of New Right Certificates. Notwithstanding any of
the provisions of this Agreement or of the Rights to the contrary, the
Corporation may, at its option, issue new Right Certificates representing Rights
in such form as may be approved by a majority of the Continuing Directors of the
Corporation to reflect any adjustment or change in the Purchase Price and the
number or kind or class of shares or other securities or property purchasable
under the Right Certificates made in accordance with the provisions of this
Agreement.
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<PAGE> 22
Section 23. Redemption.
(a) The Board of Directors of the Corporation may, at its option, at
any time prior to such time as any Person becomes an Acquiring Person, redeem
all but not less than all the then outstanding Rights at a redemption price of
$.01 per Right, appropriately adjusted to reflect any share split, share
dividend or similar transaction occurring after the date hereof (such redemption
price being hereinafter referred to as the "Redemption Price"); provided that,
notwithstanding anything to the contrary contained in this Section 23(a), the
Board of Directors of the Corporation may not take any action pursuant to this
Section 23 (a) unless (i) at the time of the action of the Board of Directors of
the Corporation approving such redemption, there are then in office not less
than two Continuing Directors and (ii) such action is approved by a majority of
the Continuing Directors then in office. The redemption of the Rights by the
Board of Directors may be made effective at such time on such basis and with
such conditions as the Board of Directors in its sole discretion may establish.
The Corporation may, at its option, pay the Redemption Price in cash, Common
Shares (based on the current per share market price of the Common Shares at the
time of redemption) or any other form of consideration deemed appropriate by the
Board of Directors.
(b) Immediately upon the action of the Board of Directors of the
Corporation ordering the redemption of the Rights (or at the effective time of
such redemption established by the Board of Directors of the Corporation
pursuant to the last sentence of paragraph (a) of this Section 23), and without
any further action and without any notice, the right to exercise the Rights will
terminate and the only right thereafter of the holders of Rights shall be to
receive the Redemption Price. The Corporation shall promptly give public notice
of any such redemption; provided, however, that the failure to give, or any
defect in, any such notice shall not affect the validity of such redemption.
Within 10 days after such action of the Board of Directors ordering the
redemption of the Rights or, if later, the effectiveness of the redemption of
the Rights pursuant to the last sentence of paragraph (a), the Corporation shall
mail a notice of redemption to all the holders of the then outstanding Rights at
their last addresses as they appear upon the registry books of the Rights Agent
or, prior to the Distribution Date, on the registry books of the transfer agent
for the Common Shares. Any notice which is mailed in the manner herein provided
shall be deemed given, whether or not the holder receives the notice. Each such
notice of redemption will state the method by which the payment of the
Redemption Price will be made. The Corporation may, at its option, discharge all
of its obligations with respect to the Rights by (i) issuing a press release
announcing the manner of redemption of the Rights, (ii) depositing with a bank
or trust company having a capital and surplus of at least $100,000,000, funds
necessary for such redemption, in trust, to be applied to the redemption of the
Rights so called for redemption and (iii) arranging for the mailing of the
Redemption Price to the registered holders of the Rights; then, and upon such
action, all outstanding Rights Certificates shall be null and void without
further action by the Corporation. Neither the Corporation nor any of its
Affiliates or Associates may redeem, acquire or purchase for value any Rights at
any time in any manner other than that specifically set forth in this Section
23, in Section 24 hereof, or in connection with the purchase of Common Shares
prior to the Distribution Date.
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<PAGE> 23
Section 24. Exchange.
(a) The Board of Directors of the Corporation may, at its option, at
any time after a Triggering Event, exchange all or part of the then outstanding
and exercisable Rights (which shall not include Rights that have become void
pursuant to the provisions of Section 7(e) hereof) for Common Shares at an
exchange ratio of one Common Share per Right, appropriately adjusted to reflect
any share split, share dividend or similar transaction occurring after the date
hereof (such exchange ratio being hereinafter referred to as the "Exchange
Ratio"). Notwithstanding the foregoing, the Board of Directors shall not be
empowered to effect such exchange at any time after any Person (other than Omega
Healthcare, the Corporation, any Affiliate or Subsidiary of the Corporation, any
employee benefit plan of the Corporation or of any Affiliate or Subsidiary of
the Corporation or any entity holding Common Shares for or pursuant to the terms
of any such plan), together with all Affiliates and Associates of such Person,
becomes the Beneficial Owner of 50% or more of the Common Shares then
outstanding.
(b) Immediately upon the action of the Board of Directors of the
Corporation ordering the exchange of any Rights pursuant to paragraph (a) of
this Section 24 and without any further action and without any notice, the right
to exercise such Rights shall terminate and the only right thereafter of a
holder of such Rights shall be to receive that number of Common Shares equal to
the number of such Rights held by such holder multiplied by the Exchange Ratio.
The Corporation shall promptly give public notice of any such exchange;
provided, however, that the failure to give, or any defect in, such notice shall
not affect the validity of such exchange. The Corporation promptly shall mail a
notice of any such exchange to all of the holders of such Rights at their last
addresses as they appear upon the registry books of the Rights Agent. Any notice
which is mailed in the manner herein provided shall be deemed given, whether or
not the holder receives the notice. Each such notice of exchange will state the
method by which the exchange of the Common Shares for Rights will be effected
and, in the event of any partial exchange, the number of Rights which will be
exchanged. Any partial exchange shall be effected pro rata based on the number
of Rights (other than Rights which have become void pursuant to the provisions
of Section 7(e) hereof) held by each holder of Rights.
(c) In any exchange pursuant to this Section 24, the Corporation, at
its option, may substitute Preferred Shares (or equivalent preferred shares, as
such term is defined in Section 11(b) hereof) for Common Shares exchangeable for
Rights, at the initial rate of one one-hundredth of a Preferred Share (or
equivalent preferred share) for each Common Share, as appropriately adjusted to
reflect adjustments in the voting rights of the Preferred Shares pursuant to the
terms thereof, so that the fraction of a Preferred Share delivered in lieu of
each Common Share shall have the same voting rights as one Common Share.
(d) In the event that there shall not be sufficient Common Shares or
Preferred Shares authorized but unissued to permit any exchange of Rights as
contemplated in accordance with this Section 24, the Corporation shall take all
such action
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<PAGE> 24
as may be necessary to authorize additional Common Shares or Preferred Shares
for issuance upon exchange of the Rights.
(e) The Corporation shall not be required to issue fractions of
Common Shares or to distribute certificates which represent fractional Common
Shares. In lieu of such fractional Common Shares, the Corporation shall pay to
the registered holders of the Right Certificates with regard to which such
fractional Common Shares would otherwise be issuable an amount in cash equal to
the same fraction of the current market value of a whole Common Share. For the
purposes of this paragraph (e), the current market value of a whole Common Share
shall be the closing price of a Common Share (as determined pursuant to the
second sentence of Section 11(d)(i) hereof) for the Trading Day immediately
prior to the date of exchange pursuant to this Section 24.
(f) Notwithstanding anything contained in Section 24(a) to the
contrary, the Board of Directors of the Corporation may not exchange any Rights
pursuant to Section 24(a) unless (i) at the time of the action of the Board of
Directors of the Corporation approving such exchange or other action, there are
then in office not less than two Continuing Directors and (ii) such exchange is
approved by a majority of the Continuing Directors then in office.
Section 25. Notice of Certain Events.
(a) In case the Corporation shall propose at any time after the
Distribution Date (i) to declare or pay any dividend payable in shares of any
class to the holders of its Preferred Shares or to make any other distribution
to the holders of its Preferred Shares (other than a regular quarterly cash
dividend), (ii) to offer to the holders of its Preferred Shares rights or
warrants to subscribe for or to purchase any additional Preferred Shares or
shares of any class or any other securities, rights or options, (iii) to effect
any reclassification of its Preferred Shares (other than a reclassification
involving only the subdivision of outstanding Preferred Shares), (iv) to effect
any consolidation or merger into or with, or to effect any sale or other
transfer (or to permit one or more of its Subsidiaries to effect any sale or
other transfer), in one or more transactions, of 50% or more of the assets or
earning power of the Corporation and its Subsidiaries (taken as a whole) to, any
other Person, (v) to effect the liquidation, dissolution or winding up of the
Corporation, or (vi) to declare or pay any dividend on the Common Shares payable
in Common Shares or to effect a subdivision, combination or consolidation of the
Common Shares (by reclassification or otherwise than by payment of dividends in
Common Shares), then, in each such case, the Corporation shall give to each
holder of a Right Certificate, in accordance with Section 26 hereof, a notice of
such proposed action, which shall specify the record date for the purposes of
such share dividend, or distribution of rights or warrants, or the date on which
such reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution, or winding up is to take place and the date of participation
therein by the holders of the Common Shares and/or Preferred Shares, if any such
date is to be fixed, and such notice shall be so given in the case of any action
covered by clause (i) or (ii) above at least 10 days prior to the record date
for determining holders of the Preferred Shares for purposes of such action,
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<PAGE> 25
and in the case of any such other action, at least 10 days prior to the date of
the taking of such proposed action or the date of participation therein by the
holders of the Common Shares and/or Preferred Shares, whichever shall be the
earlier.
