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
Filed by 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 Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form of Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing party:
(4) Date filed:
OMEGA HEALTHCARE INVESTORS, INC.
900 Victors Way, Suite 350
Ann Arbor, Michigan 48108
(734) 887-0200
__________ __, 2001
To Our Stockholders:
On October 30, 2001, we announced a plan to raise $50 million in new equity
capital from our current stockholders. The purpose of such offering is to
facilitate our reaching an agreement with our senior secured bank lenders
regarding the modification of our revolving credit facilities and to enhance our
ability to repay approximately $108 million in debt maturing during the first
half of 2002. We expect to use the proceeds from the offering to repay a portion
of the maturing debt and for working capital and other general corporate
purposes. We need you, as stockholders, to approve certain matters relating to
this transaction, as further described in these proxy materials. The essential
components of the transaction are as follows:
o Rights Offering. We will conduct a rights offering pursuant to which
holders of our common stock will receive a dividend to purchase their
pro rata percentage of additional shares of our common stock in an
aggregate amount equal to $27.24 million.
o Explorer's Investment Commitment. Explorer Holdings, L.P., which is
our largest stockholder and owns approximately 45.5% of our common
stock (assuming conversion of our Series C convertible preferred
stock, all of which is held by Explorer), will not participate in the
rights offering. Instead, Explorer has agreed to purchase $22.76
million of our stock, on the closing of the rights offering, at the
same price per share available in the rights offering. The shares that
Explorer has agreed to purchase represent its pro rata portion of the
$50 million in new equity we are seeking to raise. Explorer has also
committed to invest an additional amount equal to the aggregate
subscription price of the shares of common stock that are not
subscribed for by other stockholders in the rights offering. As a
result of Explorer's investment commitment, we are assured that we
will receive $50 million in gross proceeds from the rights offering
and Explorer's investment assuming they are both completed. We are
seeking your approval to issue shares of common stock to Explorer
because Explorer is an affiliate of ours and the rules of the New York
Stock Exchange require that stockholders approve any sale of this
amount of voting capital stock to an affiliate and issuance of
securities that may result in a change of control of the company. If
stockholders have not approved the sale of common stock to Explorer at
the time we close the rights offering and Explorer's investment, we
will sell Explorer shares of non-voting Series D preferred stock in
lieu of our common stock. The Series D preferred stock will
automatically convert into common stock upon receipt of stockholder
approval or the waiver by the New York Stock Exchange of its
stockholder approval requirement.
o Amendment of Agreements with Explorer. As a condition to Explorer's
investment, we have agreed to amend certain of the agreements relating
to Explorer's investment made in July 2000. These amendments will be
effective as of the closing of Explorer's new investment. The effect
of these amendments is generally to remove those provisions in our
agreements that prohibit Explorer from voting in excess of 49.9% of
our stock and from taking certain actions without the prior approval
of our Board of Directors. The proposed amendment to the terms of our
Series C preferred stock also requires stockholder approval. The
Explorer agreements and the negotiated changes are described in more
detail under "Proposed Amendment of Our Articles Supplementary for the
Series C Convertible Preferred Stock" on page __ and "Modifications to
Agreements with Explorer" on page ___ of the accompanying Proxy
Statement.
o Increase Size of Board of Directors. At the special meeting of
stockholders you will also be asked to approve amendments to our
Articles of Incorporation, our corporate charter, and Bylaws
increasing the maximum size of our Board of Directors from nine to
eleven directors. If the amendments are approved, we have agreed with
Explorer that the size of the Board of Directors will be fixed at ten
and that I will be appointed to fill the vacancy.
This transaction was referred to a special committee comprised solely of
directors who are not affiliated with Explorer. This special committee
unanimously recommended the proposed transaction to the Board of Directors. The
Board believes this transaction is the best alternative available to address our
current capital needs. Our Board of Directors also received a written opinion
from Shattuck Hammond Partners LLC, an independent financial advisor, that as of
October 29, 2001, the date of their opinion, the financial terms of the
investment agreement with Explorer, taken as a whole, are fair to us from a
financial point of view.
I urge you to vote FOR the issuance of shares of common stock to Explorer,
FOR the amendment to the terms of the Series C preferred stock and FOR the
amendments to our Articles of Incorporation and Bylaws. Details of the proposed
investment and other important information are in the accompanying Proxy
Statement. Please read the accompanying Proxy Statement carefully.
Thank you for your continuing support. I assure you that, through these
challenging times, our directors, officers and employees have been devoted to
serving the best interests of our company and you, its stockholders.
Very truly yours,
/s/ C. TAYLOR PICKETT
Chief Executive Officer
YOUR VOTE IS IMPORTANT. Please sign, date and mail the proxy card promptly
in the enclosed envelope whether or not you plan to attend the meeting. It is
important that you return the proxy card promptly whether or not you plan to
attend the meeting, so that your shares are properly voted.
If you hold shares through a broker, bank or other nominee (in "street
name"), you may also have the ability to vote by telephone or the Internet in
accordance with instructions that they will include with this mailing. In either
event, we urge you to vote promptly.
OMEGA HEALTHCARE INVESTORS, INC.
900 Victors Way, Suite 350
Ann Arbor, Michigan 48108
(734) 887-0200
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
________ __, 2001
To Our Stockholders:
A Special Meeting of Stockholders of Omega Healthcare Investors, Inc. will
be held at Sheraton Inn, 3230 Boardwalk, Ann Arbor, Michigan 48108 on
__________, __________, 2001, at 10:00 a.m., for the following purposes:
1. To approve the issuance to Explorer Holdings, L.P. of shares of our
common stock either in connection with Explorer's commitment to invest
$22.76 million plus an amount equal to the aggregate subscription
price of any shares of common stock not purchased in the rights
offering by other stockholders or upon the conversion of shares of
Series D preferred stock issued to Explorer in lieu of common stock if
we close Explorer's investment prior to receiving the stockholder
approval sought pursuant to the proxy statement to issue common stock
to Explorer, and any change of control that may result from such
issuance.
2. To approve an amendment to our Articles of Incorporation, which is our
corporate charter, amending the terms of our Articles Supplementary
for the Series C Convertible Preferred Stock by removing the
provisions prohibiting Explorer from voting in excess of 49.9% of our
common stock, by changing the number and manner in which holders of
our Series C and Series D preferred stock can appoint directors if we
fail to pay dividends for a specified period of time, by providing
that the subscription price in the rights offering will not result in
an adjustment to the conversion price of our Series C preferred stock
and by making certain other technical changes to reflect the possible
issuance of the Series D preferred stock.
3. To approve amendments to our Articles of Incorporation and our Bylaws
to increase the size of the Board of Directors from nine to eleven
members, and to provide that any future increase in the number of
directors can be effected by an amendment to our Bylaws approved by
our Board or our stockholders.
Your Board of Directors has fixed the close of business on _______________,
2001 as the record date for the determination of stockholders who are entitled
to notice of and to vote at the Special Meeting or any adjournments thereof.
By order of the Board of Directors
/s/ CAROL A. ALBAUGH
----------------------
Corporate Secretary
__________, 2001
Ann Arbor, Michigan
Whether you are able to attend or not, we urge you to cast your vote
promptly on the enclosed proxy card FOR each of the matters listed above, all as
set forth in the attached Proxy Statement.
Please sign, date and return the enclosed proxy card promptly in the
enclosed envelope. If you attend the Special Meeting, you may vote in person
even if you have previously mailed a proxy card.
OMEGA HEALTHCARE INVESTORS, INC.
900 Victors Way, Suite 350
Ann Arbor, Michigan 48108
(734) 887-0200
PROXY STATEMENT
FOR
SPECIAL MEETING OF STOCKHOLDERS
To be Held on ________, 2001
The accompanying proxy is solicited by our Board of Directors to be voted
at the Special Meeting of Stockholders to be held at Sheraton Inn, 3230
Boardwalk, Ann Arbor, Michigan 48108 on __________, 2001, and any adjournments
of the meeting. It is anticipated that this proxy material will be mailed on or
about ____________, 2001 to our common stockholders of record on ____________,
2001.
A stockholder giving a proxy has the power to revoke it at any time before
it is exercised. A proxy may be revoked by filing with our Secretary (i) a
signed instrument revoking the proxy or (ii) a duly executed proxy bearing a
later date. A proxy also may 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 named in the proxy.
VOTING SECURITIES
Our outstanding voting securities as of ___________, 2001, the record date,
consisted of ____________ shares of common stock, par value $.10 per share and
1,048,420 shares of Series C convertible preferred stock. Each holder of record
of common stock and Series C preferred stock as of the close of business on
_________, 2001 is entitled to notice of and to vote at the Special 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 Special Meeting.
The holder of our Series C preferred stock will vote as a single class with
holders of common stock on all matters properly brought before the Special
Meeting on an as-converted basis, except as expressly required by law. The
1,048,420 shares of Series C preferred stock outstanding as of __________, 2001
are convertible into 16,774,722 shares of common stock and accordingly an
aggregate of _____________ votes are entitled to be cast by the holders of
common stock and Series C preferred stock at the meeting.
PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding beneficial ownership
of our common stock as of October 31, 2001 by:
o each of our directors and named executive officers;
o all directors and executive officers as a group; and
o all persons known to us to be the beneficial owner of more than
5% of our outstanding common stock.
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 our common stock shown as beneficially owned by them, subject to
community property laws where applicable. The business address of the
directors and executive officers is 900 Victors Way, Suite 350, Ann Arbor,
Michigan 48108.
Common Stock
------------------------------------------------------
Before the Rights After the Rights
Offering and Offering and
Explorer Investment Explorer Investment Series A Preferred Series B Preferred
(14)
----------------------------- ----------------------- ----------------------- ------------------------
Number of Percent Number Percent Number Percent Number Percent
Beneficial Owner Shares of of of of of of of
Class Shares Class Shares Class Shares Class
(1) (1) (15) (16)
------------------------ --------------- ---------- ---------- --------- ---------- ---------- ---------- ----------
Directors and Executive
Officers:
C. Taylor Pickett....... 50,000(2) 0.3% -- -- -- --
Robert O. Stephenson.... 1,000 * -- -- -- --
Daniel J. Booth......... -- -- -- -- -- --
R. Lee Crabill.......... -- -- -- -- -- --
Thomas W. Erickson...... 3,362 * -- -- -- --
Richard M. FitzPatrick.. -- -- -- -- -- --
F. Scott Kellman........ 39,888(3)(4) 0.2% -- -- -- --
Laurence D. Rich........ 13,239(5) 0.1% -- -- -- --
Thomas F. Franke........ 38,637(6) 0.2% 3,000 * -- --
Harold J. Kloosterman... 58,792(7) 0.3% -- -- -- --
Bernard J. Korman....... 365,930(8) 1.8% 200 * 1,300 *
Edward Lowenthal........ 8,330(8)(9) * -- -- -- --
Christopher W. Mahowald. 6,695(10) * -- -- -- --
Donald J. McNamara...... 16,781,417(10)(11) 45.5% -- -- -- --
Daniel A. Decker........ 16,778,084(11) 45.5% -- -- -- --
Stephen D. Plavin....... 3,362 * -- -- -- --
Directors and executive
officers as a group
(16 persons).......... 17,374,014(12) 47.2% 3,200 * 1,300 *
5% Beneficial Owners:
Merrill Lynch & Co. Inc.
