<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:
[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
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):
[X] No fee required.
[ ] 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:
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(4) Date filed:
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<PAGE> 2
OMEGA HEALTHCARE INVESTORS, INC.
900 VICTORS WAY, SUITE 350
ANN ARBOR, MICHIGAN 48108
(734) 887-0200
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
APRIL 20, 1999
To the Shareholders:
The Annual Meeting of Shareholders of Omega Healthcare Investors, Inc. will
be held at the offices of the Company at 900 Victors Way, Suite 350, Ann Arbor,
Michigan on Tuesday, April 20, 1999, at 11:00 a.m., for the following purposes:
1. To elect three members of the Board of Directors;
2. To vote upon a proposal to amend the Company's Articles of
Incorporation to increase the total number of authorized shares of
the Company's common stock, par value $.10 per share, from 50,000,000
to 100,000,000; and
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The nominees for election as directors are Essel W. Bailey, Jr., Martha A.
Darling and Harold J. Kloosterman, each of whom presently is serving as a
director of the Company.
The Board of Directors has fixed the close of business on March 1, 1999 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 and FOR the proposal to amend the Company's Articles of
Incorporation, in each case 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
SUSAN ALLENE KOVACH
Corporate Secretary
March 12, 1999
Ann Arbor, Michigan
<PAGE> 3
OMEGA HEALTHCARE INVESTORS, INC.
900 VICTORS WAY, SUITE 350
ANN ARBOR, MICHIGAN 48108
(734) 887-0200
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
APRIL 20, 1999
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 20, 1999, and any adjournments of the meeting (the
"Annual Meeting"). It is anticipated that this proxy material will be mailed on
or about March 12, 1999 to shareholders of record on March 1, 1999.
A copy of the Annual Report of the Company for the year ended December 31,
1998, 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, 1998 FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. SUCH
REQUESTS SHOULD BE DIRECTED TO SUSAN ALLENE KOVACH, VICE PRESIDENT, GENERAL
COUNSEL AND CORPORATE SECRETARY, 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
The outstanding voting securities of the Company, as of February 16, 1999,
consisted of 19,797,364 shares of common stock, par value $.10 per share
("Common Stock"). Each holder of record of Common Stock as of the close of
business on March 1, 1999 is 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.
PROPOSAL 1 -- ELECTION OF DIRECTORS
Pursuant to the Company's Articles of Incorporation, the directors have
been divided into three groups. At this year's Annual 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 have been duly elected and
qualified. The remaining directors shall continue in office until their
respective terms expire or until their successors have been duly elected and
qualified.
The nominees for election to the three positions of director to be voted
upon at this year's annual meeting are Essel W. Bailey, Jr., Martha A. Darling
and Harold J. Kloosterman. 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. Bailey and Kloosterman and Ms.
Darling 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.
<PAGE> 4
If any nominee becomes unavailable for any reason (which event is not
anticipated), the shares represented by the enclosed proxy may (unless the proxy
contains instructions to the contrary) be voted for such other person or persons
as may be determined by the holders of the 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 (54).............. 1992 Mr. Bailey has been President and Chief 1999
Executive Officer of the Company since its
formation in 1992 and Chairman of the Company
since July 1995. Prior to forming Omega, Mr.
Bailey was a Managing Director of Omega
Capital, a healthcare investment partnership,
from 1986 to 1992. Mr. Bailey currently is a
Director, President and Chief Executive
Officer of Omega Worldwide, Inc.
("Worldwide"), a NASDAQ listed company that
provides investment advisory services and
holds equity and debt interests in companies
engaged in providing sale/leaseback financing
to healthcare service providers throughout
the world. He also is a director of Principal
Healthcare Finance Limited ("Principal"), a
company that finances healthcare facilities
in the United Kingdom; and Principal
Healthcare Finance Trust, an Australian unit
trust that is wholly owned by Worldwide and
that finances healthcare facilities in
Australia. Mr. Bailey was formerly a director
of Evergreen Healthcare, Inc., which was a
NYSE listed company engaged in the operation
of long-term healthcare facilities, and of
Vitalink Pharmacy Services, Inc., a NYSE
listed company operating institutional
pharmacies serving the long-term care
industry in the United States.
Martha A. Darling (54)............ 1998 Ms. Darling is a graduate of Reed College and 1999
the Woodrow Wilson School at Princeton
University. She currently serves as a
consultant to non-profit organizations. She
has worked in political economics and
strategic planning and most recently was
Senior Manager of the Commercial Airplane
Group at The Boeing Company in Seattle,
Washington, where she also served as Board
Vice President of King County's Harborview
Medical Center. Her career has included roles
in strategic planning for Seattle First
National Bank, 3 1/2 years as Legislative
Assistant to U.S. Senator Bill Bradley, with
responsibility for the Finance Committee, and
one year as a White House Fellow serving at
the U.S. Department of Treasury as Executive
Assistant to Secretary W. Michael Blumenthal.
