<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
OMEGA HEALTH SYSTEMS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
OMEGA HEALTH SYSTEMS, INC.
July 10, 1998
On behalf of the Board of Directors and management, I invite you to attend the
Annual Meeting of Shareholders of Omega Health Systems, Inc., to be held on
Wednesday, August 12, 1998 at 11:00 A.M., local time, in the corporate offices
of Omega Health Systems, Inc., 5350 Poplar Avenue, Suite 900, Memphis, Tennessee
38119.
The notice of meeting and proxy statement accompanying this letter describe the
specific business to be acted upon. The Annual Report to Shareholders is also
included.
In addition to the specific matters to be acted upon, there will be a report on
the progress of the Company and an opportunity for questions of general interest
to shareholders.
It is important that your shares be represented at the meeting. Whether or not
you plan to attend in person, you are requested to mark, sign, date and promptly
return the enclosed proxy in the envelope provided.
Sincerely yours,
Andrew W. Miller
Chairman of the Board
<PAGE> 3
OMEGA HEALTH SYSTEMS, INC.
5350 POPLAR AVENUE, SUITE 900
MEMPHIS, TENNESSEE 38119
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
AUGUST 12, 1998
Notice is hereby given that the Annual Meeting of Shareholders of Omega Health
Systems, Inc. (the "Company"), will be held on Wednesday, August 12, 1998, at
11:00 A.M., local time, in the corporate offices of the Company at 5350 Poplar
Avenue, Suite 900, Memphis, Tennessee 38119, for the following purposes:
1. To elect three directors to serve as described herein or until their
successors have been duly elected and qualified.
2. To approve the amendment to the 1995 Incentive and Non-qualified Stock
Option Plan (the "Option Plan") by increasing the number of shares
reserved for issuance by 150,000 shares.
3. To approve the amendment to the 1991 Employee Stock Purchase Plan (the
"Purchase Plan") by increasing the number of shares reserved for
issuance by 25,000 shares.
4. To ratify the authorization of the Audit and Compliance Committee of
the Board of Directors to select the Company's independent auditors
for the year 1998.
5. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Shareholders of record at the close of business on June 15, 1998 are entitled to
notice of and to vote at the Annual Meeting of Shareholders.
By Order of the Board of Directors
Ronald L. Edmonds, Secretary
IMPORTANT
WHETHER YOU EXPECT TO ATTEND THE ANNUAL MEETING OR NOT, PLEASE MARK, SIGN, DATE
AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN THE STAMPED ENVELOPE
PROVIDED.
<PAGE> 4
OMEGA HEALTH SYSTEMS, INC.
5350 POPLAR AVENUE, SUITE 900
MEMPHIS, TENNESSEE 38119
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
AUGUST 12, 1998
INFORMATION CONCERNING THE SOLICITATION
This statement is furnished in connection with the solicitation of proxies to be
used at the Annual Meeting of Shareholders (the "Annual Meeting") of Omega
Health Systems, Inc. (the "Company") to be held Wednesday, August 12, 1998 at
11:00 A.M.
At the Annual Meeting, the shareholders will vote (1) to elect three directors,
(2) to approve the amendment to the 1995 Incentive and Non-qualified Stock
Option Plan (the "Option Plan") by increasing the number of shares reserved for
issuance by 150,000 shares, (3) to approve the amendment to the 1991 Employee
Stock Purchase Plan (the "Purchase Plan") by increasing the number of shares
reserved for issuance by 25,000 shares and (4) to ratify the authority of the
Audit Committee of the Board of Directors to select the Company's independent
auditors for 1998. The affirmative vote of a plurality of the shares present or
represented at the meeting, if a quorum exists, is required to elect the
directors. The affirmative vote of a majority of the shares present or
represented at the meeting, if a quorum exists, is required to approve the
proposals to approve the amendment to increase the number of shares reserved for
issuance under the Option Plan, to approve the amendment to increase the number
of shares reserved for issuance under the Purchase Plan, and to ratify the
authority of the Audit Committee of the Board of Directors to select the
Company's independent auditors for the year 1998. The presence in person or by
proxy of the holders of a majority of the issued and outstanding shares of the
Common Stock entitled to vote at the Annual Meeting is necessary to constitute a
quorum.
