<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:
[ ] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive proxy statement
[X] Definitive revised materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
OMEGA HEALTHCARE INVESTORS, INC.
- -------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
OMEGA HEALTHCARE INVESTORS, INC.
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[ ] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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 HEALTHCARE INVESTORS, INC.
905 WEST EISENHOWER CIRCLE, SUITE 110
ANN ARBOR, MICHIGAN 48103
(313) 747-9790
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
APRIL 15, 1997
To the Shareholders:
The Annual Meeting of Shareholders of Omega Healthcare Investors, Inc. will
be held at the offices of the Company at 905 West Eisenhower Circle, Suite 110,
Ann Arbor, Michigan on Tuesday, April 15, 1997, at 11:00 a.m., for the following
purposes:
1. To elect three members of the Board of Directors; and
2. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The nominees for election as directors are James E. Eden, Thomas F. Franke,
and Bernard J. Korman, each of whom is presently serving as a director of the
Company.
The Board of Directors has fixed the close of business on March 12, 1997 as
the record date for the determination of shareholders who are entitled to notice
of and to vote at the meeting or any adjournments thereof.
We encourage you to attend the meeting. Whether you are able to attend or
not, we urge you to indicate your vote on the enclosed proxy card FOR the
election of directors, as set forth in the attached Proxy Statement. Please
sign, date and return the proxy card promptly in the enclosed envelope. If you
attend the meeting, you may vote in person even if you have previously mailed a
proxy card.
By order of the Board of Directors
ESSEL W. BAILEY, JR.
President and Secretary
March 13, 1997
Ann Arbor, Michigan
<PAGE> 3
OMEGA HEALTHCARE INVESTORS, INC.
905 WEST EISENHOWER CIRCLE, SUITE 110
ANN ARBOR, MICHIGAN 48103
(313) 747-9790
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
APRIL 15, 1997
The accompanying proxy is solicited by the Board of Directors of Omega
Healthcare Investors, Inc. (the "Company") to be voted at the Annual Meeting of
Shareholders to be held April 15, 1997, and any adjournments of the meeting (the
"Annual Meeting"). It is anticipated that this proxy material will be mailed on
or about March 13, 1997 to shareholders of record on March 12, 1997.
A copy of the Annual Report of the Company for the year ended December 31,
1996, including financial statements, is enclosed herewith. THE COMPANY WILL
PROVIDE WITHOUT CHARGE TO ANY PERSON SOLICITED HEREBY, UPON THE WRITTEN REQUEST
OF SUCH PERSON, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR
ENDED DECEMBER 31, 1996 FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. SUCH
REQUESTS SHOULD BE DIRECTED TO DAVID A. STOVER, CHIEF FINANCIAL OFFICER, AT THE
COMPANY'S PRINCIPAL EXECUTIVE OFFICES.
A shareholder giving a proxy has the power to revoke it at any time before
it is exercised. A proxy may be revoked by filing with the Secretary of the
Company (i) a signed instrument revoking the proxy or (ii) a duly executed proxy
bearing a later date. A proxy may also be revoked if the person executing the
proxy is present at the meeting and elects to vote in person. If the proxy is
not revoked, it will be voted by those therein named.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The outstanding voting securities of the Company as of February 28, 1997,
consisted of 18,784,560 shares of Common Stock, par value $.10 per share
("Common Stock"). Shareholders of record as of the close of business on March
12, 1997 are entitled to notice of and to vote at the Annual Meeting or any
adjournments thereof. Each holder of shares of Common Stock is entitled to one
vote per share on all matters properly brought before the Annual Meeting.
Shareholders are not permitted to cumulate votes for the purpose of electing
directors or otherwise.
<PAGE> 4
PRINCIPAL SHAREHOLDERS
At February 28, 1997, the following was the only person known to the
Company to own beneficially more than 5% of the outstanding shares of Common
Stock.
<TABLE>
<CAPTION>
PERCENT
BENEFICIAL OWNER NUMBER OF SHARES OF CLASS
---------------- ---------------- --------
<S> <C> <C>
Cohen & Steers Capital Management, Inc. .................... 1,127,170(a) 6.0%
735 Third Avenue
New York, NY
</TABLE>
- ---------------
(a) Information derived from Form 13G filed on February 5th, 1997 by Cohen &
Steers Capital Management, Inc., an investment advisor registered under
Section 203 of the Investment Advisors Act of 1940. Such firm has both sole
power to vote (or to direct the vote) and sole power to dispose (or to
direct disposition) of 1,127,170 shares.
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of February 28, 1997 (i) by each of
the Company's directors and executive officers and (ii) by all directors and
executive officers as a group. Except as indicated in the footnotes to this
table, the persons named in the table have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them,
subject to community property laws where applicable.