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
YEAR FIRST EXPIRATION
BECAME A OF TERM AS
DIRECTORS DIRECTOR BUSINESS EXPERIENCE DURING PAST 5 YEARS DIRECTOR
--------- ---------- --------------------------------------- ----------
<S> <C> <C> <C>
James E. Eden (61)................ 1993 Mr. Eden is President and principal owner of 2000
Eden & Associates, Inc., which provides
consulting services to the senior living and
long-term care industries. He is also
Chairman and principal owner of Senior Living
Properties, LLC, which owns 88 licensed
nursing homes and assisted living facilities
in Illinois and Texas, and serves as Chairman
and Chief Executive Officer of Oakwood Living
Centers, Inc., which owns seven nursing homes
in Massachusetts and Virginia. From 1976 to
1992, he held various positions in
healthcare, ultimately serving as Executive
Vice President of Marriott Corporation and
General Manager of its Senior Living Services
Division. Mr. Eden also is a director of
United Vanguard Homes, the Alliance for Aging
Research, Peak Medical Corporation and Omega
Worldwide, Inc.
Thomas F. Franke (69)............. 1992 Mr. Franke is Chairman and principal owner of 2000
Cambridge Partners, Inc., an owner, developer
and manager of multifamily housing in Grand
Rapids and Ann Arbor, Michigan. He also is
the principal owner of private healthcare
firms operating in the United States and the
United Kingdom and a private hotel firm in
the United Kingdom. Mr. Franke is a director
of Principal Healthcare Finance Limited and
Omega Worldwide, Inc.
Henry H. Greer (61)............... 1998 Mr. Greer has been President and Chief 2001
Operating Officer of SEI Investments
(NASDAQ:SEIC), a leading provider of software
and processing services to bank trust
departments and provider of mutual fund
services to banks, insurance and investment
firms, since 1990. Mr. Greer held senior
management positions in leading financial
services and technology companies for more
than twenty-five years prior to joining SEI
Investments, including positions at IBM and
AutEx, a provider of financial and technology
services to the brokerage and institutional
investor community, where he was President
and Chief Operating Officer. Mr. Greer is a
director of SEI Investments and Astea
International. Mr. Greer is a graduate of
Dartmouth College.
</TABLE>
3
<PAGE> 6
<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 (57)........ 1992 Mr. Kloosterman was formerly a Managing 1999
Director of Omega Capital from 1986 to 1992.
He is a director of Omega Worldwide, Inc. Mr.
Kloosterman has been involved in the
acquisition, development and management of
commercial and multifamily properties since
1978. He has been a senior officer of LaSalle
Partners, Inc., and in 1985 he formed
Cambridge Partners, Inc., where he serves as
President. At Cambridge, he has been involved
in the development and management of
commercial, apartment and condominium
projects in Grand Rapids and Ann Arbor,
Michigan and in the Chicago area.
Bernard J. Korman (67)............ 1993 Mr. Korman is Chairman of the Board of 2000
Trustees of Philadelphia Health Care Trust, a
private health care foundation, and Chairman
of the Board of NutraMax Products, Inc., a
public consumer health care products company.
He formerly was President, Chief Executive
Officer and Director of MEDIQ Incorporated
(health care 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), Kranzco Realty Trust
(real estate investment trust), NutraMax
Products, Inc. (consumer health care
products) and Omega Worldwide, Inc.
Edward Lowenthal (54)............. 1995 Mr. Lowenthal is President and Chief 2001
Executive Officer of Wellsford Real
Properties, Inc. (AMEX:WRP), a real estate
merchant bank, and was President of the
predecessor of Wellsford Real Properties,
Inc. since 1986. Mr. Lowenthal also serves as
director of United American Energy
Corporation, a developer, owner and operator
of energy facilities; Corporate Renaissance
Group, Inc., a mutual fund; Equity
Residential Properties Trust; Great Lakes
REIT; and Omega Worldwide, Inc.
</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>
Robert L. Parker (65)............. 1992 Mr. Parker is a Consultant to, and formerly 2001
was Chairman of, the Company from March 1992
to 1995. He was a 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, and is licensed in
California and Oklahoma. Mr. Parker served as
a director of GranCare, Inc., a public
company engaged in the operation of long-term
care facilities from 1995 to 1997, and of
Vitalink Pharmacy Services, Inc., a publicly
traded institutional pharmacy, during 1997.
Mr. Parker has served as director of
Principal Healthcare Finance Limited since
1995 and of First National Bank of Bethany,
Oklahoma and is Chairman of the Board of
Directors of Omega Worldwide, Inc.
</TABLE>
PROPOSAL 2 -- PROPOSED AMENDMENT TO ARTICLES OF INCORPORATION
The Company's Articles of Incorporation presently authorize the Company to
issue up to 50,000,000 shares of common stock. The Company's Board of Directors
has adopted, and recommends that stockholders approve, an amendment to the
Articles of Incorporation increasing the authorized number of shares of the
Company's common stock from 50,000,000 to 100,000,000.