(on behalf of Merrill
Lynch Asset
Management Group)
World Financial Center
North Tower
250 Vesey Street
New York, NY 10381... 1,136,750(13) 5.7%
Hampstead Investment
Partners III, L.P.
4200 Texas Commerce
Tower West
2200 Ross Avenue
Dallas, TX 75201..... 16,774,772(11) 45.5%
-------------------------------------------
* Less than 0.10%
(1) Based on 20,076,024 shares of our common stock outstanding as of September
30, 2001, except as to Messrs. McNamara and Decker and directors and
officers as a group, which includes shares of our common stock issuable
upon conversion of Series C preferred stock. See note 11 below.
(2) Represents unvested shares of restricted stock granted in July 2001.
(3) Includes shares owned jointly by Mr. Kellman and his wife, plus 171 shares
held solely in Mrs. Kellman's name. Mr. Kellman disclaims any beneficial
interest in the shares held solely by Mrs. Kellman.
(4) Includes 647 unvested shares of restricted stock granted in January 1999.
(5) Includes 215 unvested shares of restricted stock granted in January 1999.
(6) Includes 26,037 shares owned by a family limited liability company (Franke
Family LLC) of which Mr. Franke is a member.
(7) Includes shares owned jointly by Mr. Kloosterman and his wife, and 23,269
shares held solely in Mrs. Kloosterman's name.
(8) Includes stock options that are exercisable within 60 days to acquire 668
shares.
(9) Includes 1,000 shares held in a private profit sharing plan for the benefit
of Mr. Lowenthal.
(10) Includes stock options that are exercisable within 60 days to acquire 3,333
shares.
(11) Based on Amendment No. 3 to Schedule 13D filed by Hampstead Investment
Partners III, L.P. on October 30, 2001. Represents shares of our common
stock issuable upon conversion of 1,048,420 shares of Series C preferred
stock owned by Explorer. Hampstead holds the ultimate controlling interest
in Explorer. Messrs. McNamara and Decker disclaim beneficial ownership of
the Series C preferred stock, which they may be deemed to beneficially own
because of their ownership interests in Hampstead, which holds the ultimate
controlling interest in Explorer.
(12) Includes options that are exercisable within 60 days to acquire 8,002
shares. Also includes 50,862 unvested shares of restricted stock. Includes
shares of our common stock issuable upon conversion of Series C preferred
stock owned by Explorer. See note 11.
(13) Based on the Schedule 13G filed by Merrill Lynch & Co., Inc. with the
Securities and Exchange Commission on February 7, 2000.
(14) Assumes full exercise of the subscription rights by each stockholder in the
rights offering. If none of the subscription rights are exercised in the
rights offering, Explorer would beneficially own _________ shares or
________ %, of our common stock, represented directly or by 1,048,420
shares of Series C preferred stock and __________ shares of Series D
preferred stock, depending on whether or not we have obtained stockholder
approval for Explorer's investment at the time of the investment.
(15) Based on 2,300,000 shares of Series A preferred stock outstanding on
September 30, 2001.
(16) Based on 2,000,000 shares of Series B preferred stock outstanding on
September 30, 2001.
VOTING
The presence at the Special Meeting of shares representing a majority of
the voting power associated with our issued and outstanding common stock and
Series C preferred stock will be necessary to establish a quorum for the conduct
of business at the Special Meeting. The proposal to issue shares of common stock
to Explorer Holdings, L.P. in connection with its investment must be approved by
the affirmative vote of a majority of the shares of our common stock and Series
C preferred stock that are cast at the Special Meeting. The proposal to approve
an amendment to our Articles of Incorporation to amend the terms of our Articles
Supplementary for the Series C Convertible Preferred Stock must be approved by
the affirmative vote of a majority of the shares of our issued and outstanding
common stock and Series C preferred stock, voting together as a class, and
two-thirds of the issued and outstanding shares of Series C preferred stock
voting separately as a class. The proposal to amend our Articles of
Incorporation and Bylaws to increase the maximum number of members of the Board
of Directors from nine to eleven must be approved by the affirmative vote of at
least 80% of the shares of issued and outstanding common stock and Series C
preferred stock, voting together as a class on an as converted basis.
As of the record date, directors and executive officers of our company
beneficially owned ______ shares of our common stock (including _____ shares
subject to company stock options exercisable within 60 days). As of the record
date, shares held by directors and executive officers of our company entitle
them to exercise approximately __% of the voting power of the shares entitled to
vote at the special meeting on an as-converted basis. Explorer has committed to
vote its shares of Series C preferred stock, representing approximately 45.5% of
the voting shares, in favor of the proposal relating to the issuance of shares
of common stock to Explorer and the two proposals relating to the amendments to
our Articles of Incorporation and Bylaws.
Brokers holding shares in "street name" may vote the shares only if the
beneficial owner provides instructions on how to vote. Brokers will provide
beneficial owners instructions on how to direct the brokers to vote the shares.
Brokers holding shares for beneficial owners cannot vote on the actions proposed
in this Proxy Statement without the beneficial owners' specific instructions. A
so-called "broker non-vote" occurs when a broker, holding common stock as
nominee, does not receive voting instructions from the beneficial owner. With
respect to all matters submitted to stockholders for their consideration,
abstentions will be included as shares cast on such proposals, whereas broker
non-votes will not be included as part of the total number of votes cast on such
proposals since shares represented by broker non-votes are not legally eligible
to vote on any matter to which the non-vote relates. Thus, abstentions will have
the same effect as votes against any given proposal. Broker non-votes will have
no effect in determining whether the stockholders have approved the proposal to
approve the issuance of shares of common stock to Explorer Holdings, L.P.
because approval of such proposal is based on the number of shares that are
actually voted. However, broker non-votes will have the same effect as a vote
against the two proposals to amend our Articles of Incorporation and Bylaws
because approval of such proposals is based on the number of shares issued and
outstanding. There are no rights of appraisal or similar dissenter's rights with
respect to any matter to be acted upon pursuant to this Proxy Statement.
We urge stockholders to vote promptly either by signing, dating and
returning the enclosed proxy card in the enclosed envelope, or for stockholders
who own their shares in street name through a broker, in accordance with the
telephone or Internet voting instructions your broker may include with this
mailing.
PROPOSAL 1 -- APPROVAL OF THE ISSUANCE OF COMMON STOCK
IN CONNECTION WITH EXPLORER HOLDINGS, L.P.'s INVESTMENT
Description of Rights Offering and Explorer's Investment
On October 30, 2001, we announced a plan to raise $50 million in new equity
capital from our current stockholders. The purpose of this plan is to facilitate
our reaching an agreement with our senior secured bank lenders regarding the
modification of our revolving credit facilities and to enhance our ability to
repay approximately $108 million in debt maturing during the first half of 2002.
We expect to use the proceeds from the offering to repay a portion of the
maturing debt and for working capital and other general corporate purposes.
Our plan to raise $50 million of new common equity consists of two
components: a $27.24 million rights offering to our common stockholders and a
private placement of at least $22.76 million to Explorer Holdings, L.P., our
largest stockholder. The number of rights that each common stockholder will
receive represents the stockholder's pro rata portion on an as-converted basis
of the $50 million we propose to raise, thereby allowing stockholders who fully
participate in the rights offering the opportunity to avoid any dilution in
their ownership interest.
Explorer currently owns approximately 45.5% of our issued and outstanding
common stock, giving effect to the conversion of our Series C preferred stock,
all of which is held by Explorer. The terms of the Series C preferred stock give
Explorer the right to receive its pro rata portion on an as-converted basis of
all dividends paid to the holders of our common stock, including the rights to
be distributed in the rights offering. Explorer has agreed to waive this
provision and will not receive rights in the rights offering. Instead, Explorer
has entered into an agreement with us to invest at least $22.76 million,
representing its pro rata portion on an as-converted basis of the $50 million in
new equity we are seeking to raise, plus an amount equal to the subscription
price of the shares that are not subscribed for by our stockholders in the
rights offering. Explorer has agreed to purchase its stock at the same price per
share as is offered to our stockholders in the rights offering. As a result of
Explorer's commitment, we are assured of receiving the entire $50 million in new
equity capital we are seeking to raise assuming the rights offering and the
private placement to Explorer are completed.
Holders of our Series A and Series B preferred stock are not entitled to
participate in the rights offering. If the issuance of common stock to Explorer
has not been approved by our stockholders at the time of closing of the rights
offering and Explorer's investment, Explorer will receive shares of a newly
created series of non-voting convertible Series D preferred stock. The Series D
preferred stock has terms substantially similar to Explorer's Series C preferred
stock (except the Series D preferred stock is non-voting) and will automatically
convert into common stock upon receipt of stockholder approval or upon the
waiver by the New York Stock Exchange of its stockholder approval requirement.
Explorer has committed to vote its shares of Series C preferred stock,
representing approximately 45.5% of the voting shares, in favor of this
proposal.
The closing of both the rights offering and Explorer's investment will
occur no later than ten business days following the expiration of the
subscription period for the rights offering. In addition to customary closing
conditions, the closings will be subject to our obtaining certain amendments to
the terms of our senior secured bank facilities and waivers of our current
non-compliance with certain covenants on terms acceptable to us and Explorer.
See "Conditions" on page __ of this Proxy Statement. Although we are in
discussions with the lenders under such facilities, we cannot assure you as to
whether satisfactory amendments and waivers will be reached with such lenders
or, if so, as to the terms thereof. In the event such conditions are not
satisfied, we will terminate the rights offering and the private placement to
Explorer. We will make a public announcement of the general terms of the
amendments to our two credit facilities promptly after satisfaction of these
closing conditions and, in any event, prior to the expiration of the
subscription period for the rights offering.