(b) In case any of the events set forth in Section 11(a)(ii) hereof
shall occur, then the Corporation shall as soon as practicable thereafter give
to each holder of a Right Certificate, in accordance with Section 26 hereof, a
notice of the occurrence of such event, which notice shall describe such event
and the consequences of such event to holders of Rights under Section 11(a)(ii)
hereof.
Section 26. Notices. Notices or demands authorized by this Agreement to
be given or made by the Rights Agent or by the holder of any Right Certificate
to or on the Corporation shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed (until another address is filed in
writing with the Rights Agent) as follows:
Omega Worldwide, Inc.
905 W. Eisenhower Circle
Suite 101
Ann Arbor, Michigan 48103
Attention: Secretary
Subject to the provisions of Section 21 hereof, any notice or demand
authorized by this Agreement to be given or made by the Corporation or by the
holder of any Right Certificate to or on the Rights Agent shall be sufficiently
given or made if sent by first-class mail, postage prepaid, addressed (until
another address is filed in writing with the Corporation) as follows:
Frist Chicago Trust Company of New York
P.O. Box 2565, Suite 4660
Jersey City, New Jersey 07303-2565
Attention: Tenders & Exchanges
Notices or demands authorized by this Agreement to be given or made by the
Corporation or the Rights Agent to the holder of any Right Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Corporation.
Section 27. Supplements and Amendments. The Corporation may from time
to time supplement or amend this Agreement without the approval of any holders
of Right Certificates in order to cure any ambiguity, to correct or supplement
any provision contained herein which may be defective or inconsistent with any
other provisions herein, or to make any other provisions with respect to the
Rights (including, without limitation, changes to the Purchase Price) which the
Corporation may deem necessary or desirable, any such supplement or amendment to
be evidenced by a writing signed by the Corporation and the Rights Agent;
provided, however, that from and after such time as any Person becomes an
Acquiring Person,
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<PAGE> 26
this Agreement shall not be amended in any manner which would adversely affect
the interests of the holders of Rights. Notwithstanding anything contained in
this Agreement to the contrary, supplements or amendments shall be made only if
(i) at the time of the action of the Board of Directors of the Corporation
approving such supplement or amendment, there are then in office not less than
two Continuing Directors and (ii) such supplement or amendment is approved by a
majority of the Continuing Directors then in office.
Section 28. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Corporation or the Rights Agent shall
bind and inure to the benefit of their respective successors and assigns
hereunder.
Section 29. Benefits of this Agreement. Nothing in this Agreement shall
be construed to give to any Person other than the Corporation, the Rights Agent
and the registered holders of the Right Certificates (and, prior to the
Distribution Date, the Common Shares) any legal or equitable right, remedy or
claim under this Agreement; and this Agreement shall be for the sole and
exclusive benefit of the Corporation, the Rights Agent and the registered
holders of the Right Certificates (and, prior to the Distribution Date, the
Common Shares).
Section 30. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
Section 31. Governing Law. This Agreement and each Right Certificate
issued hereunder shall be deemed to be a contract made under the laws of the
State of Maryland and for all purposes shall be governed by and construed in
accordance with the laws of such State applicable to contracts to be made and
performed entirely within such State, except that those provisions of this
Agreement affecting the rights, duties and responsibilities of the Rights Agent
shall be governed by and construed in accordance with the law of the State of
New York.
Section 32. Counterparts. This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.
Section 33. Descriptive Headings. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
Section 34. Determinations and Actions by the Board of Directors. (a)
Except as otherwise specifically provided herein and subject to paragraph (b) of
this Section, the Board of Directors of the Corporation shall have the exclusive
power and authority to administer this Agreement and to exercise all rights and
powers specifically granted to the Directors or the Corporation or as may be
necessary or advisable in the administration of this Agreement,
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<PAGE> 27
including, without limitation, the right and power to (i) interpret the
provisions of this Agreement, and (ii) make all determinations deemed necessary
or advisable for the administration of this Agreement (including a determination
to redeem or not redeem the Rights or to amend this Agreement). All such
actions, interpretations and determinations (including, for purpose of clause
(ii) above, all omissions with respect to the foregoing) which are done or made
by the Board of Directors of the Corporation (or any committee thereof) or by a
majority of the Continuing Directors in good faith, shall (x) be final,
conclusive and binding on the Corporation, the Rights Agent, the holders of the
Right Certificates and all other parties, and (y) not subject the Directors to
any liability to the holders of the Right Certificates.
(b) Notwithstanding anything to the contrary contained in this
Agreement, the concurrence of a majority of the Continuing Directors then in
office shall be required to give effect to any action, calculation,
interpretation or determination made by the Board of Directors of the
Corporation (or any committee thereof) or the Continuing Directors in the
administration of this Agreement and the exercise of the rights or powers
granted to the Board of Directors of the Corporation, to the Continuing
Directors or to the Corporation pursuant to this Agreement, and no effect shall
be given to any such action, calculation, interpretation, determination or
exercise of rights or powers unless at least two Continuing Directors are then
in office.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and attested, all as of the day and year first above written.
OMEGA WORLDWIDE, INC.
By _____________________________
Essel W. Bailey, Jr.
President
Attest:
By ___________________________
Susan A. Kovach
Secretary
FIRST CHICAGO TRUST COMPANY OF NEW YORK
By ______________________________
Name:_________________________
Title:________________________
Attest:
By ____________________________
Name:_______________________
Title:______________________
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EXHIBIT A
OMEGA WORLDWIDE, INC.
ARTICLES SUPPLEMENTARY
SERIES A JUNIOR
PARTICIPATING PREFERRED STOCK
Omega Worldwide, Inc., a Maryland corporation (the "Corporation"),
hereby certifies to the State Department of Assessments and Taxation of Maryland
pursuant to Sections 2- 105(a)(9) and 2-208(a) of the Maryland General
Corporation Law (the "MGCL") that:
FIRST: Under a power contained in Section 5.3 of the charter of the
Corporation (the"Charter"), the Board of Directors, as required by Section
2-208(a) of the MGCL pursuant to a written consent dated _________, 1998, has
classified and designated 300,000 unissued shares of Preferred Stock of the
Corporation as shares of Series A Junior Participating Preferred Stock with the
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends and other distributions, qualifications, and terms
and conditions of redemption as follows, which upon any restatement of the
Charter shall be made part of Article V of the Charter, with any necessary or
appropriate changes to the numeration or lettering of the provisions hereof:
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
Section 1. Designation and Amount. There shall be a series of preferred
stock of the Corporation, $1.00 par value per share, which shall be
designated "Series A Junior Participating Preferred Stock," $1.00 par value per
share (the "Series A Preferred Shares"), and the number of shares constituting
that series shall be __________. Such number of shares may be increased or
decreased by resolution of the Board of Directors and by the filing of articles
supplementary in accordance with the MGCL stating that such increase or
reduction has been so authorized; provided, however, that no decrease shall
reduce the number of Series A Preferred Shares to a number less than the number
of Series A Preferred Shares then outstanding plus the number of Series A
Preferred
<PAGE> 30
EXHIBIT A
Shares issuable upon exercise of outstanding rights, options
or warrants or upon conversion of outstanding securities issued by the
Corporation.
Section 2. Dividends and Distributions.
(A) Subject to the prior and superior rights of the holders of any
shares of any class or series of preferred shares of the Corporation ranking
prior and superior to the Series A Preferred Shares with respect to dividends,
the holders of Series A Preferred Shares shall be entitled to receive, when, as
and if authorized by the Board of Directors out of funds legally available for
the purpose, quarterly dividends payable in cash to holders of record on the
last Business Day of January, April, July and October in each year (each such
date being referred to herein as a "Quarterly Dividend Payment Date")
(commencing on the first Quarterly Dividend Payment Date after the first
issuance of a Series A Preferred Share or fraction thereof) in an amount per
share (rounded to the nearest cent) equal to the greater of (a) $1.00 or (b)
subject to the provision for adjustment hereinafter set forth, 100 times the
aggregate per share amount of all cash dividends, and 100 times the aggregate
per share amount (payable in kind) of all non-cash dividends or other
distributions other than a dividend payable in Common Shares (hereinafter
defined) or a subdivision of the outstanding Common Shares (by a
reclassification or otherwise), declared on the shares of common stock, par
value $0.10 share, of the Corporation (the "Common Shares") since the
immediately preceding Quarterly Dividend Payment Date, or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any Series A
Preferred Share or fraction thereof. In the event the Corporation shall at any
time following _______, 1998 (i) declare or pay any dividend on Common Shares
payable in Common Shares, (ii) subdivide the outstanding Common Shares or (iii)
combine the outstanding Common Shares into a smaller number of shares, then in
each such case the amount to which holders of Series A Preferred Shares were
entitled immediately prior to such event under clause (b) of the preceding
sentence shall be adjusted by multiplying each such amount by a fraction the
numerator of which is the number of Common Shares outstanding immediately after
such event and the denominator of which is the number of Common Shares that were
outstanding immediately prior to such event.
(B) The Board of Directors shall authorize a dividend or
distribution on the Series A Preferred Shares as provided in paragraph
(A) above at the time it authorizes a dividend or distribution on the Common
Shares (other than a dividend payable in Common Shares).