At February 16, 1999, there were 19,797,364 shares of common stock
outstanding. Of the remaining authorized but unissued shares of common stock,
833,013 shares remain reserved for issuance under the Company's Amended and
Restated Stock Option and Restricted Stock Plan, including 798,427 shares
represented by outstanding option grants, 619,592 shares remain reserved for
issuance under the Company's Dividend Reinvestment Plan, and an aggregate of
1,794,107 shares has been reserved for issuance upon conversion of the Company's
outstanding 8.5% Convertible Debentures Due 2001. Accordingly, 26,955,924 shares
of authorized common stock remain unissued and unreserved.
The Board of Directors believes it is prudent to have a greater number of
authorized shares of common stock available to issue in the future for, among
other things, raising additional capital, acquisitions, stock splits, stock
dividends and other corporate purposes. Except for shares reserved under the
terms of the Company's Amended and Restated Stock Option and Restricted Stock
Plan, shares reserved under the Company's Dividend Reinvestment Plan, and shares
which will be issued upon the conversion of Debentures, the Board of Directors
has no present plans, arrangements, undertakings or commitments to issue any
shares of common stock. The Company does, however, have an effective
Registration Statement on file with the Securities and Exchange Commission under
which it may issue additional securities from time to time, including common
stock and/or preferred stock, in the aggregate amount of $300,000,000. Having
authorized shares of common stock available for issuance in the future for such
corporate purposes as the Board of Directors deems necessary and advisable will
give the Company greater flexibility and will allow shares to be issued without
the expense and delay of a special stockholders' meeting. The additional shares
of common stock authorized by the proposed amendment would be available for
future issuance without further action by stockholders, unless action is
required by stockholders by applicable law or the rules of any stock exchange on
which the Company's securities may then be listed.
5
<PAGE> 8
The Company's common stock is listed on the New York Stock Exchange, which
requires prior stockholder approval under certain circumstances for the issuance
of common stock or securities convertible into common stock, other than in a
public offering for cash, in an amount equal to or in excess of 20% of the
voting power outstanding before the proposed issuance or 20% of the number of
shares of common stock outstanding before the proposed issuance.
It is proposed that Section I of Article IV of the Company's Articles of
Incorporation be amended to read in its entirety as follows:
"Section l. The total number of shares of capital stock which the
corporation shall have authority to issue is One Hundred Ten Million
(110,000,000), of which One Hundred Million (100,000,000) shall be shares of
Common Stock having a par value of $.l0 per share and Ten Million (10,000,000)
shall be shares of Preferred Stock having a par value of $l.00 per share. The
aggregate par value of all of said shares shall be Twenty Million Dollars
($20,000,000). Prior to the increase, the aggregate par value of all said shares
was Fifteen Million Dollars ($15,000,000)."
VOTE REQUIRED
The affirmative vote of two-thirds of all votes entitled to be cast at the
Annual Meeting is required for adoption of the Amendment. The proxy holders
named in the accompanying form of proxy will vote the shares represented by the
proxy for approval of the Amendment, unless otherwise specified.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" APPROVAL OF
THE AMENDMENT.
6
<PAGE> 9
PRINCIPAL SHAREHOLDERS
The Company believes that, at December 31, 1998, the following owned
beneficially more than 5% of the outstanding shares of the Company's Common
Stock:
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
COMMON STOCK
BENEFICIALLY PERCENT
BENEFICIAL OWNER OWNED OF CLASS
---------------- ------------ --------
<S> <C> <C>
Merrill Lynch & Co., Inc.
(On behalf of Merrill Lynch Asset Management Group)....... 1,350,882(1) 6.2%
World Financial Center, North Tower
250 Vesey Street
New York, NY 10381
</TABLE>
- ---------------
(1) Of this amount, Merrill Lynch Global Allocation Fund, Inc. owns 1,216,519
shares (5.6%)
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of January 31, 1999 (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. ....................................... 323,910(1)(2) 1.60%
James P. Flaherty........................................... 33,903(3) 0.17%
F. Scott Kellman............................................ 90,160(4) 0.45%
Susan A. Kovach............................................. 7,958(5) *
David A. Stover............................................. 73,664(6) 0.36%
Martha A. Darling........................................... 3,633(7) *
James E. Eden............................................... 14,899(8) *
Thomas F. Franke............................................ 46,674(8)(9) 0.23%
Henry H. Greer.............................................. 300 *
Harold J. Kloosterman....................................... 33,221(8)(10) 0.16%
Bernard J. Korman........................................... 13,900(11) *
Edward Lowenthal............................................ 12,699(12) *
Robert L. Parker............................................ 124,417(13) 0.61%
------- -----
Directors and executive officers as a group (13 persons).... 779,338 3.84%
</TABLE>
- ---------------
* Less than 0.10%
The business address of all the above persons is 900 Victors Way, Suite 350, Ann
Arbor, Michigan 48108.