Shareholders are urged to sign the enclosed form of proxy and return it promptly
in the envelope enclosed for that purpose. Proxies will be voted in accordance
with the shareholders' directions. If no directions are given, proxies will be
voted FOR the election of the nominees named herein as directors, FOR the
approval of the amendment to increase the number of shares reserved for issuance
under the option plan, FOR the approval of the amendment to increase the number
of shares reserved for issuance under the purchase plan and FOR the ratification
of the authority of the Audit and Compliance Committee of the Board of Directors
to select the Company's independent auditors of the year 1998.
SHAREHOLDER'S PROPOSALS FOR 1998 ANNUAL MEETING
Shareholders' proposals intended to be presented at the 1999 annual Meeting of
Shareholders must be received by the Company no later than February 15, 1999 for
inclusion in the Company's proxy statement and form of proxy relating to that
meeting.
OUTSTANDING VOTING SECURITIES
Only shareholders of record on June 15, 1998, are entitled to notice of and to
vote at the Annual Meeting. On that date there were 8,716,690 shares of Common
Stock issued and outstanding. The holder of each share of common stock is
entitled to one vote on all matters submitted before the Annual Meeting or any
adjournments of the Annual Meeting.
1
<PAGE> 5
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of March 1, 1998, the Company's records indicated that the following number
of shares were beneficially owned by (i) each person known by the Company to
beneficially own more than 5% of the Company's shares; (ii) directors and
persons nominated to become directors of the Company and executive officers; and
(iii) directors and officers of the Company as a group.
<TABLE>
<CAPTION>
Amount and
Nature of
Beneficial Percent
Name of Beneficial Owner Ownership (1) of Class(1)
------------------------ ------------- -----------
<S> <C> <C>
(i) None -0- -0-
(ii) Andrew W. Miller(2) 334,992 3.50%
Herman L. Tacker, O.D.(3) 130,219 1.36%
David M. Dillman, M.D. 66,667 0.70%
Donald H. Beisner, M.D. -0- -0-
Thomas P. Lewis(4) 167,272 1.75%
Ronald L. Edmonds(5) 23,600 0.25%
Donald A. Hood, O.D.(6) 97,541 1.02%
Robert C. Kelly -0- -0-
Allen D. Leck 383 -0-
Cassandra T. Speier(7) 5,000 0.05%
Randall N. Reichle, O.D.(8) 18,079 0.19%
(iii) Directors and Executive Officers as a group 843,753 8.81%
(11 persons)(9)
</TABLE>
(1) Unless otherwise indicated, beneficial ownership consists of sole voting and
investing power based on 9,576,014 shares issued and outstanding, including
options and warrants to purchase 860,324 shares which are exercisable or become
exercisable within 60 days.
(2) Included in Mr. Miller's shares are options to purchase 10,000 shares.
(3) Of the total of 130,219 shares shown, 16,875 are held jointly by Dr. Tacker
and his wife, Wilma R. Tacker. Included in Dr. Tacker's shares are options to
purchase 8,333 shares.
(4) Included in Mr. Lewis' shares are options to purchase 35,000 shares.
(5) Included in Mr. Edmonds' shares are options to purchase 20,333 shares.
(6) Included in Dr. Hood's shares are options to purchase 16,667 shares.
(7) Included in Ms. Speier's shares are options to purchase 5,000 shares.
(8) Included in Mr. Reichle's shares are options to purchase 7,333 shares.
(9) Included in the ownership of directors and executive officers as a group are
options to purchase 102,666 shares, which are exercisable or become exercisable
within 60 days.
2
<PAGE> 6
PROPOSAL 1. ELECTION OF DIRECTORS
The Company's By-laws provide for a board of directors divided into three
classes. Each class is to consist as nearly as possible of one-third of the
directors. At the Annual Meeting, the following two (2) directors, both of whom
are members of the present Board, are nominees for election to hold office for a
three-year term beginning in 1998 or until their successors are elected and
qualified:
RONALD L. EDMONDS
THOMAS P. LEWIS
Also at the Annual Meeting, the following director, who is also a member of the
present Board, is a nominee for election to hold office for a one-year term
beginning in 1998 or until his successor is elected and qualified:
DONALD H. BEISNER, M.D.