(C) No dividend or distribution (other than a dividend or
distribution payable in Common Shares) shall be paid or payable to the holders
of Common Shares unless, prior thereto, all accrued but unpaid dividends to the
date of that dividend or distribution shall have been paid to the holders of
Series A Preferred Shares.
2
<PAGE> 31
EXHIBIT A
(D) Dividends shall begin to accrue and be cumulative on outstanding
Series A Preferred Shares from the Quarterly Dividend Payment Date next
preceding the date of issuance of such Series A Preferred Shares, unless the
date of issuance of such shares is prior to the record date for the first
Quarterly Dividend Payment Date, in which case dividends on such shares shall
begin to accrue and be cumulative from the date of issuance of such shares, or
unless the date of issuance is a Quarterly Dividend Payment Date or is a date
after the record date for the determination of holders of Series A Preferred
Shares entitled to receive a quarterly dividend and before such Quarterly
Dividend Payment Date, in either of which events such dividends shall begin to
accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but
unpaid dividends shall not bear interest. Dividends paid on the Series A
Preferred Shares in an amount less than the total amount of such dividends at
the time accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The Board of
Directors may fix a record date for the determination of holders of Series A
Preferred Shares entitled to receive payment of a dividend or distribution
declared thereon, which record date shall be no more than 30 days prior to the
date fixed for the payment thereof.
Section 3. Voting Rights. The holders of Series A Preferred Shares
shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth,
each one one-hundredth of a Series A Preferred Share shall entitle the holder
thereof to one vote on all matters submitted to a vote of the shareholders of
the Corporation. In the event the Corporation shall at any time following
________, 1998 (i) declare or pay any dividend on Common Shares payable in
Common Shares, (ii) subdivide the outstanding Common Shares or (iii) combine the
outstanding Common Shares into a smaller number of shares, then in each such
case the number of votes per share to which holders of Series A Preferred Shares
were entitled immediately prior to such event shall be adjusted by multiplying
such number by a fraction the numerator of which is the number of Common Shares
outstanding immediately after such event and the denominator of which is the
number of Common Shares that were outstanding immediately prior to such event.
(B) Except as otherwise provided herein, the holders of Series A
Preferred Shares and the holders of Common Shares and any other shares of stock
of the Corporation having general voting rights shall vote together as one class
on all matters submitted to a vote of shareholders of the Corporation.
(C) (i) Whenever, at any time or times, dividends payable on any
Series A Preferred Shares shall be in arrears in an amount equal to at
least six full quarterly dividends (whether or not declared and
whether or not consecutive), the holders of record of the outstanding
Series A Preferred Shares shall have the exclusive right, voting
separately as a single class, to elect two directors of the
Corporation at a special meeting
3
<PAGE> 32
EXHIBIT A
of shareholders of the Corporation or at the Corporation's next annual
meeting of shareholders, and at each subsequent annual meeting of
shareholders, as provided below. At elections for such directors, the
holders of Series A Preferred Shares shall be entitled to cast one vote
for each one one-hundredth of a Series A Preferred Share held, subject
to adjustment.
(ii) Upon the vesting of such right of the holders of the
Series A Preferred Shares, the maximum authorized number of members of
the Board of Directors shall automatically be increased by two and the
two vacancies so created shall be filled by vote of the holders of the
outstanding Series A Preferred Shares as hereinafter set forth. A
special meeting of the shareholders of the Corporation then entitled to
vote shall be called by any Co-Chairman, Managing Director, Senior Vice
President or the Secretary of the Corporation, if requested in writing
by the holders of record of not less than 10% of the es A Preferred
Shares then outstanding. At such special meeting, or, if no such
special meeting shall have been called, then at the next annual meeting
of shareholders of the Corporation, the holders of the Series A
Preferred Shares shall elect, voting as above provided, two directors
of the Corporation to fill the aforesaid vacancies created by the
automatic increase in the number of members of the Board of Directors.
At any and all such meetings for such election, the holders of a
majority of the outstanding Series A Preferred Shares shall be
necessary to constitute a quorum for such election, whether present in
person or by proxy, and such two directors shall be elected by the vote
of at least a plurality of shares held by such shareholders present or
represented at the meeting. Any director elected by holders of Series A
Preferred Shares pursuant to this Section may be removed at any annual
or special meeting, by vote of a majority of the shareholders voting as
a class who elected such director, with or without cause. In case any
vacancy shall occur among the directors elected by the holders of the
Series A Preferred Shares pursuant to this Section, such vacancy may be
filled by the remaining director so elected, or his successor then in
office, and the director so elected to fill such vacancy shall serve
until the next meeting of shareholders for the election of directors
and until their successors have been elected and qualified. After the
holders of the Series A Preferred Shares shall have exercised their
right to elect directors in any default period and during the
continuance of such period, the number of directors shall not be
further increased or decreased except by vote of the holders of Series
A Preferred Shares as herein provided or pursuant to the rights of any
equity securities ranking senior to or pari passu with the Series A
Preferred Shares.
(iii) The right of the holders of the Series A Preferred
Shares, voting separately as a class, to elect two members of the Board
of Directors of the Corporation as aforesaid shall continue until, and
only until, such time as all arrears in dividends (whether or not
declared) on the Series A Preferred Shares shall have been paid or
declared and set apart for payment, at which time such right shall
terminate, except as herein or by law expressly provided, subject to
revesting in the event of each and every
4
<PAGE> 33
EXHIBIT A
subsequent default of the character above-mentioned. Upon any
termination of the right of the holders of the Series A Preferred
Shares as a class to vote for directors as herein provided, the term of
office of all directors then in office elected by the holders of Series
A Preferred Shares pursuant to this Section shall terminate
immediately. Whenever the term of office of the directors elected by
the holders of the Series A Preferred Shares pursuant to this Section
shall terminate and the special voting powers vested in the holders of
the Series A Preferred Shares pursuant to this Section shall have
expired, the maximum number of members of the Board of Directors of the
Corporation shall be such number as may be provided for in the Bylaws
of the Corporation irrespective of any increase made pursuant to the
provisions of this Section.
(D) Except as otherwise provided herein, holders of Series A
Preferred Shares shall have no special voting rights and their consent shall not
be required (except to the extent they are entitled to vote with holders of
Common Shares as provided herein) for taking any corporate action.
Section 4. Certain Restrictions.
(A) Whenever any quarterly dividends or other dividends or
distributions payable on the Series A Preferred Shares as provided in Section 2
are in arrears, then, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declred, on Series A Preferred Shares outstanding
shall have been paid in full, the Corporation shall not:
(i) declare or pay dividends on, make any other
distributions on, or redeem or purchase or otherwise acquire for
consideration any shares ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred
Shares, other than dividends paid or payable in such junior shares;
(ii) declare or pay dividends on or make any other
distributions on any shares ranking on a parity (either as to dividends
or upon liquidation, dissolution or winding up) with the Series A
Preferred Shares, except dividends paid ratably on the Series A
Preferred Shares and all such parity shares on which dividends are
payable or in arrears in proportion to the total amounts to which the
holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares ranking on a parity (either as to dividends or
upon liquidation, dissolution or winding up) with the Series A
Preferred Shares, provided that the Corporation may at any time redeem,
purchase or otherwise acquire any such parity shares in exchange for
shares of the Corporation ranking junior (either as to dividends or
upon dissolution, liquidation or winding up) to the Series A Preferred
Shares; or
5
<PAGE> 34
EXHIBIT A
(iv) purchase or otherwise acquire for consideration any
Series A Preferred Shares, except in accordance with a purchase offer
made in writing or by publication (as determined by the Board of
Directors) to all holders of such shares upon such terms as the Board
of Directors, after consideration of the respective annual dividend
rates and other relative rights and preferences of the respective
series and classes, shall determine in good faith will result in fair
and equitable treatment among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the Corporation
to purchase or otherwise acquire for consideration any shares of the Corporation
unless the Corporation could, under paragraph (A) of this Section, purchase or
otherwise acquire such shares at such time and in such manner.
Section 5. Reacquired Shares. Any Series A Preferred Shares purchased
or otherwise acquired by the Corporation in any manner whatsoever shall become
authorized but unissued preferred shares and may be reissued as part of a new
series of preferred shares to be created by resolution or resolutions of the
Board of Directors, subject to the conditions and restrictions on issuance set
forth herein.
Section 6. Liquidation, Dissolution or Winding Up. (A) Upon any
voluntary liquidation, dissolution or winding up of the Corporation, no
distribution shall be made to the holders of shares ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Series A
Preferred Shares unless, prior thereto, the holders of Series A Preferred Shares
shall have received $1.00 per share, plus an amount equal to accrued and unpaid
dividends and distributions thereon, whether or not declared, to the date of
such payment (the "Series A Liquidation Preference"). Following the payment of
the full amount of the Series A Liquidation Preference, no additional
distributions shall be made to the holders of Series A Preferred Shares unless,
prior thereto, the holders of Common Shares shall have received an amount per
share (the "Common Adjustment") equal to the quotient obtained by dividing (i)
the Series A Liquidation Preference by (ii) 100 (as appropriately adjusted as
set forth in subparagraph C below to reflect such events as share splits, share
dividends and recapitalizations with respect to the Common Shares) (such number
in clause (ii), the "Adjustment Number"). Following the payment of the full
amount of the Series A Liquidation Preference and the Common Adjustment in
respect of all outstanding Series A Preferred Shares and Common Shares,
respectively, holders of Series A Preferred Shares and holders of Common Shares
shall receive their ratable and proportionate share of the remaining assets to
be distributed in the ratio, on a per share basis, of the Adjustment Number to 1
with respect to such Series A Preferred Shares and Common Shares, on a per share
basis, respectively.