(1) Includes shares owned jointly by Mr. Bailey and his wife, plus 6,803 shares
held solely in Mrs. Bailey's name. Mr. Bailey disclaims any beneficial
interest in the shares held solely by Mrs. Bailey.
(2) Includes stock options that are currently exercisable within 60 days to
acquire 108,720 shares, and 9,486 unvested shares of Restricted Stock, of
which 4,655 shares, 2,750 shares and 2,081 shares were granted in January
of 1999, December of 1997 and January of 1997, respectively.
(3) Includes stock options that are currently exercisable within 60 days to
acquire 20,000 shares, and 4,410 unvested shares of Restricted Stock, of
which 2,760 shares and 1,650 shares were granted in January of 1999 and
December of 1997, respectively.
7
<PAGE> 10
(4) Includes stock options that currently are exercisable within 60 days to
acquire 56,842 shares, and 5,290 unvested shares of Restricted Stock, of
which 2,590 shares, 1,525 shares and 1,175 shares were granted in January
1999, December 1997 and January 1997, respectively.
(5) Includes stock options that currently are exercisable within 60 days to
acquire 6,667 shares, and 1,030 unvested shares of Restricted Stock granted
in January 1999.
(6) Includes stock options that currently are exercisable within 60 days to
acquire 40,588 shares, and 5,505 unvested shares of Restricted Stock, of
which 2,930 shares, 1,650 shares and 925 shares were granted in January
1999, December 1997 and January 1997, respectively.
(7) Includes stock options that currently are exercisable within 60 days to
acquire 3,333 shares.
(8) Includes stock options that currently are exercisable within 60 days to
acquire 1,999 shares.
(9) Includes 34,675 shares owned by a family limited liability company (Franke
Family LLC) of which Mr. Franke is a Member.
(10) Includes shares owned jointly by Mr. Kloosterman and his wife, and 8,269
owned directly by his wife.
(11) Includes stock options that currently are exercisable within 60 days to
acquire 1,000 shares.
(12) Includes 1,000 shares held in a private profit sharing plan for the benefit
of Mr. Lowenthal. Also includes stock options that currently are
exercisable within 60 days to acquire 4,000 shares.
(13) 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. Also includes stock options that currently are exercisable within
60 days to acquire 28,993 shares.
DIRECTORS AND OFFICERS OF THE COMPANY
BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
The Board of Directors held 13 meetings during 1998. The Board of Directors
has an Audit Committee, consisting of Messrs. Korman and Kloosterman and Ms.
Darling, a Compensation Committee, consisting of Messrs. Franke, Eden, Greer
(beginning July 1998) and Lowenthal (until July 1998), a Nominating Committee,
consisting of Messrs. Bailey and Parker, and an Independent Directors Committee,
consisting of Ms. Darling and Mr. Greer.
The Audit Committee, which met twice in 1998, 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 four times during 1998 and has
responsibility for the compensation of the Company's key management personnel
and administration of the Company's Amended and Restated Stock Option and
Restricted Stock Plan and the Company's 1993 Deferred Compensation Plan.
The Nominating Committee, which met twice during 1998, 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., 900 Victors Way, Suite 350, Ann Arbor, Michigan
48108.
The Independent Directors Committee, which met twice during 1998, has
responsibility for passing upon those issues with respect to which a conflict
may exist between the Company and Omega Worldwide, Inc., including issues with
respect to the Opportunity Agreement between them and the allocation of costs
between the Company and Worldwide pursuant to the Services Agreement between
them.
8
<PAGE> 11
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 Amended and Restated Stock Option and Restricted Stock
Plan, and 1993 Deferred Compensation 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.
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's stock.
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 currently are 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.
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.
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 $420,000 in January 1998, and a cash bonus for 1998
performance of $75,000 was awarded in January 1999. In addition, in January 1999
Mr. Bailey was granted 50,000 stock options and 4,655 shares of restricted stock
under the Company's Amended and Restated Stock Option and Restricted Stock Plan.
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.
9
<PAGE> 12
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 4,655 shares of restricted stock were granted on
January 4, 1999 as a bonus for 1998 performance and for continued employment in
1999 through 2000. The award vests one-quarter in July 1999, with the balance
vesting one-quarter on January 1 of 2000, 2001 and 2002.
Compensation Committee of the Board
Thomas F. Franke, Chairman
James E. Eden
Henry H. Greer
COMPENSATION OF DIRECTORS
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. 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
$3,000 monthly.
In 1998, the directors terminated the 1993 Retirement Plan for Directors
and the participation by directors in the 1993 Deferred Compensation Plan,
effective December 31, 1997, in an attempt to compensate directors in a manner
that is more closely aligned with the interests of the Company's shareholders.
Benefits to the non-employee directors under both plans were settled in 1998.
