UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 000-23953
OMEGA WORLDWIDE, INC.
(Exact name of registrant as specified in its charter)
Maryland 38-3382537
(State of Incorporation) (IRS Employer Identification No.)
900 Victors Way, Suite 345, Ann Arbor, MI 48108 (Address of
principal executive offices)
(734) 887-0300
(Telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--------- ---------
Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of March 31, 2000
Common Stock, $.10 par value 12,302,500
(Class) (Number of shares)
<PAGE>
OMEGA WORLDWIDE, INC.
FORM 10-Q
March 31, 2000
INDEX
<TABLE>
<CAPTION>
<S> <C> <C>
Page No.
--------
PART I Financial Information
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets
March 31, 2000 (unaudited) and September 30, 1999 ...................................... 2
Condensed Consolidated Statements of Operations (unaudited) -
Three-month and Six-month periods ended March 31, 2000 and 1999 ........................ 3
Condensed Consolidated Statements of Cash Flows (unaudited) -
Six-month periods ended March 31, 2000 and 1999 ........................................ 4
Notes to Condensed Consolidated Financial Statements
March 31, 2000 (unaudited) ............................................................. 5
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations ............................................................................. 10
Item 3. Quantitative and Qualitative Disclosure About Market Risk ................................ 12
PART II Other Information
Item 5. Other Information ........................................................................ 13
Item 6. Exhibits and Reports on Form 8-K ......................................................... 13
</TABLE>
<PAGE>
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
OMEGA WORLDWIDE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
March 31, September 30,
2000 1999
---- ----
(Unaudited) (See Note)
ASSETS
<S> <C> <C>
Current Assets:
Cash and short-term investments ............................................... $ 767 $ 5,738
Restricted cash ............................................................... 2,384 389
Patient receivables ........................................................... 7,952 -
Other current assets .......................................................... 6,023 915
----- ---
Total Current Assets ....................................................... 17,126 7,042
Plant, property and equipment, net of accumulated depreciation .................. 12,770 -
Investments in and advances to Principal Healthcare Finance Limited ............. 48,458 48,842
Investments in Principal Healthcare Finance Trust ............................... 6,558 6,619
Prepaid rent............. ....................................................... 6,583 -
Rent deposits ................................................................... 4,043 -
Other assets .................................................................... 3,304 5,909
----- -----
81,716 61,370
------ ------
Total Assets .................................................................... $ 98,842 $ 68,412
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term debt .............................................................. $ 11,654 $ -
Accounts payable and accrued expenses ......................................... 15,875 1,177
Accrued income taxes .......................................................... 1,732 1,880
Deferred income ............................................................... 1,185 1,215
----- -----
Total Current Liabilities ................................................... 30,446 4,272
Long-term debt .................................................................. 3,311 -
Other long-term liabilities ..................................................... 475 -
---- ----
Total Liabilities ............................................................. 34,232 4,272
------ -----
Shareholders' Equity:
Preferred Stock $1.00 par value:
Authorized 10,000 shares
Outstanding 260 Class B shares at liquidation value ...................... 2,600 2,600
Common stock $.10 par value
Authorized 50,000 shares
Outstanding 12,303 shares and 12,266 at March 31, 2000
and September 30, 1999 respectively ...................................... 1,230 1,227
Additional paid-in capital ................................................... 53,058 52,893
Retained earnings ............................................................ 8,000 7,418
Accumulated other comprehensive income ....................................... (278) 2
---- ----
Total Shareholders' Equity ................................................. 64,610 64,140
------ ------
Total Liabilities and Shareholders' Equity ...................................... $ 98,842 $ 68,412
========= ========
</TABLE>
Note - The balance sheet at September 30, 1999, has been derived from
audited consolidated financial statements at that date but does not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements.
See notes to condensed consolidated financial statements.
2
<PAGE>
OMEGA WORLDWIDE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
(In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
------------------ ------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Patient services revenue .............................................. $ 37,172 $ - $ 61,766 $ -
Fee income - Principal Healthcare Finance Limited ..................... 1,358 1,179 2,675 2,322
Fee income - Principal Healthcare Finance Trust ....................... 255 - 497 -
Interest Income:
Principal Healthcare Finance Limited ................................ 1,209 1,354 2,410 2,443
Short-term investments .............................................. 59 124 109 350
Rent income ........................................................... - 2,593 - 3,908
Other income .......................................................... - 19 124 171
----- ---- --- ---
40,053 5,269 67,581 9,194
Expenses:
Direct cost of patient services ........................................ 39,238 - 64,686 -
Direct costs of asset management ....................................... 658 611 1,263 1,268
Allocated expenses from Omega Healthcare Investors, Inc. ............... 204 198 378 386
Imputed and other interest ............................................. 275 1,697 608 2,550
Provision for depreciation ............................................. 23 433 43 627
General and administrative ............................................. 391 439 779 804
--- --- --- ---
40,789 3,378 67,757 5,635
------ ----- ------ -----
Earnings (loss) before equity earnings and taxes ......................... (736) 1,891 (176) 3,559
Equity in earnings of Principal Healthcare Finance Limited ............... 277 228 613 451
Equity in earnings of Principal Healthcare Finance Trust ................. 9 - 185 -
Equity in loss of Essex Healthcare Corporation ........................... (112) (304) (37) (371)
---- ---- --- ----
Earnings (loss) before income taxes ...................................... (562) 1,815 585 3,639
Income tax (provision) benefit ........................................... 247 (601) (3) (1,134)
--- ---- --- ------
Earnings (loss) before preferred stock dividends ......................... (315) 1,214 582 2,505
Preferred stock dividends ................................................ (52) (52) (104) (104)
---- --- ---- ----
Net earnings (loss) ...................................................... $ (367) $ 1,162 $ 478 $ 2,401
======== ======= ======== =======
Earnings (loss) per common share, basic .................................. $ (0.03) $ 0.10 $ 0.04 $ 0.20
======== ======= ======== =======
Earnings (loss) per common share, diluted ................................ $ (0.03) $ 0.10 $ 0.04 $ 0.20
======== ======= ======== =======
Average shares outstanding, basic ........................................ 12,295 12,258 12,282 12,258
====== ====== ====== ======
Average shares outstanding, diluted ...................................... 12,297 12,258 12,283 12,258
====== ====== ====== ======
Total comprehensive income (loss), net of taxes .......................... $ (403) $ 1,516 $ 302 $ 2,496
======== ======= ======== =======
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
OMEGA WORLDWIDE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
(In Thousands)
<TABLE>
<CAPTION>
Six Months Ended
March 31,
----------------
2000 1999
---- ----
<S> <C> <C>
Net earnings ....................................................................................... $ 582 $ 2,505
Adjustments to reconcile net earnings to cash provided by operating
activities:
Equity earnings of Principal Healthcare Finance Limited .......................................... (613) (451)
Equity earnings of Principal Healthcare Finance Trust ............................................ (185) -
Equity loss of Essex Healthcare Corporation ...................................................... 37 371
Straight-line rent adjustment .................................................................... 1,711 -
Depreciation and amortization .................................................................... 898 702
Payments of federal and foreign income taxes ..................................................... (1,405) (875)
Imputed interest ................................................................................. - 1,146
Net change in operating assets and liabilities ...................................................(10,849) (194)
------- ----
Net cash provided by (used in) operating activities ................................................... (9,824) 3,204
Cash flows from financing activities:
Proceeds from short-term borrowings, net of repayments ............................................. 6,479 23,300
Proceeds from (repayments of) long-term borrowings ................................................. (569) 34,502
Increase in restricted cash ........................................................................ (1,995) (389)
------ ----
Net cash provided by financing activities ............................................................. 3,915 57,413
Cash flows from investing activities:
Repayments from (temporary advances to) Principal Healthcare Finance Limited ....................... 997 (19,096)
Cash received in acquisition of operating companies by Idun Health Care Limited
net of cash consideration paid .................................................................... 857 -
Acquisition of plant, property and equipment by subsidiaries ....................................... (995) (49,288)
Dividends from affiliates .......................................................................... 174 272
Investment in Tamaris, plc stock ................................................................... - (2,884)
Other .............................................................................................. (95) 837
---- ----
Net cash provided by (used in) investing activities ................................................... 938 (70,159)
---- -------
Decrease in cash and short-term investments ........................................................... (4,971) (9,542)
Cash and short-term investments at beginning of period ................................................ 5,738 10,281
----- ------
Cash and short-term investments at end of period .....................................................$ 767 $ 739
======= =======
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
OMEGA WORLDWIDE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Unaudited
March 31, 2000
Note A - Organization and Significant Accounting Policies
ORGANIZATION
On April 2, 1998, the registration statement of Omega Worldwide, Inc. (the
"Company") became effective, and it offered 3,750,000 shares of common stock to
the public at $7.50 per share. The Company received $27,375,000, net of issuance
costs of $750,000. Shares offered included 500,000 shares in a primary offering
and 3,250,000 shares in a rights offering. Operations commenced upon the
effectiveness of the initial public offering. Additionally, except for $1,000
invested by Omega Healthcare Investors, Inc. ("Omega") at the date of formation
(November 1997) there were no cash flow activities of the Company from the date
of formation to the date operations commenced.
Immediately prior to the offering of shares by the Company, Omega
contributed substantially all of its investment in Principal Healthcare Finance
Limited ("Principal-UK") to the Company. Assets contributed by Omega, which were
recorded by the Company at Omega's accounting basis, included a $23,805,000
subordinated loan to Principal-UK, 33.375% of the common stock of Principal-UK
with a carrying value of $5,297,000, 10,556,361 warrants and other net assets
totaling $150,000. Omega also assigned its interest in a management agreement
with Principal-UK in which the Company receives an annual fee of 0.9% of
Principal-UK's assets (as defined) for providing certain advisory services. In
exchange, Omega received 8,500,000 shares of common stock and 260,000 shares of
Class B preferred stock. Of the common stock received by Omega, approximately
5,200,000 shares were distributed pro rata to Omega's shareholders, and
approximately 2,300,000 were sold pursuant to the Company's registration
statement. Omega retained approximately 9.9% of the Company's common stock.
BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements for
the Company have been prepared in accordance with accounting principles
generally accepted in the United States for interim financial information and
with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by accounting principles generally accepted in the United States for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three-month and six-month period ended
March 31, 2000, are not necessarily indicative of the results that may be
expected for the year ending September 30, 2000. For further information, refer
to the financial statements and footnotes thereto in the Company's annual
report, Form 10-K/A for the period ended September 30, 1999.
CONSOLIDATION AND SUBSIDIARIES
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries after elimination of all material intercompany
accounts and transactions. The Company's policy is to report the results of its
subsidiaries and equity method investees on a one-month lag basis. This allows
time to produce accounts in a local GAAP and then convert to a U.S. GAAP basis.
The Company's wholly owned subsidiary, Idun, began operations on November 1,
1999. To reflect activities for a five-month period and adopt reporting on a
one-month lag basis, profit and loss results for the four-month period ended
February 29, 2000, as well as an estimated loss from operations for the month of
March 2000, are included in the Company's results for the six-month period ended
March 31, 2000.
5
<PAGE>
Until April 1, 1999, the Company owned 100% of Principal-Australia. As more
fully explained in Form 8-K dated April 1, 1999, newly issued shares of
Principal-Australia were issued to independent investors resulting in the
dilution of the Company's ownership to 47%. Principal-Australia's financial
results are included in the Company's results on a consolidated basis prior
to April 1, 1999, and thereafter are included in the results using the equity
method of accounting.
The Company reports the results of those subsidiaries which it has over 20%
ownership, but in which it does not hold a majority interest, using the equity
method of accounting, using a one-month lag basis. Investments in public
companies over which the Company does not exercise control are recorded at fair
market value. Temporary changes in fair market value are charged to accumulated
other comprehensive income, while permanent reductions in fair market value are
charged to operations.