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
COMMON STOCK
BENEFICIALLY PERCENT
BENEFICIAL OWNER OWNED OF CLASS
---------------- ------------ --------
<S> <C> <C>
Essel W. Bailey, Jr......................................... 193,677(1)(2)(3) 1.02%
James P. Flaherty........................................... 270 *
F. Scott Kellman............................................ 42,611(4) 0.22%
David A. Stover............................................. 21,544(5) 0.11%
James E. Eden............................................... 12,599(6) *
Thomas F. Franke............................................ 13,174(6)(7) *
Harold Kloosterman.......................................... 30,648(6)(8) 0.16%
Bernard J. Korman........................................... 11,599(9) *
Edward Lowenthal............................................ 4,733(10) *
Robert L. Parker............................................ 119,951(11)(12) 0.63%
------- -----
Directors and executive officers as a group (10 persons).... 450,536 2.38%
</TABLE>
- ---------------
* Less than 0.10%
The business address of all the above persons is 905 W. Eisenhower Circle, Suite
110, Ann Arbor, Michigan 48103.
(1) Includes shares owned jointly by Mr. Bailey and his wife, plus 5,714 shares
held solely in Mrs. Bailey's name. Mr. Bailey disclaims any beneficial
interest in the shares held solely by Mrs. Bailey.
(2) Includes 9,125 shares of Restricted Stock, of which 8,325 shares and 800
shares were granted in January of 1997 and 1996, respectively. See Summary
Compensation Table.
(3) Includes stock options that are currently exercisable within 60 days to
acquire 46,383 shares.
(4) Includes stock options that are currently exercisable within 60 days to
acquire 31,000 shares, and 6,357 shares of Restricted Stock, of which 4,700
shares, 1,029 shares and 628 shares were granted in January 1997, 1996 and
1995 respectively. See Summary Compensation Table.
(5) Includes stock options that are currently exercisable within 60 days to
acquire 9,792 shares, and 4,618 shares of Restricted Stock, of which 3,700
shares, 786 shares and 132 shares were granted in January 1997, 1996 and
1995, respectively. See Summary Compensation Table.
2
<PAGE> 5
(6) Includes stock options that are currently exercisable within 60 days to
acquire 11,999 shares. Also includes 200 shares of Restricted Stock which
were granted in January 1997.
(7) Includes 975 shares owned by a trust of which Mr. Franke is sole trustee.
(8) Includes 1,511 shares owned jointly by Mr. Kloosterman and his wife, and
8,269 owned directly by his wife.
(9) Includes stock options that are currently exercisable within 60 days to
acquire 10,999 shares, and 200 shares of Restricted Stock which were
granted in January 1997.
(10) Includes 1,000 shares held in a private profit sharing plan for the benefit
of Mr. Lowenthal, stock options that are currently exercisable within 60
days to acquire 3,333 shares and 200 shares of Restricted Stock granted in
January 1997.
(11) Includes 3,393 shares owned by a private pension plan for Mr. Parker's
benefit and 3,000 shares owned by a trust of which Mr. Parker is sole
trustee.
(12) Includes stock options that are currently exercisable within 60 days to
acquire 45,333 shares, and 200 unvested shares of Restricted Stock, which
were granted in January of 1997.
3
<PAGE> 6
ELECTION OF DIRECTORS
Pursuant to the Company's Articles of Incorporation, the directors have
been divided into three groups. At the meeting, three directors will be elected
in one group to hold office for a term of three years or, in each case, until
their respective successors shall have been duly elected and qualified. The
remaining directors shall continue in office until their respective terms expire
and until their successors have been duly elected and qualified.
The nominees for election to the three positions of director to be voted
upon at the meeting are James E. Eden, Thomas F. Franke and Bernard J. Korman.
Unless authority to vote for the election of directors has been specifically
withheld, the persons named in the accompanying proxy intend to vote for the
election of Messrs. Eden, Franke and Korman to hold office as directors for a
term of three years each or until their respective successors have been duly
elected and qualified. The affirmative vote of a majority of all votes cast at
the Annual Meeting is required for the election of a director.
If any nominee becomes unavailable for any reason (which event is not
anticipated), the shares represented by the enclosed proxy may (unless such
proxy contains instructions to the contrary) be voted for such other person or
persons as may be determined by the holders of such proxies. In no event would
the proxy be voted for more than three nominees.
The following information relates to the nominees for election as directors
of the Company and the other persons whose terms as directors continue after
this meeting.
<TABLE>
<CAPTION>
YEAR FIRST EXPIRATION
BECAME A OF TERM AS
DIRECTORS DIRECTOR BUSINESS EXPERIENCE DURING PAST 5 YEARS DIRECTOR
--------- ---------- --------------------------------------- ----------
<S> <C> <C> <C>
Essel W. Bailey (52).............. 1992 Chairman, President, Chief Executive Officer 1999
and Secretary of the Company since March
1992. Managing Director of Omega Capital from
1986 to 1992. Mr. Bailey also is a director
of Principal Healthcare Finance Limited, a
company which finances health care facilities
in the United Kingdom and Excellence
Manufacturing, Inc., a supplier to the auto
industry.