If any nominee should be unable to accept nomination or election as a director,
which is not expected, the proxies may be voted with discretionary authority for
a substitute designated by the Board of Directors. The election of a director
requires the affirmative vote of a plurality of shares present or represented at
the meeting.
Set forth below is biographical information concerning the directors and
nominees for directors of the Company:
DONALD H. BEISNER, M.D. (59) has served as a director of the Company since
January 1998. Dr. Beisner was in private ophthalmic practice from 1975 through
1995. He serves as secretary of the Board of Directors of the Hawaiian Eye
Foundation. Dr. Beisner received his medical degree from the University of Iowa
College of Medicine and completed his ophthalmology residency at the University
of Iowa Hospital and Clinics.
DAVID M. DILLMAN, M.D. (46) has served as a director of the Company since August
1997, and at that date became the Company's National Medical Director. Dr.
Dillman has been in private ophthalmic practice since 1981 and is currently the
Medical Director of Dillman Eye Care, an Omega Affiliated Practice, in Danville,
Illinois. He serves on the Scientific Advisory Board for the American Society of
Cataract and Refractive Surgery and on the board of directors for the American
College of Eye Surgeons. Dr. Dillman is a graduate of the University of Notre
Dame, received his medical degree from Indiana University and completed his
ophthalmology residency at the Mayo Clinic in Rochester, Minnesota.
RONALD L. EDMONDS (42) has served as the Company's Executive Vice President
since January 1997 and Chief Financial Officer since September 1992. From
September 1992 until December 1996, he served as Senior Vice President. He was
elected a director in February 1993 and Secretary in October 1994. From 1978
until 1992, he served in various positions with KPMG Peat Marwick in Memphis,
Tennessee, Oklahoma City, Oklahoma and New York City, New York. Mr. Edmonds is a
certified public accountant and holds B.S. and M.S. degrees in accounting from
Oklahoma State University.
DONALD A. HOOD, O.D. (53) was one of the founders of The Eye Health Network,
Inc. in 1988 and presently serves as its President and Chief Executive Officer.
He was elected to the Company's board of directors in April 1994. Dr. Hood has
maintained a private optometry practice in the Denver, Colorado area since 1972.
Dr. Hood graduated from the Pacific University College of Optometry in 1968.
THOMAS P. LEWIS (43) has served as the Company's President since January 1990
and as its Chief Executive Officer since March 1, 1991. From June 1988 to
December 1989, he served as Executive Vice President, and Chief Operating
Officer. Mr. Lewis has been the Company's Secretary since June 1986. From June
1986, until the merger with Omega Health Services, Inc., in June 1988, he served
as the Company's President and Chief
3
<PAGE> 7
Executive Officer. He has been a director since June 1986. From June 1985 to
June 1986, Mr. Lewis served as the Company's Vice President.
ANDREW W. MILLER (54) has served as the Company's Chairman of the Board of
Directors since September 30, 1990 and has been a principal stockholder of the
Company since 1986. Mr. Miller served as the Company's Chief Executive Officer
from September 30, 1990 until March 1, 1991. Since June 1996, Mr. Miller has
served as chairman and chief executive officer of Women's Health Partners, Inc.,
a physician practice management company specializing in obstetrics and
gynecology. Since 1989 Mr. Miller has served as Chairman of American Healthmark,
Inc., a hospital ownership and management corporation. Formerly Mr. Miller was
affiliated with Surgical Care Affiliates, Inc. ("SCA"), an owner and operator of
outpatient health care facilities, Hospital Corporation of America ("HCA") and
HCA Management Company ("HMC"), a division of HCA. Mr. Miller is a certified
public accountant and prior to his association with HCA was employed by a
national accounting firm.