PATIENT SERVICE REVENUE
Patient service revenue is recorded as the services are provided.
STRAIGHT-LINE RENT EXPENSE
Idun Health Care Limited's subsidiaries are the lessees of several
long-term leases. Rent expense is recognized as the total rent payable over the
initial term of the related lease amortized on a straight-line basis. Such
expense includes the adjustment in the rental payments based upon predetermined
minimum formulas as defined in the master lease.
Note B - Asset Concentrations
Until April 1, 1999, Principal-Australia was reported on the consolidated
basis of accounting and 100% of the consolidated group's real estate investments
were owned by Principal-Australia. All of Principal-Australia's real estate
investments are long-term care facilities located in Australia, leased to Moran
Health Care Group (Australia) Pty Limited, the largest operator of aged care
homes in Australia.
Note C - Principal Healthcare Finance Limited (Principal-UK)
The following summarizes selected financial information of Principal-UK in
accordance with accounting principles generally accepted in the United States
(in thousands):
<TABLE>
<CAPTION>
Three-Month Period Ended Six-Month Period Ended
February 29, February 28, February 29, February 28,
Selected Operating Results for the period: 2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Rent income ............................... $ 15,473 $ 13,655 $ 30,309 $ 27,105
Interest income ........................... 156 1,565 274 3,091
Other income .............................. 1,147 13 2,488 52
----- ---- ----- ----
Total revenues .......................... 16,776 15,233 33,071 30,248
Expenses:
Interest expense .......................... (10,381) (9,716) (20,592) (19,530)
Depreciation and amortization ............. (2,826) (2,339) (5,548) (4,679)
General and administrative ................ (1,954) (1,572) (3,512) (2,858)
------ ------ ------ ------
Total expenses ........................ (15,161) (13,627) (29,652) (27,067)
------- ------- ------- -------
Income from operations before income taxes ... 1,615 1,606 3,419 3,181
Provision for income taxes ................... (723) (871) (1,460) (1,734)
----- ---- ------ ------
Net income from operations ................... $ 892 $ 735 $ 1,959 $ 1,447
======== ======== ======== ========
Selected Balance Sheet Information as of: February 29, 2000 August 31, 1999
------------------ ---------------
Investments in real estate subject to
triple-net lease, net of depreciation .......... $ 416,057 $ 395,533
Total assets ..................................... 584,173 569,666
Non-recourse debt borrowings ..................... 491,528 478,233
Total liabilities ................................ 565,064 552,544
Total stockholders' equity ....................... 19,109 17,122
</TABLE>
The effective tax rates are 43% and 55% for the six-month periods ending
February 29, 2000 and February 28, 1999, respectively. These rates differ from
6
<PAGE>
the UK tax rate primarily because the provision for depreciation and
amortization is not deductible for tax purposes in the United Kingdom. The
Company's proportionate share of Principal-UK's earnings for the three-month
periods ended February 29, 2000 and February 28, 1999 are approximately $297,000
and $245,000 respectively, and approximately $653,000 and $483,000 for the
six-month periods ended February 29, 2000 and February 28, 1999, respectively.
Additionally, the Company had recorded a charge against earnings of
approximately $20,000 and $17,000 for the three-month periods ended February 29,
2000 and February 28, 1999, respectively, and approximately $40,000 and $32,000
for the six-month periods ended February 29, 2000 and February 28, 1999,
respectively, representing amortization over a ten-year period of the excess of
the Company's investment in Principal-UK over its proportionate share of
Principal-UK's underlying equity.
Note D - Acquisition of Idun Health Care Limited ("Idun")
At October 31, the Company, through its wholly owned subsidiary, Idun
Health Care Limited ("Idun"), acquired the operating subsidiaries of Tamaris,
plc, a nursing home operating company in the United Kingdom. The 48 subsidiaries
acquired operate 119 nursing homes located throughout England, Scotland and
Northern Ireland. The fair market value of the net assets at the date of
acquisition was $9.5 million. Fixed assets included in the $9.5 million amount
have been written down by $5.2 million to report net assets equal to the
purchase price.
Pro forma information for the Company, as if the Idun purchase had been
made as of October 1, 1998, is as follows:
<TABLE>
<CAPTION>
Six-Month Three-Month Six-Month
Period Ended Period Ended Period Ended
Pro forma operating results for the period ended: March 31, 2000 March 31, 1999 March 31, 1999
-------------- -------------- --------------
<S> <C> <C> <C>
Revenues ................................................. $ 79,818 $ 36,323 $ 69,725
Net earnings available to common shareholders ............ 240 1,815 3,145
Earnings per common share, basic ......................... 0.02 0.15 0.26
Earnings per common share, dilutive ...................... 0.02 0.15 0.26
</TABLE>
Idun's results are included in the Company's consolidated results for
the entire three-month period ended March 31, 2000.
Note E - Principal Healthcare Finance Trust (Principal-Australia)
The following summarizes selected unaudited financial information of
Principal-Australia in accordance with United States generally accepted
accounting principles (in thousands):
<TABLE>
<CAPTION>
Three-Month Six-Month
Period Ended Period Ended
Selected Operating Results for the period ended: February 29, 2000 February 29, 2000
----------------- -----------------
<S> <C> <C>
Revenues:
Rent income ............................................. $ 2,990 $ 5,904
Interest income ......................................... 166 321
Other income ............................................ 11 22
---- ----
Total revenues ...................................... 3,167 6,247
Expenses:
Interest expense ........................................ (2,344) (4,291)
Depreciation and amortization ........................... (508) (998)
Amortization of debt issue and organizational costs .... (33) (112)
General and administrative .............................. (262) (452)
---- ----
Total expenses ...................................... (3,147) (5,853)
------ ------
Income from operations ..................................... $ 20 $ 394
======= =======
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Selected Balance Sheet Information as of: February 29, 2000 August 31, 1999
----------------- ---------------
<S> <C> <C>
Investments in real estate subject to
triple-net lease, net of depreciation ....... $ 92,138 $ 85,652
Total assets ................................... 124,384 96,986
Non-recourse debt borrowings ................... 101,177 75,815
Total liabilities .............................. 110,130 82,215
Total unit holders' equity ..................... 14,254 14,771
</TABLE>
On April 1, 1999, Principal-Australia sold 7,500,000 newly issued shares to
Omega and AMP Life Limited, as well as 875,000 additional shares to the Company,
as more fully described in the Form 8-K dated April 1, 1999. Prior to this date,
the Company owned 100% of Principal-Australia. Issuance of the new shares
reduced the Company's ownership to 47% of shares outstanding.
Note F - Essex Healthcare Corporation
The Company holds approximately 47% of the outstanding common shares of
Essex Healthcare Corporation ("Essex"), an Atlanta-based private operator of
skilled nursing facilities. Essex's primary activities are in Ohio, where it
operates 68 long-term care and assisted living facilities (approximately 4,300
beds). It also manages 55 facilities (approximately 2,900 beds) in Indiana,
Wisconsin and Texas. The Company accounts for this investment using the equity
method.
The Company's proportionate share of Essex's loss for the three-month
periods ending February 29, 2000 and February 28, 1999 is approximately $112,000
and $304,000, respectively, and a loss of approximately $37,000 and $371,000 for
the six-month periods ended February 29, 2000 and February 28, 1999,
respectively.
Note G - Earnings (Loss) Per Share
Earnings (loss) per share are computed based on the weighted average number
of common shares outstanding during the period. Average shares outstanding for
the basic earnings per share were 12,295,000 and 12,258,000 for the three-month
periods ending March 31, 2000 and 1999, respectively. The assumed conversion of
shares of preferred stock is antidilutive.
Note H - Credit Facilities
The Company had no outstanding indebtedness at September 30, 1999. At
March 31, 2000, the Company's outstanding indebtedness consists of the following
(in thousands):
<TABLE>
<CAPTION>
<S> <C>
(1) Revolving credit agreement (7.30% interest at March 31, 2000) ......... $ 8,850
(2) Loan due on demand (8.56% interest at March 31, 2000) ................. 1,995
(3) Loan due February 2003 (8.37% interest at March 31, 2000) ............. 1,793
(4) Loan due February 2017 (8.37% interest at March 31, 2000) ............. 1,865
(5) Loan due April 2018 (5.50% interest at March 31, 2000) ................ 462
---
14,965
Less current maturities ................................................... (11,654)
-------
Long-term debt ............................................................ $ 3,311
=======
</TABLE>
1) In November 1998, the Company entered into a revolving credit agreement
with a bank for borrowings up to $25 million, since reduced to $8.9 million
in March 2000. Omega provided a guarantee to the banks in consideration of
a fee of 1%, plus an annual 25 basis point facility fee. The agreement is
scheduled to expire on September 30, 2000. The Company also pays to the
banks an unused facility fee of 0.40%. Borrowings under the facility bear
interest at LIBOR plus 1.350% or, at the Company's option, at the prime
rate.
8
<PAGE>
2) Idun has a loan with a bank that is secured by the business and assets of a
nursing home subsidiary and carries an interest rate of 2.5% above the
bank's base lending rate.
3) Idun has a loan with a bank that is secured by the business and assets of a
nursing home company and carries a floating interest rate of LIBOR plus 2%.
The loan is being amortized over its life and requires quarterly payments
of approximately $178,000.
4) Idun has a loan with a bank that is secured by the business and assets of a
nursing home company and carries a floating interest rate of LIBOR plus 2%.
The loan is being amortized over its life and requires quarterly payments
of approximately $60,000.
5) Idun has an unsecured bank loan of approximately $462,000. The interest
rate on this loan is at a bank's base rate less .5%.
None of the loans of Idun is guaranteed by the Company. Cash of $1,995,000
included in Restricted Cash will be used for partial payment of an as yet
undetermined combination of items 2, 3 and 4 above.
Note I - Related Party Transactions
Pursuant to the provisions of a services agreement between Omega and the
Company, indirect costs incurred by Omega, including compensation of shared
executive officers and related support personnel, and costs incurred by Omega
for rent, insurance, telephone, utilities, supplies, maintenance and travel, are
allocated to the Company based upon the relationship of assets under the
Company's management to the combined total of those assets and Omega's assets.
Assets and costs in the formula are on a one-quarter lag basis. Allocated
expenses during the three-month periods ending March 31, 2000 and 1999 were
approximately $204,000 and $198,000, respectively, and for the six-month periods
ended March 31, 2000 and 1999 were approximately $378,000 and $386,000,
respectively. Such allocations are based on estimates and formulas that
management believes to be reasonable.
Temporary unsecured advances to Principal-UK in the amounts of $17,371,000
and $27,483,000 are outstanding at March 31, 2000 and 1999, respectively.
Interest on the temporary advances is 9.25%, paid monthly. Interest arising from
temporary advances to Principal-UK is included in interest income for the
three-month periods ended March 31, 2000 and 1999 is $433,000 and $610,000,
respectively, and for the six-month periods ended March 31, 2000 and 1999 is
$850,000 and $938,000, respectively.
A subordinated loan to Principal-UK in the amount of $23,805,000 is
outstanding at March 31, 2000 and 1999, respectively. Interest on the
subordinated loan is 12.55% at March 31, 2000 and 12.18% at March 31, 1999, paid
semi-annually. Interest arising from the subordinated loan to Principal-UK
included in interest income for the three-month periods ended March 31, 2000 and
1999 is $776,000 and $744,000, respectively, and for the six-month periods ended
March 31, 2000 and 1999 is $1,560,000 and $1,505,000, respectively.