James E. Eden (59)................ 1993 President and principal owner of Eden & 1997
Associates, Inc., which provides consulting
services to the senior living and long-term
care industries. From 1992 to the present,
Mr. Eden has served as Chairman and Chief
Executive Officer of Oakwood Living Centers,
Inc., which owns and operates nursing homes.
From 1982 to 1992 he held various positions,
ultimately as Executive Vice President and
General Manager, Senior Living Services
division at Marriott Corporation. Mr. Eden
also is a director of Forum Group, Inc., Just
Like Home, Inc. and United Vanguard Homes,
Inc.
Thomas F. Franke (67)............. 1992 Chairman and principal owner of Cambridge 1997
Partners, Inc., an owner, developer and
manager of multi-family housing in Grand
Rapids and Ann Arbor, Michigan. He is also
the principal owner of a hotel firm in the
United Kingdom and a director of Principal
Healthcare Finance Limited.
</TABLE>
4
<PAGE> 7
<TABLE>
<CAPTION>
YEAR FIRST EXPIRATION
BECAME A OF TERM AS
DIRECTORS DIRECTOR BUSINESS EXPERIENCE DURING PAST 5 YEARS DIRECTOR
--------- ---------- --------------------------------------- ----------
<S> <C> <C> <C>
Harold J. Kloosterman (55)........ 1992 President and principal owner of Cambridge 1999
Partners, Inc., an owner, developer and
manager of multi-family housing in Grand
Rapids and Ann Arbor, Michigan.
Bernard J. Korman (65)............ 1993 Chairman of the Board of Directors of 1997
Graduate Health System, Inc., a
not-for-profit healthcare system, and of
NutraMax Products, Inc., a public consumer
healthcare products company. He formerly was
President, Chief Executive Officer and
Director of MEDIQ (healthcare services) from
1977 to 1995. Mr. Korman also is a director
of the following public companies: The New
America High Income Fund (financial
services), The Pep Boys, Inc. (auto
supplies), Today's Man, Inc. (retail men's
clothing sales), InnoServ Technologies, Inc.
(medical equipment support services) and
Kapson Senior Quarters Corp. (assisted living
services).
Edward Lowenthal (52)............. 1995 President and Chief Executive Officer of 1998
Wellsford Residential Property Trust (NYSE:
WRP), a multi-family real estate investment
trust, and President of the predecessor of
Wellsford Residential Property Trust since
1986. Mr. Lowenthal also serves as a director
of United American Energy Corporation, a
developer, owner and operator of
hydroelectric and other alternative energy
facilities, a director of Corporate
Renaissance Group, Inc., a mutual fund, as a
trustee of Corporate Realty Income Trust, a
REIT, and as a director of Great Lakes REIT,
Inc. a REIT.
Robert L. Parker (63)............. 1992 Consultant, formerly Chairman of the Company 1998
from March 1992 to 1995 and Managing Director
of Omega Capital from 1986 to 1992. From 1972
through 1983, Mr. Parker was a senior officer
of Beverly Enterprises, the largest operator
of long-term care facilities in the United
States. At the time of his retirement in
1983, Mr. Parker was Executive Vice President
of Beverly Enterprises. Mr. Parker is a
registered architect, licensed in California
and Oklahoma. He also is a director of
GranCare, Inc., a public company engaged in
the operation of long-term care facilities,
of Vitalink Pharmacy Services, Inc., a
publicly traded institutional pharmacy, of
Principal Healthcare Finance Limited, and of
First National Bank of Bethany, Oklahoma.
</TABLE>
5
<PAGE> 8
BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
The Board of Directors held 9 meetings during 1996. Each director attended
not less than 75% of all meetings of the Board and of the committees on which he
served.
The Board of Directors has an Audit Committee, consisting of Messrs.
Korman, Kloosterman and Franke, a Compensation Committee, consisting of Messrs.
Franke, Eden and Lowenthal, and a Nominating Committee, consisting of Messrs.
Bailey and Parker. The Audit Committee, which met twice in 1996, selects the
Company's independent accountants, approves the compensation to be paid to such
accountants and reports to the Board concerning the scope of audit procedures.
The Compensation Committee met twice during 1996 and has responsibility for
the compensation of the Company's key management personnel and administration of
the Company's 1993 Stock Option and Restricted Stock Plan, as amended, and the
Company's 1993 Deferred Compensation Plan.