Reasons for the Rights Offering
Our current financial challenges are the result of the continuation of the
unprecedented financial difficulties in the long-term care industry. The
introduction in 1998 of a new Medicare Prospective Payment System for the
reimbursement of skilled nursing facilities, in lieu of the cost-based
reimbursement system, was implemented with harsh and somewhat unexpected
consequences for the long-term care industry. The prospective payment system
significantly reduced payments to nursing home operators which forced many
nursing home operators in America into financial distress. Ultimately, many of
them, including our customers Allegheny Health Systems, Sun Healthcare Group,
Frontier Group, Inc., Integrated Health Services, RainTree Healthcare Corp. and
Mariner Post-Acute Network, Inc. were forced to seek bankruptcy protection in
order to continue to deliver care to the nation's elderly.
The wave of bankruptcy filings by large nursing home operators seriously
disrupted the long-term care industry to which we provide capital and virtually
froze our access to capital sources in 2000. In response to these financial
challenges, we completed a transaction with Explorer in July 2000 pursuant to
which Explorer provided us with $100.0 million in exchange for $100.0 million of
our Series C preferred stock. The proceeds of the initial Explorer investment
were used to fund the repayment of debt that matured in July 2000, and the
Company was subsequently able to repay $48.4 million in indebtedness that
matured in February 2001. However, our portfolio of investments continued to
experience difficulties as we sought to restructure certain investments (such as
Mariner) and as we recovered other properties which we have now reclassified as
"owned and operated."
As a result of the continuing financial difficulties in the long-term care
industry and the recording of the settlement of a lawsuit in June 2001, we are
not in compliance with certain of the financial covenants contained in the loan
agreements relating to our two credit facilities. These violations prevent us
from drawing upon the remaining credit available under both credit facilities at
this time. The waiver of existing defaults and the modification of the terms of
the credit facilities in a manner acceptable to both us and Explorer is a
condition to the closing of the rights offering and Explorer's investment.
Although discussions with our revolving credit facility lenders are continuing,
we cannot assure you that we will be successful in restructuring these
facilities. In addition, we have approximately $108 million of indebtedness
maturing in the first half of 2002. Although we suspended dividends on our
common and preferred stock in February, 2001 in order to conserve cash to assist
us in repaying this indebtedness, we cannot assure you that we will be
successful in addressing these pending obligations unless we obtain additional
cash from one or more sources.
In the face of the continuing financial difficulties plaguing the long-term
care industry in general and our investment portfolio in particular, management
explored a number of capital financing alternatives including discussions with
Explorer to address our near-term liquidity challenges.
The Board of Directors asked our special committee, a standing committee
composed solely of directors that are not affiliated with Explorer, to evaluate
a possible transaction with Explorer and assess whether any other viable
alternatives existed. The special committee began its work in mid-September by
soliciting proposals from financial advisors. Ultimately, the special committee
retained Shattuck Hammond Partners LLC, an investment banking firm that had no
pre-existing relationship with us, Explorer or any of its affiliates.
Shattuck Hammond worked with our management team and counsel to the special
committee to negotiate the terms of the proposed Explorer investment and
finalize the documentation relating thereto. On October 23, 2001, Shattuck
Hammond delivered its preliminary reports to the special committee and Board of
Directors regarding Shattuck Hammond's evaluation of the terms of the proposed
Explorer investment and an assessment of viable alternatives. On October 29,
2001, following a review of the definitive documentation pertaining to the
proposed Explorer investment, Shattuck Hammond rendered its written opinion to
our Board of Directors to the effect that the financial terms of the investment
agreement, taken as a whole, are fair to us from a financial point of view. See
"Opinion of Financial Advisor to the Special Committee of Independent Directors
and the Board of Directors."
The Board of Directors unanimously approved the rights offering and
Explorer's investment transactions. The process of evaluating Explorer's
proposal compared with other potential capital alternatives and negotiating the
terms of our agreement with Explorer, as described in the accompanying Proxy
Statement, was deliberative and thoughtful. The special committee engaged in
extensive deliberations to structure a transaction that meets our near-term
liquidity needs while affording our existing stockholders an opportunity to
participate in our future on the same terms on which Explorer may invest.
We believe that the rights offering is the most appropriate means of
raising equity capital because it affords our existing stockholders the
opportunity to subscribe for the new shares of common stock and to maintain
their proportionate interest in us at a price not greater than that being paid
by Explorer. Some of the factors considered by our Board of Directors in
approving the rights offering included:
o our need for capital;
o the alternative methods available to us for raising capital;
o the pro rata nature of a rights offering to our stockholders;
o the terms of the investment agreement with Explorer;
o the time period available in which to raise the needed capital and
certainty of closure associated with various alternative methods for
raising capital;
o the market price of our common stock; and
o conditions of the capital markets in general.
In addition, since no underwriting or sales commission will be paid in respect
of the shares purchased in the rights offering, we believe the rights offering
will be a low cost method of raising additional capital.
Summary of Key Terms of the New Explorer Investment
The following summary of the material terms of Explorer's investment is
subject to, and qualified in its entirety by, the complete text of the
investment agreement described below and the other material documents described
in more detail under "Proposed Amendment of Our Articles Supplementary for the
Series C Convertible Preferred Stock" on page __ and "Modifications to
Agreements with Explorer" on page ___ of this Proxy Statement. Copies of the
investment agreement and the other material agreements are attached as
appendices to this Proxy Statement and are incorporated in this Proxy Statement
by reference. You should read the full text of the Explorer agreements because
those agreements, and not this Proxy Statement, are the legal documents that
govern the additional investment by Explorer. In the event of any discrepancy
between the terms of the investment agreement and the following summary, the
investment agreement will control.
Investment Agreement
Amount and Nature of Explorer Investment. Under the terms of the investment
agreement, a copy of which is attached as Appendix A to this Proxy Statement,
Explorer has agreed to invest at least $22.76 million, representing its pro rata
portion on an as-converted basis of the $50 million in new equity we are seeking
to raise. Explorer has also agreed to invest an amount equal to the subscription
price of the shares that are not subscribed for by our stockholders in the
rights offering. Explorer has agreed to purchase its stock at the same price per
share as is offered to our stockholders in the rights offering. Our Board of
Directors has authorized the issuance and sale to Explorer of either newly
issued shares of our Series D preferred stock, having the designations, voting
powers, preferences and other rights as set forth in the Articles Supplementary
to the Series D Convertible Preferred Stock, a copy of which is attached as
Appendix B to this Proxy Statement, or, if we have the approval of our
stockholders prior to the closing of Explorer's investment, our common stock, in
each case having an aggregate value equal to the difference between $50 million
and the gross proceeds we receive from the rights offering. We anticipate the
closing of Explorer's investment to occur no later than ten business days
following the expiration of the subscription period for the rights offering.
Representations, Warranties and Indemnities. The investment agreement
contains representations, warranties and indemnification provisions that we
believe are customary for a transaction of this nature. In the investment
agreement, Omega made representations and warranties about itself related to,
among other things:
o corporate existence, qualification to conduct business and corporate
power;
o ownership of subsidiaries;
o capital structure;
o corporate authority to enter into, and carry out the obligations
under, the investment agreement and the agreements entered into in
connection therewith, and the enforceability of such agreements;
o our rights plan;
o absence of a breach or conflict with its charter documents, bylaws or
material agreements as a result of the transactions contemplated by
the investment agreement;
o filings with the SEC;
o financial statements;
o absence of undisclosed liabilities;
o compliance with laws;
o legal proceedings;
o absence of specified changes or events since July 1, 2001;
o tax matters;
o environmental matters;
o material contracts;
o employee benefit plans; and
o information supplied for use in this Proxy Statement and the
registration statement related to the rights offering.
The representations and warranties survive the closing of Explorer's
investment for two years. Subject to certain thresholds and caps, we have agreed
to indemnify Explorer and its affiliates for all losses relating to a breach of
our representations and warranties, and to indemnify Explorer and its affiliates
for all losses relating to a breach of our agreements or any actual or
threatened claim made by any third party relating to or in connection with the
transactions contemplated by the investment agreement.
We have also agreed to reimburse Explorer for its out-of-pocket costs and
expenses in connection with the transactions contemplated by the investment
agreement, not to exceed $1 million.
Conditions. The consummation of Explorer's investment is subject to the
following conditions:
o our obtaining waivers from the lenders under our two credit facilities
of any and all then existing covenant defaults as well as the right to
assert a default or give notice of an event which, with the giving of
notice and/or the passing of time, could become an event of default
under the credit facilities;
o our obtaining an extension of the maturity of our $175 million secured
revolving credit facility by not less than twelve months from its
current maturity of December 31, 2002;
o our obtaining amendments and/or modifications to some of the covenants
and/or conditions contained in our two credit facilities on terms
satisfactory to us and Explorer; and
o the absence of any governmental order or litigation with respect to
the transactions that is reasonably likely to render it impossible or
unlawful to complete the rights offering and/or Explorer's investment,
or that could reasonably be expected to have a material adverse effect
on our business, results of operations, or financial condition, or
materially restrict the rights of Explorer under the documents
relating to its investment.
Although we are in discussions with the lenders under such facilities, we can
provide no assurance as to whether satisfactory amendments and waivers will be
reached with such lenders or, if so, as to the terms thereof. In the event such
conditions are not satisfied, we will terminate the rights offering and the
private placement to Explorer.
Termination. Explorer may terminate the investment agreement if the closing
has not occurred by January 15, 2002, which date will be extended on a
day-for-day basis to the extent that the registration statement relating to the
rights offering has not been declared effective by the SEC by December 1, 2001,
not to exceed 30 calendar days.
Summary of Terms of Series D Preferred Stock
The terms of the Series D preferred stock are set forth in the Articles
Supplementary for Series D Convertible Preferred Stock, a copy of which is
attached as Appendix B to this Proxy Statement. The following description does
not purport to be complete and is qualified in its entirety by reference to the
Articles Supplementary. You should read the full text of the Series D Preferred
Stock Articles Supplementary because that document, and not this Proxy
Statement, is the legal document that contains the specific rights and
preferences of the Series D preferred stock be sold to Explorer. In the event of
any discrepancy between the terms of the Series D Preferred Stock Articles
Supplementary and the following summary, the Articles Supplementary will
control.