HERMAN L. TACKER, O.D. (59) has served as a director of the Company since
October 1985. Since 1972, Dr. Tacker has conducted a private optometric practice
in Memphis, Tennessee, and has served as a Professor at the Southern College of
Optometry. He graduated from the Southern College of Optometry and earned a M.S.
Degree in Education from Indiana University.
OTHER EXECUTIVE OFFICERS
The following persons also serve as executive officers of the Company:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Robert C. Kelly 45 Senior Vice President, Center Operations
Allen D. Leck 50 Senior Vice President, ValueAdded Services
Randall N. Reichle, O.D. 45 National Optometric Director
and Vice President
Cassandra T. Speier 39 Senior Vice President , Development, Chief
Compliance Officer
</TABLE>
INFORMATION REGARDING MEETINGS OF DIRECTORS
During the last fiscal year, the Board of Directors held four Board of Directors
meetings. All directors attended no less than 75% of the meetings held during
1997.
The Board of Directors has four committees - an Executive Committee, a Quality
Assurance Committee, a Compensation Committee and an Audit and Compliance
Committee. Members of the Executive Committee during 1997 were Messrs. Miller,
Lewis, and Tacker. The Executive Committee is authorized by the Board of
Directors to take any action, as individually approved by the Board, which may
be taken by the Board of Directors, except the power to alter or amend the
Bylaws; submit to shareholders any action that needs shareholders'
authorization; fill vacancies on the Board of Directors or any committee
thereof; or declare dividends or make any other distributions. The Executive
Committee held four meetings during 1997.
Members of the Quality Assurance Committee during 1997 were Messrs. Miller,
Lewis and Tacker. The Quality Assurance Committee was appointed by the Board of
Directors to establish and monitor risk management policies. The Quality
Assurance Committee held four meetings during 1997.
Members of the Compensation Committee during 1997 were Messrs. Miller and
Tacker. The Compensation Committee was appointed by the Board of Directors to
administer its employee benefit plans. The Compensation Committee held two
meetings during 1997.
4
<PAGE> 8
Members of the Audit Committee during 1997 were Messrs. Miller and Tacker. The
Audit Committee was appointed to engage independent auditors and review audit
fees, supervise matters relating to audit functions, review audit results with
the auditors, and review the scope and results of the Company's internal
auditing procedures and the adequacy of the internal controls. The audit
committee held two meetings during 1997.
EXECUTIVE COMPENSATION
The following table shows the aggregate cash compensation paid by the Company to
(i) the chief executive officer, and (ii) the executive officers of the Company
for the years ended December 31, 1997, 1996, and 1995.
5
<PAGE> 9
<TABLE>
<CAPTION>
Annual Compensation
---------------------------------------------------------------------
Long Term
Other Annual Compensation
Name and Position Year Salary ($) Bonus ($) Compensation($) Options (#)
- ----------------- ---- ---------- --------- ---------------- ------------
<S> <C> <C> <C> <C> <C>
Thomas P. Lewis 1997 175,000 22,500 -0- -0-
President and Chief Executive 1996 104,000 14,426 -0- 100,000
Officer 1995 104,000 6,000 8,335(1) -0-
Ronald L. Edmonds 1997 115,000 20,000 -0- 25,000
Executive Vice President and 1996 92,000 9,617 -0- 25,000
Chief Financial Officer 1995 92,000 4,000 -0- -0-
Donald A. Hood, O.D. 1997 141,833 -0- -0- -0-
Senior Vice President - 1996 85,000 54,959 -0- -0-
Managed Care 1995 85,000 25,000 -0- -0-
Allen D. Leck 1997 75,519 14,885 -0- -0-
Senior Vice President-
Value-Added Services
Cassandra T. Speier 1996 91,540 7,500 -0- -0-
Senior Vice President - Development 1995 89,000 -0- -0- 25,000
And Chief Compliance Officer 1994 86,833 1,250 -0- -0-
Randall N. Reichle, O.D. 1997 98,875 32,713 -0- -0-
Vice President and 1996 84,000 52,115 -0- 5,000
National Optometric Director 1995 84,000 46,333 -0- -0-
</TABLE>
(1) In January 1990, the Company entered into a stock bonus arrangement with
Mr. Lewis, pursuant to which Mr. Lewis was issued 1,667 shares on each
January 1, for five years, commencing January 1, 1991, provided Mr. Lewis
was an employee of the Company on such dates. The stock bonus arrangement
was partial compensation for Mr. Lewis' relocation to Memphis, Tennessee.