The Nominating Committee, which met once during 1996, reviews suggestions
of candidates for director made by directors, shareholders, management and
others, and makes recommendations to the Board of Directors regarding the
composition of the Board of Directors and nomination of individual candidates
for election to the Board of Directors. Suggestions by shareholders for
candidates should be submitted in writing to the office of the President, Omega
Healthcare Investors, Inc., 905 West Eisenhower Circle, Suite 110, Ann Arbor,
Michigan 48103.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
The Company pays each non-employee director a fee of $20,000 per year for
services as a director, plus $1,500 for services as a Committee Chairperson and
$500 for attendance at a meeting of the Board of Directors, or any Committee
thereof on a day on which the Board of Directors does not itself meet. In
addition, the Company reimburses the directors for travel expenses incurred in
connection with their duties as directors. Employee directors receive no
compensation for service as directors.
Mr. Parker, who formerly served as Chairman of the Board, provides ongoing
consulting services to the Company in addition to his service as a director. In
his capacity as senior advisor for the Company Mr. Parker currently receives
$5,500 monthly.
Directors are eligible to participate in the 1993 Retirement Plan for
Directors, whereby individuals who subsequently terminate their service as a
director with at least five years service are entitled to receive an annual
retirement benefit from the Company equal to the aggregate annual director
retainer in effect at the time of the director's termination from the Board.
Benefits under the 1993 Retirement Plan for Directors will be paid for a period
equal to the number of years of service that the director served as a director
of the Board. Upon death of a director, any benefits under the Plan will be paid
to his or her surviving spouse of at least one year in accordance with the same
payment schedule set forth above until receipt of the maximum benefit to which
the director would have been entitled had he or she survived or until the death
of the eligible spouse, whichever occurs first. All of the present directors are
participants under the Plan.
Directors participate in the Company's 1993 Stock Option and Restricted
Stock Plan, as amended. Each non-employee director was awarded options with
respect to 10,000 shares at the date the Plan was adopted or on his subsequent
election as a director of the Company, and each non-employee director is to be
granted an additional option grant with respect to 1,000 shares on or after each
anniversary of the initial grant. All grants have been and are to be at an
exercise price equal to 100% of the fair market value of the Company's common
stock on the date of the grant. Non-employee director options vest one third
after each year for three years. Each non-employee director also is annually
awarded 200 shares of Restricted Stock, with each such grant of Restricted Stock
shares vesting six months after the date of grant.
In addition, directors are eligible to participate in the Company's 1993
Deferred Compensation Plan. The Company's 1993 Deferred Compensation Plan
provides for the granting of units to key personnel and directors. On a
participant's severance from the Company by death, retirement, resignation or
otherwise, the participant will receive, over a ten-year period, an amount equal
to the excess of the fair market value of a
6
<PAGE> 9
share of common stock of the Company at the date of death, retirement, or
resignation, over the fair market value of a share of common stock of the
Company at the date of award, times the number of units awarded. In addition,
the participant will receive an amount equivalent to dividends that would have
been paid on a similar number of shares of common stock since the date of the
award, plus interest thereon at 8% per year. If the death, retirement or
resignation occurs prior to five years subsequent to the date of the award, the
amounts otherwise payable are reduced by 20% for each year short of five years.
The Plan is administered by the Compensation Committee of the Board of
Directors. Each non-employee director was granted 3,500 units on March 5, 1993,
or at the time of his appointment as a director, and no further units shall be
awarded to any such director under the Plan.
EXECUTIVE COMPENSATION
The following table sets forth for the years ended December 31, 1996, 1995,
and 1994, the compensation for services in all capacities to the Company of
those persons who were at December 31, 1996 (i) the chief executive officer and
(ii) the other executive officers of the Company whose total 1996 salary and
bonus exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
--------------------------------------------- ----------------------------------------------------
AWARDS PAYOUTS
--------------------------- -------
OTHER RESTRICTED SECURITIES ALL
ANNUAL STOCK UNDERLYING LTIP OTHER
NAME AND COMPENSATION AWARD(S) OPTIONS/ PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR(1) SALARY($) BONUS($) ($)(1) ($)(3) SARS(#) ($) ($)(2)
- ------------------ ------- --------- -------- ------------ ---------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Essel W. Bailey,
Jr. ................ 1996 325,000 375,000 0 104,564(3) 25,000 0 123,830
Chairman, President 1995 284,000 35,000 0 98,050(3) 10,000 0 54,988
and CEO 1994 275,000 25,000 0 76,750(3) 27,500 0 19,625
F. Scott Kellman...... 1996 210,000 30,000 0 54,332(4) 15,000 0 46,329
Executive Vice 1995 200,000 23,000 0 16,750(4) 3,500 0 20,570
President 1994 162,500 19,000 0 7,600(4) 10,000 0 7,518
David A. Stover....... 1996 175,000 25,000 0 38,176(5) 12,500 0 32,545
Chief Financial 1995 153,000 17,700 0 8,580(5) 2,500 0 8,582
Officer 1994 36,500 4,000 0 1,600(5) 10,000 0 0
</TABLE>
- ---------------
(1) "Other Annual Compensation" includes the aggregate of perquisites and other
personal benefits, securities or properties which exceed 10% of salary and
bonus of each named executive.