That settlement called for the payment of the following amounts with respect to
eligible participants:
<TABLE>
<CAPTION>
DIRECTORS' DEFERRED
RETIREMENT COMPENSATION
NAME OF DIRECTOR PLAN PLAN TOTAL
---------------- ---------- ------------ -----
<S> <C> <C> <C>
Essel W. Bailey, Jr. ................. $219,525 0 $219,525
James E. Eden......................... $182,938 $100,429 $283,367
Thomas F. Franke...................... $219,525 $110,451 $329,976
Harold J. Kloosterman................. $219,525 $110,451 $329,976
Bernard J. Korman..................... $182,938 $ 84,718 $267,656
Edward Lowenthal...................... $109,763 $ 31,698 $141,461
Robert L. Parker...................... $219,525 $293,026 $512,551
</TABLE>
Directors are eligible to participate in the Company's Amended and Restated
Stock Option and Restricted Stock Plan. Each non-employee director was awarded
options with respect to 10,000 shares at the date the Plan was adopted or on his
or her 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 awarded annually 300 shares of restricted stock, with each such grant of
restricted stock shares vesting six months after the date of grant.
In addition, a borrowing program was adopted to enable directors and
employees to borrow funds from the Company with which to purchase shares of the
Company's common stock pursuant to the exercise of stock options. See "Certain
Transactions," below, for a more complete description of the borrowing program.
10
<PAGE> 13
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth, for the years ended December 31, 1998, 1997
and 1996, the compensation for services in all capacities to the Company of
those persons who were at December 31, 1998 (i) the chief executive officer and
(ii) the other executive officers of the Company whose total 1998 salary and
bonus exceeded $100,000.
<TABLE>
<CAPTION>
OTHER RESTRICTED SECURITIES ALL
ANNUAL STOCK UNDERLYING LTIP OTHER
NAME AND COMPENSATION AWARD(S) OPTIONS/ PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($)(1) ($) SARS(#) ($) ($)(2)
------------------ ---- --------- -------- ------------ ---------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Essel W. Bailey,
Jr. ................. 1998 420,000 75,000 -- 152,865(3) -- -- 252,043
Chairman, President 1997 400,000 60,000 -- 139,027(3) 105,000 -- 109,272
and CEO 1996 325,000 375,000 -- 104,564(3) 25,000 -- 123,830
F. Scott Kellman....... 1998 236,000 65,000 -- 102,311(4) -- -- 37,092
Chief Operating 1997 220,000 35,000 -- 82,701(4) 62,500 -- 65,375
Officer 1996 210,000 30,000 -- 54,332(4) 15,000 -- 46,329
Susan A. Kovach........ 1998 120,000 15,000 -- 7,788(5) -- -- 1,800
Vice President, 1997 10,000 -- -- -- 20,000 -- --
Secretary and General
Counsel
David A. Stover........ 1998 210,000 55,000 -- 90,944(6) -- -- 30,910
Vice President and 1997 195,000 30,000 -- 68,817(6) 62,500 -- 50,941
Chief Financial Officer 1996 175,000 25,000 -- 38,176(6) 12,500 -- 32,545
</TABLE>
- ---------------
(1) "Other Annual Compensation" includes the aggregate of perquisites and other
personal benefits, securities or properties that 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, except that, with respect to Mr. Bailey, such amount
includes $219,525 from the settlement of the Directors' Retirement Plan as
described under "Compensation of Directors".
(3) On January 4, 1999, December 19, 1997, and January 22, 1997, Mr. Bailey was
awarded 4,655 shares, 5,500 shares, and 8,325 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 $140,500,
$203,500, and $267,400 for the awards with respect to 1998, 1997, and 1996,
respectively. With respect to these grants, one-quarter of the shares are to
be released 180 days following the grant date, with the balance to be
released 25% per year on the anniversary of the grant in each of the
following three years. Pursuant to the Plan, the recipient receives
dividends on unvested shares. The number of unreleased shares and value of
Mr. Bailey's restricted stock awards as of the end of last year were 9,487
shares and $286,389, of which 2,082 shares were released in January 1999.
(4) On January 4, 1999, December 19, 1997, and January 22, 1997, Mr. Kellman was
awarded 2,590 shares, 3,050 shares, and 4,700 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 $78,200,
$112,850, and $151,000 for the awards with respect to 1998, 1997 and 1996,
respectively. With respect to these grants, one-quarter of the shares are to
be released 180 days following the grant date, with the balance to be
released 25% per year on the anniversary of the grant in each of the
following three 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 5,632
shares and $170,016 of which 1,833 shares were released in January 1999.
(5) On January 4, 1999 Ms. Kovach was awarded 1,030 shares of restricted common
stock of the Company. The fair value of the award, based on the market price
of common stock on the date of the award, was $31,100. With respect to this
grant, one-quarter of the shares are to be released 180 days following the
11
<PAGE> 14
grant date, with the balance to be released 25% per year on the anniversary
of the grant in each of the following three years. Pursuant to the Plan, the
recipient receives dividends on unvested shares. The number of unreleased
shares and value of Ms. Kovach's restricted stock awards at the end of last
year were 1,030 shares and $31,100.