Fees from services provided to Principal-UK for the three-month periods
ended March 31, 2000 and 1999 are $1,358,000 and $1,179,000, respectively, and
for the six-month periods ended March 31, 2000 and 1999 are $2,675,000 and
$2,322,000, respectively. Fees from services provided to Principal-Australia for
the three-month and six-month periods ended March 31, 2000 are $255,000 and
$497,000, respectively.
9
<PAGE>
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
"Safe Harbor" Statement under the United States Private Securities
Litigation Reform Act of 1995. Statements that are not historical facts
contained in Management's Discussion and Analysis are forward-looking statements
that involve risks and uncertainties that could cause actual results to differ
from projected results. Some of the factors that could cause actual results to
differ materially include: the financial strength of the operators of the
facilities owned by the Company's investees as it affects their continuing
ability to meet their obligations under the terms of the lease agreements;
changes in operators or ownership of operators; government policy relating to
the healthcare industry, including changes in the reimbursement levels;
operators' continued eligibility to participate in the government sponsored
payment programs; changes in reimbursement by other third-party payors;
occupancy levels at the facilities; the availability and cost of capital of the
Company and its investees; the strength and financial resources of competitors
of the Company and investees; the ability of investees to make additional real
estate investments at attractive yields; and the ability of investees to obtain
debt and equity capital at reasonable costs.
Following is a discussion and analysis of the Company's consolidated
results of operations, financial condition and liquidity and capital resources.
The discussion should be read in conjunction with the unaudited consolidated
financial statements and accompanying footnotes.
Results of Operations
In prior years the Company generated income from three primary sources: (1)
fee income from providing investment advisory and management services; (2)
interest income from providing financing to companies in the healthcare and
healthcare financing industries; and (3) equity in earnings of companies in the
healthcare and healthcare financing industries. In the first fiscal quarter of
the current year, the Company acquired through it's wholly-owned subsidiary,
Idun Health Care Ltd. ("Idun") 119 nursing homes in the United Kingdom. Company
results for the six months include five months of Idun's operations since the
date of acquisition.
Prior to April 1, 1999 Principal-Australia was reported on a consolidated
basis; currently, Principal-Australia, now 47% owned, is reported under the
equity method.
Revenues
Patient services revenue from the Idun operations was $37,172,000 for the
quarter and $61,766,000 for the five months of Idun's operations. The average
occupancy for the quarter was 86.1% and for the five months, 86.6%. UK nursing
homes rely on placements from the funding agencies, which frequently delay
placements late in the agencies' fiscal year, which ends March 31. In addition,
the mortality effects of the colder winter weather and the flu virus further
reduced occupancy in the second quarter. The Company acquired Idun with the
intention of bringing occupancy up to levels required for profitability and is
directing significant resources to this end.
Fee income for the quarter and the six-month period grew 37% from the prior
year. In the case of Principal Healthcare Finance Limited ("Principal-UK"), the
fee increase is largely the result of an increase in the market value of rental
assets of (pound)28 million from April 1, 1999 to March 31, 2000. The Principal
Healthcare Finance Trust ("Principal-Australia") increase is due to the combined
impact of now charging fees to the newly unconsolidated entity and an increase
in the market value of rental assets of A$55.8 million.
Interest income from Principal-UK is down 11% for the quarter from the
comparable period last year and down 1% for the six-month period ended March 31,
2000. The impact of the annual interest rate increase for the subordinated debt
is $32,000 for the quarter and $55,000 year-to-date. The rate on temporary
advances remains fixed at 9.25%, but the amount outstanding has declined from
$27,483,000 at February 28, 1999 to $17,371,000 on February 29, 2000. The
Principal-UK securitization in March 1999 was the primary source of repayment
from Principal-UK.
10
<PAGE>
Expenses
Cost of patient services is incurred in running the Idun subsidiary's
nursing homes in the United Kingdom. They exceed patient service revenues due to
wage pressures and seasonal occupancy reductions. Minimum wage increases and
increased costs of temporary services and overtime have pushed costs up faster
than government-determined fees. In addition, December holiday premiums for
staff and the premiums paid to temporary agencies to ensure adequate coverage
over the holidays further increased cost of patient services this quarter. The
long-term nature of the Company's operating leases results in significant
($340,000 per month) non-cash rent expense. The Idun nursing homes were
unprofitable under previous management. The Company expects to streamline
operations and improve management practices in the year ahead.
Despite the increase in levels of assets managed, the total of direct cost
of asset management, allocated expenses and general and administrative costs
year-to-date has declined by $38,000 from the comparable period last year. The
current quarter is $5,000 higher than last year. Principal-Australia incurred
most of the interest and depreciation expense in the prior year and is no longer
consolidated. Interest expense in the current year arose from financing required
to fund the operations of the nursing home businesses acquired.
Other
Equity in earnings of Principal-UK increased from $228,000 in the prior
year quarter to $277,000 in the current year quarter. The year-to-date increase
is $162,000. The Company's ownership percentage in Principal-UK has remained
constant at 33.375%. The increase in income is due to improved performance of
Principal-UK as its leased assets and their rents have increased and the more
favorable long-term finance rates achieved with the securitization in March
1999. Equity in earnings of Principal-Australia is affected by the A$182 million
financing completed in September 1999. Not all of the proceeds have yet been
reinvested in rental properties due to the newness of our product in the market.
Although we are pursuing numerous prospects, the return on temporary investment
is not adequate to cover the interest expense.
The change in the Medicare payment structure enacted last year in the
United States resulted in the prior year loss of $304,000 for Essex Healthcare
Corporation. Essex management continues to make progress in structuring
operations to be profitable under this payment structure and in improving
performance at the several skilled nursing facilities that were acquired when
they were unprofitable. In addition, it has doubled its beds this year to take
advantage of the benefit of economies of scale.
The Company's effective tax rate varies from the federal statutory rate of
34% due to the benefit of available foreign tax credits.
Liquidity and Capital Resources
The Company has outstanding at quarter end $8,850,000 of debt under its
line of credit agreement with Fleet Bank, N.A. and Harris Trust and Savings
Bank. Funds from Operations including scheduled repayment of temporary advances
to Principal Healthcare Finance Limited are projected to be adequate to fund
cash obligations.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
The Company is exposed to various market risks. Market risk is the
potential loss arising from adverse changes in market interest rates and prices,
such as short-term borrowing and foreign currency exchange rates. The Company
does not enter into derivatives or other financial instruments for trading or
speculative purposes. The Company enters into forward foreign currency contracts
principally to hedge currency fluctuations in its investments denominated in
foreign currencies, thereby limiting the Company's risk that would otherwise
result from changes in exchange rates. At March 31, 2000, the Company had
11
<PAGE>
outstanding a British pound sterling forward currency swap to exchange
(pound)20,000,000 for $31,740,000 to mature on October 15, 2007, and an
Australian dollar forward currency swap to exchange A$11.0 million Australian
dollars for $6,749,000 to mature on July 3, 2003. From time to time, the Company
may also obtain hedges for its foreign currency exposure relative to temporary
loans to Principal-UK and Idun. Because of the Company's foreign exchange
contracts, its sensitivity to foreign exchange currency exposure is considered
low.
Year 2000 Implications
The Company is not aware of any significant adverse effects of year 2000 on
its systems and operations.
12
<PAGE>
PART II - OTHER INFORMATION
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits - the following exhibits are filed herewith:
Exhibit Description
3.2 Amendment No.1 to Amended and Restated Bylaws dated as of
March 25, 2000
10.1 First Amendment to the Omega Worldwide, Inc. 1997 Stock
Option and Restricted Stock Plan dated as of March 25, 2000
10.2 Change in Control Agreement, dated March 24, 2000, by and
between Essel W. Bailey, Jr. and Omega Worldwide, Inc.
10.3 Change in Control Agreement, dated March 24, 2000, by and
between James P. Flaherty and Omega Worldwide, Inc.
10.4 Change in Control Agreement, dated March 24, 2000, by and
between Edward C. Noble and Omega Worldwide, Inc.
10.5 Amendment No. 2 to Loan Agreement dated January 10, 2000,
among the Company, Fleet Bank N.A. as agent and a bank and
Harris Trust and Savings Bank.
10.6 Amendment No.3 to Loan Agreement dated as of March 17,
2000, among the Company, Fleet Bank, N.A. as agent and a
bank and Harris Trust and Savings Bank.
27 Financial Data Schedule
(b) Reports on Form 8-K - None were filed.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
OMEGA WORLDWIDE, INC.
Registrant
By /s/ ESSEL W. BAILEY, Jr.
-----------------------------
Essel W. Bailey, Jr.
May 12, 2000 President and Chief Executive Officer
By /s/ EDWARD C. NOBLE
------------------------
Edward C. Noble
May 12, 2000 Chief Financial Officer
14
AMENDMENT NO. 1 TO
AMENDED AND RESTATED
BY-LAWS
OF
OMEGA WORLDWIDE, INC.
The first sentence of Section 4 of Article III is hereby deleted in its
entirety and replaced with the following:
Section 4. Annual Meetings. An annual meeting of the Board of Directors
shall be held on a date and at the time set by the Board of Directors in each
year.
FIRST AMENDMENT TO THE
OMEGA WORLDWIDE, INC.
1997 STOCK OPTION AND RESTRICTED STOCK PLAN
THIS FIRST AMENDMENT is made as of April , 2000, by Omega Worldwide,
Inc., a Maryland corporation (the "Corporation").
WHEREAS, the Corporation maintains the Omega Worldwide, Inc. 1997 Stock
Option and Restricted Stock Plan (the "Plan"); and
WHEREAS, the Corporation desires to amend the Plan to modify the
definition of "change of control" and the vesting provisions for stock options
and restricted stock awards.
NOW, THEREFORE, BE IT RESOLVED, that the Corporation does hereby amend
the Plan as follows:
1. By deleting the existing Section 8(a) of the Plan and substituting
therefor the following new Section 8(a):
" (a) Certain Terms. Subject to Section 19 hereof, the shares
of Restricted Stock granted to a Grantee 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. All shares of
Restricted Stock shall be fully released not later than ten (10) years
from the date of grant. Except for normal retirement, or pursuant to
the terms of the 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 restriction following the termination of
employment of such Grantee and accelerate the release of the shares of
Restricted Stock in accordance with Section 19 of the Plan) 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. "
2. By deleting the third paragraph of Section 19 of the Plan and
substituting therefor the following new third paragraph:
<PAGE>
"Notwithstanding the preceding two paragraphs or any other
provision of this Plan, in the event of a Change of Control, as
hereinafter defined, all Restricted Stock granted under the Plan which
has not previously been forfeited shall immediately vest as of the
effective date of the Change of Control and all Stock Options granted
under the Plan which have not previously been forfeited shall be
immediately vested and exercisable in full as of the effective date of
the Change of Control. For purposes of this Plan, "Change of Control"
shall mean the occurrence of any of the following events:
(a) a change in control of the Corporation 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 (the
"Exchange Act") as in effect on the date hereof, or, if Item
6(e) is no longer in effect, any regulation issued by the
Securities Exchange Commission pursuant to the Exchange Act
which serves similar purposes;
(b) any "Person" (as defined in Section 3(a)(9) of
the Exchange Act as modified and used in Sections 13(d) and
14(d) of the Exchange Act), is or becomes the "beneficial
owner" (as defined in Rule 13d-3 of the Exchange Act),
directly or indirectly, of equity securities of the
Corporation representing more than fifty percent (50%) of the
combined voting power or value of the surviving entity's then
outstanding voting equity securities;
(c) during any period of not more than two (2)
consecutive years, not including any period prior to the
Effective Date, individuals who at the beginning of such
period constitute the Board (the "Incumbent Directors"), cease
for any reason to constitute at least a majority thereof;
provided, however, that any director who was not a director as
of the Effective Date shall be deemed to be Incumbent Director
if that director was elected to such board of directors on the
recommendation of or with the approval of, at least two-thirds
(2/3) of the directors who then qualified as Incumbent
Directors; and provided further that no director whose initial
assumption of office is in connection with an actual or
threatened election contest relating to the election of
directors shall be deemed to be an Incumbent Director;
(d) the approval by the shareholders of the
Corporation of a merger, consolidation, share exchange or
other reorganization in which the shareholders of the
Corporation immediately prior to the transaction do not own
equity securities of the surviving entity representing at
least fifty percent (50%) of the combined voting power or
value of the surviving entity's then outstanding voting
securities immediately after the transaction;
(e) the sale or transfer of more than fifty percent
(50%) of the value of the assets of the Corporation, in a
single transaction, in a series of related transactions, or in
a series of transactions over any one year period; or
(f) a dissolution or liquidation of the Corporation.