General. Under our Articles of Incorporation, which is our charter, our
Board of Directors is authorized without further stockholder action to provide
for the issuance of up to an aggregate of 10,000,000 shares of our preferred
stock, in one or more series, with such designations, preferences, powers and
relative participating, optional or other special rights, dividend rate or
rates, conversion rights, voting rights, rights and terms of redemption
(including sinking fund provisions), the redemption price or prices, and the
liquidation preferences as will be stated in the resolutions providing for the
issuance of a series of such stock, adopted, at any time or from time to time,
by our Board of Directors. The Series D Articles Supplementary authorize us to
issue up to 1,000,000 shares of the Series D preferred stock. Whether or not we
issue any shares of Series D preferred stock will depend on whether our
stockholders have approved the issuance of common stock to Explorer prior to the
closing of Explorer's investment in our company.
Rank. The Series D preferred stock will, with respect to dividend rights
and rights upon liquidation, dissolution or winding up of our company, rank (i)
senior to our common stock and to all other equity securities that by their
terms rank junior to the Series D preferred stock with respect to dividend
rights or rights upon liquidation, dissolution or winding up of our company;
(ii) on a parity with our outstanding Series A preferred stock, Series B
preferred stock, Series C preferred stock and any other equity securities that
may be issued by our company that have terms which specifically provide that
such equity securities will rank on a parity with the Series D preferred stock;
and (iii) junior to all of our existing and future indebtedness.
Dividend Rights. If approval of our stockholders to permit the conversion
of Series D preferred stock into common stock is not received by January 30,
2002, holders of shares of the Series D preferred stock are entitled to receive
dividends at the greater of:
o 10% per annum of the liquidation preference, as discussed below, per
share; and
o the amount per share declared or paid by us on our common stock based
on the number of shares of common stock into which the shares of
Series D preferred stock are then convertible.
Dividends on each share of the Series D preferred stock will be cumulative
commencing from the date of issuance unless the Series D preferred stock is
converted into common stock prior to January 30, 2002, in which case there will
be no adjustment or payment in respect of any accrued dividends. Dividends are
payable in arrears for each dividend period ended July 31, October 31, January
31 and April 30 on or before the relevant dividend payment date, which will be
the 15th day of August, November, February and May of each year. Any dividend
payable on shares of the Series D preferred stock for any partial period will be
prorated for the partial period based on the actual number of days elapsed
commencing with and including the date of issuance of such shares through the
end of the dividend period. Dividends will be payable at the election of the
holders of a majority of the Series D preferred stock with respect to any period
after June 30, 2002, and at the election of our Board of Directors with respect
to any period on or prior to June 30, 2002, (i) by the issuance as of the
relevant dividend payment date of additional shares of Series D preferred stock
having an aggregate liquidation preference equal to the amount of such accrued
dividends, or (ii) in cash. If dividends are paid in additional shares of Series
D preferred stock, the number of authorized shares of Series D preferred stock
will be deemed, without further action, to be increased by the number of shares
so issued. Dividends on shares of Series D preferred stock will not be declared
by our Board of Directors or paid or set apart for payment if the terms of any
agreement to which we are a party, including any agreement relating to our
indebtedness, prohibits the declaration or payment of dividends on the Series D
preferred stock or provides that such declaration, payment or setting aside for
payment would constitute a breach thereof or default thereunder; provided that
in such case dividends on the Series D preferred stock will accrue. Dividends on
the Series D preferred stock will also accrue whether or not we have earnings or
other funds legally available for the payment of such dividends. Accrued but
unpaid dividends on the Series D preferred stock will not bear interest. Except
as set forth in the next sentence, no dividends will be declared or paid or set
apart for payment on any of our capital stock or any other series of preferred
stock ranking, as to dividends, on a parity with or junior to the Series D
preferred stock, other than a dividend in shares of our common stock or in
shares of any other class of stock ranking junior to the Series D preferred
stock as to dividends and upon liquidation, for any period unless full
cumulative dividends have been or contemporaneously are declared and paid or
declared and a sum sufficient for the payment thereof is set apart for such
payment on the Series D preferred stock for all past dividend periods and the
then current dividend period. When dividends are not paid in full upon the
Series D preferred stock and the shares of any other series of preferred stock
ranking on a parity as to dividends with the Series D preferred stock, all
dividends declared upon the Series D preferred stock and any other series of
preferred stock ranking on a parity as to dividends with the Series D preferred
stock will be declared pro rata so that the amount of dividends declared per
share of Series D preferred stock and such other series of preferred stock will
in all cases bear to each other the same ratio that accrued dividends per share
on the Series D preferred stock and such other series of preferred stock bear to
each other, excluding any accrual in respect of unpaid dividends for prior
dividend periods if such preferred stock does not have a cumulative dividend.
Unless full cumulative dividends on the Series D preferred stock have been or
contemporaneously are declared and paid in full or declared and a sum sufficient
for the payment thereof is set apart for payment in full, no dividends, other
than certain dividends payable in our capital stock, may be declared or paid
upon our common stock, except for certain limited exceptions such as dividends
paid for the purpose of preserving our qualification as a real estate investment
trust under the Internal Revenue Code of 1986, as amended. Any dividend payment
made on shares of the Series D preferred stock will first be credited against
the earliest accrued but unpaid dividend due with respect to such shares which
remains payable.
Liquidation Preference. Upon any voluntary or involuntary liquidation,
dissolution or winding up of our affairs, each holder of shares of Series D
preferred stock will, at the election of such holder, be entitled to be paid the
liquidation preference out of our assets legally available for distribution to
our stockholders before any distribution of assets is made to holders of common
stock or any other class or series of our capital stock that ranks junior to the
Series D preferred stock as to liquidation rights. After payment of the full
amount of the liquidation preference, plus any accrued and unpaid dividends and
interest thereon, if any, to which they are entitled, the holders of Series D
preferred stock will have no right or claim to any of our remaining assets. The
consolidation or merger of our company with or into any other corporation, trust
or entity or of any other corporation with or into us in a manner that
constitutes a change in control, or the sale, lease or conveyance of all or
substantially all of our property or business will be deemed to constitute a
liquidation, dissolution or winding up of our company. The liquidation
preference for shares of Series D preferred stock is equal to the original issue
price of the Series D preferred stock plus any accrued and unpaid dividends.
Redemption. The Series D preferred stock is not redeemable, subject,
however, to certain restrictions on transfer and ownership, described in
"Redemption and Business Combination Provisions" on page __ of this Proxy
Statement
Voting Rights. Holders of Series D preferred stock will not have voting
rights, except as set forth below. Whenever dividends on any shares of Series D
preferred stock are in arrears for two or more dividend periods, the number of
directors then constituting the Board of Directors will be increased by two if
not already increased pursuant to a similar provision in the Amended and
Restated Articles Supplementary for Series C Convertible Preferred Stock, which
will become effective upon stockholder approval as set forth in the description
of the Series C preferred stock in "Proposed Amendment of Our Articles
Supplementary for the Series C Convertible Preferred Stock" on page __ of this
Proxy Statement. The holders of such shares of Series D preferred stock and the
holders of Series C preferred stock upon which like voting rights have been
conferred and are exercisable, voting together as a single class, will be
entitled to vote as a single class to elect the additional preferred stock
directors until such time as all dividends accumulated on such shares of Series
D preferred stock and Series C preferred stock for the past dividend periods and
the dividend for the then current dividend period shall have been fully paid, at
which time the directors elected pursuant to this right are required to resign.
In any vote to elect or remove such directors, each holder of shares of Series D
preferred stock and Series C preferred stock will be entitled to one vote for
each share held by such holder. So long as any shares of Series D preferred
stock remain outstanding, we will not, without the affirmative vote or consent
of the holders of at least two-thirds of the shares of the Series D preferred
stock outstanding at the time (voting as a single class together with any other
classes of preferred stock adversely affected in the same manner), amend, alter
or repeal the provisions of our charter or the Series D Articles Supplementary,
whether by merger, consolidation or otherwise, so as to materially and adversely
affect any right, preference, privilege or voting power of the Series D
preferred stock, including the creation of any series of preferred stock ranking
senior to the Series D preferred stock with respect to payment of dividends or
the distribution of assets upon liquidation, dissolution or winding up, but not
including the creation or issuance of preferred stock ranking on a parity with
the Series D preferred stock.
Conversion. The holders of Series D preferred stock have the following
conversion rights:
Automatic Conversion. Each share of Series D preferred stock will
automatically convert into shares of our common stock upon the earlier of:
(i) the date the holders of a majority of the shares of our common stock,
giving effect to the conversion of the Series C preferred stock, present
and entitled to vote at a duly convened meeting of our stockholders vote to
approve the conversion of the Series D preferred stock into common stock
and (ii) the date the New York Stock Exchange waives any requirement for
stockholder approval of the conversion of the Series D preferred stock into
common stock under its rules and policies.
Conversion Price. Subject to certain limitations on conversion set
forth in the Series D Articles Supplementary, each share of Series D
preferred stock will be converted into the number of shares of our common
stock as is equal to the quotient obtained by dividing the original issue
price for such share by the conversion price, as discussed below, in effect
at the time of conversion. Initially, the conversion price will be equal to
the subscription price in the rights offering. However, the conversion
price will be adjusted to reflect the economic impact of a stock split,
stock combination, certain dividends paid on common stock, the issuance of
additional common stock at a price less than fair market value and similar
events.
Redemption and Business Combination Provisions
If our Board of Directors is, at any time and in good faith, of the opinion
that direct or indirect ownership of at least 9.9% or more of the voting shares
of capital stock has or may become concentrated in the hands of one beneficial
owner, our Board of Directors will have the power:
o by lot or other means deemed equitable by it, to call for the purchase
from any of our stockholders of a number of voting shares sufficient,
in the opinion of our Board of Directors, to maintain or bring the
direct or indirect ownership of voting shares of capital stock of such
beneficial owner to a level of no more than 9.9% of the outstanding
voting shares of our capital stock, and
o to refuse to transfer or issue voting shares of our capital stock to
any person whose acquisition of such voting shares would, in the
opinion of our Board of Directors, result in the direct or indirect
ownership by that person of more than 9.9% of our outstanding voting
shares of our capital stock.
Further, any transfer of shares, options, warrants, or other securities
convertible into voting shares that would create a beneficial owner of more than
9.9% of the outstanding voting shares will be deemed void ab initio and the
intended transferee will be deemed never to have had an interest therein.