(6) On January 4, 1999, December 19, 1997, and January 22, 1997, Mr. Stover was
awarded 2,930 shares, 3,300 shares, and 3,700 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 $88,400,
$122,100, and $119,000 for the awards with respect to 1998, 1997 and 1996,
respectively. With respect to these grants, one-quarter of the shares are to
be released 180 days following the grant date, with the balance to be
released 25% per year on the anniversary of the grant in each of the
following three 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 5,767 shares and
$174,091, of which 1,253 were released in January 1999.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
There were no options/SARs granted during 1998 to executive officers of the
Company.
AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
The following table summarizes options and SARs exercised during 1998 and
presents the value of unexercised options and SARs held by the named executives
at Year-End:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES IN-THE-MONEY
UNDERLYING UNEXERCISED OPTIONS/SARS
SHARES OPTIONS/SARS AT AT FISCAL
ACQUIRED ON VALUE FISCAL YEAR-END(#) YEAR-END($)
EXERCISE REALIZED UNEXERCISABLE(U) UNEXERCISABLE(U)
NAME (#) ($) EXERCISABLE(E) EXERCISABLE(E)
---- ----------- -------- ---------------------- ----------------
<S> <C> <C> <C> <C>
Essel W. Bailey, Jr................... 7,664 84,763 78,332(U) 42,909(U)
85,388(E) 337,564(E)
F. Scott Kellman...................... 15,157 223,672 46,667(U) 25,750(U)
42,676(E) 170,794(E)
Susan A. Kovach....................... 0 0 13,333(U) 0(U)
6,667(E) 0(E)
David A. Stover....................... 11,703 117,055 45,833(U) 21,454(U)
27,256(E) 71,786(E)
</TABLE>
LONG-TERM INCENTIVE PLAN
For the period from August 14, 1992 (date of commencement of operations of
the Company) through December 31, 1998, 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, 1998, the Company had no pension plans.
12
<PAGE> 15
COMPARISON OF CUMULATIVE TOTAL RETURN*
Among: Omega Healthcare Investors, Inc.
All REIT Index**
S&P 500 Index
[GRAPH]
<TABLE>
<CAPTION>
OHI INDEX ALL REITS S&P INDEX
--------- --------- ---------
<S> <C> <C> <C>
12/31/94 100.00 100.00 100.00
3/31/95 101.00 101.00 110.00
6/30/95 111.00 108.00 120.00
9/30/95 121.00 113.00 130.00
12/31/95 124.00 118.00 137.00
3/31/96 137.00 121.00 145.00
6/30/96 135.00 127.00 151.00
9/30/96 151.00 135.00 156.00
12/31/96 173.00 161.00 169.00
3/31/97 166.00 161.00 174.00
6/30/97 177.00 170.00 204.00
9/30/97 200.00 189.00 219.00
12/31/97 220.00 191.00 225.00
3/31/98 238.00 190.00 257.00
6/30/98 218.00 181.00 265.00
9/30/98 208.00 161.00 239.00
12/31/98 196.00 155.00 290.00
</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.
THIS GRAPH REPRESENTS HISTORICAL STOCK PRICE PERFORMANCE AND IS NOT
NECESSARILY INDICATIVE OF ANY FUTURE STOCK PRICE PERFORMANCE.
THE REPORT OF THE COMPENSATION COMMITTEE AND THE PERFORMANCE GRAPH THAT
APPEARS ABOVE 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 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. During 1998, the
Company moved its principal executive offices to 900 Victors Way, Suite 350, Ann
Arbor, Michigan 48108 and entered into a sublease agreement with respect to
1,900 square feet of the Eisenhower space on December 14, 1998. Rent payments
totaling $98,456 were made to Circle Partners in 1998. The Company currently
makes monthly payments of $8,237 to the partnership pursuant to a five-year
lease involving 5,823 square feet of office space. The current lease expires,
concurrently with the expiration of the sublease, on October 31, 2000. Current
monthly rent income on the sublease is $2,382.
In November, 1997 the Company formed Omega Worldwide, Inc., a company which
furnishes asset management services and management advisory services to firms
extending financing to providers of healthcare services, particularly healthcare
services to the elderly, throughout the world. On April 2, 1998, the Company
contributed substantially all of its investment in Principal Healthcare Finance
Limited ("Principal") to Worldwide in exchange for 8,500,000 million shares of
Worldwide Common Stock and 260,000
13
<PAGE> 16
shares of Series B preferred stock. Of the 8,500,000 shares of Worldwide
received by the Company, approximately 5,200,000 were distributed on April 2,
1998 to the shareholders of the Company on the basis of one Worldwide share for
every 3.77 common shares of the Company held by shareholders of the Company on
February 1, 1998. Of the remaining 3,300,000 shares of Worldwide received by the
Company, 2,300,000 shares were sold by the Company on April 3, 1998 for net
proceeds of approximately $16,250,000 in a Secondary offering pursuant to a
registration statement of Worldwide. The market value of the distribution to
shareholders approximated $39 million or $1.99 per share. The Company recorded a
non-recurring gain of $30.2 million on the distribution and secondary offerings
of Worldwide common shares during 1998.