<PAGE>
Notwithstanding any other provision of the Plan or any applicable
agreement documenting an award under the Plan, in the event of a termination of
a Grantee's or Optionee's employment, other than a termination for cause (as
defined in Section 15 of the Plan), the Plan Committee may accelerate the
vesting of any shares of Restricted Stock or Stock Option granted under the
Plan. "
4. By deleting the existing second paragraph of Section 20 of the Plan
in its entirety.
Except as specifically amended hereby, the remaining provisions of the
Plan shall remain in full force and effect as prior to the adoption of this
First Amendment.
IN WITNESS WHEREOF, the Corporation has caused this First Amendment to
be executed, effective as of the date first above written.
ATTEST: OMEGA WORLDWIDE, INC.
By: /s/: Susan Allene Kovach By: /s/: Essel W. Bailey, Jr.
- ----------------------------- ------------------------------
Title: Vice President, General Counsel Title: President and Chief Executive
and Secretary Officer
OMEGA WORLDWIDE, INC.
CHANGE IN CONTROL AGREEMENT
THIS CHANGE IN CONTROL AGREEMENT (the "Agreement") is made as of
March 24, 2000 (the "Effective Date") by and between ESSEL W. BAILEY, JR.
(the "Officer"), and OMEGA WORLDWIDE, INC., a Maryland corporation.
WHEREAS, the Officer presently serves at the pleasure of the Board of
Directors of the Company as President and Chief Executive Officer of the Company
and performs significant strategic and management responsibilities necessary to
the continued conduct of the Company's business and operations.
WHEREAS, the Board of Directors of the Company has determined that it
is in the best interests of the Company and its stockholders to assure that the
Company will have the continued dedication and objectivity of the Officer,
notwithstanding the possibility or occurrence of a Change in Control (as defined
below) of the Company.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and in consideration of the continuing employment of Officer by the
Company, the parties agree as follows:
1. Definitions. For purposes of this Agreement, the following terms
shall have the meanings set forth in this Section 1:
(a) "Board" means the Board of Directors of the Company.
(b) "Cause" means (i) willful refusal to follow a lawful
written order of the Board; (ii) willful misconduct or reckless
disregard of his or her duties by the Officer; (iii) any act of fraud,
misappropriation, dishonesty or moral turpitude; or (iv) the conviction
of the Officer of any felony.
(c) "Change in Control" means the occurrence of any of the
following events:
(i) 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 as in
effect on the date hereof (the "Exchange
Act"), or, if Item 6(e) is no longer in
effect, any regulation issued by the
Securities and Exchange Commission pursuant
to the Exchange Act which serves similar
purposes.
<PAGE>
(ii) any "Person" (as defined in Section 3(a)(9)
of the Exchange Act, as modified and used in
Sections 13(d) and 14(d) of the Exchange
Act) is or becomes the "beneficial owner"
(as defined in Rule 13d-3 of the Exchange
Act), directly or indirectly, of equity
securities of the Company representing more
than fifty percent (50%) of the combined
voting power or value of the surviving
entity's then outstanding voting equity
securities.
(iii) during any period of not more than two (2)
consecutive years, not including any period
prior to the Effective Date, individuals who
at the beginning of such period constitute
the Board (the "Incumbent Directors"),cease
for any reason to constitute at least a
majority thereof; provided, however, that
any director who was not a director as of
the Effective Date shall be deemed to be
an Incumbent Director if that director was
elected to such board of directors on the
recommendation, or with the approval, of at
least two-thirds (2/3) of the directors who
then qualified as Incumbent Directors; and
provided further, that no director whose
initial assumption of office is in
connection with an actual or threatened
election contest relating to the election
of directors shall be deemed to be an
Incumbent Director;
(iv) the approval by the shareholders of the
Company of a merger, consolidation, share
exchange or other reorganization in which
the shareholders of the Company immediately
prior to the transaction do not own equity
securities of the surviving entity
representing at least fifty percent (50%) of
the combined voting power or value of the
surviving entity's then outstanding voting
securities immediately after the
transaction;
(v) the sale or transfer of more than fifty
percent (50%) of the value of the assets of
the Company, in a single transaction, in a
series of related transactions, or in a
series of transactions over any one year
period; or
(vi) a dissolution or liquidation of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as
amended.
(e) "Company" means Omega Worldwide, Inc.
(f) "Compensation Committee" means the Compensation Committee
of the Board.
<PAGE>
(g) "Confidential Information" means data and information
relating to the business of the Company (which does not rise to the
status of a Trade Secret) which is or has been disclosed to the Officer
or of which the Officer became aware as a consequence of or through the
Officer's relationship to the Company and which has value to the
Company and is not generally known to its competitors. Confidential
Information shall not include any data or information that has been
voluntarily disclosed to the public by the Company (except where such
public disclosure has been made by the Officer without authorization)
or that has been independently developed and disclosed by others, or
that otherwise enters the public domain through lawful means.
(h) "Disability" has the same meaning as provided in the
long-term disability plan or policy maintained or, if applicable, most
recently maintained, by the Company for the Officer. If no long-term
disability plan or policy was ever maintained on behalf of the Officer,
Disability means that condition described in Code Section 22(e)(3), as
amended from time to time. In the event of a dispute, the determination
of Disability shall be made by the Board and shall be supported by
advice of a physician competent in the area to which such Disability
relates.
(i) "Fair Market Value" means an amount equal to:
(i) the closing price per share at which sales of the
common stock of the Company shall have been sold on the most
recent trading date immediately prior to the date of grant of
the restricted stock award, as reported by any such exchange
or system selected by the Company on which the shares of
common stock are then traded;
(ii) if such market information is not published, the
price of one share of common stock in the over-the-counter
market on the most recent trading date prior to the date of
grant of the restricted stock award that is available as
reported by the Nasdaq Stock Market or, if not so reported, by
a generally accepted reporting service; or
(iii) if no such information is available, the value
of one share of common stock as of the date of grant of the
restricted stock award, as determined in good faith by the
Company with due consideration being given to the most recent
independent appraisal of the Company and the valuation
methodology used in the appraisal.
(j) "Quit With Good Reason" mean the Officer's resignation
within ninety (90) days following the occurrence of any of the
following events which (except as to Subsection (j)(vi)) occurs without
the Officer's written consent:
(i) the failure of the Board to reelect the
Officer to his or her then existing office;
<PAGE>
(ii) a diminution in the Officer's title, position,
authority or responsibility or the assignment to the Officer
of duties or work responsibilities which are inconsistent with
his or her title, position, authority or responsibility;
(iii) any reduction in the Officer's base salary,
bonus opportunity or other compensation, or a material
reduction in employee benefits;
(iv) a change in the position to which the Officer
reports or the positions which report to the Officer;
(v) the relocation of the Company's headquarters or
the primary place at which the Officer is to perform his or
her duties to a location more than fifty (50) miles from the
location at which the Officer previously performed his or her
duties; or
(vi) the expiration of one hundred eighty (180) days
after the occurrence of a Change in Control, regardless of
whether the Officer consented to the Change in Control.
Each separate event meeting the above requirements will allow
the Officer to terminate his or her employment due to a Quit With Good
Reason and the failure of the Officer to do so within one hundred
eighty (180) days from the occurrence of such event in any given case
will not prevent the Officer from terminating his or her employment due
to a Quit With Good Reason if a later event occurs which entitles the
Officer to do so.
(k) "Period of Employment" means the number of months that the
Officer has been an employee of the Company. Prior service may be
included within "Period of Employment" at the discretion of the
Compensation Committee. "Period of Employment" shall include
disability, sick leave, vacation and military leaves of absence but
exclude other leaves of absence unless such leaves of absence are for
the convenience of the Company and are approved by the Compensation
Committee.
(l) "Termination Payment" means a payment under this Agreement
equal to the product derived by multiplying 10,000 by the Fair Market
Value.
<PAGE>
(m) "Trade Secrets" means Employer information including, but
not limited to, technical or nontechnical data, formulas, patterns,
compilations, programs, devices, methods, techniques, drawings,
processes, financial data, financial plans, product plans or lists of
actual or potential customers or suppliers which: (i) derives economic
value, actual or potential, from not being generally known to, and not
being readily ascertainable by proper means by, other persons who can
obtain economic value from its disclosure or use; and (ii) is the
subject of efforts that are reasonable under the circumstances to
maintain its secrecy.
2. Eligibility. Unless otherwise determined by the Compensation
Committee, no Termination Payment shall be paid to the Officer unless, at the
time that the Change in Control occurs, his or her Period of Employment is at
least one (1) year.
3. Severance Benefits Upon Termination Of Employment. If, within three
(3) years after a Change in Control, the Officer's employment is terminated by
the Company without Cause or by the Officer due to a Quit With Good Reason, the
Company shall pay to the Officer, a Termination Payment in a lump sum cash
payment within thirty (30) days following the later of the Officer's termination
of employment or the occurrence of the Change in Control. Payments made to the
Officer hereunder as a Termination Payment shall be subject to applicable
federal, state and local tax withholding requirements. If the Officer's
employment is terminated due to his death or Disability, that will not be deemed
a termination of employment by the Company without Cause or by a Quit With Good
Reason.
4. Death Of Officer. If the Officer is entitled to receive a
Termination Payment and dies before receiving the Termination Payment, the
Company will pay the Termination Payment to his or her beneficiary as designated
in writing by the Officer or, in the absence of such written designation, his or
her estate. The Officer shall designate in writing a beneficiary or
beneficiaries to receive the Termination Payment hereunder. The Officer may
revoke or change his or her designation of a beneficiary at any time by written
notice to the Company.
5. Other Company Employment Benefits. If the Officer is entitled to
receive a Termination Payment, the Officer shall be entitled to participate in
certain employee insurance plans (as described below) for three (3) years
following the date of termination (the "Termination Coverage Period"). During
the Termination Coverage Period, the officer shall be treated as a continuing
employee for purposes of participation in and accrual of rights and benefits
under all of the Company's life, accident, medical and dental insurance plans
for Officer and his or her spouse. If such participation in one or more of such
plans is not possible, Company shall arrange to provide Officer with benefits
substantially similar to those which the Officer would have been entitled to
receive if he or she had continued as an employee at the Total Compensation
level. Benefits of continued participation in the Company deferred compensation
plan and any retirement plans hereafter adopted in which the Officer was
entitled to participate prior to the date of termination shall continue;
provided, however, that if Officer's continued participation is not possible
under the general terms and provisions of the foregoing plans, the Company shall
arrange to provide Officer with benefits substantially similar to those which
the Officer would have been entitled to receive under the foregoing plans if he
or she had continued as an employee of the Company during the Termination
Coverage Period.