(2) Consists of Company contributions to its 401-K Profit-Sharing Plan and
provisions for each participant under the Company's 1993 Deferred
Compensation Plan.
(3) On January 22, 1997, January 17, 1996, and January 13, 1995, Mr. Bailey was
awarded 8,325 shares, 2,400 shares, and 2,062 shares, respectively, of
restricted common stock of the Company. The fair value of each award, based
on the market prices of the common stock at the date of award, was $267,400,
$63,900, and $50,000 for the award in 1997, 1996 and 1995, respectively.
With respect to the grant in 1997, one-quarter of the award was deemed to
have been earned in the year prior to the award, with the balance earned in
three equal annual installments beginning in the year of award and for each
of the following two years. One-quarter of the shares are scheduled to be
released in the year of grant, with the balance released 25% per year in
January of each of the following three years. With respect to the grants in
1996 and 1995, one-third of each award was deemed to have been earned in the
year prior to the award, with the balance earned equally in the year of the
award and the following year. Additionally, with respect to the grants in
1996 and 1995, one-third of the shares for each award are scheduled to be
released to Mr. Bailey following each of three consecutive six-month vesting
periods. Pursuant to the Plan, the recipient receives dividends on unvested
shares. The number of shares and value of Mr. Bailey's restricted
7
<PAGE> 10
stock awards as of the end of last year were 9,125 shares and $303,400, of
which 800 shares were released in January 1997.
(4) On January 22, 1997, January 17, 1996 and January 13, 1995, Mr. Kellman was
awarded 4,700 shares, 1,715 shares and 1,567 shares, respectively, of
restricted common stock of the Company. The fair value of each award, based
on the market prices of the common stock at the date of award, was $151,000,
$45,700 and $38,000 for the award in 1997, 1996 and 1995, respectively. With
respect to the grant in 1997, one-quarter of the award was deemed to have
been earned in the year prior to the award, with the balance earned in three
equal annual installments beginning in the year of award and for each of the
following two years. One-quarter of the shares are scheduled to be released
in the year of grant, with the balance released 25% per year in January of
each of the following three years. With respect to the grants for 1996 and
1995, one-fifth of the award was deemed to have been earned prior to the
award, with the balance earned in four equal annual installments beginning
in the year of award and for each of the following three years.
Additionally, with respect to the grants for 1996 and 1995, one-fifth of the
shares are scheduled to be released six months after the grant, with the
balance released 20% per year in January for each of the following four
years. Pursuant to the Plan, the recipient receives dividends on unvested
shares. The number of shares and value of Mr. Kellman's restricted stock
awards as of the end of last year were 6,357 shares and $211,400 of which
656 were released on January 1997.
(5) On January 22, 1997, January 17, 1996 and January 13, 1995, Mr. Stover was
awarded 3,700 shares, 1,310 shares and 330 shares, respectively, of
restricted common stock of the Company. The fair value of each award, based
on the market prices of the common stock at the date of award, was $119,000,
$34,900 and $8,000 for the award in 1997, 1996 and 1995, respectively. With
respect to the grant in 1997, one-quarter of the award was deemed to have
been earned in the year prior to the award, with the balance earned in three
equal annual installments beginning in the year of award and for each of the
following two years. One-quarter of the shares are scheduled to be released
in the year of grant, with the balance released 25% per year in January of
each of the following three years. With respect to the grants for 1996 and
1995, one-fifth of the award was deemed to have been earned prior to the
award, with the balance earned in four equal annual installments beginning
in the year of award and for each of the following three years. With respect
to the grants for 1996 and 1995, one-fifth of the shares are scheduled to be
released six months after the grant, with the balance released 20% per year
in January for each of the following four years. Pursuant to the Plan, the
recipient receives dividends on unvested shares. The number of shares and
value of Mr. Stover's restricted stock awards as of the end of last year
were 4,618 shares and $153,500, of which 328 were released on January 1997.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information concerning options/SARs
granted during 1996 to the named executives:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
-------------------------------------- VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS/SARS EXERCISE PRICE APPRECIATION FOR GRANT
UNDERLYING GRANTED TO OR BASE OPTION TERM DATE
OPTIONS/SAR EMPLOYEES IN PRICE EXPIRATION ---------------------- PRESENT
NAME GRANTED FISCAL YEAR ($/SHARE) DATE(1) 5%($)(2) 10%($)(3) VALUE($)(3)
---- ----------- ------------ --------- ---------- -------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Essel W. Bailey,
Jr.................. 25,000 29.94% 26.625 1/17/06 472,750 1,233,500 N/A
F. Scott Kellman...... 15,000 17.96% 26.625 1/17/06 283,650 740,100 N/A
David A. Stover....... 12,500 14.97% 26.625 1/17/06 236,375 616,750 N/A
</TABLE>
- ---------------
(1) Incentive stock options expire 10 years from date of grant (January 17,
2006), while non-qualified options expire 11 years after date of grant.