<TABLE>
<CAPTION>
Option Grants in 1997(1)
-------------------------------------------------------------------------------------
Potential Realizable
Value at Assumed Rates of
% of Total Options Exercise Stock Appreciation for
Options Granted to Price Option Term
Name Granted Employees in 1997 ($/Sh) Expiration Date 5%($) 10%($)
- ---- ------- ----------------- ------ --------------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Ronald L. Edmonds 25,000 22% $6.50 January, 2003 55,266 125,379
Donald A. Hood 25,000 22% $6.50 January, 2003 55,266 125,379
</TABLE>
6
<PAGE> 10
<TABLE>
<CAPTION>
Aggregated Option Exercises in 1997(1) and Year end Option Values(2)
--------------------------------------------------------------------------
Number of Unexercised Options Value of Unexercised In-The-Money Options
at Year End at Year End ($)
Name Exercisable/Unexercisable Exercisable/Unexercisable (2)
- ---- ------------------------- -----------------------------
<S> <C> <C>
Thomas P. Lewis 35,000/105,000 $157,500/$197,500
Ronald L. Edmonds 20,333/52,667 $91,500/$80,750
Donald A. Hood, O.D. 16,667/58,333 $61,167/$147,333
Robert C. Kelly 0/15,000 $0/$3,750
Cassandra T. Speier 5,000/35,000 $15,000/$73,750
Randall N. Reichle, O.D. 7,333/8,667 $33,000/$25,250
</TABLE>
(1) During 1997, no options were exercised by any executive officer.
(2) Option values are based on a December 31, 1997 market price per share of
$7.50.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The compensation of the Company's executive officers is reviewed and approved by
the Compensation Committee. The Compensation Committee is currently composed of
Mr. Miller and Dr. Tacker, neither of whom at any time has been an officer or
employee of the Company, except that Mr. Miller did serve as the Company's chief
executive officer, not as an employee, from September 30, 1990 until March 1,
1991. In addition to reviewing and approving executive officers' salary and
bonus arrangements, the Compensation Committee administers the awards of stock
options pursuant to the Company's Stock Option Plan.
COMPENSATION POLICIES APPLICABLE TO EXECUTIVE OFFICERS FOR 1997
The objectives of the Company's executive compensation program are to (1)
attract, motivate and retain key executives responsible for the success of the
Company, (2) reward key executives based on corporate and individual
performance, and (3) provide incentives designed to maximize shareholder value.
The three primary components of the executive officer compensation program are
base salaries, cash bonuses, and equity awards in the form of stock options.
The base salary of each of the Company's executive officers is established
pursuant to an employment agreement that is approved by the Compensation
Committee. Base salaries are reviewed by the Compensation Committee and may be
increased in the Committee's discretion.
Each executive officer is entitled to receive such bonuses or other incentive
compensation as the Compensation Committee determines in its sole discretion. In
determining bonuses, the Committee considers overall company performance and the
performance of the individual executive in contributing to the overall company
performance. Dr. Reichle and Dr. Hood have specific bonus arrangements based on
the performance, in terms of earnings and, in the case of Dr. Reichle, revenues,
of the business units of the Company to which they give leadership.
In order to align long-term interests of executive officers with those of
shareholders, the Compensation Committee, in its subjective discretion, from
time to time considers the award of stock options. The terms of these options,
including the sizes of the grants, are determined by the Compensation Committee
based on its subjective judgment and without regard to any specific performance
criteria. Awards of stock options to executive officers have historically been
for a term of six years at then-current market prices with vesting in the third,
fourth and fifth years of the option term.