<PAGE>
6. Tax Indemnity Payment. Should any of the payments or benefits that
are provided for hereunder to be paid to or for the benefit of Officer or
payments or benefits under any other plan, agreement or arrangement between
Officer and the Company, be determined or alleged to be subject to an excise or
similar purpose tax pursuant to Code Section 4999 or any successor or other
comparable federal, state or local tax laws, the Company shall pay to the
Officer such additional compensation as is necessary (after taking into account
all federal, state and local income taxes payable by the Officer as a result of
the receipt of such additional compensation) to place the Officer in the same
after-tax position (including federal, state and local taxes) the Officer would
have been in had no such excise or similar purpose tax (or any interest or
penalties thereon) been paid or incurred. The Company hereby agrees to pay such
additional compensation within ten (10) business days after the Officer notifies
the Company that the Officer intends to file a tax return which takes the
position that such excise or similar purpose tax is due and payable in reliance
upon a written opinion of the Officer's tax counsel (such tax counsel to be
chosen solely by the Officer), that is more likely than not that such excise tax
is due and payable. The costs of obtaining such tax counsel's opinion shall be
borne by the Company, and as long as such tax counsel was chosen by the Officer
in good faith, the conclusions reached in such opinion shall not be challenged
or disputed by the Company. If the Officer intends to make any payment with
respect to any such excise or similar purpose tax as a result of an adjustment
to the Officer's tax liability by any federal, state or local tax authority, the
Company will pay such additional compensation by delivering its cashier's check
payable in such amount to the Officer within ten (10) business days after the
Officer notifies the Company of his intention to make such payment. Without
limiting the obligation of the Company hereunder, the Officer agrees, in the
event the Officer makes any payment pursuant to the preceding sentence, to
negotiate with the Company in good faith with respect to procedures reasonably
requested by the Company which would afford the Officer the ability to contest
the imposition of such excise tax; provided, however, that the Officer will not
be required to afford the Company any right to contest the applicability of any
such excise tax to the extent that the Officer reasonably determines (based upon
the opinion of his tax counsel) that such contest is inconsistent with the
overall tax interests of the Officer.
7. No Mitigation. No amounts or benefits payable to the Officer
hereunder shall be subject to mitigation or reduction by income or benefits the
Officer receives from other sources.
8. Nondisclosure Of Confidential Information. The Officer agrees not to
disclose, directly or indirectly to any third person any Confidential
Information, Trade Secrets or customer list relating to Company's business
within three (3) years following payment of the Termination Payment.
9. Continued Employment. Nothing herein shall entitle Officer to
continued employment with the Company or to continued tenure in any specific
office or position.
<PAGE>
10. Sole Remedy. The Termination Payment provided hereby supersedes and
replaces any and all other termination compensation to which Officer is or might
become entitled, except termination compensation covered by an agreement in
effect on the Effective Date that has separately been approved by the
Compensation Committee or by the Board.
11. Assignment. The rights and obligations of the Company under this
Agreement shall inure to the benefit of the Company's successors and assigns.
This Agreement may be assigned by the Company to any legal successor to the
Company or to an entity which purchases all or substantially all of the assets
of the Company. In the event the Company assigns this Agreement as permitted by
this Agreement and the Officer remains employed by the assignee, the "Company"
as defined herein will refer to the assignee and the Officer will not be deemed
to have terminated employment hereunder until the Officer terminates employment
from the assignee.
12. Attorneys' Fees. If the Officer (or the Officer's estate in the
event of his or her death) brings any action at law or in equity to enforce any
of the provisions or rights hereunder, the Company shall pay all costs, expenses
and reasonable attorneys' fees incurred by the Officer.
13. Headings. Sections or other headings contained herein are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
14. Entire Agreement. This Agreement contains the entire understanding
of the parties with respect to the subject matter hereof.
15. Intentionally Omitted.
16. Severability. In the event that one or more of the provisions of
this Agreement shall be or become invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein shall not be affected thereby.
17. Governing Law. To the full extent controllable by stipulation of
the parties, this Agreement shall be interpreted and enforced under Michigan
law.
18. Amendment. This Agreement may not be modified, amended,
supplemented or terminated except by a written agreement between the Company and
the Officer.
IN WITNESS WHEREOF, each of the parties has executed this Agreement as
of the date and year first above written.
COMPANY:
OMEGA WORLDWIDE, INC.,
a Maryland corporation
By:/s/: Susan Allene Kovach
---------------------------
Its: Vice President, General Counsel
and Secretary
OFFICER:
/s/: Essel W. Bailey, Jr.
-------------------------
OMEGA WORLDWIDE, INC.
CHANGE IN CONTROL AGREEMENT
This Change in Control Agreement (the "Agreement") is made as of March
24, 2000 (the "Effective Date") by and between JAMES P. FLAHERTY (the
"Officer"), and OMEGA WORLDWIDE, INC., a Maryland corporation.
WHEREAS, the Officer presently serves at the pleasure of the Board of
Directors of the Company as Chief Operating Officer of the Company and performs
significant strategic and management responsibilities necessary to the continued
conduct of the Company's business and operations.
WHEREAS, the Board of Directors of the Company has determined that it
is in the best interests of the Company and its stockholders to assure that the
Company will have the continued dedication and objectivity of the Officer,
notwithstanding the possibility or occurrence of a Change in Control (as defined
below) of the Company.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and in consideration of the continuing employment of Officer by the
Company, the parties agree as follows:
1. Definitions. For purposes of this Agreement, the following terms
shall have the meanings set forth in this Section 1:
(a) "Board" means the Board of Directors of the Company.
(b) "Cause" means (i) willful refusal to follow a lawful
written order of the Board; (ii) willful misconduct or reckless
disregard of his or her duties by the Officer; (iii) any act of fraud,
misappropriation, dishonesty or moral turpitude; or (iv) the conviction
of the Officer of any felony.
(c) "Change in Control" means the occurrence of any of the
following events:
(i) 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 as in
effect on the date hereof (the "Exchange
Act"), or, if Item 6(e) is no longer in
effect, any regulation issued by the
Securities and Exchange Commission pursuant
to the Exchange Act which serves similar
purposes.
(ii) any "Person" (as defined in Section 3(a)(9)
of the Exchange Act, as modified and used in
Sections 13(d) and 14(d) of the Exchange
Act) is or becomes the "beneficial owner"
(as defined in Rule 13d-3 of the Exchange
Act), directly or indirectly, of equity
securities of the Company representing more
than fifty percent (50%) of the combined
voting power or value of the surviving
entity's then outstanding voting equity
securities.
(iii) during any period of not more than two (2)
consecutive years, not including any period
prior to the Effective Date, individuals who
at the beginning of such period constitute
the Board (the "Incumbent Directors"), cease
for any reason to constitute at least a
majority thereof; provided, however, that
any director who was not a director as of
the Effective Date shall be deemed to be an
Incumbent Director if that director was
elected to such board of directors on the
recommendation, or with the approval, of at
least two-thirds (2/3)of the directors who
then qualified as Incumbent Directors; and
provided further, that no director whose
initial assumption of office is in
connection with an actual or threatened
election contest relating to the election
of directors shall be deemed to be an
Incumbent Director;
(iv) the approval by the shareholders of the
Company of a merger, consolidation, share
exchange or other reorganization in which
the shareholders of the Company immediately
prior to the transaction do not own equity
securities of the surviving entity
representing at least fifty percent (50%) of
the combined voting power or value of the
surviving entity's then outstanding voting
securities immediately after the
transaction;
(v) the sale or transfer of more than fifty
percent (50%) of the value of the assets of
the Company, in a single transaction, in a
series of related transactions, or in a
series of transactions over any one year
period; or
(vi) a dissolution or liquidation of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as
amended.
(e) "Company" means Omega Worldwide, Inc.
(f) "Compensation Committee" means the Compensation Committee
of the Board.
(g) "Confidential Information" means data and information
relating to the business of the Company (which does not rise to the
status of a Trade Secret) which is or has been disclosed to the Officer
or of which the Officer became aware as a consequence of or through the
Officer's relationship to the Company and which has value to the
Company and is not generally known to its competitors. Confidential
Information shall not include any data or information that has been
voluntarily disclosed to the public by the Company (except where such
public disclosure has been made by the Officer without authorization)
or that has been independently developed and disclosed by others, or
that otherwise enters the public domain through lawful means.
(h) "Disability" has the same meaning as provided in the
long-term disability plan or policy maintained or, if applicable, most
recently maintained, by the Company for the Officer. If no long-term
disability plan or policy was ever maintained on behalf of the Officer,
Disability means that condition described in Code Section 22(e)(3), as
amended from time to time. In the event of a dispute, the determination
of Disability shall be made by the Board and shall be supported by
advice of a physician competent in the area to which such Disability
relates.
(i) "Fair Market Value of Restricted Stock Awards" means an
amount equal to the value per share of common stock of the Company
multiplied by the number of shares of common stock subject to
restricted stock awards granted to the Officer during the twelve (12)
full months (excluding any partial month in which the Change in Control
occurs) immediately preceding termination of the Officer's employment.
The value per share will be equal to:
(i) the closing price per share at which sales of the
common stock of the Company shall have been sold on the most
recent trading date immediately prior to the date of grant of
the restricted stock award, as reported by any such exchange
or system selected by the Company on which the shares of
common stock are then traded;
(ii) if such market information is not published, the
price of one share of common stock in the over-the-counter
market on the most recent trading date prior to the date of
grant of the restricted stock award that is available as
reported by the Nasdaq Stock Market or, if not so reported, by
a generally accepted reporting service; or
(iii) if no such information is available, the value
of one share of common stock as of the date of grant of the
restricted stock award, as determined in good faith by the
Company with due consideration being given to the most recent
independent appraisal of the Company and the valuation
methodology used in the appraisal.
(j) "Quit With Good Reason" mean the Officer's resignation
within ninety (90) days following the occurrence of any of the
following events which (except as to Subsection (j)(vi)) occurs without
the Officer's written consent:
(i) the failure of the Board to reelect the
Officer to his or her then existing office;
(ii) a diminution in the Officer's title, position,
authority or responsibility or the assignment to the Officer
of duties or work responsibilities which are inconsistent with
his or her title, position, authority or responsibility;
(iii) any reduction in the Officer's base salary,
bonus opportunity or other compensation, or a material
reduction in employee benefits;
(iv) a change in the position to which the Officer
reports or the positions which report to the Officer;
(v) the relocation of the Company's headquarters or
the primary place at which the Officer is to perform his or
her duties to a location more than fifty (50) miles from the
location at which the Officer previously performed his or her
duties; or
(vi) the expiration of one hundred eighty (180) days
after the occurrence of a Change in Control, regardless of
whether the Officer consented to the Change in Control.
Each separate event meeting the above requirements will allow
the Officer to terminate his or her employment due to a Quit With Good
Reason and the failure of the Officer to do so within one hundred
eighty (180) days from the occurrence of such event in any given case
will not prevent the Officer from terminating his or her employment due
to a Quit With Good Reason if a later event occurs which entitles the
Officer to do so.
(k) "Period of Employment" means the number of months that the
Officer has been an employee of the Company. Prior service may be
included within "Period of Employment" at the discretion of the
Compensation Committee. "Period of Employment" shall include
disability, sick leave, vacation and military leaves of absence but
exclude other leaves of absence unless such leaves of absence are for
the convenience of the Company and are approved by the Compensation
Committee.
(l) "Termination Payment" means a payment under this Agreement
equal to two (2) times the Officer's Total Compensation less one dollar
($1.00).
(m) "Total Compensation" means that amount paid to the Officer
by the Company during the last twelve (12) full months (excluding any
partial month in which the Change in Control occurs) immediately
preceding termination of Officer's employment equal to aggregate
compensation (salary, inclusive of any elective salary reductions, such
as contributions to a plan described in Code Section 401(k) or to a
nonqualified deferred compensation plan, plus any cash bonus) plus the
Fair Market Value of Restricted Stock Awards (whether or not such
awards are vested).