The Company has invested approximately $1,600,000 in Principal Healthcare
Finance Limited ("Principal") as of December 31, 1998. As of that date,
Principal owns and leases 179 nursing homes in the British Isles. Essel W.
Bailey, Jr., Chairman, President and Chief Executive Officer of the Company, and
Company directors Thomas F. Franke, Harold J. Kloosterman, Bernard J. Korman and
Robert L. Parker, have invested in the aggregate, directly or indirectly,
$2,170,000 in Principal.
In connection with the 1994 relocation of F. Scott Kellman, Chief Operating
Officer, 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 $67,000. The loan is secured by a lien on Mr.
Kellman's residence, and bears interest at 7.05% per annum. Interest is payable
monthly, and principal installments are payable annually.
In connection with the 1997 appointment of James P. Flaherty as Vice
President-International, the Company loaned him L350,000 to purchase his home in
London, England. The loan is secured by a first lien against Mr. Flaherty's
residence, bears interest at 7.00% per annum and matures in the year 2000.
Interest is payable monthly.
On January 14, 1998, the Board of Directors adopted a program (the
"Borrowing Program") pursuant to which the Company has agreed to lend funds to
employees and directors to enable them to purchase the Company's common stock
through the exercise of stock options. The goal of the Borrowing Program is to
increase ownership of the Company's common stock by employees and directors,
and, as a result, to foster a proprietary feeling among employees and directors
and to further align the interests of employees and directors with those of the
Company's other shareholders. The maximum amount that an employee may borrow
under the Borrowing Program depends upon the employee's salary level, with the
maximum loan amount for employees at the lower end of the salary range being
$20,000, and the maximum loan amount for employees at the upper end of the
salary range being $300,000. The maximum loan amount for directors is $300,000.
Each loan bears interest at the Company's borrowing cost, as determined by the
Company's management in its sole discretion. Interest is payable quarterly, and
all principal and accrued and unpaid interest is due five years from the date of
the loan. Upon receipt by an employee of a cash bonus from the Company, the
employee is obligated to make a principal reduction payment equal to 10% of the
amount of the cash bonus. The loans are secured by pledges of the stock
purchased with the proceeds of the loans. As long as a loan is not in default,
the borrower may vote the shares purchased and is entitled to receive all
dividends paid on the shares. At December 31, 1998, the following loans are
outstanding to executive officers and non-employee directors:
<TABLE>
<CAPTION>
NAME OF DIRECTOR
OR EXECUTIVE OFFICER AMOUNT BORROWED
-------------------- ---------------
<S> <C>
Essel W. Bailey, Jr. ....................................... $199,965
James E. Eden............................................... $262,587
James P. Flaherty........................................... $267,698
Thomas F. Franke............................................ $262,587
F. Scott Kellman............................................ $299,992
Harold J. Kloosterman....................................... $262,587
Bernard J. Korman........................................... $300,000
Edward Lowenthal............................................ $187,472
Robert L. Parker............................................ $299,955
David A. Stover............................................. $300,000
</TABLE>
14
<PAGE> 17
The aggregate outstanding principal balance of loans made under the
Borrowing Program to employees who are not directors or executive officers is
$220,357.
The Board of Directors has approved Change of Control Agreements between
the Company and its executive officers. Each Change of Control Agreement
provides that the Company will pay to the applicable executive officer
termination payments, for a period of up to 36 months, in an amount equal to
100% of the executive officer's monthly total compensation (including bonus) for
the most recent year if an event occurs that results in a change of control of
the Company and within three (3) years after the change of control either (i)
the Company terminates, without cause, the employment of an executive officer
who, at the time of the change of control, has been employed by the Company for
at least two years or (ii) an executive officer who has been employed by the
Company for at least two years terminates his or her employment after the Board
of Directors has failed to reelect him or her to his or her then existing or a
reasonably comparable office or if a change not acceptable to said officer is
made that affects a substantial reduction in his or her compensation or benefits
(other than a general reduction of compensation or benefits affecting all
officers of the Company and resulting from a severe economic downturn in the
financial position of the Company). During that payout period, an executive
officer also will be entitled to other employee benefits substantially similar
to those in effect at the time of the executive officer's termination.