Subject to the rights of the preferred stock described below, the purchase price
for any voting shares of our capital stock so redeemed will be equal to the fair
market value of the shares reflected in the closing sales prices for the shares,
if then listed on a national securities exchange, or the average of the closing
sales prices for the shares if then listed on more than one national securities
exchange, or if the shares are not then listed on a national securities
exchange, the latest bid quotation for the shares if then traded
over-the-counter, on the last business day immediately preceding the day on
which we send notices of such acquisitions, or, if no such closing sales prices
or quotations are available, then the purchase price shall be equal to the net
asset value of such stock as determined by our Board of Directors in accordance
with the provisions of applicable law. The purchase price for shares of Series A
preferred stock, Series B preferred stock, Series C preferred stock and Series D
preferred stock will be equal to the fair market value of the shares into which
such preferred stock may be converted as reflected in the closing sales price
for the shares, if then listed on a national securities exchange, or if the
shares are not then listed on a national securities exchange, the purchase price
will, in the case of the Series A preferred stock and Series B preferred stock,
be equal to the redemption price of such shares of Series A preferred stock and
Series B preferred stock, respectively, and, in the case of the Series C
preferred stock and Series D preferred stock, the purchase price will be equal
to the liquidation preference of such shares of Series C preferred stock and
Series D preferred stock, respectively. From and after the date fixed for
purchase by our Board of Directors, the holder of any shares so called for
purchase will cease to be entitled to distributions, voting rights and other
benefits with respect to such shares, except the right to payment of the
purchase price for the shares.
Our Articles of Incorporation require that, except in certain
circumstances, business combinations between us and a beneficial holder of 10%
or more of our outstanding voting stock, a related person, be approved by the
affirmative vote of at least 80% of our outstanding voting shares. A "business
combination" is defined in the Articles of Incorporation as:
o any merger or consolidation of our company with or into a related
person;
o any sale, lease, exchange, transfer or other disposition, including
without limitation a mortgage or any other security device, of all or
any "substantial part," as defined below, of our assets including,
without limitation, any voting securities of a subsidiary to a related
person;
o any merger or consolidation of a related person with or into our
company;
o any sale, lease, exchange, transfer or other disposition of all or any
substantial part of the assets of a related person to our company;
o the issuance of any securities (other than by way of pro rata
distribution to all stockholders) of our company to a related person;
and
o any agreement, contract or other arrangement providing for any of the
transactions described in the definition of business combination.
The term "substantial part" is defined as more than 10% of the book value of our
total assets as of the end of our most recent fiscal year ending prior to the
time the determination is being made. The 80% voting requirement described above
will not be applicable if (i) our Board of Directors has unanimously approved in
advance the acquisition of our stock that caused a related person to become a
related person or (ii) the business combination is solely between us and a
wholly owned subsidiary. Our Board of Directors unanimously approved in advance
Explorer's acquisition of our Series C preferred stock, which made Explorer a
related person to us. Therefore, the 80% voting requirement is inapplicable to
Explorer.
Under the terms of our Articles of Incorporation, our Board of Directors is
classified into three classes. Each class of directors serves for a term of
three years, with one class being elected each year. As of the date of this
prospectus, there are nine directors, with each class consisting of three
directors.
The foregoing provisions of our Articles of Incorporation and certain other
matters may not be amended without the affirmative vote of at least 80% of our
outstanding voting shares.
The foregoing provisions may have the effect of discouraging unilateral
tender offers or other takeover proposals which certain stockholders might deem
in their interests or in which they might receive a substantial premium. Our
Board of Directors' authority to issue and establish the terms of currently
authorized preferred stock, without stockholder approval, may also have the
effect of discouraging takeover attempts. The provisions could also have the
effect of insulating current management against the possibility of removal and
could, by possibly reducing temporary fluctuations in market price caused by the
accumulation of shares, deprive stockholders of opportunities to sell at a
temporarily higher market price. However, our Board of Directors believes that
inclusion of the business combination provisions in the Articles of
Incorporation may help assure fair treatment of all stockholders and preserve
our assets.
The foregoing summary of certain provisions of the Articles of
Incorporation does not purport to be complete or to give effect to provisions of
statutory or common law.
Dividends on Common Stock
In February 2001, we suspended payment of all dividends on all common stock
and preferred stock. We do not know when or if we will resume dividend payments
on our common stock or, if resumed, what the amount or timing of any dividend
will be. We do not anticipate paying dividends on any class of capital stock at
least until our $108 million of debt maturing in the first half of 2002 has been
repaid, and in any event, all accrued and unpaid dividends on our Series A, B, C
and D (if issued) preferred stock must be paid in full before dividends on our
common stock can be resumed. Dividends on our Series A, B and C preferred stock
currently outstanding accrue at $20.1 million annually. As of September 30,
2001, we had $14.9 million of accumulated and unpaid preferred dividends on our
preferred stock. Notwithstanding the suspension of dividends, we have made
sufficient distributions to satisfy the distribution requirements under the REIT
rules of the Internal Revenue Code of 1986 to maintain our REIT status for 2000
and expect to satisfy the requirements under the REIT rules for 2001.
Reason for Seeking Stockholder Approval
Our common stock trades on the New York Stock Exchange. The rules of the
New York Stock Exchange require that a company whose securities are listed on
the New York Stock Exchange receive stockholder approval before selling or
issuing to an affiliate, such as Explorer, common stock or stock convertible
into common stock that represents 1% or more of the issuing company's
outstanding common stock. Because the number of shares of common stock which
will be issued pursuant to the investment agreement will be more than 1% of
Omega's outstanding common stock, we must obtain stockholder approval to issue
shares of common stock to Explorer. The New York Stock Exchange rules also
require stockholder approval prior to the issuance of any securities that may
result in a change in control.
Vote Required for Approval of the Share Issuance Proposal
The share issuance proposal must be approved by the affirmative vote of a
majority of all shares of common stock and Series C preferred stock present and
voting at the Special Meeting. Explorer has committed to vote its shares of
Series C preferred stock, representing approximately 45.5% of the voting shares,
in favor of the proposal relating to the issuance of shares of common stock to
Explorer.
Capitalization
The following table shows, as of September 30, 2001, our historical
capitalization and our capitalization as adjusted for the rights offering and
Explorer's investment, including the application of the proceeds, assuming net
proceeds of $48 million. For purposes of this table, we have assumed that all of
the rights will be exercised in full by stockholders in the rights offering and
that we will issue Series D preferred stock to Explorer at the closing of the
rights offering. If stockholders approve Explorer's investment before the
closing of the rights offering, Explorer will be issued, in lieu of the Series D
preferred stock, a number of shares of common stock equal to the number of
shares of common stock that would otherwise have been issuable upon conversion
of the Series D preferred stock. To the extent stockholders do not exercise all
of the rights, the amount of Series D preferred stock or common stock issued to
Explorer will increase. For purposes of our capitalization as adjusted, we have
assumed a subscription price of $2.92 per share, the maximum price at which our
Board of Directors authorized our proceeding with the rights offering. The
actual subscription price may be lower.
Unaudited
----------------------------------
Historical As Adjusted
----------- -----------
(In thousands)
Debt:
Revolving lines of credit........................................................ $ 203,641 $ 203,641
Other secured borrowings......................................................... 18,595 18,595
Unsecured borrowings:
6.95% Notes Due June 2002 (1)................................................ 99,641 51,641
6.95% Notes Due August 2007.................................................. 100,000 100,000
Other unsecured borrowings................................................... 4,160 4,160
--------- ---------
Total Debt....................................................................... 426,037 378,037
Stockholders' Equity:
Preferred Stock $1.00 par value:
Authorized - 10,000 Shares
Issued and Outstanding--2,300 shares Series A with an aggregate liquidation
preference of $57,500........................................................ 57,500 57,500
Issued and Outstanding--2,000 shares Series B with an aggregate liquidation
preference of $50,000........................................................ 50,000 50,000
Issued and Outstanding--1,048 shares Series C with an aggregate liquidation
preference of $104,842....................................................... 104,842 104,842
Issued and Outstanding--228 shares Series D with an aggregate liquidation
preference of $22,760 (2).................................................... --- 22,760
Common Stock $.10 par value:
Authorized--100,000 shares
Issued and Outstanding--20,076(2).............................................. 2,008 ---
Issued and Outstanding--37,199(2) ............................................. --- 3,720
Additional paid-in capital..................................................... 438,384 461,912
Cumulative net earnings........................................................ 171,272 171,272
Cumulative dividends paid...................................................... (365,654) (365,654)
Unamortized restricted stock awards.............................................. (202) (202)
Accumulated other comprehensive income........................................... (1,491) (1,491)
--------- ---------
Total Stockholders' Equity....................................................... 456,659 504,659
--------- ---------
Total Capitalization............................................................. $ 882,696 $ 882,696
========= =========
------------------------------------
(1) For purposes of our capitalization, as adjusted, we have assumed that the
net proceeds from the rights offering and the Explorer investment will be
approximately $48 million and that we used those proceeds to repay notes
due June 2002. We have not determined the actual allocation of proceeds
from this offering and the Explorer investment and management will have
broad discretion in making that determination.
(2) If none of the subscription rights are exercised by stockholders,
___________ shares of common stock or __________ shares of Series D
preferred stock with a liquidation preference of $50 million will be
outstanding following the closing of the rights offering and Explorer's
investment as adjusted. Upon stockholder approval of the issuance of common
stock to Explorer, all the outstanding Series D preferred stock will
automatically be converted into _____________ shares of common stock.
Opinion of Financial Advisor to the Special Committee of Independent Directors
and the Board of Directors
Our Board of Directors asked a special committee, composed solely of
directors who are unaffiliated with Explorer, to evaluate any proposals received
from Explorer and make a recommendation to the full Board of Directors regarding
what action, if any, our company should take with respect to such proposals. The
special committee engaged Shattuck Hammond Partners LLC on October 15, 2001 as
the committee's financial advisor to (i) review and analyze potential financing
alternatives for our company as well as financing proposals we received; and
(ii) if requested, render an opinion to the Board of Directors regarding the
fairness from a financial point of view of a financing contemplated by us
involving, among other things, an investment by Explorer, a 45.5% owner of our
common stock on an as converted basis, and a rights offering to our stockholders
other than Explorer. Prior to being engaged by us as the financial advisor to
the special committee, Shattuck Hammond had no professional relationship with us
or Explorer.