(n) "Trade Secrets" means Employer information including, but
not limited to, technical or nontechnical data, formulas, patterns,
compilations, programs, devices, methods, techniques, drawings,
processes, financial data, financial plans, product plans or lists of
actual or potential customers or suppliers which: (i) derives economic
value, actual or potential, from not being generally known to, and not
being readily ascertainable by proper means by, other persons who can
obtain economic value from its disclosure or use; and (ii) is the
subject of efforts that are reasonable under the circumstances to
maintain its secrecy.
2. Eligibility. Unless otherwise determined by the Compensation Committee, no
Termination Payment shall be paid to the Officer unless, at the time that the
Change in Control occurs, his or her Period of Employment is at least one (1)
year.
3. Severance Benefits Upon Termination Of Employment. If, within three (3) years
after a Change in Control, the Officer's employment is terminated by the Company
without Cause or by the Officer due to a Quit With Good Reason, the Company
shall pay to the Officer, a Termination Payment in a lump sum cash payment
within thirty (30) days following the later of the Officer's termination of
employment or the occurrence of the Change in Control. Payments made to the
Officer hereunder as a Termination Payment shall be subject to applicable
federal, state and local tax withholding requirements. If the Officer's
employment is terminated due to his death or Disability, that will not be deemed
a termination of employment by the Company without Cause or by a Quit With Good
Reason.
4. Death Of Officer. If the Officer is entitled to receive a Termination Payment
and dies before receiving the Termination Payment, the Company will pay the
Termination Payment to his or her beneficiary as designated in writing by the
Officer or, in the absence of such written designation, his or her estate. The
Officer shall designate in writing a beneficiary or beneficiaries to receive the
Termination Payment hereunder. The Officer may revoke or change his or her
designation of a beneficiary at any time by written notice to the Company.
5. Other Company Employment Benefits. If the Officer is entitled to receive a
Termination Payment, the Officer shall be entitled to participate in certain
employee insurance plans (as described below) for three (3) years following the
date of termination (the "Termination Coverage Period"). During the Termination
Coverage Period, the officer shall be treated as a continuing employee for
purposes of participation in and accrual of rights and benefits under all of the
Company's life, accident, medical and dental insurance plans for Officer and his
or her spouse. If such participation in one or more of such plans is not
possible, Company shall arrange to provide Officer with benefits substantially
similar to those which the Officer would have been entitled to receive if he or
she had continued as an employee at the Total Compensation level. Benefits of
continued participation in the Company deferred compensation plan and any
retirement plans hereafter adopted in which the Officer was entitled to
participate prior to the date of termination shall continue; provided, however,
that if Officer's continued participation is not possible under the general
terms and provisions of the foregoing plans, the Company shall arrange to
provide Officer with benefits substantially similar to those which the Officer
would have been entitled to receive under the foregoing plans if he or she had
continued as an employee of the Company during the Termination Coverage Period.
6. Tax Indemnity Payment. Should any of the payments or benefits that are
provided for hereunder to be paid to or for the benefit of Officer or payments
or benefits under any other plan, agreement or arrangement between Officer and
the Company, be determined or alleged to be subject to an excise or similar
purpose tax pursuant to Code Section 4999 or any successor or other comparable
federal, state or local tax laws, the Company shall pay to the Officer such
additional compensation as is necessary (after taking into account all federal,
state and local income taxes payable by the Officer as a result of the receipt
of such additional compensation) to place the Officer in the same after-tax
position (including federal, state and local taxes) the Officer would have been
in had no such excise or similar purpose tax (or any interest or penalties
thereon) been paid or incurred. The Company hereby agrees to pay such additional
compensation within ten (10) business days after the Officer notifies the
Company that the Officer intends to file a tax return which takes the position
that such excise or similar purpose tax is due and payable in reliance upon a
written opinion of the Officer's tax counsel (such tax counsel to be chosen
solely by the Officer), that is more likely than not that such excise tax is due
and payable. The costs of obtaining such tax counsel's opinion shall be borne by
the Company, and as long as such tax counsel was chosen by the Officer in good
faith, the conclusions reached in such opinion shall not be challenged or
disputed by the Company. If the Officer intends to make any payment with respect
to any such excise or similar purpose tax as a result of an adjustment to the
Officer's tax liability by any federal, state or local tax authority, the
Company will pay such additional compensation by delivering its cashier's check
payable in such amount to the Officer within ten (10) business days after the
Officer notifies the Company of his intention to make such payment. Without
limiting the obligation of the Company hereunder, the Officer agrees, in the
event the Officer makes any payment pursuant to the preceding sentence, to
negotiate with the Company in good faith with respect to procedures reasonably
requested by the Company which would afford the Officer the ability to contest
the imposition of such excise tax; provided, however, that the Officer will not
be required to afford the Company any right to contest the applicability of any
such excise tax to the extent that the Officer reasonably determines (based upon
the opinion of his tax counsel) that such contest is inconsistent with the
overall tax interests of the Officer.
7. No Mitigation. No amounts or benefits payable to the Officer hereunder shall
be subject to mitigation or reduction by income or benefits the Officer receives
from other sources.
8. Nondisclosure Of Confidential Information. The Officer agrees not to
disclose, directly or indirectly to any third person any Confidential
Information, Trade Secrets or customer list relating to Company's business
within three (3) years following payment of the Termination Payment.
9. Continued Employment. Nothing herein shall entitle Officer to continued
employment with the Company or to continued tenure in any specific office or
position.
10. Sole Remedy. The Termination Payment provided hereby supersedes and
replaces any and all other termination compensation to which Officer is or might
become entitled, except termination compensation covered by an agreement in
effect on the Effective Date that has separately been approved by the
Compensation Committee or by the Board.
11. Assignment. The rights and obligations of the Company under this Agreement
shall inure to the benefit of the Company's successors and assigns. This
Agreement may be assigned by the Company to any legal successor to the Company
or to an entity which purchases all or substantially all of the assets of the
Company. In the event the Company assigns this Agreement as permitted by this
Agreement and the Officer remains employed by the assignee, the "Company" as
defined herein will refer to the assignee and the Officer will not be deemed to
have terminated employment hereunder until the Officer terminates employment
from the assignee.
12. Attorneys' Fees. If the Officer (or the Officer's estate in the event of his
or her death) brings any action at law or in equity to enforce any of the
provisions or rights hereunder, the Company shall pay all costs, expenses and
reasonable attorneys' fees incurred by the Officer.
13. Headings. Sections or other headings contained herein are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
14. Entire Agreement. This Agreement contains the entire understanding of the
parties with respect to the subject matter hereof.
15. Intentionally Omitted.
16. Severability. In the event that one or more of the provisions of this
Agreement shall be or become invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions contained
herein shall not be affected thereby.
17. Governing Law. To the full extent controllable by stipulation of the
parties, this Agreement shall be interpreted and enforced under Michigan law.
18. Amendment. This Agreement may not be modified, amended, supplemented or
terminated except by a written agreement between the Company and the Officer.
IN WITNESS WHEREOF, each of the parties has executed this Agreement as
of the date and year first above written.
COMPANY:
OMEGA WORLDWIDE, INC.,
a Maryland corporation
By: /s/: Essel W. Bailey, Jr.
----------------------------
Its: President and Chief Executive Officer
OFFICER:
/s/: James P. Flaherty
----------------------
OMEGA WORLDWIDE, INC.
CHANGE IN CONTROL AGREEMENT
THIS CHANGE IN CONTROL AGREEMENT (the "Agreement") is made as of March
24, 2000 (the "Effective Date") by and between EDWARD C. NOBLE (the "Officer"),
and OMEGA WORLDWIDE, INC., a Maryland corporation.
WHEREAS, the Officer presently serves at the pleasure of the Board of
Directors of the Company as Vice President and Chief Financial Officer of the
Company and performs significant strategic and management responsibilities
necessary to the continued conduct of the Company's business and operations.
WHEREAS, the Board of Directors of the Company has determined that it
is in the best interests of the Company and its stockholders to assure that the
Company will have the continued dedication and objectivity of the Officer,
notwithstanding the possibility or occurrence of a Change in Control (as defined
below) of the Company.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and in consideration of the continuing employment of Officer by the
Company, the parties agree as follows:
1. Definitions. For purposes of this Agreement, the following terms
shall have the meanings set forth in this Section 1:
(a) "Board" means the Board of Directors of the Company.
(b) "Cause" means (i) willful refusal to follow a lawful
written order of the Board; (ii) willful misconduct or reckless
disregard of his or her duties by the Officer; (iii) any act of fraud,
misappropriation, dishonesty or moral turpitude; or (iv) the conviction
of the Officer of any felony.
(c) "Change in Control" means the occurrence of any of the
following events:
(i) 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 as in
effect on the date hereof (the "Exchange
Act"), or, if Item 6(e) is no longer in
effect, any regulation issued by the
Securities and Exchange Commission pursuant
to the Exchange Act which serves similar
purposes.
<PAGE>
(ii) any "Person" (as defined in Section 3(a)(9)
of the Exchange Act, as modified and used in
Sections 13(d) and 14(d) of the Exchange
Act) is or becomes the "beneficial owner"
(as defined in Rule 13d-3 of the Exchange
Act), directly or indirectly, of equity
securities of the Company representing more
than fifty percent (50%) of the combined
voting power or value of the surviving
entity's then outstanding voting equity
securities.
(iii) during any period of not more than two (2)
consecutive years, not including any period
prior to the Effective Date, individuals
who at the beginning of such period
constitute the Board ( the "Incumbent
Directors") , cease for any reason to
constitute at least a majority thereof;
provided, however, that any director who was
not a director as of the Effective Date
shall be deemed to be an Incumbent Director
if that director was elected to such board
of directors on the recommendation, or with
the approval, of at least two-thirds(2/3) of
the directors who then qualified as
Incumbent Directors; and provided further,
that no director whose initial assumption
of office is in connection with an actual or
threatened election contest relating to the
election of directors shall be deemed to be
an Incumbent Director;
(iv) the approval by the shareholders of the
Company of a merger, consolidation, share
exchange or other reorganization in which
the shareholders of the Company immediately
prior to the transaction do not own equity
securities of the surviving entity
representing at least fifty percent (50%) of
the combined voting power or value of the
surviving entity's then outstanding voting
securities immediately after the
transaction;
(v) the sale or transfer of more than fifty
percent (50%) of the value of the assets of
the Company, in a single transaction, in a
series of related transactions, or in a
series of transactions over any one year
period; or
(vi) a dissolution or liquidation of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as
amended.
(e) "Company" means Omega Worldwide, Inc.
(f) "Compensation Committee" means the Compensation Committee
of the Board.
<PAGE>
(g) "Confidential Information" means data and information
relating to the business of the Company (which does not rise to the
status of a Trade Secret) which is or has been disclosed to the Officer
or of which the Officer became aware as a consequence of or through the
Officer's relationship to the Company and which has value to the
Company and is not generally known to its competitors. Confidential
Information shall not include any data or information that has been
voluntarily disclosed to the public by the Company (except where such
public disclosure has been made by the Officer without authorization)
or that has been independently developed and disclosed by others, or
that otherwise enters the public domain through lawful means.
(h) "Disability" has the same meaning as provided in the
long-term disability plan or policy maintained or, if applicable, most
recently maintained, by the Company for the Officer. If no long-term
disability plan or policy was ever maintained on behalf of the Officer,
Disability means that condition described in Code Section 22(e)(3), as
amended from time to time. In the event of a dispute, the determination
of Disability shall be made by the Board and shall be supported by
advice of a physician competent in the area to which such Disability
relates.