(B) In the event, however, that there are not sufficient assets
available to permit payment in full of the Series A Liquidation Preference and
the liquidation preferences of all
6
<PAGE> 35
EXHIBIT A
other series of preferred shares, if any, which rank on a parity with the Series
A Preferred Shares, then such remaining assets shall be distributed ratably to
the holders of the Series A Preferred Shares and such parity shares in
proportion to their respective liquidation preferences.
(C) In the event the Corporation shall at any time following
__________, 1998 (i) declare or pay any dividend on Common Shares payable in
Common Shares, (ii) subdivide the outstanding Common Shares or (iii) combine the
outstanding Common Shares into a smaller number of shares, then in each such
case the Adjustment Number in effect immediately prior to such event shall be
adjusted by multiplying such Adjustment Number by a fraction the numerator of
which is the number of Common Shares outstanding immediately after such event
and the denominator of which is the number of Common Shares that were
outstanding immediately prior to such event.
(D) In determining whether a distribution (other than upon voluntary
or involuntary liquidation), by dividend, redemption or other acquisition of
shares of stock of the Corporation or otherwise, is permitted under the MGCL,
amounts that would be needed, if the Corporation were to be dissolved at the
time of the distribution, to satisfy the preferential rights upon dissolution of
holders of Series A Preferred hares will not be added to the Corporation's total
liabilities.
Section 7. Consolidation, Merger, etc. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the Common Shares are exchanged for or changed into other shares or securities,
cash and/or any other property, then in any such case, the Series A Preferred
Shares shall at the same time be similarly exchanged or changed in an amount per
share (subject to the provision for adjustment hereinafter set forth) equal to
100 times the aggregate amount of shares, securities, cash and/or any other
property (payable in kind), as the case may be, into which or for which each
Common Share is exchanged or changed. In the event the Corporation shall at any
time (i) declare any dividend on Common Shares payable in Common Shares, (ii)
subdivide the outstanding Common Shares or (iii) combine the outstanding Common
Shares into a smaller number of shares, then in each such case the amount set
forth in the preceding sentence with respect to the exchange or change of Series
A Preferred Shares shall be adjusted by multiplying such amount by a fraction
the numerator of which is the number of Common Shares outstanding immediately
after such event and the denominator of which is the number of Common Shares
that were outstanding immediately prior to such event.
Section 8. Redemption. The Series A Preferred Shares shall not be
redeemable by the Corporation. The preceding sentence shall not limit the
ability of the Corporation to purchase or otherwise deal in such shares to the
extent permitted by law.
Section 9. Ranking. The Series A Preferred Shares shall rank junior to
all other series of the Corporation's preferred stock (whether with or without
par value) as to the payment of
7
<PAGE> 36
EXHIBIT A
dividends and the distribution of assets, unless the terms of any such series
shall provide otherwise.
Section 10. Amendment. The Corporation's Charter shall not be amended
in any manner which would materially and adversely alter or change the
powers, preferences or special rights of the Series A Preferred Shares, as set
forth herein without the affirmative vote of the holders of a majority or more
of the outstanding Series A Preferred Shares, voting separately as a class.
Section 11. Fractional Shares. Series A Preferred Shares may be issued
in fractions of a share that are integral multiples of one-one hundredth of a
share, which shall entitle the holder, in proportion to such holder's fractional
shares, to exercise voting rights, receive dividends and participate in
distributions and to have the benefit of all other rights of holders of Series A
Preferred Shares.
SECOND: These Articles Supplementary have been approved by the Board of
Directors in the manner and by the vote required by law.
THIRD: The undersigned officer acknowledges these Articles
Supplementary to be the corporate act of the Corporation and, as to all matters
or facts required to be verified under oath, such officer acknowledges that to
the best of his or her knowledge, information and belief, these matters and
facts are true in all material respects and that this statement is made under
the penalties for perjury.
IN WITNESS WHEREOF, these Articles Supplementary have been duly
executed by the undersigned officer this ___th day of _____, 1998.
OMEGA WORLDWIDE, INC.
By
--------------------------------------
Name:
-----------------------------------
Title: President
----------------------------------
Attest:
8
<PAGE> 37
EXHIBIT A
By:
-----------------------------------
Name:
---------------------------------
Title: Secretary
--------------------------------
9
<PAGE> 38
EXHIBIT B
[Form of Right Certificate]
Certificate No. R- ______Rights
NOT EXERCISABLE AFTER ________, 2008 OR EARLIER IF THE RIGHTS EXPIRE
UNDER CERTAIN CIRCUMSTANCES OR ARE EXCHANGED OR REDEEMED BY THE
CORPORATION. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE
CORPORATION, AT $.01 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS
AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY
AN ACQUIRING PERSON (AS SUCH TERM IS DEFINED IN THE Rights RIGHTS
AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL
AND VOID. [THE RIGHTS REPRESENTED BY THIS CERTIFICATE ARE OR WERE
BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON
OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE
DEFINED IN THE RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHT CERTIFICATE
AND THE RIGHTS REPRESENTED HEREBY MAY BECOME VOID IN THE CIRCUMSTANCES
SPECIFIED IN SECTION 7(e) OF SUCH AGREEMENT.]*
Right Certificate
OMEGA WORLDWIDE, INC.
This certifies that , or registered assigns, is the registered owner of the
number of Rights set forth above, each of which entitles the owner thereof,
subject to the terms, provisions and conditions of the Rights Agreement, dated
as of ________, 1998 (the "Rights Agreement"), between Omega Worldwide, Inc., a
Maryland corporation (the "Corporation"), and First Chicago Trust Company of New
York (the "Rights Agent") to purchase from the Corporation at any time after the
Distribution Date (as such term is defined in the Rights Agreement) and prior to
5:00 p.m. (Eastern time) on ________, 2008 or notice of redemption or exchange
at the office of the Rights Agent (or its successors as Rights Agent) designated
for such purpose, one one-hundredth of a fully paid, non-assessable Series A
Junior
- ----------------
* The portion of the legend in brackets shall be inserted only if applicable
and shall replace the preceding sentence.
<PAGE> 39
Participating Preferred Share (a "Preferred Share") of the Corporation, at a
purchase price of $_____ per one one-hundredth of a Preferred Share (the
"Purchase Price"), upon presentation and surrender of this Right Certificate
with the appropriate Form of Election to Purchase and related Certificate duly
executed. The number of Rights represented by this Right Certificate (and the
number of Preferred Shares which may be purchased upon exercise thereof) set
forth above, and the Purchase Price per Preferred Share set forth above, are the
number and Purchase Price as of ________, 1998, based on the Preferred Shares as
constituted at such date. Capitalized terms not defined in this Right
Certificate that are defined in the Rights Agreement shall have the meanings
ascribed to them in the Rights Agreement.
Upon the occurrence of a Triggering Event, if the Rights represented by
this Right Certificate are beneficially owned by (i) an Acquiring Person or an
Affiliate or Associate of any such Acquiring Person, (ii) under certain
circumstances specified in the Rights Agreement, a transferee of any such
Acquiring Person, Associate or Affiliate, or (iii) under certain circumstances
specified in the Rights Agreement, a transferee of a person who, after such
transfer, became an Acquiring Person, or an Affiliate or Associate of an
Acquiring Person, such Rights shall become null and void and no holder hereof
shall have any right with respect to such Rights from and after the occurrence
of any such Triggering Event.
As provided in the Rights Agreement, the Purchase Price and the number
and kind of Preferred Shares or other securities which may be purchased upon the
exercise of the Rights represented by this Right Certificate are subject to
modification and adjustment upon the happening of certain events.
This Right Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Corporation and the holders of the Right Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under certain circumstances specified in such Rights Agreement.
Copies of the Rights Agreement are on file at the above-mentioned office of the
Rights Agent and are also available upon written request to the Rights Agent.
This Right Certificate, with or without other Right Certificates, upon
surrender at the principal stock transfer office of the Rights Agent, may be
exchanged for another Right Certificate or Right Certificates of like tenor and
date representing Rights entitling the holder to purchase a like aggregate
number of Preferred Shares as the Rights represented by the Right Certificate or
Right Certificates surrendered shall have entitled such holder to purchase. If
this Right Certificate shall be exercised in part, the holder shall be entitled
to receive upon surrender hereof another Right Certificate or Right Certificates
for the number of whole Rights not exercised.
2
<PAGE> 40
Subject to the provisions of the Rights Agreement, the Rights
represented by this Certificate may be redeemed by the Corporation at its option
at a redemption price of $.01 per Right at any time prior to the earlier of (i)
such time as any Person becomes an Acquiring Person or (ii) the close of
business on the Final Expiration Date.