The amount, terms and structure of the proposed financing were determined
through a negotiated process between the special committee and Explorer and are
set forth in an investment agreement dated as of October 29, 2001 between us and
Explorer. Shattuck Hammond did not participate directly in the negotiation of
the terms of the investment agreement. Pursuant to the investment agreement,
among other things, Explorer commits to invest, subject to certain closing
conditions being satisfied or waived, up to $50 million in payment for our
common stock or Series D preferred stock. The actual amount of Explorer's
investment will be equal to the difference between $50 million and the gross
proceeds received by us through a rights offering to our common stockholders
other than Explorer, defined as the "unsubscribed purchase amount." For purposes
of their opinion, Shattuck Hammond assumed that if all rights offered in the
rights offering are exercised, the proportional ownership of our stock by
stockholders other than Explorer and by Explorer on an as converted basis would,
upon Explorer's payment of the unsubscribed purchase amount and the issuance to
it of shares of our common stock, remain approximately the same. Shattuck
Hammond also assumed that the subscription price per common share in the rights
offering and the price per common share or the conversion price of the Series D
preferred to be paid by Explorer would be the same. For purposes of their
opinion Shattuck Hammond also assumed that the subscription price was $2.92, the
maximum price approved by our Board of Directors and that the investment
agreement included, among other things, the various financial terms that are
specifically identified in Shattuck Hammond's fairness opinion set forth in
Appendix C to this Proxy Statement.
Shattuck Hammond rendered an oral opinion to the special committee and our
Board of Directors on October 23, 2001 (subject to review of definitive
documentation that was in the process of being negotiated), and a written
opinion addressed to the special committee and our Board of Directors on October
29, 2001, in each case to the effect that, as of such date and subject to the
assumptions made, matters considered and the limitations set forth in its
opinion, the financial terms of the investment agreement taken as a whole,
defined as the "financial terms of the investment agreement" as described more
fully in its opinion, are fair to us from a financial point of view. The full
text of Shattuck Hammond's written opinion is attached as Appendix C to this
Proxy Statement and is incorporated herein by reference. Shattuck Hammond's
opinion sets forth the assumptions made, the matters considered and limits on
the review undertaken by Shattuck Hammond in connection with its engagement. The
following summary of Shattuck Hammond's opinion is qualified in its entirety by
reference to the full text of such opinion. Shattuck Hammond's opinion is
directed only to the fairness to us, from a financial point of view, of the
financial terms of the investment agreement taken as a whole and does not
address any other aspect of the investment by Explorer or the rights offering or
any other transaction to which Explorer and our company are parties. Shattuck
Hammond's opinion was provided for the information and assistance of the special
committee and the Board of Directors in connection with their consideration of
the financing proposal put forward by Explorer and is not a recommendation of
any action that the special committee, the Board of Directors or any of our
stockholders should take.
In connection with preparing its opinion, Shattuck Hammond reviewed a
variety of materials including those specifically identified in its fairness
opinion set forth in Appendix C to this Proxy Statement and made such
investigations as it deemed appropriate. Shattuck Hammond did not independently
verify any of the information it obtained for the purposes of its opinion.
Instead, Shattuck Hammond assumed the accuracy and completeness of all such
information. Shattuck Hammond relied upon assurances by our management that all
forward-looking information concerning us reflected the best currently available
judgments and estimates of management as to our likely future financial
performance and capital requirements. Shattuck Hammond assumed that the
financing will be consummated in accordance with the terms of the investment
agreement. Shattuck Hammond did not make an independent inspection, evaluation
or appraisal of our assets or liabilities, nor did anyone furnish Shattuck
Hammond with any such evaluation or appraisal. The Shattuck Hammond opinion is
based on market, economic and other conditions as they existed and could be
evaluated at the time their fairness opinion was rendered.
No limitations were imposed by the special committee, the Board of
Directors or us on the scope of Shattuck Hammond's investigation or the
procedures Shattuck Hammond followed in rendering its opinion. The terms of
Shattuck Hammond's engagement, however, did not include soliciting interest in
an investment transaction from investors, and Shattuck Hammond made no such
solicitation.
In evaluating the fairness, from a financial point of view, of the
financial terms of the investment agreement taken as a whole to us, Shattuck
Hammond employed a variety of analyses and reviews which it believes were
appropriate for preparing its opinion. The preparation of a fairness opinion
involves various determinations of the most appropriate and relevant methods of
financial analyses and review and the application of those methods to the
particular circumstances. Therefore such an opinion is not necessarily
susceptible to partial analysis or summary description. Shattuck Hammond
believes that its analyses and reviews must be considered as a whole and that
selection of portions of its analyses and reviews and of the factors considered
by it, without considering all of the factors and analyses and reviews, would
create a misleading view of the processes underlying its opinion. In arriving at
its opinion, Shattuck Hammond did not attribute any particular weight to any
particular analysis, review or factor considered by it, but rather made
qualitative judgments about the significance and relevance of each analysis,
review and factor.
In performing its analyses and reviews, Shattuck Hammond made numerous
assumptions with respect to industry performance, general business and economic
conditions and other matters, many of which are beyond our control. The analyses
and reviews performed by Shattuck Hammond do not purport to be an appraisal and
are not necessarily indicative of actual values or actual future results that
might be achieved, all of which may be significantly more or less favorable than
suggested by Shattuck Hammond's analyses and reviews. In connection with its
analyses and reviews, Shattuck Hammond utilized estimates and forecasts of our
future operating results contained in or derived from projections developed and
supplied by our management. Analyses based on forecasts of future results are
not necessarily indicative of actual future results, which may be significantly
more or less favorable than the forecasts. Such analyses are inherently subject
to uncertainty, being based on numerous factors or events beyond our control,
and are susceptible to interpretations and periodic revision based on actual
experience and business and economic developments after the date they were
prepared. Therefore, future results or actual values may be materially different
from these forecasts or assumptions.
The following is a brief summary of material analyses and reviews performed
by Shattuck Hammond in connection with the preparation of Shattuck Hammond's
fairness opinion delivered to the special committee and our Board of Directors
on October 29, 2001. The following analyses and reviews reflect substantially
the same methodologies used by Shattuck Hammond in its preliminary oral
presentation to the special committee and our Board of Directors on October 23,
2001, but updated and confirmed in writing to reflect financial information and
market data that was available as of October 26, 2001 as well as a review of the
definitive documentation executed in connection with the Explorer investment.
Alternative Financing Structures Review
General. Shattuck Hammond reviewed a number of financing alternatives to
Explorer's investment including:
o equity financing (secondary public offering, private investment
into public equity, private placement);
o debt financing (subordinated debt, collateralized mortgage backed
securitization, Health and Urban Development insured and senior
unsecured); and
o other financings (asset sales, sale or merger of our company).
Shattuck Hammond's review was based on a number of theoretical criteria
including pricing, completion risk, timing, deleveraging of balance sheet,
governance and approval requirements, fees and other factors. Based on its
review and the criteria cited, Shattuck Hammond was of the view that no
other financing alternative was clearly better than the Explorer
investment. In this regard, Shattuck Hammond noted that, among other
things:
o Explorer did not require any additional due diligence;
o Explorer and our company were willing to enter into agreements on
terms that were substantially similar to the definitive
documentation related to Explorer's investment in our Series C
preferred stock;
o the views of our management regarding the potential consequences
if we did not reach an agreement with its banks for covenant
waivers by mid December, 2001, including, without limitation,
interest rate increases and other penalties and possible
acceleration of its senior debt;
o the requirement of our banks that there be an infusion of equity
or other junior capital in connection with any covenant waivers
and possible term extensions;
o Explorer's commitment to purchase our common stock at a fixed
price per share determined under the investment agreement
irrespective of the actual price of our common stock at the time
Explorer makes its investment;
o the structure of the Explorer investment as an investment in our
common stock or Series D preferred stock to convert into our
common stock thereby eliminating the potential need to pay
dividends or interest that other investments might require
(assuming that Series D preferred stock is not issued or, if
issued, is outstanding for only a short period of time);
o an investment of equity would deleverage our balance sheet;
o the World Trade Center attack on September 11, 2001 negatively
impacted the financing markets; and
o a rights offering is "democratic" from the perspective that all
stockholders can participate based on their proportional
ownership.
Market Valuation of Omega Publicly-Traded Senior Unsecured Debt and Series
A and B Preferred Stock. Shattuck Hammond noted that our senior unsecured
debt and Series A and B preferred stock were trading at significant
discounts to their respective par values. Moreover, Shattuck Hammond
further noted that our unsecured debt has a below investment grade rating
and that the Series A and B preferred stock have had their dividends
suspended. Shattuck Hammond concluded that our below investment grade
rating on our debt, dividend suspension on our preferred stock and relative
trading values of such securities to their par amounts were indicative of
the challenges we would face in attempting to complete an alternative
financing to the Explorer investment.
Omega Senior Unsecured Debt
Price YTM S&P Rating
----- ----- ----------
Omega 6.95%; 6/15/02 ...................... 85 35.8% CCC+
Omega 6.95%; 8/01/07 ...................... 60 18.5% CCC+
Series A and Series B Preferred (Actual Dollars)
Current Discount to
Liquidation Price as of Liquidation Dividend
Preference 10/26/01 Preference Yield
----------- ------------ ------------- ---------
Series A Preferred ............. $25.00 $14.51 58.0% NA(1)
Series B Preferred ............. $25.00 $13.70 54.8% NA(2)
(1) Dividend suspended; accrues at rate of 9.250%.
(2) Dividend suspended; accrues at rate of 8.625%.
Explorer Pro Forma Ownership Analysis. Shattuck Hammond noted that Explorer's
current ownership of 45.5% of our voting capital stock and the ability to
designate four out of nine Board seats (and approve an independent director)
provided Explorer with significant control of our company. Based on the $50
million financing and a subscription price of $2.92, depending on the number of
our stockholders other than Explorer who exercise their rights, Explorer's
ownership of our voting capital stock could exceed 50% on an as converted basis.
The table below presents Explorer and non-Explorer ownership of our common
stock on an as converted basis based on different assumed levels of non-Explorer
stockholder participation in the rights offering:
Ownership Analysis (Shares in Millions)
Common Shares on an as Converted Basis (1)
------------------------------------------
Non-
Explorer Total
Participation Shares Percentage Total
In Rights Non- Non- Shares Percentage Total
Explorer Ownership Level Offering Explorer Explorer Explorer Explorer Shares
------------------------ -------- -------- ---------- -------- -------- ------
High....................... 0% 20.1 37.2% 33.9 62.8% 54.0
Medium..................... 50% 24.7 45.8% 29.2 54.2% 54.0
Low........................ 100% 29.4 54.5% 24.6 45.5% 54.0
(1) Excludes options and warrants.
Shattuck Hammond further noted that in the event that upon consummation of
the rights offering and transactions contemplated by the investment agreement,
Explorer were to beneficially own more than 50% of our voting securities,
Explorer would have voting control of our company through its unrestricted right
to vote our voting capital stock and the power to designate a majority of our
Board of Directors subject to the following restrictions imposed by the
investment agreement and any other limitation or restriction imposed by law:
o a limitation on the number of our Board of Directors which Explorer
could designate;
o so long as Explorer holds at least 15% of our voting securities, a
commitment by Explorer to vote in favor of the election of three
directors who are both "independent" under the rules of the New York
Stock Exchange and unaffiliated with Explorer and, upon the increase
in the number of directors to ten, one additional person who is
unaffiliated with Explorer; and
o except for a transaction approved by a committee of our Board of
Directors comprised entirely of independent directors and under
certain other limited circumstances, a prohibition against Explorer
acquiring beneficial ownership of more than 80% of our voting
securities.