(i) "Fair Market Value" means an amount equal to:
(i) the closing price per share at which sales of the
common stock of the Company shall have been sold on the most
recent trading date immediately prior to the date of grant of
the restricted stock award, as reported by any such exchange
or system selected by the Company on which the shares of
common stock are then traded;
(ii) if such market information is not published, the
price of one share of common stock in the over-the-counter
market on the most recent trading date prior to the date of
grant of the restricted stock award that is available as
reported by the Nasdaq Stock Market or, if not so reported, by
a generally accepted reporting service; or
(iii) if no such information is available, the value
of one share of common stock as of the date of grant of the
restricted stock award, as determined in good faith by the
Company with due consideration being given to the most recent
independent appraisal of the Company and the valuation
methodology used in the appraisal.
(j) "Quit With Good Reason" mean the Officer's resignation
within ninety (90) days following the occurrence of any of the
following events which (except as to Subsection (j)(vi)) occurs without
the Officer's written consent:
(i) the failure of the Board to reelect the
Officer to his or her then existing office;
<PAGE>
(ii) a diminution in the Officer's title, position,
authority or responsibility or the assignment to the Officer
of duties or work responsibilities which are inconsistent with
his or her title, position, authority or responsibility;
(iii) any reduction in the Officer's base salary,
bonus opportunity or other compensation, or a material
reduction in employee benefits;
(iv) a change in the position to which the Officer
reports or the positions which report to the Officer;
(v) the relocation of the Company's headquarters or
the primary place at which the Officer is to perform his or
her duties to a location more than fifty (50) miles from the
location at which the Officer previously performed his or her
duties; or
(vi) the expiration of one hundred eighty (180) days
after the occurrence of a Change in Control, regardless of
whether the Officer consented to the Change in Control.
Each separate event meeting the above requirements will allow
the Officer to terminate his or her employment due to a Quit With Good
Reason and the failure of the Officer to do so within one hundred
eighty (180) days from the occurrence of such event in any given case
will not prevent the Officer from terminating his or her employment due
to a Quit With Good Reason if a later event occurs which entitles the
Officer to do so.
(k) "Period of Employment" means the number of months that the
Officer has been an employee of the Company. Prior service may be
included within "Period of Employment" at the discretion of the
Compensation Committee. "Period of Employment" shall include
disability, sick leave, vacation and military leaves of absence but
exclude other leaves of absence unless such leaves of absence are for
the convenience of the Company and are approved by the Compensation
Committee.
(l) "Termination Payment" means a payment under this Agreement
equal to two (2) times the Officer's Total Compensation less one dollar
($1.00).
<PAGE>
(m) "Trade Secrets" means Employer information including, but
not limited to, technical or nontechnical data, formulas, patterns,
compilations, programs, devices, methods, techniques, drawings,
processes, financial data, financial plans, product plans or lists of
actual or potential customers or suppliers which: (i) derives economic
value, actual or potential, from not being generally known to, and not
being readily ascertainable by proper means by, other persons who can
obtain economic value from its disclosure or use; and (ii) is the
subject of efforts that are reasonable under the circumstances to
maintain its secrecy.
2. Eligibility. Unless otherwise determined by the Compensation
Committee, no Termination Payment shall be paid to the Officer unless, at the
time that the Change in Control occurs, his or her Period of Employment is at
least one (1) year.
3. Severance Benefits Upon Termination Of Employment. If, within three
(3) years after a Change in Control, the Officer's employment is terminated by
the Company without Cause or by the Officer due to a Quit With Good Reason, the
Company shall pay to the Officer, a Termination Payment in a lump sum cash
payment within thirty (30) days following the later of the Officer's termination
of employment or the occurrence of the Change in Control. Payments made to the
Officer hereunder as a Termination Payment shall be subject to applicable
federal, state and local tax withholding requirements. If the Officer's
employment is terminated due to his death or Disability, that will not be deemed
a termination of employment by the Company without Cause or by a Quit With Good
Reason.
4. Death Of Officer. If the Officer is entitled to receive a
Termination Payment and dies before receiving the Termination Payment, the
Company will pay the Termination Payment to his or her beneficiary as designated
in writing by the Officer or, in the absence of such written designation, his or
her estate. The Officer shall designate in writing a beneficiary or
beneficiaries to receive the Termination Payment hereunder. The Officer may
revoke or change his or her designation of a beneficiary at any time by written
notice to the Company.
5. Other Company Employment Benefits. If the Officer is entitled to
receive a Termination Payment, the Officer shall be entitled to participate in
certain employee insurance plans (as described below) for three (3) years
following the date of termination (the "Termination Coverage Period"). During
the Termination Coverage Period, the officer shall be treated as a continuing
employee for purposes of participation in and accrual of rights and benefits
under all of the Company's life, accident, medical and dental insurance plans
for Officer and his or her spouse. If such participation in one or more of such
plans is not possible, Company shall arrange to provide Officer with benefits
substantially similar to those which the Officer would have been entitled to
receive if he or she had continued as an employee at the Total Compensation
level. Benefits of continued participation in the Company deferred compensation
plan and any retirement plans hereafter adopted in which the Officer was
entitled to participate prior to the date of termination shall continue;
provided, however, that if Officer's continued participation is not possible
under the general terms and provisions of the foregoing plans, the Company shall
arrange to provide Officer with benefits substantially similar to those which
the Officer would have been entitled to receive under the foregoing plans if he
or she had continued as an employee of the Company during the Termination
Coverage Period.
<PAGE>
6. Tax Indemnity Payment. Should any of the payments or benefits that
are provided for hereunder to be paid to or for the benefit of Officer or
payments or benefits under any other plan, agreement or arrangement between
Officer and the Company, be determined or alleged to be subject to an excise or
similar purpose tax pursuant to Code Section 4999 or any successor or other
comparable federal, state or local tax laws, the Company shall pay to the
Officer such additional compensation as is necessary (after taking into account
all federal, state and local income taxes payable by the Officer as a result of
the receipt of such additional compensation) to place the Officer in the same
after-tax position (including federal, state and local taxes) the Officer would
have been in had no such excise or similar purpose tax (or any interest or
penalties thereon) been paid or incurred. The Company hereby agrees to pay such
additional compensation within ten (10) business days after the Officer notifies
the Company that the Officer intends to file a tax return which takes the
position that such excise or similar purpose tax is due and payable in reliance
upon a written opinion of the Officer's tax counsel (such tax counsel to be
chosen solely by the Officer), that is more likely than not that such excise tax
is due and payable. The costs of obtaining such tax counsel's opinion shall be
borne by the Company, and as long as such tax counsel was chosen by the Officer
in good faith, the conclusions reached in such opinion shall not be challenged
or disputed by the Company. If the Officer intends to make any payment with
respect to any such excise or similar purpose tax as a result of an adjustment
to the Officer's tax liability by any federal, state or local tax authority, the
Company will pay such additional compensation by delivering its cashier's check
payable in such amount to the Officer within ten (10) business days after the
Officer notifies the Company of his intention to make such payment. Without
limiting the obligation of the Company hereunder, the Officer agrees, in the
event the Officer makes any payment pursuant to the preceding sentence, to
negotiate with the Company in good faith with respect to procedures reasonably
requested by the Company which would afford the Officer the ability to contest
the imposition of such excise tax; provided, however, that the Officer will not
be required to afford the Company any right to contest the applicability of any
such excise tax to the extent that the Officer reasonably determines (based upon
the opinion of his tax counsel) that such contest is inconsistent with the
overall tax interests of the Officer.
7. No Mitigation. No amounts or benefits payable to the Officer
hereunder shall be subject to mitigation or reduction by income or benefits the
Officer receives from other sources.
8. Nondisclosure Of Confidential Information. The Officer agrees not to
disclose, directly or indirectly to any third person any Confidential
Information, Trade Secrets or customer list relating to Company's business
within three (3) years following payment of the Termination Payment.
9. Continued Employment. Nothing herein shall entitle Officer to
continued employment with the Company or to continued tenure in any specific
office or position.
<PAGE>
10. Sole Remedy. The Termination Payment provided hereby supersedes and
replaces any and all other termination compensation to which Officer is or might
become entitled, except termination compensation covered by an agreement in
effect on the Effective Date that has separately been approved by the
Compensation Committee or by the Board.
11. Assignment. The rights and obligations of the Company under this
Agreement shall inure to the benefit of the Company's successors and assigns.
This Agreement may be assigned by the Company to any legal successor to the
Company or to an entity which purchases all or substantially all of the assets
of the Company. In the event the Company assigns this Agreement as permitted by
this Agreement and the Officer remains employed by the assignee, the "Company"
as defined herein will refer to the assignee and the Officer will not be deemed
to have terminated employment hereunder until the Officer terminates employment
from the assignee.
12. Attorneys' Fees. If the Officer (or the Officer's estate in the
event of his or her death) brings any action at law or in equity to enforce any
of the provisions or rights hereunder, the Company shall pay all costs, expenses
and reasonable attorneys' fees incurred by the Officer.
13. Headings. Sections or other headings contained herein are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
14. Entire Agreement. This Agreement contains the entire understanding
of the parties with respect to the subject matter hereof.
15. Intentionally Omitted.
16. Severability. In the event that one or more of the provisions of
this Agreement shall be or become invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein shall not be affected thereby.
17. Governing Law. To the full extent controllable by stipulation of
the parties, this Agreement shall be interpreted and enforced under Michigan
law.
18. Amendment. This Agreement may not be modified, amended,
supplemented or terminated except by a written agreement between the Company and
the Officer.
IN WITNESS WHEREOF, each of the parties has executed this Agreement as
of the date and year first above written.
<PAGE>
COMPANY:
OMEGA WORLDWIDE, INC.,
a Maryland corporation
By:/s/: Essel W. Bailey, Jr.
----------------------------
Its:President and Chief Executive Officer
OFFICER:
/s/: Edward C. Noble
------------------------------
Edward C. Noble
AMENDMENT NO. 2 AND WAIVER TO LOAN AGREEMENT
AMENDMENT NO. 2 AND WAIVER TO LOAN AGREEMENT (this "Second Amendment"),
made and executed this 10th day of January, 2000, by and between:
OMEGA WORLDWIDE, INC., a Maryland corporation (the "Borrower");
The Banks that have executed the signature pages hereto (individually,
a "Bank" and collectively, the "Banks"); and
FLEET BANK, N.A., a national banking association, as Agent for the
Banks (in such capacity, together with its successors in such capacity, the
"Agent").
PRELIMINARY STATEMENTS
(A) The Borrower has entered into a certain Loan Agreement dated
November 20, 1998, as amended by Amendment No. 1 to Loan Agreement dated October
22, 1999, effective as of August 18, 1999 (as so amended, hereinafter referred
to as the "Loan Agreement") with the Agent and the Banks; and
(B) The Borrower has requested that the Banks and the Agent waive a
certain Event of Default under, and amend certain provisions of, the Loan
Agreement, and the Banks and the Agent are willing to do so, all on the terms
and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the agreements and provisions
contained herein, the parties hereto hereby agree as follows:
1. Definitions. Capitalized terms used but not otherwise
defined herein shall have the meanings ascribed to such terms in the Loan
Agreement.
2. Certain Amendments to Loan Agreement. The Loan Agreement is hereby
amended as follows:
2.1. The definition of "Total Commitment" appearing in Article
1 is amended by deleting the amount "Twenty-Five Million ($25,000,000) Dollars"
and substituting therefor the amount "Twenty Million ($20,000,000) Dollars".
2.2. The phrase "the amount set forth opposite such Bank's
name on the signature pages hereof" appearing in the definition of the term
"Revolving Credit Commitment" in Article 1 of the Loan Agreement shall be deemed
to refer to the amounts set forth opposite each Bank's name on the signature
pages hereto.