No fractional Preferred Shares will be issued upon the exercise of any
Right or Rights represented hereby (other than fractions which are integral
multiples of one one-hundredth of a Preferred Share, which may, at the election
of the Corporation, be evidenced by depositary receipts), but in lieu thereof a
cash payment will be made, as provided in the Rights Agreement.
No holder of this Right Certificate, as such, shall be entitled to vote
or receive dividends or be deemed for any purpose the holder of Preferred Shares
or of any other securities of the Corporation which may at any time be issuable
on the exercise hereof, nor shall anything contained in the Rights Agreement or
herein be construed to confer upon the holder hereof, as such, any of the rights
of a stockholder of the Corporation or any right to vote for the election of
trustees or upon any matter submitted to stockholders at any meeting thereof, or
to give or withhold consent to any trust action, or to receive notice of
meetings or other actions affecting stockholders (except as provided in the
Rights Agreement), or to receive dividends or subscription rights, or otherwise,
until the Right or Rights represented by this Right Certificate shall have been
exercised as provided in the Rights Agreement.
This Right Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the
Corporation and its seal.
Dated as of _______________, 19_
OMEGA WORLDWIDE, INC.
By: ____________________________
Name:
Title:
Attest: (SEAL)
___________________________________
Name:
Title:
3
<PAGE> 41
Countersigned:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
By: ___________________________________
Authorized Signature
4
<PAGE> 42
[Form of Reverse Side of Right Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to
transfer the Right Certificate.)
FOR VALUE RECEIVED _____________________________________________________________
hereby sells, assigns and transfers unto________________________________________
(Please print name and address of transferee)
this Right Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint __________________ Attorney,
to transfer the within Right Certificate on the books of the within-named
Corporation, with full power of substitution.
Date: _________________, 19__ __________________________________
__________ Signature
Signature Guaranteed:
Certificate
The undersigned hereby certifies by checking the appropriate boxes that:
(1) this Rights Certificate [ ] is [ ] is not being sold, assigned and
transferred by or on behalf of a Person who is or was an Acquiring Person or an
Affiliate or Associate of any such Acquiring Person (as such terms are defined
pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it [ ]
did [ ] did not acquire the Rights represented by this Rights Certificate from
any Person who is, was or subsequently became an Acquiring Person or an
Affiliate or Associate of an Acquiring Person.
Date: ________________, 19__ ________________________________
Signature
NOTICE
The signature to the foregoing Assignment and Certificate must
correspond to the name as written upon the face of this Right Certificate in
every particular, without alteration or enlargement or any change whatsoever.
<PAGE> 43
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to
exercise Rights represented by the
Right Certificate.)
To: OMEGA WORLDWIDE, INC.
The undersigned hereby irrevocably elects to exercise ________ Rights
represented by this Right Certificate to purchase the Preferred Shares issuable
upon the exercise of the Rights (or such other securities of the Corporation or
of any other person which may be issuable upon the exercise of the Rights) and
requests that certificates for such shares be issued in the name of:
Please insert social security
or other identifying number:____________________________________________________
________________________________________________________________________________
(Please print name and address)
If such number of Rights shall not be all the Rights represented by
this Right Certificate, a new Right Certificate for the balance of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number:____________________________________________________
________________________________________________________________________________
(Please print name and address)
Date:______________ , 19__ ______________________________
Signature
<PAGE> 44
Signature Guaranteed:
Certificate
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights represented by this Rights Certificate [ ] are [ ] are
not being exercised by or on behalf of a Person who is or was an Acquiring
Person or an Affiliate or Associate of any such Acquiring Person (as such terms
are defined pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it
[ ] did [ ] did not acquire the Rights represented by this Rights Certificate
from any Person who is, was or became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person.
Dated: ___________, 19__ _________________________
Signature
NOTICE
The signature to the foregoing Election to Purchase and Certificate
must correspond to the name as written upon the face of this Right Certificate
in every particular, without alteration or enlargement or any change whatsoever.
<PAGE> 1
EXHIBIT 10.7
INDEMNIFICATION AGREEMENT
This INDEMNIFICATION AGREEMENT is made as of the ___ day of
________ 1998 by and between Omega Worldwide, Inc., a Maryland corporation (the
"Corporation"), and the undersigned (the"Indemnitee" and, together with other
persons who may execute similar agreements, the "Indemnitees").
The Indemnitee currently is and in the future may be serving
in one or more capacities as a directoror officer of the Corporation or, at the
request of the Corporation, as a director, officer, employee, agent, fiduciary,
or trustee of, or in a similar capacity for, another foreign ordomestic
corporation, real estate investment trust, partnership, joint venture, trust,
employee benefit plan, or other entity, and in so doing is and will be
performing a valuable service to or on behalf of the Corporation. The Board of
Directors of the Corporation has determined that, in order to attract and retain
qualified individuals as directors and officers, the Corporation will supplement
the Corporation's liability insurance for officers and directors and the
protection provided by the Corporation's By-Laws by providing the contractual
assurances herein contained. The Indemnitee is willing to continue to serve and
to undertake such additional duties and responsibilities for and on behalf of
the Corporation as may be agreed to on the condition that [he] [she] be
indemnified contractually by the Corporation. As an inducement to the Indemnitee
to continue to serve the Corporation, and in consideration for such continued
service, the Corporation has therefore agreed to indemnify the Indemnitee and to
advance certain expenses upon the terms set forth herein.
In consideration of the promises and mutual covenants
contained herein, and intending to be legally bound hereby, the Corporation and
the Indemnitee agree as follows:
1. Indemnification
(a) Except as provided in Sections 3 and 5 hereof, the
Corporation shall indemnify the Indemnitee to the full extent permitted by
Maryland law against any Liability incurred by or assessed against the
Indemnitee in connection with any Proceeding in which the Indemnitee may be
involved, as a party, a witness or otherwise, by reason of the fact that the
Indemnitee is or was serving in any Official Capacity held now or in the future,
including, without limitation, any Liability resulting from actual or alleged
breach or neglect of duty, error, misstatement, misleading statement, omission,
negligence, act giving rise to strict or product liability, act giving rise to
liability for environmental contamination, or other act or omission, whether
occurring prior to or after the date of this Agreement. As used in this
Agreement:
(1) "Liability" means any damage, judgment, amount paid in
settlement, fine, penalty, punitive damage or expense of any nature (including
attorney's fees and expenses);
<PAGE> 2
(2) "Proceeding" means any threatened, pending, or
completed action, suit, appeal, arbitration, or other proceeding of any nature,
whether civil, criminal, administrative, or investigative, whether formal or
informal, and whether brought by or in the right of the Corporation, a class of
its security holders, or any other party; and
(3) "Official Capacity" means service to the Corporation as
director or officer or, at the request of the Corporation, as a director,
officer, employee, agent, fiduciary, or trustee of, or in a similar capacity
for, another foreign or domestic corporation, real estate investment trust,
partnership, joint venture, trust, employee benefit plan (including a plan
qualified under the Employee Retirement Income Security Act of 1974), or other
entity.
(b) Notwithstanding Section 1(a) hereof, except for a
Proceeding brought pursuant to Section 5(e) of this Agreement, the Corporation
shall not indemnify the Indemnitee under this Agreement for any Liability
incurred in a Proceeding initiated by the Indemnitee unless the Proceeding is
authorized, either before or after commencement of the Proceeding, by the Board
of Directors of the Corporation. An affirmative defense or counterclaim of an
Indemnitee shall not be deemed to constitute a Proceeding initiated by the
Indemnitee.
2. Agreement to Serve and to Cooperate with the Corporation in any
Proceeding. The Indemnitee shall serve or continue to serve for or on behalf of
the Corporation in each Official Capacity held now or in the future for so long
as the Indemnitee is duly elected or appointed or until such time as the
Indemnitee tenders a resignation in writing [for outside Directors - or such
service is otherwise terminated pursuant to the Corporation's Charter, By-Laws
or the Maryland General Corporation Law]. [For officers - This Agreement shall
not be deemed an employment contract between the Corporation or any of its
subsidiaries and any Indemnitee who is an employee of the Corporation or any of
its subsidiaries. The Indemnitee specifically acknowledges that the Indemnitee's
employment with the Corporation or any of its subsidiaries, if any, is at will,
and that the Indemnitee may be discharged at any time for any reason, with or
without cause, except as may be otherwise provided in any written employment
contract between the Indemnitee and the Corporation or any of its subsidiaries,
or other applicable formal severance policies duly adopted by the board of
directors of the Indemnitee's employer.] The Indemnitee also shall cooperate
with the Corporation in connection with the investigation, prosecution or
defense of any Proceeding for which indemnification or the advancement of
expenses may be claimed hereunder. The foregoing notwithstanding, this Agreement
shall continue in force after the Indemnitee has ceased to serve in any Official
Capacity for or on behalf of the Corporation or any of its subsidiaries with
respect to claims based on matters occurring before the Indemnitee ceased to
serve in any Official Capacity.