Rights Offering Analysis
Shattuck Hammond reviewed 31 rights offerings (excluding rights offerings
involving closed end funds and American Depositary Receipts) that have been
completed since January 1, 2001. Shattuck Hammond noted that rights offerings
are:
o in many instances used by financially troubled companies, and
approximately 61% of the companies in the sample involved companies
with share prices less than $5.00 per share;
o all of the rights offerings in the sample for which information was
available had over-subscription rights available to all stockholders;
o approximately 41% of such rights offerings for which information was
available had a large investor that was willing to purchase all or a
large part of any rights which were not exercised;
o approximately 36% of the rights offerings in the sample for which
information was available had rights that were transferable; and
o approximately 86% of the sample for which information was available
were priced based on intangible factors that may have had no relation
to the value of the companies' assets, operating performance or share
price.
Shattuck Hammond also reviewed the relative share price performance of the
sample group based on the date of announcement and ex dividend date, and
concluded that rights offerings typically have relatively little impact on a
company's share price.
Rights Offering Analysis
Analysis by Announcement Date
Week Day On One One
Before Before Day of Day After Week After
------ ------ ------ --------- ----------
1.00 0.99 1.00 0.97 0.93
Analysis by Ex Date
Week Day On One One
Before Before Day of Day After Week After
------ ------ ------ --------- ----------
1.13 1.13 1.00 0.98 1.05
---- ---- ---- ---- ----
Omega Float Comparison
Based on information provided by Bloomberg Investor Services, Shattuck Hammond
compared our public float (common shares not owned by management or other
affiliates) with the public float of a select group of publicly-traded
financially stable healthcare REITs (Health Care Property Investors, Inc.,
Health Care REIT, Inc., Healthcare Realty Trust, Inc., Nationwide Health
Properties, Inc. and Senior Housing Properties Trust) and a select group of
publicly-traded financially distressed REITs (LTC Properties, Inc. and National
Health Investors, Inc.). The REITs in each group were selected because their
healthcare focus and mix of assets were reasonably similar to those of our
company. The general criteria used to distinguish between a stable and
distressed REIT is that stable REITs generally have stronger financial
performance, fewer operators who are in bankruptcy, and pay a dividend to their
common stockholders. Shattuck Hammond considered our company to be a distressed
REIT.
The float for the stable REITs ranged from 16.4 million shares to 54.7 million
shares and averaged 37.9 million shares. The float for the distressed REITs
(excluding our company) ranged from 20.2 million shares to 21.8 million shares
and averaged 21.0 million shares. Shattuck Hammond noted that a larger float
generally increases the trading liquidity of a stock and may enhance the ability
to undertake a reverse split to increase share price. In this regard, if any
non-Explorer stockholders (other than management and other affiliates) exercised
their rights, our float would increase.
The table below presents the pro forma impact on our float based on different
levels of assumed participation in the rights offering by our stockholders other
than Explorer:
Omega Pro Forma Float Analysis (Shares in Millions)
High Medium Low
---- ------ ----
Omega Float................................. 19.2 19.2 19.2
Non-Explorer Rights Participation........... 100% 50% 0%
New Shares Issued (1)....................... 9.3 4.7 0.0
Total Pro Forma Float....................... 28.5 23.9 19.2
% Increase in Float......................... 48% 24% 0%
(1) Assumes $27.3 million Rights Offering priced at 6% discount to average
closing price for 20 trading day period ended October 26, 2001--hence
$2.92.
Pro Forma Debt to Capitalization Analysis
Shattuck Hammond analyzed the debt to capitalization of the stable REITs
and the distressed REITs (excluding our company) and compared them to our
company. Debt/capitalization is calculated as (long-term debt + short-term
debt)/(long-term debt + short-term debt + preferred stock + equity value).The
debt/capitalization of the stable REITs ranged from 14.2% to 56.7% and from
30.8% to 38.5% for the distressed REITs. Shattuck Hammond noted that a $50
million equity financing and additional subsequent repayment of debt through
cash flow from operations would significantly lower our debt/capitalization
ratio and bring such ratio into closer proximity with the ratios of the
distressed REITs and stable REITs.
The table presents our capitalization at June 30, 2001 and as adjusted on a
pro forma basis for a $50 million equity investment that is assumed will be used
to repay debt, and for an assumed further $73.5 million reduction in debt
through cash flow from operations:
Omega Pro Forma Debt to Capitalization Analysis (Dollars in Millions)
June 30, Equity Pro Forma Further Pro Forma
2001 Investment with Equity Reduction June 30, 2001
--------- ---------- ----------- --------- -------------
Debt
Total Debt (1)............. $425.6 (50.0) $375.6 (73.5) $302.1
Equity
Preferred.................. $212.3 $212.3 $212.3
Other...................... 247.4 50.0 297.4 297.4
----- ----- ------ ------ ------
Total Equity.......... $459.7 50.0 $509.7 $509.7
Debt to Capitalization: 48.1% 42.4% 37.2%
Mean (2)
Distressed REITs........... 34.7% 34.7% 34.7%
Stable REITs............... 42.5% 42.5% 42.5%
Median (2)
Distressed REITs........... 34.7% 34.7% 34.7%
Stable REITs 40.3% 40.3% 40.3%
(1) Assumes additional $10.0 million of debt is repaid from proceeds
in excess of $113.5 million due in March and June of 2002.
(2) Mean and median for distressed REITs exclude Omega. Mean and
median for stable REITs exclude Senior Housing Properties Trust.
Omega Share Price Analysis
Shattuck Hammond compared our share price performance to an index created
by Shattuck Hammond of the share price performances of the stable REITs and the
distressed REITs. Shattuck Hammond noted that we under-performed both indices
for the five year period and twelve month period ended October 26, 2001.
Shattuck Hammond also noted that for the three months ended October 26, 2001, we
outperformed the stable REIT index and improved relative to the distressed REIT
index.
Shattuck Hammond calculated our average share price based on the daily
close for our common stock for the five year, twelve month and three month
period ended October 26, 2001. Such averages were $20.26, $3.03 and $3.03,
respectively. Shattuck Hammond noted that the maximum rights offering price of
$2.92 was 94% of the average price for both the twelve month and three month
period.
Comparable Company Analysis
In its comparable company analysis, Shattuck Hammond derived various valuation
and leverage multiples as well as leverage and operating margins for our company
and compared them to similar multiples and margins for the stable REITs and the
distressed REITs. As previously discussed, the REITs in each group were selected
because their healthcare focus and mix of assets were reasonably similar to our
company. Shattuck Hammond focused the comparable company analysis on:
o the common share price to funds from operations multiple defined as
"Price/FFO" where FFO is defined as net income available to common
stockholders plus depreciation and amortization less any gains or
losses on sales of assets, and adjusted for any items deemed
extraordinary or "one-time" items; and
o the Debt/Capitalization ratio (see "Omega Pro Forma Debt to
Capitalization Analysis" above).
Shattuck Hammond noted that Omega's Price/FFO multiple was below the median
and mean multiples for the distressed and stable REITs. Shattuck Hammond further
noted that completion of the Explorer investment and rights offering could
result in an increase in our Price/FFO multiple. The table below presents the
mean and median price to FFO multiples for the periods shown:
Comparable Public Companies' Price/FFO Multiples
Six Months
LTM Annualized 2001 2002
6/30/01 6/30/01 Estimated Projected
-------- ------------ ----------- -----------
Stable REITs
Mean......................... 10.4x 10.5x 9.6x 9.2x
Median....................... 10.4x 10.4x 10.2x 9.8x
Distressed REITs
Mean (1)..................... 5.6x 6.0x 7.0x 7.0x
Median (1)................... 5.6x 6.0x 7.0x 7.0x
Omega (2) (3)................ 3.2x 3.1x 3.9x 4.4x
(1) Mean and median excludes Omega.
(2) 2001E and 2002P assume full conversion of Series C preferred
stock, and includes additional stock in 2002 due to proposed $50
million financing.
(3) Our FFO per share includes add-back of one-time items and certain
adjustments related to 2002 financing.
Net Asset Value Analysis
Shattuck Hammond performed a net asset value analysis that compared the
estimated net asset value per fully-diluted common share to our actual share
price at October 26, 2001. A similar comparative analysis was done with respect
to the stable REITs and the distressed REITs. The analysis was based on
financial results for the latest twelve months ended June 30, 2001 and the six
months ended June 30, 2001 annualized. The net asset value calculation was based
on determining a value for owned properties and other income and then adjusting
this combined value for various balance sheet related items such as cash, debt
and preferred stock. The value of owned properties was determined by multiplying
property cash flow by a multiple. Property cash flow was assumed to be equal to
real estate operating revenue less direct real estate operating costs. Other
income is assumed to consist primarily of interest income and excludes income or
losses related to sales of assets. The value of other income is determined by
multiplying other income for the period by a multiple. For the stable REITs, the
property cash flow multiple and other income multiple utilized is 10.0x and
6.0x, respectively. For the distressed REITs, the property cash flow multiple
and other income multiple utilized is 8.0x and 5.5x, respectively.
The table below presents the calculation of our net asset value, the median
and mean net asset values per share for the stable REITs and the distressed
REITs and the premium or discount of the actual share prices to the net asset
value per share for each group of REITs and our company at October 26, 2001:
Summary Net Asset Value per Share (Actual Dollars)
LTM Premium/ Annualized Premium/
6/30/01 (Discount) 6/30/01 (Discount)
-------- ---------- ---------- ----------
Stable REITs
Mean......................... $ 25.5 (6.8)% $ 25.0 (4.7)%
Median....................... $ 24.8 (3.7)% $ 24.8 (2.2)%
Distressed REITs
Mean (1)..................... $ 13.31 (22.9)% $ 11.95 (8.3)%
Median (1)................... $ 13.31 (22.9)% $ 11.95 (8.3)%
Omega........................ $ 2.97 7.2% $ 2.39 33.2%
(1) Distressed REITs exclude Omega.