(2) The assumed annual rates of appreciation of 5% and 10% would result in the
price of the Company's stock increasing, at the expiration date of the
options, to $45.54 and $75.97, respectively.
(3) The Company does not elect to provide grant date present value as an
alternative to disclosing potential realizable value.
8
<PAGE> 11
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES
The following table summarizes options and SARs exercised during 1996 and
presents the value of unexercised options and SARs held by the named executives
at Year-End:
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
SHARES AT FISCAL AT FISCAL
ACQUIRED ON VALUE YEAR-END(#) YEAR-END($)
EXERCISE REALIZED UNEXERCISABLE(U) UNEXERCISABLE(U)
NAME (#) ($) EXERCISABLE(E) EXERCISABLE(E)
---- ----------- -------- ---------------- ----------------
<S> <C> <C> <C> <C>
Essel W. Bailey, Jr........................ 0 0 40,834(U) 294,381(U)
34,166(E) 319,057(E)
F. Scott Kellman........................... 0 0 20,333(U) 142,373(U)
21,667(E) 228,753(E)
David A. Stover............................ 0 0 17,500(U) 126,563(U)
7,500(E) 65,000(E)
</TABLE>
LONG-TERM INCENTIVE PLAN
For the period from August 14, 1992 (date of commencement of operations of
the Company) through December 31, 1996, the Company had no long-term incentive
plans.
DEFINED BENEFIT OR ACTUARIAL PLAN
For the period from August 14, 1992 (date of commencement of operations of
the Company) through December 31, 1996, the Company had no pension plans.
COMPENSATION COMMITTEE REPORT
The Compensation Committee (the Committee) is composed of outside directors
who have never served as officers of the Company. The Committee administers the
Company's 1993 Stock Option and Restricted Stock Plan, as amended, 1993 Deferred
Compensation Plan, 401-K Profit Sharing Plan, and has responsibility for other
incentive and benefit plans. The Committee determines the compensation of the
Company's executive officers and reviews with the Board of Directors all aspects
of compensation for the Company's executive officers.
Compensation Policies. The policy of the Company and the guidelines
followed by the Committee provide that compensation to the Company's executive
officers should achieve the following objectives:
1) Assist the Company in attracting and retaining talented and
well-qualified executives.
2) Reward performance and initiative.
3) Be competitive with other healthcare real estate investment trusts.
4) Be significantly related to accomplishments and the Company's
short-term and long-term successes, particularly measured in terms of
growth in Funds from Operations.
5) Encourage executives to achieve meaningful levels of ownership of the
Company stock.
9
<PAGE> 12
The Company's compensation practices embody the principle that annual
bonuses should be based primarily on achieving Company objectives that enhance
long-term shareholder value, and that meaningful stock ownership by management,
including participation in various benefit plans providing for stock options,
restricted stock and retirement, is desirable in aligning shareholder and
management interests.
The Company's approach to base compensation levels is to offer competitive
salaries in comparison with prevailing market practices. The Committee annually
examines market compensation levels and trends. Additionally, for this purpose,
the Committee also considers the pool of executives who are currently employed
in similar positions in public companies, with emphasis on salaries paid by real
estate investment trusts.
The Committee evaluates executive officer salary decisions in connection
with an annual review and input from the Chief Executive Officer. This annual
review considers the decision-making responsibilities of each position and the
experience, work performance and team-building skills of each incumbent. The
Committee views work performance as the single most important measurement
factor, followed by team-building skills and decision-making responsibilities.
Finally, for executives other than the Chief Executive Officer, the
Committee gives consideration to both overall Company performance and the
performance of the specific areas of the Company under the incumbent's direct
control. This balance supports the accomplishment of overall objectives and
rewards individual contributions by executive officers. Individual annual
bonuses for each named executive are consistent with market practices for
positions with comparable decision-making responsibilities.
Chief Executive Officer Compensation: In determining the compensation of
the Company's Chief Executive Officer, as well as the other Executive Officers,
the Committee takes into account various qualitative and quantitative indicators
of corporate and individual performance in determining the level and the
composition of compensation. While the Committee considers such performance
measures as growth in assets, market capitalization, dividends, earnings and
funds from operations, the Committee does not apply any specific quantitative
formula in making compensation decisions. The Committee also values the
importance of achievements that may be difficult to quantify and recognizes such
qualitative factors.