3. Exclusions.
(a) The Corporation shall not be liable under this
Agreement to make any payment in connection with any Liability incurred by the
Indemnitee:
2
<PAGE> 3
(1) to the extent payment for such
Liability is made to or on behalf of the Indemnitee under an insurance policy;
(2) to the extent payment is made to or
on behalf of the Indemnitee for such Liability by the Corporation under its
Charter, By-Laws, the Maryland General Corporation Law or otherwise than
pursuant to this Agreement;
(3) to the extent such Liability is
determined in a final judgment pursuant to Section 5(e) hereof to be based upon
or attributable to the Indemnitee receiving any improper personal benefit in
money, property or services;
(4) for which, in the case of a criminal
proceeding, the Indemnitee has been determined in a final judgment pursuant to
Section 5(e) hereof to have had reasonable cause to believe the act or omission
was unlawful;
(5) for which the conduct of the
Indemnitee has been determined in a final judgment pursuant to Section 5(e)
hereof to constitute bad faith or active and deliberate dishonesty, in either
such case material to the cause of action or claim at issue in the Proceeding;
or
(6) to the extent such indemnification
has been determined in a final judgment pursuant to Section 5(e) hereof to be
unlawful.
(b) No act, omission, liability, knowledge, or
other fact of or relating to any other person, including any other person who is
also an Indemnitee, shall be imputed to the Indemnitee for the purposes of
determining the applicability of any exclusion set forth herein.
(c) The termination of a proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent shall not, of itself, create a presumption that the Indemnitee is not
entitled to indemnification under this Agreement.
4. Advancement of Expenses. The Corporation shall pay any
Liability in the nature of an expense (including attorneys' fees and expenses)
incurred in good faith by the Indemnitee in advance of the final disposition of
a Proceeding within twenty (20) days of receipt of a demand for payment by the
Indemnitee, and the Indemnitee undertakes to repay any such amount if it shall
ultimately be determined pursuant to Section 5(e) hereof that the Indemnitee is
not entitled to be indemnified by the Corporation pursuant to this Agreement.
The financial ability of the Indemnitee to repay an advance shall not be a
prerequisite to the making of such advance.
3
<PAGE> 4
5. Indemnification Procedure.
(a) The Indemnitee shall notify promptly the
Secretary of the Corporation of the commencement of any Proceeding or the
occurrence of any event which might give rise to a Liability under this
Agreement, but the failure to so notify the Corporation shall not relieve the
Corporation of any obligation which it may have to the Indemnitee under this
Agreement or otherwise.
(b) The Corporation shall be entitled, upon notice
to the Indemnitee, to assume the defense of any Proceeding with counsel
reasonably satisfactory to the Indemnitee involved in such Proceeding or, if
there be more than one Indemnitee involved in such Proceeding, to a majority of
the Indemnitees involved in such Proceeding. The foregoing notwithstanding, the
Indemnitee may elect to retain separate counsel to participate in the defense of
such Proceeding and the fees and expenses of such separate counsel shall be
borne by Indemnitee unless: (i) the engagement of separate counsel shall have
been authorized by the orporation, or (ii) the Corporation shall not in fact
have employed counsel reasonably satisfactory to such Indemnitee or to the
majority of Indemnitees if more than one is involved, to assume the defense of
such Proceeding.
(c) The Corporation shall not be required to obtain
the consent of the Indemnitee to the settlement of any Proceeding which the
Corporation has undertaken to defend if the Corporation assumes full and sole
responsibility for such settlement and the settlement grants the Indemnitee a
complete and unqualified release in respect of the potential Liability. The
Corporation shall not be liable for any amount paid by an Indemnitee in
settlement of any Proceeding unless the Corporation has consented to such
settlement, which consent shall not be unreasonably withheld.
(d) In the event that a claim for indemnification
against liabilities arising under the Securities Act of 1933 (the "Act") (other
than the payment by the Corporation of expenses incurred or paid by a director,
officer, or controlling person of the Corporation in the successful defense of
any action, suit, or proceeding) is asserted by a director, officer, or
controlling person in connection with securities being registered under the Act,
the Corporation will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of competent 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.
(e) If a claim under Section 1 of this Agreement
is not paid in full by the Corporation within sixty (60) days after a written
claim has been received by the Corporation, except in the case of a claim for an
advancement of expenses, in which case the applicable period shall be twenty
(20) days, the Indemnitee may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim and, to the extent
successful in whole or in part, the Indemnitee shall also be entitled to be paid
the expense of prosecuting such suit. Any
4
<PAGE> 5
suit by the Indemnitee under this Agreement must be brought in Maryland in the
Circuit Court of Baltimore City. The Indemnitee shall be presumed to be entitled
to indemnification under this Agreement upon submission of a written claim, and
thereafter the Corporation shall have the burden of proof to overcome the
presumption that the Indemnitee is not so entitled. Neither the failure of the
Corporation (including its Board of Directors, independent legal counsel or its
stockholders) to have made a determination prior to the commencement of such
suit that indemnification of the Indemnitee is proper in the circumstances nor
any actual determination by the Corporation (including its Board of Directors,
independent legal counsel or its stockholders) that the Indemnitee is not
entitled to indemnification shall be a defense to the suit or create a
presumption that the Indemnitee is not so entitled except to the extent required
by law.
(f) Upon a payment under this Agreement to the
Indemnitee with respect to any Liability, the Corporation shall be subrogated to
the extent of such payment to all of the rights of the Indemnitee to recover
against any person with respect to such Liability, and the Indemnitee shall
execute all documents and instruments required and shall take such other actions
as may be necessary to secure such rights, including the execution of such
documents as may be necessary for the Corporation to bring suit to enforce such
rights.
6. Non-Exclusivity. The rights granted to the Indemnitee
pursuant to this Agreement shall not be deemed exclusive of any other rights to
which the Indemnitee may be entitled under statute, the provisions of any
articles of incorporation, by-laws, or agreement, a vote of stockholders or
directors, or otherwise, both as to action in an Official Capacity and in any
other capacity.
7. Reliance on Provisions. The Indemnitee shall be deemed to
be acting in any Official Capacity in reliance upon the rights of
indemnification provided by this Agreement. Without limiting the generality of
the foregoing, the Corporation and the Indemnitee acknowledge the existence of
Article VII of the Corporation's Charter and Article XII of the Corporation's
By-Laws, and confirm that the Indemnitee is also acting in reliance thereon.
8. Severability and Reformation. Any provision of this
Agreement which is determined to be invalid or unenforceable in any jurisdiction
or under any circumstances shall be ineffective only to the extent of such
invalidity or unenforceability and shall be deemed reformed to the extent
necessary to conform to the applicable law of such jurisdiction and still give
maximum effect to the intent of the parties hereto. Any such determination shall
not invalidate or render unenforceable the remaining provisions hereof and shall
not invalidate or render unenforceable such provision in any other jurisdiction
or under any other circumstances.
9. Notices. Any notice, claim, request, or demand required or
permitted hereunder shall be in writing and shall be deemed given if delivered
personally or sent by facsimile or by registered or certified mail, first class,
postage prepaid: (i) if to the Corporation, to Omega Worldwide, Inc., 905 West
Eisenhower Circle, Suite 101, Ann Arbor, Michigan 48103, Attention: Secretary,
or (ii) if to any Indemnitee, to the address of such Indemnitee listed
5
<PAGE> 6
on the signature page hereto, or to such other address as any party hereto shall
have specified in a notice duly given in accordance with this Section 9.
10. Amendments; Binding Effect. No amendment, modification,
termination, or cancellation of this Agreement shall be effective unless signed
in writing by the Corporation and the Indemnitee. This Agreement shall be
binding upon the Corporation and its successors and assigns and shall inure to
the benefit of the Indemnitee's heirs, executors, administrators, and personal
representatives.
11. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Maryland, without regard
to the conflict of laws provisions thereof.
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the day and year first set forth above.
OMEGA WORLDWIDE, INC.
By:__________________________________
Name:________________________________
Title:_______________________________
Attest:
______________________
Secretary
Indemnitee
_____________________________________
Name:
Address:
_____________________________________
_____________________________________
6
<PAGE> 1
EXHIBIT 10.8
RIGHTS INVESTORS AGREEMENT
THIS RIGHTS INVESTORS AGREEMENT (the "Agreement") is entered into as of
April __, 1998 by and between OMEGA WORLDWIDE, INC., a Maryland corporation (the
"Company"), and the persons listed on attached Schedule I (each a "Rights
Investor" and collectively, the "Rights Investors").