7
<PAGE> 11
CEO COMPENSATION
In evaluating the compensation of Thomas P. Lewis, the Company's chief executive
officer, the Compensation Committee utilized the same compensation policies
applicable to executive officers in general. As of August 1, 1996, the Company
entered into an Employment Agreement with Mr. Lewis. The Agreement increased Mr.
Lewis' annual base salary to $150,000 and provides for a salary increase of
$50,000 upon the Company achieving a specific earnings per share performance
goal, which was met in 1997. The Agreement granted Mr. Lewis qualified options
to purchase 100,000 shares of Company stock at $5.75 per share, which options do
not vest the first two years and vest 1/3 per year beginning August 1, 1999. The
options terminate August 1, 2002. The Company also agreed to grant Mr. Lewis
options to purchase an additional 100,000 shares of Company common stock, which
grant is contingent upon the Company achieving a specific earnings per share
performance goal. As part of the Agreement, Mr. Lewis agreed to certain
non-competition and confidentiality provisions that would continue after the
termination of his employment. In the event of Mr. Lewis' termination of
employment related to a change in control of the Company, Mr. Lewis shall be
paid by the Company a lump sum payment of one year's salary, and the Company
shall provide for two years certain insurance benefits.
OTHER EXECUTIVE EMPLOYMENT ARRANGEMENTS
Effective January 1, 1997, the Company entered into an Employment Agreement with
Ronald L. Edmonds, its Executive Vice President and Chief Financial Officer. The
Agreement increased Mr. Edmonds' annual base salary to $115,000 on January 1,
1997 and provides for a $15,000 increase effective January 1, 1998. The
Agreement granted Mr. Edmonds qualified options to purchase 25,000 shares of
Company common stock at $6.50 per share, which options do not vest the first two
years and vest 1/3 per year beginning January 1, 2000. The options terminate
January 1, 2003. As part of the Agreement, Mr. Edmonds agreed to certain
non-competition and confidentiality provisions that would continue after the
termination of his employment. In the event of Mr. Edmonds' termination of
employment related to a change in control of the Company, Mr. Edmonds shall be
paid by the Company a lump sum payment of one year's salary, and the Company
shall provide for up to one year certain insurance benefits.
Effective January 1, 1997, the Eye Health Network, Inc., a wholly-owned
subsidiary of the Company entered into an Employment Agreement with Donald A.
Hood, O.D. Under the terms of the Agreement, Dr. Hood's annual base salary
during the first phase of the Agreement is $125,000. During the second phase of
the Agreement, Dr. Hood's base salary will be $80,000. During the first phase,
Dr. Hood will serve as President and Chief Executive Officer of The Eye Health
Network, Inc. and during phase two as its Chairman. The Agreement granted Dr.
Hood qualified options to purchase 25,000 shares of Company common stock at
$6.50 per share, which options do not vest the first two years and vest 1/3 per
year beginning January 1, 2000. The options terminate January 1, 2003. As part
of the Agreement, Dr. Hood agreed to certain non-competition and confidentiality
provisions that would continue after the termination of his employment. In the
event of Dr. Hood's termination of employment related to a change in control of
the Company, Dr. Hood shall be paid by the Company a lump sum payment of one
year's salary, and the Company shall provide for up to two years certain
insurance benefits. In June 1997, Dr. Hood was named Chairman.
ANDREW W. MILLER HERMAN L. TACKER, O.D.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is currently composed of Mr. Miller and Dr. Tacker,
neither of whom at any time has been an officer or employee of the Company,
except that Mr. Miller did serve as the Company's chief executive officer, not
as an employee, from September 30, 1990 until March 1, 1991. No executive
officer of the Company served during 1997 as a member of a compensation
committee or as a director of any entity of which any of the Company's directors
serves as an executive officer.
8
<PAGE> 12
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has, and expects to have, transactions in the ordinary course of its
business with directors and officers of the Company and their affiliates,
including members of their families or corporations, partnerships or other
organizations in which such officers or directors have a controlling interest,
on substantially the same terms (including price, or interest rates and
collateral) as those prevailing at the time for comparable transactions with
unrelated parties. The Company has an agreement to perform management services
for Cathleen M. Schanzer, M.D., the Medical Director for the Company's Memphis
Center. Dr. Schanzer is the wife of the Company's president, Thomas P. Lewis.