3. Waiver. The Borrower has advised the Agent of the occurrence of an
Event of Default under Section 8.11 of the Loan Agreement as a result of the
failure by Omega to maintain an investment grade Rating from at least two of the
three Ratings Agencies.
The Banks and the Agent hereby waive non-compliance by Omega
of Section 8.11 of the Loan Agreement for the period commencing December 29,
1999 through and including March 17, 2000; provided, however, the waiver granted
herein is limited to the matter expressly stated above and shall not be deemed
to be a waiver of any future violations of Section 8.11 after March 17, 2000 or
a waiver of any violation of any other provisions of the Loan Agreement.
4. Representations and Warranties. In order to induce the Banks and the
Agent to enter into this Second Amendment, each of the Loan Parties hereby
represents and warrants to the Banks and the Agent that:
4.1 No Default. After giving effect to this Second Amendment,
no Default or Event of Default shall have occurred or be continuing.
4.2 Existing Representations and Warranties. As of the date
hereof and after giving effect to this Second Amendment, each and every one of
the representations and warranties set forth in the Loan Documents are true,
accurate and complete in all respects and with the same effect as though made on
the date hereof, and each is hereby incorporated herein in full by reference as
if restated herein in its entirety, except for changes in the ordinary course of
business which are not prohibited by the Loan Agreement (as amended hereby) and
which do not, either singly or in the aggregate, have a Material Adverse Effect.
4.3 Authority; Enforceability. (i) The execution, delivery and
performance by each Loan Party of this Second Amendment are within its
organizational powers and have been duly authorized by all necessary action
(corporate or otherwise) on the part of each Loan Party, (ii) this Second
Amendment is the legal, valid and binding obligation of each Loan Party,
enforceable against each Loan Party in accordance with its terms, and (iii) this
Second Amendment and the execution, delivery and performance by each Loan Party
thereof does not: (A) contravene the terms of any Loan Party's organization
documents, (B) conflict with or result in any breach or contravention of, or the
creation of any Lien under, any document evidencing any contractual obligation
to which any Loan Party is a party or any order, injunction, writ or decree to
which any Loan Party or its property is subject, or (C) violate any requirement
of law.
5. Reference to and Effect Upon the Loan Agreement.
5.1 Effect. Except as specifically set forth herein, the Loan
Agreement and the other Loan Documents shall remain in full force and effect in
accordance with their terms and are hereby ratified and confirmed.
5.2 No Waiver; References. The execution, delivery and
effectiveness of this Second Amendment shall not operate as a waiver of any
right, power or remedy of the Agent or any Bank under the Loan Agreement, nor
constitute a waiver of any provision of the Loan Agreement, except as
specifically set forth herein. Upon the effectiveness of this Second Amendment,
each reference in:
(i) the Loan Agreement to "this Agreement",
"hereunder", "hereof", "herein" or words of similar import shall mean and be
a reference to the Loan Agreement as amended hereby;
(ii) the other Loan Documents to the "Loan Agreement"
shall mean and be a reference to the Loan
Agreement as amended hereby; and
(iii) the Loan Documents to the "Loan Documents"
shall be deemed to include this Second Amendment.
6. Miscellaneous.
6.1 Expenses. The Loan Parties agree to pay the Agent upon
demand for all reasonable expenses, including reasonable attorneys' fees and
expenses of the Agent, incurred by the Agent in connection with the preparation,
negotiation and execution of this Second Amendment.
6.2. Law. THIS SECOND AMENDMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK.
6.3 Successors. This Second Amendment shall be binding upon
the Loan Parties, the Banks and the Agent and their respective successors and
assigns, and shall inure to the benefit of the Loan Parties, the Banks and the
Agent and the successors and assigns of the Banks and the Agent.
6.4 Execution in Counterparts. This Second Amendment may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute one
and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Second
Amendment to be executed and delivered by their respective officers thereunto
duly authorized as of the date first written above.
<PAGE>
OMEGA WORLDWIDE, INC.
By /s/ Edward C. Noble
-------------------
Title
Revolving Credit Commitment: FLEET BANK, N.A., as Agent and as
a Bank
$12,000,000
By /s/ Christian Covello
----------------------
Title
Revolving Credit Commitment: HARRIS TRUST AND SAVINGS BANK
$8,000,000
By /s/ Kirby M. Law
-----------------
Title
Agreed to and Accepted:
OMEGA HEALTHCARE INVESTORS, INC.
By /s/ David A. Stover
-------------------
Title
AMENDMENT NO. 3 AND WAIVER TO LOAN AGREEMENT
AMENDMENT NO. 3 AND WAIVER TO LOAN AGREEMENT (this "Third Amendment"),
made and executed this 12th day of May, 2000, effective as of March 17, 2000 by
and between:
OMEGA WORLDWIDE, INC., a Maryland corporation (the "Borrower");
The Banks that have executed the signature pages hereto (individually,
a "Bank" and collectively, the "Banks"); and
FLEET BANK, N.A., a national banking association, as Agent for the
Banks (in such capacity, together with its successors in such capacity, the
"Agent").
PRELIMINARY STATEMENTS
(A) The Borrower has entered into a certain Loan Agreement dated
November 20, 1998, as amended by (i) Amendment No. 1 to Loan Agreement dated
October 22, 1999, effective as of August 18, 1999, and (ii) Amendment No. 2 and
Waiver to Loan Agreement dated January 10, 2000 (as so amended, hereinafter
referred to as the "Loan Agreement") with the Agent and the Banks; and
(B) The Borrower has requested that the Banks and the Agent waive a
certain Event of Default under, and amend certain provisions of, the Loan
Agreement, and the Banks and the Agent are willing to do so, all on the terms
and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the agreements and provisions
contained herein, the parties hereto hereby agree as follows:
1. Definitions. Capitalized terms used but not otherwise
defined herein shall have the meanings ascribed to such terms in the Loan
Agreement.
2. Certain Amendments to Loan Agreement. The Loan Agreement is hereby
amended as follows:
2.1. The definition of "Total Commitment" appearing in Article
1 is amended by deleting the amount "Twenty-Million ($20,000,000) Dollars" and
substituting therefor the amount "Eight Million Eight Hundred Fifty Thousand
($8,850,000) Dollars".
2.2. The phrase "the amount set forth opposite such Bank's
name on the signature pages hereof" appearing in the definition of the term
"Revolving Credit Commitment" in Article 1 of the Loan Agreement shall be deemed
to refer to the amounts set forth opposite each Bank's name on the signature
pages hereto.
3. Waiver. The Borrower has advised the Agent of the occurrence of an
Event of Default under (i) Section 8.4 of the Loan Agreement as a result of
Omega's failure to meet the minimum consolidated Tangible Net Worth test as of
December 31, 1999 as set forth in subsection 6.9(b) of the Omega Loan Agreement,
and (ii) Section 8.11 of the Loan Agreement as a result of the failure by Omega
to maintain an investment grade Rating from at least two of the three Ratings
Agencies.
The Banks and the Agent hereby waive non-compliance by Omega
of (i) Section 8.4 of the Loan Agreement for the period commencing December 31,
1999 through and including June 29, 2000, and (ii) Section 8.11 of the Loan
Agreement for the period commencing March 17, 2000 through and including June
29, 2000; provided, however, the waivers granted herein are limited to the
matters expressly stated above and shall not be deemed to be a waiver of any
future violations of Section 8.4 or Section 8.11 after June 29, 2000 or a waiver
of any violation of any other provisions of the Loan Agreement.
<PAGE>
The waivers set forth herein are subject to your agreement and
acknowledgement that notwithstanding such waivers, the Borrower shall not
request and the Banks are under no obligation to continue to make, any Loans
under the Loan Agreement (other than the rollover of outstanding LIBOR Loans in
accordance with the terms of the Loan Agreement), irrespective of whether the
Borrower repays or prepays any outstanding Loans.
4. Representations and Warranties. In order to induce the Banks and the
Agent to enter into this Third Amendment, each of the Loan Parties hereby
represents and warrants as to itself with respect to the Loan Documents to which
it is a party to the Banks and the Agent that:
4.1 No Default. After giving effect to this Third Amendment,
no Default or Event of Default shall have occurred or be continuing.
4.2 Existing Representations and Warranties. As of the date
hereof and after giving effect to this Third Amendment, each and every one of
the representations and warranties set forth in the Loan Documents are true,
accurate and complete in all respects and with the same effect as though made on
the date hereof, and each is hereby incorporated herein in full by reference as
if restated herein in its entirety, except for changes in the ordinary course of
business which are not prohibited by the Loan Agreement (as amended hereby) and
which do not, either singly or in the aggregate, have a Material Adverse Effect.
4.3 Authority; Enforceability. (i) The execution, delivery and
performance by each Loan Party of this Third Amendment are within its
organizational powers and have been duly authorized by all necessary action
(corporate or otherwise) on the part of each Loan Party, (ii) this Third
Amendment is the legal, valid and binding obligation of each Loan Party,
enforceable against each Loan Party in accordance with its terms, and (iii) this
Third Amendment and the execution, delivery and performance by each Loan Party
thereof does not: (A) contravene the terms of any Loan Party's organization
documents, (B) conflict with or result in any breach or contravention of, or the
creation of any Lien under, any document evidencing any contractual obligation
to which any Loan Party is a party or any order, injunction, writ or decree to
which any Loan Party or its property is subject, or (C) violate any requirement
of law.
5. Reference to and Effect Upon the Loan Agreement.
5.1 Effect. Except as specifically set forth herein, the Loan
Agreement and the other Loan Documents shall remain in full force and effect in
accordance with their terms and are hereby ratified and confirmed.
5.2 No Waiver; References. The execution, delivery and
effectiveness of this Third Amendment shall not operate as a waiver of any
right, power or remedy of the Agent or any Bank under the Loan Agreement, nor
constitute a waiver of any provision of the Loan Agreement, except as
specifically set forth herein. Upon the effectiveness of this Third Amendment,
each reference in:
(i) the Loan Agreement to "this Agreement",
"hereunder", "hereof", "herein" or words of similar import shall mean and be a
reference to the Loan Agreement as amended hereby;
(ii) the other Loan Documents to the "Loan Agreement"
shall mean and be a reference to the Loan Agreement as amended hereby; and
(iii) the Loan Documents to the "Loan Documents"
shall be deemed to include this Third Amendment.
6. Miscellaneous.
6.1 Expenses. The Loan Parties agree to pay the Agent upon
demand for all reasonable expenses, including reasonable attorneys' fees and
expenses of the Agent, incurred by the Agent in connection with the preparation,
negotiation and execution of this Third Amendment.
6.2. Law. THIS THIRD AMENDMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK.
6.3 Successors. This Third Amendment shall be binding upon the
Loan Parties, the Banks and the Agent and their respective successors and
assigns, and shall inure to the benefit of the Loan Parties, the Banks and the
Agent and the successors and assigns of the Banks and the Agent.
<PAGE>
6.4 Execution in Counterparts. This Third Amendment may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute one
and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Third Amendment
to be executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
OMEGA WORLDWIDE, INC.
By /s/ Edward C. Noble
--------------------
Title
Revolving Credit Commitment: FLEET BANK, N.A., as Agent and as
a Bank
$5,310,000
By /s/ Christian Covello
---------------------
Title
Revolving Credit Commitment: HARRIS TRUST AND SAVINGS BANK
$3,540,000
By /s/Michael J. Johnson
----------------------
Title
Agreed to and Accepted:
OMEGA HEALTHCARE INVESTORS, INC.
By /s/ Essel W. Bailey, Jr.
------------------------
Title
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<TOTAL-REVENUES> 40,053
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