WHEREAS, the Company has filed with the Securities and Exchange
Commission (the "SEC") a Registration Statement dated December 30, 1997 (as
amended from time to time, the "Registration Statement") pursuant to which the
Company will distribute to its shareholders rights (the "Rights") to subscribe
for and purchase 2,250,000 shares of common stock of the Company, $0.10 par
value per share (the "Common Stock"); and
WHEREAS, not all the Rights distributed may be exercised by the
shareholders; and
WHEREAS, the Rights Investors desire to purchase from the Company all
of the shares of Common Stock that have not been purchased through the exercise
of Rights (the "Unsubscribed Shares"); and
WHEREAS, the Company has authorized the issuance of 1,000,000
additional shares of Common Stock (the "Additional Shares") to ensure that the
Rights Investors will be able to purchase the minimum shares of Common Stock set
forth herein;
WHEREAS, the purchase from the Company of the Unsubscribed Shares and
the Additional Shares pursuant to this Agreement constitutes an integral part of
the transaction set forth in the Registration Statement, including the
capitalization of the Company;
NOW, THEREFORE, in consideration of the respective covenants and
agreements herein set forth and of other consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. PURCHASE OF SHARES
Subject to the declaration of effectiveness of the Registration
Statement and the terms and conditions set forth herein, the Company agrees to
sell and transfer the Unsubscribed Shares to the Rights Investors according to
the percentages set forth opposite each Rights Investor's name on Schedule I
hereto and each Rights Investor agrees to purchase and accept the specified
percentage of Unsubscribed Shares, provided, however, that in the event there
are less than 1,000,000 Unsubscribed Shares in the aggregate, the Company agrees
to sell and transfer and each Rights Investor agrees to purchase and accept the
number of shares of Common Stock set forth on Schedule I hereto opposite such
Rights Investor's name. Each Rights Investor agrees to comply with the
procedures set forth in the Prospectus (as hereinafter defined) under "The
Rights Offering -- Unsubscribed Shares and Third Party Sales" with respect to
the purchase of, and payment for, the shares of Common Stock.
1
<PAGE> 2
2. REPRESENTATIONS AND WARRANTIES
2.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to each Rights Investor that:
(a) the Company is a company duly incorporated and validly
existing under the laws of the State of Maryland;
(b) the authorized capital stock of the Company on the date of
this Agreement consists of 50,000,000 shares of Common Stock,
of which 11,200,000 shares (assuming no Additional Shares are
issued) will be issued and outstanding upon consummation of
the transactions contemplated by the Registration Statement,
and 10,000,000 shares of Preferred Stock, $1.00 par value per
share, of which no shares are issued and outstanding as of the
date hereof;
(c) there is no contract, option or right, in equity or at law, or
otherwise binding upon or which at any time in the future may
become binding upon the Company to allot or issue any of the
unissued Common Stock or Preferred Stock or to create any
additional class of stock, except as set forth in the
Prospectus dated ________, 1998 forming part of the
Registration Statement (the "Prospectus");
(d) the Company has all necessary corporate power and capacity to
execute and deliver, and to observe and perform its covenants
and obligations under, this Agreement and has taken all
corporate action necessary to authorize the execution and
delivery of, and the observance and performance of its
covenants and obligations under, this Agreement;
(e) this Agreement has been duly executed and delivered by the
Company and this Agreement constitutes a valid and binding
obligation of the Company enforceable against the Company in
accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and other laws
affecting the rights of creditors generally and to the
exercise of judicial discretion in accordance with general
principles of equity (whether applied by a court of law or
equity); and
(f) the shares of Common Stock will be duly issued and outstanding
as fully paid and non-assessable shares of Common Stock of the
Company.
2
<PAGE> 3
2.2 REPRESENTATIONS AND WARRANTIES OF RIGHTS INVESTORS
Each Rights Investor represents and warrants to the Company that:
(a) he has all necessary power and capacity to execute and
deliver, and to observe and perform his covenants and
obligations under, this Agreement;
(b) this Agreement has been duly executed and delivered by the
Rights Investor and this Agreement constitutes a valid and
binding obligation of the Rights Investor enforceable against
the Rights Investor in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium
and other laws affecting the rights of creditors generally and
to the exercise of judicial discretion in accordance with
general principles of equity (whether applied by a court of
law or equity); and
(c) there is no contract, option or right, in equity or at law, or
otherwise binding upon or which at any time in the future may
become binding upon the Rights Investor to sell any of the
shares of Common Stock to be acquired hereunder and the Rights
Investor is acquiring such shares of Common Stock as an
investment and not with a view to the sale or distribution
thereof.
2.3 SURVIVAL
The representations and warranties set forth in Sections 2.1
and 2.2 hereof shall survive for a period of one year after the date hereof. No
claim in respect of any misrepresentation or breach of covenant hereunder
pursuant to Section 3 shall be made by any party more than one year after the
date hereof.
3. INDEMNIFICATION
3.1 INDEMNIFICATION OF RIGHTS INVESTORS BY THE COMPANY
Subject to Section 2.3, the Company agrees to indemnify and
hold each Rights Investor harmless from and against any and all loss which
arises out of or results from the breach by the Company of any representation or
warranty of the Company set forth in this Agreement or the failure by the
Company to perform any covenant of the Company set forth in this Agreement.
3.2 INDEMNIFICATION OF THE COMPANY BY THE RIGHTS INVESTORS
Subject to Section 2.3, each Rights Investor agrees, severally
and not jointly, to indemnify and hold the Company harmless from and against any
and all loss which arises out of or results from the breach by such Rights
Investor of any representation or warranty of such Rights Investor set forth in
this Agreement or the failure by such Rights Investor to perform any covenant of
such Rights Investor set forth in this Agreement.
3
<PAGE> 4
5. MISCELLANEOUS
5.1 FURTHER ASSURANCES
The Company and the Rights Investors shall do such acts and
shall execute such further documents, conveyances, deeds, assignments, transfers
and the like, and will cause the doing of such acts and will cause the execution
of such further documents as are within their power as the Company or a Rights
Investor may at any time and from time to time reasonably request be done or
executed, in order to give full effect to the provisions of this Agreement.
5.2 GOVERNING LAW
This Agreement shall be governed by and construed and enforced
in accordance with the laws of the State of Michigan, without regard to the
conflict of law principles thereof.
5.3 COUNTERPARTS
This Agreement may be executed in any number of counterparts.
Each executed counterpart shall be deemed to be an original and all executed
counterparts taken together shall constitute one agreement.
5.4 ASSIGNMENT
This Agreement may not be assigned by a Rights Investor
without the prior written consent of the Company.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
OMEGA WORLDWIDE, INC.
By:_____________________________
Name:___________________________
Title:__________________________
________________________________
________________________________
________________________________
4
<PAGE> 5
SCHEDULE I
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Name of Percentage of Aggregate Number of
Rights Investor Unsubscribed Shares Shares
- --------------------------------------------------------------------------------
<S> <C> <C>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
5
<PAGE> 1
EXHIBIT 21
LIST OF SUBSIDIARIES
<TABLE>
<CAPTION>
SUBSIDIARY NAME PLACE OF INCORPORATION
--------------- ----------------------
<S> <C>
Omega (UK) Limited.......................................... London, England
</TABLE>
<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 10, as to which the
date is January 15, 1998) with respect to the financial statements of Principal
Healthcare Finance Limited in the Registration Statement (Amendment No. 4 to
Form S-1) dated March 25, 1998.
/s/ Ernst & Young
Jersey, Channel Islands
March 25, 1998
<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 (Amendment
No. 4 to Form S-1) dated March 25, 1998.
/s/ Ernst & Young LLP
Detroit, Michigan
March 25, 1998
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We have issued our report dated June 16, 1997 (except for Note 36 as to which
the date is March 3, 1998) accompanying the financial statements of Tamaris
PLC as of and for the two years ended March 31, 1997. We consent to the
inclusion of the aforementioned report in this Registration Statement of Omega
Worldwide, Inc. on Form S-1 and to the use of our name as it appears under the
caption "Experts".
/s/ GRANT THORNTON
London, United Kingdom
March 25, 1998
<PAGE> 1
EXHIBIT 99.1
VOID IF NOT RECEIVED BY THE SUBSCRIPTION AGENT
PRIOR TO 5:00 P.M., EASTERN STANDARD TIME,
ON APRIL 23, 1998.
OMEGA WORLDWIDE, INC. RIGHTS CERTIFICATE NO. ______
No. of Rights _______
REGISTERED OWNER:
Dear Shareholder:
As the registered owner of this Rights Certificate, you are entitled to
subscribe for shares of common stock ("Shares") of Omega Worldwide, Inc. ("Omega
Worldwide") at the subscription price (the "Subscription Price") of $7.50 per
Share and upon the terms and conditions set forth in the enclosed Prospectus
dated March 27, 1998 (the "Prospectus"). You are entitled to subscribe for one
Share at the Subscription Price for every one Right held by you. If you were a
holder of Shares on April 3, 1998 (the "Record Date") and if you have validly
exercised all of the Rights initially issued to you to the extent possible, you
have the further right to oversubscribe for additional Shares (the
"Oversubscription Privilege"), subject to the maximum number of Shares offered
in the Rights Offering and certain other restrictions described in the
Prospectus, including proration of available Shares. You may not purchase
fractional Shares.
Certificates for Shares 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.
Certificates for Shares purchased pursuant to the exercise of the
Oversubscription Privilege 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.