The Company and Worldwide have entered into an Opportunity Agreement to
provide each other with rights to participate in certain transactions and make
certain investments. The Opportunity Agreement provides, subject to certain
terms, that, regardless of whether the following kinds of investments (each a
"REIT Opportunity") first come to the attention of the Company or Worldwide, the
Company will have the right to: make any investment within the United States (a)
in real estate, real estate mortgages, real estate derivatives or entities that
invest exclusively in or have a substantial portion of their assets in any of
the foregoing, so long as the Company's REIT status would not be jeopardized by
the investment; and (b) that, if made by a REIT, would not result in the
termination of the REIT's status as a REIT under Sections 856 through 860 of the
Internal Revenue Code ("Code"). However, Worldwide will have the right,
regardless of whether the following kinds of investments (each a "Worldwide
Opportunity") first come to the attention of the Company or Worldwide, to: (a)
provide advisory services and/or management services to any healthcare
investors, wherever located; (b) acquire or make debt and/or equity investments
(through a joint venture or otherwise) in any healthcare investor or in
healthcare real estate-related assets outside the United States: (c) make
investments in any entity conducting healthcare operations; and (d) make any
other real estate, finance or other investments not customarily undertaken by a
qualified REIT. If Worldwide declines to pursue a Worldwide Opportunity, it must
offer that opportunity to the Company, and if the Company declines to pursue a
REIT Opportunity, it must offer that opportunity to Worldwide. Each of the
Company and Worldwide may participate, in its discretion, in any REIT
Opportunity or Worldwide Opportunity that the other requests be pursued jointly.
The terms upon which each of the Company and Worldwide elect to participate in
such an opportunity will be negotiated in good faith and must be mutually
acceptable to the respective boards of directors of the Company and Worldwide,
with the affirmative votes of the independent directors of the boards of
directors of the Company and Worldwide. Each of the Company and Worldwide has
agreed to notify the other of and make available to the other investment
opportunities developed by such party or of which such party becomes aware but
is unable or unwilling to pursue. The Opportunity Agreement has a term of ten
years and automatically renews for successive five-year terms unless terminated.
In that connection, Worldwide has offered to the Company the opportunity to
acquire up to 9.9% of the common shares of Principal Healthcare Finance Trust,
an Australian unit trust, which owns thirty-five long-term care facilities and
475 assisted living units in New South Wales, Victoria and Queensland.
The Company and Worldwide have entered into a Services Agreement pursuant
to which the Company provides shared management and other employees, office
space and administrative services to Worldwide. Worldwide reimburses the Company
quarterly for a portion of the Company's overhead expenses such as rent,
compensation and utilities, based on a formula determined by dividing the value
of the assets managed by Worldwide at the end of each fiscal quarter by the sum
of the value of the assets of Worldwide and assets managed by the Company at the
end of each fiscal quarter. During the year ended December 31, 1998, indirect
costs allocated to Worldwide under the Services Agreement totaled $490,000.
15
<PAGE> 18
On December 30, 1998, the Company made a $6,000,000 loan to Oakwood Living
Centers of Massachusetts, Inc., an affiliate of Oakwood Living Centers, Inc., of
which James E. Eden, a director of the Company, also is Chairman and Chief
Executive Officer. The loan is secured by a second mortgage lien on six skilled
nursing facilities located in Massachusetts, bears interest at 14% per annum and
matures December 31, 1999.
RELATIONSHIP WITH INDEPENDENT AUDITORS
Ernst & Young LLP audited the Company's financial statements for each of
the years ended December 31, 1996, 1997 and 1998. 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, 1999 is the date by which proposals of shareholders intended
to be presented at the Annual Meeting of Shareholders, held on or about April
15, 2000, 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 $7,500 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 Chief Executive Officer
March 12, 1999
Ann Arbor, Michigan
16
<PAGE> 19
OMEGA HEALTHCARE INVESTORS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Susan Allene Kovach and David A. Stover 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 1,
1999 at the Annual Meeting of Stockholders to be held on April 20, 1999 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 and FOR the proposal
to amend the Company's Articles of incorporation to increase the total number
of authorized shares as set forth 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)
-------------
|SEE REVERSE|
| SIDE |
-------------
- --------------------------------------------------------------------------------
-FOLD AND DETACH HERE-
<PAGE> 20
[X] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE. 8293
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
THE DIRECTORS RECOMMEND A VOTE FOR PROPOSALS 1 AND 2.
- ------------------------------------------------------------------------------------------------------------------------------------
<S><C>
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of [ ] [ ] Nominees: 2. Amendment to Articles of Incorporation [ ] [ ] [ ]
Directors Essel W. Bailey, Jr. to increase Authorized Shares
Martha A. Darling
[INSTRUCTIONS: To withhold Harold J. Kloosterman
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
held by joint tenants,
both should sign. When
signing as attorney,
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 the box [ ]
if you plan to attend
the Annual Meeting in
person.
SIGNATURE(S) DATE
----------------------------------------------------- -------------
NOTE: Please sign exactly as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such. This proxy will not be used if you attend the meeting in
person and so request.
- -----------------------------------------------------------------------------------------------------------------------------------
-FOLD AND DETACH HERE-
</TABLE>