The compensation for Essel W. Bailey, Jr., the Company's Chief Executive
Officer, was established at $325,000 in January 1996, and a cash bonus for 1996
performance of $375,000 awarded in January 1997. In addition, in January 1997,
Mr. Bailey was granted 45,000 stock options and 8,325 shares of restricted stock
under the Company's 1993 Stock Option and Restricted Stock Plan, as amended.
Mr. Bailey's base salary and bonus were established in light of his duties
and the scope of his responsibilities in the context of the policies and
guidelines enumerated above. In the Committee's evaluation of total compensation
for Mr. Bailey, it gives appropriate weight to his leadership in the growth of
the Company's assets, in obtaining financing for that growth, and in
accomplishing the Company's short-term and long-term objectives.
Grants of options were made based on the Committee's conclusions as to
appropriate levels of participation for the Company's Chief Executive Officer,
with a particular sensitivity to the Company's objective of aligning shareholder
and management interest. The 8,325 shares of restricted stock were granted on
January 22, 1997, as a bonus for 1996 performance and for continued employment
in 1997 through 1999. The award vests one-quarter in July 1997, with the balance
vesting one-quarter each January of 1998, 1999 and 2000.
Compensation Committee of the Board
Thomas F. Franke, Chairman
James E. Eden
Edward Lowenthal
10
<PAGE> 13
COMPARISON OF CUMULATIVE TOTAL RETURN *
Among: Omega Healthcare Investors, Inc.
All REIT's Index **
S&P 500 Index
<TABLE>
<CAPTION>
MEASUREMENT PERIOD OHI INDEX ALL REITS S&P
(FISCAL YEAR COVERED)
<S> <C> <C> <C>
8/31/92 92.2619 100 100
9/30/92 92.2619 102.3823 101.1453
12/31/92 100.6732 106.0503 106.5067
3/31/93 106.0987 126.3188 110.8610
6/30/93 105.3983 122.7737 111.4336
9/30/93 127.8502 133.6737 114.2871
12/31/93 133.2933 125.7137 116.9333
3/31/94 125.2845 128.5404 112.4704
6/30/94 137.1375 130.3838 112.9246
9/30/94 140.0416 128.1244 118.4538
12/30/94 139.2074 126.7253 118.4538
3/31/95 140.4125 128.1339 129.9862
6/29/95 152.9505 136.5854 142.3282
9/29/95 165.8229 143.3541 153.6434
12/29/95 169.0025 149.9338 162.7962
3/29/96 185.7570 153.7531 171.5344
6/28/96 183.2021 160.6258 179.2358
9/30/96 203.2430 171.5353 184.7749
12/31/96 229.6425 203.5356 200.1777
</TABLE>
- ---------------
*Total return assumes reinvestment of dividends.
**The All REIT Index is published by National Association of Real Estate
Investment Trusts, Inc. ("NAREIT"), Washington, D.C. It is comprised of all
REITs traded on the New York Stock Exchange, the American Stock Exchange and
NASDAQ National Market System. A list of those REITs is available by request to
the Company or NAREIT.
IT SHOULD BE NOTED THAT THIS GRAPH REPRESENTS HISTORICAL STOCK PRICE
PERFORMANCE AND IS NOT NECESSARILY INDICATIVE OF ANY FUTURE STOCK PRICE
PERFORMANCE.
THE FOREGOING REPORT OF THE COMPENSATION COMMITTEE AND THE PERFORMANCE
GRAPH THAT APPEARS IMMEDIATELY AFTER SUCH REPORT SHALL NOT BE DEEMED TO BE
SOLICITING MATERIAL OR TO BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES EXCHANGE ACT OF 1934 OR
INCORPORATED BY REFERENCE IN ANY DOCUMENT SO FILED.
CERTAIN TRANSACTIONS
The Company leases space for its principal executive offices at 905 West
Eisenhower Circle, Suite 110, Ann Arbor, Michigan 48103, from Circle Partners, a
general partnership whose general partners are Essel W. Bailey, Jr., President,
and Chief Executive Officer of the Company, and Thomas F. Franke, a Director of
the Company. Rent payments totaling $91,425 were made to Circle Partners in
1996. The Company currently makes monthly payments of $7,850 to the partnership
pursuant to a five-year lease involving 5,823 square feet of office space. The
current lease was consummated November 1995.
The Company has invested, directly or indirectly, approximately $30 million
in Principal Healthcare Finance Limited ("Principal") as of December 31, 1996.
As of that date, Principal owns and leases 42 nursing homes in the British
Isles. Essel W. Bailey, Jr., President and Chief Executive Officer and a
director, and directors Thomas F. Franke, Harold J. Kloosterman, Bernard J.