THIS RIGHTS CERTIFICATE IS NOT TRANSFERABLE
Payment of the full Subscription Price for all Shares subscribed for
pursuant to the exercise of Rights and the Oversubscription Privilege must
accompany this properly completed and duly executed Rights Certificate, payable
in United States currency by personal check, cashier's check, bank draft or
money order drawn on a bank located in the United States, payable to "Omega
Worldwide Rights Offering" or by wire instructions. Alternatively, subscribers
may return a completed Notice of Guaranteed Delivery. PLEASE WRITE YOUR RIGHTS
CERTIFICATE NUMBER, SET FORTH ABOVE, IN YOUR CHECK, BANK DRAFT, MONEY ORDER OR
NOTICE OF GUARANTEED DELIVERY OR REFER TO IT ON YOUR WIRE TRANSFER
- --------------------------------------------------------------------------------
SECTION 1: DETAILS OF SUBSCRIPTION--PLEASE PRINT ALL INFORMATION
CLEARLY AND LEGIBLY
- --------------------------------------------------------------------------------
IF YOU WISH TO EXERCISE ALL OF YOUR RIGHTS:
A: I SUBSCRIBE FOR MY FULL ENTITLEMENT OF SHARES:
______________ X $ 7.50 = $ ______________
SHARES
B: OVERSUBSCRIPTION PRIVILEGE*:
______________ X $7.50 = $ ______________
SHARES
TOTAL AMOUNT ENCLOSED: $__________
*I HAVE VALIDLY EXERCISED ALL RIGHTS INITIALLY
ISSUED TO ME TO THE EXTENT POSSIBLE AND WAS
A HOLDER OF SHARES ON THE RECORD DATE.
- --------------------------------------------------------------------------------
IF YOU DO NOT WISH TO EXERCISE ALL OF YOUR RIGHTS:
C: I SUBSCRIBE FOR ONLY _________ SHARES X $ 7.50 = $________(AMOUNT ENCLOSED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
OMEGA WORLDWIDE, INC. OMEGA WORLDWIDE, INC. FIRST CHICAGO TRUST COMPANY OF NEW YORK
BY _______________________________ BY __________________________ BY _________________________________
CHAIRMAN SECRETARY MANAGING DIRECTOR
</TABLE>
<PAGE> 2
To exercise all or part of your Rights, please complete part A. or C.
of Section 1 on the reverse side of this certificate and Section 2 below. To
exercise your Oversubscription Privilege, please also complete part B of Section
1 on the reverse side of this certificate.
The completed Rights Certificate and payment or Notice of Guaranteed
Delivery should be mailed or delivered to the Subscription Agent as follows:
By Regular Mail: By Hand:
First Chicago Trust Company First Chicago Trust Company
of New York of New York
Attention: Tenders & Exchanges Attention: Tenders & Exchanges
P.O. Box 2565, Suite 4660 c/o THE DEPOSITORY
Jersey City, NJ 07303-2565 TRUST COMPANY
55 Water Street, DTC TAD
Vietnam Veterans Memorial Plaza
New York, NY 10041
By Facsimile Transmission: By Overnight Courier:
(201) 222-4720 First Chicago Trust Company
(201) 222-4721 of New York
Confirm by Telephone Attention: Tenders & Exchanges
(201) 222-4707 Suite 4680-OWI
14 Wall Street, 8th Floor
New York, NY 10005
Delivery other than as set forth above will not constitute a
valid delivery.
FOR FURTHER INFORMATION CONCERNING COMPLETION AND EXECUTION OF THIS
FORM, PLEASE CONTACT THE SUBSCRIPTION AGENT AT 1-800-251-4215.
- --------------------------------------------------------------------------------
SECTION 2: TO SUBSCRIBE
I acknowledge that I have received the Prospectus for this Rights
Offering, and I hereby irrevocably subscribe for the number of Shares indicated
in Section 1 on the terms and conditions set forth in the Prospectus.
I understand that my Rights will be deemed exercised only when a
properly completed and duly executed Rights Certificate and payment of the full
Subscription Price with respect to such exercise have been received by the
Subscription Agent.
SIGNATURE OF
SUBSCRIBER(S): __________________________ ___________________________
TELEPHONE NUMBER: ( ) __________________________________ (daytime)
AREA CODE
TELEPHONE NUMBER: ( ) __________________________________ (evening)
AREA CODE
Address for delivery of Shares if other than as shown on front:
[ ] Check here if permanent change.
<PAGE> 1
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
FOR SUBSCRIPTIONS FOR SHARES OF COMMON STOCK OF
OMEGA WORLDWIDE, INC.
As set forth in the Prospectus dated March 27, 1998 (the "Prospectus")
of Omega Worldwide, Inc. ("Omega Worldwide"), this form or one substantially
equivalent hereto must be used to exercise a holder's rights ("Rights") to
subscribe for shares of common stock ("Shares") of Omega Worldwide and to
oversubscribe for additional Shares (the "Oversubscription Privilege"), if
time will not permit all required documents to reach First Chicago Trust
Company of New York (the "Subscription Agent") prior to 5:00 p.m., Eastern
Standard Time, on April 23, 1998, unless extended (the "Expiration Date"). This
form should be mailed or delivered or sent by facsimile transmission to the
Subscription Agent as follows:
By Regular Mail: By Hand:
First Chicago Trust Company First Chicago Trust Company
of New York of New York
Attention: Tenders & Exchanges Attention: Tenders & Exchanges
P.O. Box 2565, Suite 4660 c/o THE DEPOSITORY
Jersey City, NJ 07303-2565 TRUST COMPANY
55 Water Street, DTC TAD
Vietnam Veterans Memorial Plaza
New York, NY 10041
By Facsimile Transmission: By Overnight Courier:
(201) 222-4720 First Chicago Trust Company
(201) 222-4721 of New York
Confirm by Telephone Attention: Tenders & Exchanges
(201) 222-4707 Suite 4680-OWI
14 Wall Street, 8th Floor
New York, NY 10005
Delivery other than as set forth above will not constitute a
valid delivery.
The commercial bank, trust company or credit union or member firm which
completes this form must communicate this guarantee and the number of Shares
subscribed for in connection with this guarantee (stating separately the number
of Shares subscribed for pursuant to the exercise of Rights and the
Oversubscription Privilege) to the Subscription Agent and must deliver this
Notice of Guaranteed Delivery to the Subscription Agent prior to 5:00 p.m.,
Eastern Standard Time, on the Expiration Date, guaranteeing delivery of (a)
payment of the full Subscription Price for all Shares subscribed for pursuant to
the exercise of Rights and the Oversubscription Privilege and (b) a properly
completed and duly executed Rights Certificate (which certificate and full
payment must then be delivered no later than the close of business of the
third business day after the Expiration Date). Failure to do so will result in
a forfeiture of the Rights.
GUARANTEE
The undersigned, a commercial bank, trust company or credit union
having an office, branch or agency in the United States or a member firm of a
Stock Transfer Association approved medallion program such as STAMP, SEMP or
MSP, guarantees delivery to the Subscription Agent by no later than 5:00 p.m.,
Eastern Standard Time, on April 28, 1998 of (a) a properly completed and duly
executed Rights Certificate and (b) payment of the full Subscription Price for
all Shares subscribed for pursuant to the exercise of Rights and the
Oversubscription Privilege, as subscription for such Shares is indicated
herein or in the Rights Certificate.
(Continued on reverse side)
<PAGE> 2
Control Number:________________________
OMEGA WORLDWIDE, INC.
1. Exercise of Rights:
I subscribe to exercise___________________ Rights for _________________
Shares x $ 7.50 = $______________________
2. Oversubscription Privilege:
I apply for the Oversubscription Privilege* for _______________________
Shares x $7.50 = $__________________
*I have validly exercised all Rights initially issued to me to the
extent possible and was a holder of Shares on April 3, 1998.
3. Total Rights Exercised: ______ Total Shares Subscribed For: _______
Total Payment: $__________
METHOD OF PAYMENT
Payment must be made by April 28, 1998, unless extended, to:
First National Bank of Chicago, ABA # 0710-0001-3, for further credit to
First Chicago Trust Company of New York, Cash Funding Account #93-00007,
Attn.: Omega Worldwide Rights Offering, or by certified or cashier's check to
one of the addresses on side 1 of this form.
________________________________________________________________________________
__________________________ _______________________________
Name of Firm Authorized Signature
__________________________ _______________________________
Address Print Name Title
__________________________ _______________________________
City State ZIP Code Telephone Number
__________________________ _______________________________
Contact Name Date
__________________________
DTC Participant Number
________________________________________________________________________________
INSTRUCTIONS
NOTICE OF GUARANTEED DELIVERY
A Notice of Guaranteed Delivery may be submitted if the Notice is received by
the Subscription Agent prior to 5:00 p.m., Eastern Standard Time, on the
Expiration Date.
CONTROL NUMBER
First Chicago Trust Company of New York will assign a control number to this
Notice upon receipt. Such number may be confirmed by inquiry to First Chicago
Trust Company of New York.
ITEM 1. EXERCISE OF RIGHTS
State the number of Rights exercised and the number of Shares subscribed for
pursuant to the exercise of Rights and the corresponding dollar amount. You are
entitled to subscribe for one Share at the Subscription Price of $ 7.50 for
every one Right held by you.
ITEM 2. OVERSUBSCRIPTION PRIVILEGE
State the number of additional Shares oversubscribed for pursuant to the
Oversubscription Privilege and the corresponding dollar amount. You may
oversubscribe for as many additional Shares as desired, subject to the maximum
number of Shares offered in the Rights Offering and certain other restrictions
described in the Prospectus, including proration of available Shares.
ITEM 3. State the total number of Rights exercised and the total number of
Shares subscribed for pursuant to the exercise of Rights and the
Oversubscription Privilege and the dollar amount that the Subscription Agent
will receive from you prior to 5:00 p.m. Eastern Standard Time, on April 28,
1998, unless extended.