The management agreement includes payments to Dr. Schanzer equal to 35% of the
cash receipts of the practice, but with minimum payments to her totaling
$200,400 per year. Dr. Schanzer received approximately $453,000 in 1997 pursuant
to the management agreement.
PERFORMANCE GRAPH
The following graph compares the cumulative returns of $100 invested on December
31, 1992 in (a) the Company, (b) the CRSP Index for the Nasdaq Stock Market
("The Nasdaq Stock Market"), and (3) the CSRP Index for Nasdaq Health Services
Stocks ("Nasdaq Health Services Stocks"), assuming reinvestment of all
dividends.
<TABLE>
<CAPTION>
Measurement Period Indexed to 1992 Indexed to 1992 Indexed to 1992
(Fiscal Year Covered) Omega Health Systems, Inc. The Nasdaq Stock Market Nasdaq Health Services Stocks
<S> <C> <C> <C>
1992 100 100 100
1993 145 115 115
1994 164 112 124
1995 191 159 157
1996 241 195 157
1997 273 240 160
</TABLE>
9
<PAGE> 13
PROPOSAL 2. AMENDMENT TO 1995 STOCK OPTION PLAN
The Board of Directors believes that it is in the best interests of the Company
and its shareholders to increase the authorized number of shares under the
Company's Stock Option Plan reserved for issuance to key employees, advisors,
officers and directors of the Company.
Effective May 1, 1998, the Board of Directors approved an amendment to the
Company's Purchase Plan, which, if approved, would increase the number of shares
of the Company's common stock reserved for issuance reserved for issuance under
the Option Plan from 300,000 to 450,000.
The affirmative vote of the holders of a majority of the outstanding shares of
Common Stock present or represented at the meeting, if a quorum exists, is
required to authorize the proposed amendment to the Option Plan.
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR" THE AMENDMENT TO THE COMPANY'S
OPTION PLAN TO INCREASE THE NUMBER OF SHARES RESERVED FOR ISSUANCE UNDER THE
OPTION PLAN FROM 300,000 TO 450,000.
PROPOSAL 3. AMENDMENT TO 1991 STOCK PURCHASE PLAN
The Board of Directors believes that it is in the best interests of the Company
and its shareholders to increase the authorized number of shares under the
Company's Employee Stock Purchase Plan reserved for issuance to employees of the
Company.
Effective May 1, 1998, the Board of Directors approved an amendment to the
Company's Purchase Plan, which, if approved, would increase the number of shares
of the Company's common stock reserved for issuance reserved for issuance under
the Purchase Plan from 50,000 to 75,000.
The affirmative vote of the holders of a majority of the outstanding shares of
Common Stock present or represented at the meeting, if a quorum exists, is
required to authorize the proposed amendment to the Purchase Plan.
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR" THE AMENDMENT TO THE COMPANY'S
OPTION PLAN TO INCREASE THE NUMBER OF SHARES RESERVED FOR ISSUANCE UNDER THE
PURCHASE PLAN FROM 50,000 TO 75,000.
PROPOSAL 4. RATIFICATION OF THE AUTHORIZATION FOR THE AUDIT COMMITTEE
TO SELECT 1998 INDEPENDENT AUDITORS
The Board of Directors has authorized the Audit Committee to select the
Company's independent auditors for the year 1998. The empowering of the Audit
Committee is subject to approval by the shareholders not later than the date of
the annual meeting of shareholders. KPMG Peat Marwick LLP served as independent
auditors of the Company for the year ended December 31, 1997. Representatives of
the firm will be present at the Annual Meeting, have an opportunity to make a
statement if they so desire and are expected to be available to respond to
appropriate questions.
The affirmative vote of the holders of a majority of the outstanding shares of
Common Stock present or represented at the meeting, if a quorum exists, is
required to ratify the authority of the Audit Committee to select the Company's
independent auditors for 1998.
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR" RATIFICATION OF THE AUTHORITY OF
THE AUDIT COMMITTEE TO SELECT THE COMPANY'S INDEPENDENT AUDITORS FOR 1998.