Korman, and Robert J. Parker, have invested in the aggregate, directly or
indirectly, $2,170,000 in Principal.
11
<PAGE> 14
In connection with the 1994 relocation of F. Scott Kellman, Executive Vice
President, from the Philadelphia metropolitan area to Ann Arbor, Michigan, the
Company loaned him $220,000 to enable him to purchase a home in Ann Arbor, all
of which has been repaid except $77,000. The loan is secured by a second
mortgage on Mr. Kellman's residence, bears interest at 7.05% payable monthly,
along with annual principal installments. Concurrent with Mr. Kellman's
appointment as Executive Vice President, the Company agreed to a severance
arrangement whereby a payment of two year's base compensation (currently
$440,000) is due in the event Mr. Kellman's employment is terminated without
cause or in the event of his disability.
Mr. Bernard J. Korman, a Director of the Company, was named Chairman of
Graduate Health System, Inc. during 1995. The Company leases three medical
office buildings to Graduate Hospital Corporation, a subsidiary of Graduate
Health System, Inc., pursuant to leases negotiated and executed by the Company
in October 1993, prior to the designation of Mr. Korman as a Director of the
Company. Rental income of $3,645,000 was received by the Company under these
lease agreements during 1996.
RELATIONSHIP WITH INDEPENDENT AUDITORS
Ernst & Young LLP audited the Company's financial statements for each of
the years ended December 31, 1994, 1995 and 1996. Representatives of Ernst &
Young LLP are expected to be present at the Annual Meeting and will be given the
opportunity to make a statement if they desire to do so. It is also expected
that they will be available to respond to appropriate questions from
shareholders at the Annual Meeting.
SHAREHOLDERS PROPOSALS
November 13, 1997 is the date by which proposals of shareholders intended
to be presented at the Annual Meeting of Shareholders, held on or about April
15, 1998, must be received by the Company for inclusion in the Company's proxy
statement and form of proxy relating to that meeting.
EXPENSES OF SOLICITATION
The total cost of this solicitation will be borne by the Company. In
addition to use of the mails, proxies may be solicited by directors, officers
and regular employees of the Company personally and by telephone, telex or
facsimile. The Company may reimburse persons holding shares in their own names
or in the names of the nominees for expenses such persons incur in obtaining
instructions from beneficial owners of such shares. The Company has also engaged
Georgeson & Company Inc. to solicit proxies for a fee not to exceed $7,000 plus
out-of-pocket expenses.
OTHER MATTERS
The Board of Directors knows of no other business to be presented at the
Annual Meeting, but if other matters do properly come before the Annual Meeting,
it is intended that the persons named in the proxy will vote on said matters in
accordance with their best judgment.
ESSEL W. BAILEY, JR.
President and Secretary
March 13, 1997
Ann Arbor, Michigan
12
<PAGE> 15
PROXY
OMEGA HEALTHCARE INVESTORS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Essel W. Bailey, Jr., David A. Stover and Don
M. Pearson, and each of them, as proxies, each with the power to appoint his
substitute to represent and to vote as designated below, all the shares of
Common Stock of Omega Healthcare Investors, Inc. held of record by the
undersigned on March 12, 1997 at the Annual Meeting of Stockholders to be held
on April 15, 1997 or any adjournment thereof.
In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting and at any adjournment
thereof.
This Proxy when properly executed will be voted in the manner directed
herein by the undersigned. If no specification is made, the Proxy will be
voted FOR the election of the directors named in the Proxy Statement.
If any nominee named above declines or is unable to serve as a director, the
persons named as proxies, and each of them, shall have full discretion to vote
for any other person who may be nominated.
(CONTINUED, AND TO BE MARKED, DATED AND SIGNED, ON THE OTHER SIDE)
- FOLD AND DETACH HERE -
<PAGE> 16
<TABLE>
<S><C>
Please mark
your votes as
indicated in X
the example
WITHHOLD
FOR AUTHORITY
1. ELECTION OF DIRECTORS
James E. Eden, Thomas F. Franke and Bernard J. Korman
INSTRUCTION: To withhold authority to vote
for any individual nominee, write that nominee's
name in the space provided below.)
NOTE: Please sign exactly as name appears
on this Proxy. When shares are hold by joint
tenants, both should sign. When signing as
attorney, as executor, administrator, trustee or
guardian, please give full title as such. If a
corporation, please sign in full corporate name
___ by President or other authorized officer. If a
| partnership, please sign in partnership name by
authorized person.
Please check this box is you plan
to attend the Annual Meeting in person.
Signature of Stockholder(s) __________________________________________________________ Dated _______________ , 1996
Please sign, date and return today in the enclosed envelope. This Proxy will not be used if you attend the meeting in
person and so request.
- ------------------------------------------------------------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
</TABLE>