10
<PAGE> 14
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
The federal securities laws require the Company's directors and officers, and
persons who own more than ten percent of a registered class of the Company's
equity securities, to file with the Securities and Exchange Commission initial
reports of ownership and reports of changes in ownership of any securities of
the Company. To the Company's knowledge, based solely on review of the copies of
such reports furnished to the Company and representations that no other reports
were required, during the fiscal year ended December 31, 1997, all of the
Company's officers and directors made all required filings, except that each
director and officer filed one late annual report on Form 5.
OTHER MATTERS
The Board of Directors, at the time of the preparation of this Proxy Statement,
knows of no business to come before the meeting other than that referred to
herein. If any other business should come before the meeting, the persons named
in the enclosed Proxy will have discretionary authority to vote all proxies in
accordance with their best judgment.
UPON THE WRITTEN REQUEST OF ANY RECORD HOLDER OR BENEFICIAL OWNER OF COMMON
STOCK ENTITLED TO VOTE AT THE ANNUAL MEETING, THE COMPANY, WITHOUT CHARGE, WILL
PROVIDE A COPY OF ITS ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31,
1997, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. REQUESTS SHOULD BE
DIRECTED TO RONALD L. EDMONDS, SECRETARY, OMEGA HEALTH SYSTEMS, INC., 5350
POPLAR AVENUE, SUITE 900, MEMPHIS, TENNESSEE 38119, WHICH IS THE ADDRESS OF THE
COMPANY'S PRINCIPAL EXECUTIVE OFFICES.
BY ORDER OF THE BOARD OF DIRECTORS
Memphis, Tennessee Thomas P. Lewis
July 10, 1998 President and Chief Executive Officer
11
<PAGE> 15
OMEGA HEALTH SYSTEMS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned appoints Robert Walker and George T. Lewis, III, with full
power of substitution and revocation as Proxy to vote all shares of stock
standing in my name on the books of Omega Health Systems, Inc. (the "Company")
at the close of business on June 15, 1998 which I would be entitled to vote if
personally present at the Annual Meeting of Shareholders of the Company to be
held in the Company's offices at 5350 Poplar Avenue, Suite 900, Memphis,
Tennessee 38119 on August 12, 1998, at 11:00 A.M., local time, and at any and
all adjournments, upon the matters set forth in the notice of said meeting. The
Proxy is further authorized to vote at his discretion as to any other matters
which may come before the meeting. The Board of Directors at the time of
preparation of the Proxy Statement knows of no business to come before the
meeting other than that referred to in the Proxy Statement.
THE SHARES COVERED BY THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE
INSTRUCTIONS GIVEN BELOW AND WHEN NO INSTRUCTIONS ARE GIVEN WILL BE VOTED FOR
THE PROPOSALS DESCRIBED IN THE ACCOMPANYING NOTICE OF ANNUAL MEETING AND PROXY
STATEMENT AND ON THIS PROXY.
1. Election of three(3) directors
For all nominees below (except as indicated to the contrary
------------- below.)
WITHHOLD AUTHORITY to vote for all nominees listed below.
-------------
Donald H. Beisner, M.D. Ronald L. Edmonds Thomas P. Lewis
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE
SUCH NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.
------------------------------------------------------------------------------
2. To approve the amendment to the 1995 Stock Option Plan.
[ ] For [ ] Against [ ] Abstain
3. To approve the amendment to the 1991 Stock Purchase Plan.
[ ] For [ ] Against [ ] Abstain
4. To ratify the authorization of the Audit Committee of the Board of Directors
to select the Company's independent auditors for the year 1998.
[ ] For [ ] Against [ ] Abstain
The undersigned hereby acknowledges receipt of notice of said meeting and the
related proxy statement.
Date:
------------------------ Signed:
-----------------------------
Signed:
-----------------------------
Shareholder signs here
exactly as shown on the label
affixed hereto.
Administrator, Trustee or
Guardian, please give full
title. If more than one
Trustee, all should sign. All
joint owners should sign.