Calculation of Omega's Net Asset Value (Dollars in Millions)
LTM Annualized
6/30/01 6/30/01
-------- ----------
Real Estate Operating Revenue................. $ 251.6 $ 241.1
Direct Operating Expenses..................... 191.2 180.3
------- -------
Property Cash Flow........................ $ 60.4 $ 60.8
Applied Market Multiple....................... 8.0x 8.0x
Property Asset Value...................... $ 483.4 $ 486.7
Other Income.................................. $ 31.3 $ 28.6
Applied Market Multiple....................... 5.5x 5.5x
Other Income for NAV Purposes............. $ 172.3 $ 157.2
LTM Annualized
6/30/01 6/30/01
-------- ----------
Balance Sheet (6/30/01)
Property Asset Value.......................... $ 483.4 $ 486.7
Other Income.................................. 172.3 157.2
Plus: Land.................................... 32.1 32.1
Plus: Cash.................................... 10.8 10.8
Less: Debt.................................... (425.7) (425.7)
Less: Preferred............................... (212.3) (212.3)
------- --------
Net Asset Value........................... $ 60.5 $ 48.7
Shares Outstanding (Millions)................. 20.4 20.4
Net Asset Value per Share..................... $ 2.97 $ 2.39
Current Share Price (10/26/01)................ $ 3.18 $ 3.18
Share Price Relative to NAV................... 7.16% 33.17%
Engagement Terms
As compensation for its services as financial advisor to the special
committee, pursuant to a letter agreement dated October 15, 2001, we agreed to
pay Shattuck Hammond $250,000 in cash as follows:
o a retainer of $50,000;
o $50,000 upon the submission of a written report to the Board of
Directors which addressed a review and analysis of potential financing
alternatives for us as well as a review and analysis of financing
proposals received by us; and
o $250,000 (less any fees previously received) upon the earlier of the
completion of a financing or the delivery of a written opinion as to
the fairness of such financing from a financial point of view.
On October 29, 2001, the October 15, 2001 agreement was amended in recognition
of the increased time requirement of Shattuck Hammond, to provide for Shattuck
Hammond to receive a fee of $400,000 (instead of $250,000) less any fees
received, upon the earlier of the completion of a financing and the delivery of
its written opinion. In addition, Shattuck Hammond agreed to pay for all of its
out-of-pocket expenses.
Interests of Directors and Officers in Matters to be Acted Upon.
Hampstead Investment Partners III, L.P. holds the ultimate controlling
interest in Explorer, which owns 1,048,420 shares of Series C preferred stock,
representing 45.5% of our outstanding voting power. Daniel A. Decker, the
Chairman of our Board of Directors, is a member of Hampstead. Donald J.
McNamara, the Chairman of Hampstead, is one of our directors. Christopher W.
Mahowald, a member of the Board of Directors, through a separate investment
fund, contributed $5 million towards Explorer's $100 million investment in our
company in July 2000.
Recommendation of Board of Directors
The Board of Directors unanimously recommends a vote FOR the approval of
the issuance of common stock to Explorer either upon consummation of its
investment or, if such investment is completed prior to the date of the Special
Meeting, upon conversion of the Series D preferred stock.
PROPOSAL 2 - APPROVAL OF THE AMENDMENT TO OUR ARTICLES OF INCORPORATION
AMENDING TERMS OF OUR ARTICLES SUPPLEMENTARY FOR SERIES C
CONVERTIBLE PREFERRED STOCK
Explorer owns approximately 45.5% of our issued and outstanding common
stock, giving effect to the conversion of our Series C preferred stock, all of
which is held by Explorer. The terms of Series C preferred stock give Explorer
the right to receive its pro rata portion on an as-converted basis of all
dividends paid to the holders of our common stock, including the rights to be
distributed in the rights offering. Explorer has agreed to waive this provision
and will not receive rights in the rights offering. Instead, Explorer has agreed
to purchase $22.76 million of our stock, on the closing of the rights offering,
at the same price per share available in the rights offering. The shares that
Explorer has agreed to purchase represent its pro rata portion of the $50
million in additional equity capital we are seeking to raise. Explorer has also
committed to invest an additional amount equal to the aggregate subscription
price of any shares that are not subscribed for in the rights offering. As a
result of this commitment, we are assured of receiving a total of $50 million in
gross proceeds from the rights offering and Explorer's investment assuming they
are both completed.
As a condition to Explorer's investment in our company, we have agreed to
amend certain of the agreements relating to Explorer's initial investment in our
company made in July 2000. These amendments will be effective as of the closing
of Explorer's new investment. The effect of these amendments is to remove the
provisions in our agreements that prohibit Explorer from voting in excess of
49.9% of our common stock and from taking certain actions without the prior
approval of our Board of Directors. The proposed amendments also (i) modify the
right of the holders of our Series C preferred stock to appoint directors upon
our failure to pay dividends for a specified period of time, (ii) provide that
the subscription price in the rights offering will not result in an adjustment
to the conversion price of our Series C preferred stock and (iii) make certain
other technical changes to reflect the possible issuance of the Series D
preferred stock. The amendment to our Articles of Incorporation to amend the
terms of our Articles Supplementary for the Series C Convertible Preferred Stock
to effect these changes requires stockholder approval.
The following summary of the material changes to the Articles Supplementary
for the Series C Convertible Preferred Stock and the Explorer investment
agreements is subject to, and qualified in its entirety by, the complete text of
each amendment and the other material documents described below. A copy of the
Amended and Restated Articles Supplementary for the Series C Convertible
Preferred Stock, which is marked to show the proposed modifications to our
Articles Supplementary for the Series C Convertible Preferred Stock filed in
July 2000, is attached as Appendix D to this Proxy Statement. The Explorer
investment agreements have been previously filed as exhibits to a Schedule 13D/A
filed on behalf of Explorer on October 29, 2001. You should read the full text
of the amendments to the Explorer agreements and other material agreements
because those agreements, and not this Proxy Statement, are the legal documents
that govern the investment by Explorer. In the event there are any discrepancies
between the terms of the Explorer agreements and the amendments thereto in the
following summary, the Explorer agreements and amendments will control.
Proposed Amendment of Our Articles Supplementary for the Series C Convertible
Preferred Stock
Pursuant to the Articles Supplementary for the Series C Convertible
Preferred Stock and our investment agreement with Explorer, we are required to
seek the approval of our stockholders to amend the Series C Articles
Supplementary for the Series C Convertible Preferred Stock presently owned by
Explorer. A copy of the Amended and Restated Articles Supplementary for the
Series C Convertible Preferred Stock, which is marked to show the proposed
modifications to our Articles Supplementary for the Series C Convertible
Preferred Stock filed in July 2000, is attached as Appendix D to this Proxy
Statement. Pursuant to the Amended Series C Articles Supplementary, the terms of
the Series C preferred stock will be amended to:
(i) remove the restriction that prevents the voting or conversion of the
Series C preferred stock in excess of 49.9% of our voting securities
owned by Explorer;
(ii) provide that if we fail to pay dividends owed upon the Series C
preferred stock or the Series D preferred stock for a period of time,
the holders of the Series C preferred stock and the Series D preferred
stock, voting together as a single class, will be entitled to
designate two additional directors to our Board of Directors;
(iii)provide that the subscription price in the rights offering will not
result in an adjustment to the conversion price of our Series C
preferred stock; and
(iv) make other technical changes to reflect the existence of the Series D
preferred stock.
As a result of this amendment, if Explorer holds greater than fifty percent
of the outstanding shares of voting stock of our company, it will have the
ability to control certain aspects of our company. In addition, if we are in
arrears on our dividends for four or more periods, Explorer could gain more
control of our Board of Directors.
The above amendments will not be effective unless approved by our
stockholders. The proposed amendments must be approved by the affirmative vote
of a majority of all issued and outstanding shares of common stock and Series C
preferred stock voting together as a class and at least two-thirds of the shares
of the issued and outstanding Series C preferred stock. Explorer has committed
to vote its shares, representing approximately 45.5% of our voting shares on an
as converted basis, in favor of these amendments. We will file an amended Series
C Articles Supplementary with the Department of Assessments and Taxation of the
State of Maryland following receipt of stockholder approval and the closing of
Explorer's investment.
Modifications to Agreements with Explorer
Amended and Restated Stockholders Agreement. We will enter into an amended
and restated stockholders agreement at the closing of Explorer's investment. If
Explorer owns more than 50% of our common stock, Explorer would be able to elect
all of the members of the Board of Directors. However, pursuant to the amended
and restated stockholders agreement, Explorer will be entitled to designate to
our Board of Directors that number of directors that would generally be
proportionate to Explorer's ownership of voting securities of our company, not
to exceed five directors (six following increase in the size of the Board of
Directors to ten directors). We will limit the number of directors on our Board
so as not exceed ten without the consent of Explorer. We will also take such
action to ensure generally that Explorer's representation on all committees of
the Board is proportionate to its representation on the entire Board of
Directors other than any special committee established to consider transactions
in which Explorer or any of its affiliates may have a conflict of interest.
Explorer will, so long as it owns at least 15% of our voting securities,
vote its shares in favor of three "independent directors" as defined under the
rules of the New York Stock Exchange who are not affiliates of Explorer. Upon
the increase of the size of the Board of Directors to ten members, Explorer will
vote its shares in accordance with the previous sentence in favor of an
additional director who is not affiliated with Explorer. Upon the increase of
the size of the Board to ten members, we will appoint C. Taylor Pickett, our
Chief Executive Officer, as a new director. Mr. Pickett will then constitute the
fourth non-Explorer director.
Pursuant to the amended stockholders agreement, Explorer will no longer be
subject to certain restrictions under the prior stockholders agreement
preventing it from acquiring more than 5% of our voting securities without prior
approval of our Board of Directors, but Explorer will be restricted from
acquiring beneficial ownership of more than 80% of our voting securities without
the approval of a committee of the Board consisting entirely of independent
directors. Other restrictions on Explorer under the prior stockholders
agreement, including the agreement of Explorer not to solicit proxies in
opposition to, or prior to the issuance of a recommendation by, the Board; not
to join, form or participate in a group relating to the ownership or voting of
our securities or control of our company; not to deposit any securities in a
voting trust or other voting arrangement; and not to tender any securities in a
tender offer not approved by the Board will also no longer apply to Explorer.
Explorer will also no longer be subject to the right of first offer transfer
restrictions in the prior stockholders agreement.
Pursuant to the amended stockholders agreement, Explorer will not transfer
our voting securities to a transferee who, as a result of such transfer, would
beneficially own 10% or more of our outstanding voting securities unless such
transferee agrees to be bound by certain provisions of the amended stockholders
agreement including those relating to the election of independent directors.
Amended and Restated Registration Rights Agreement. Pursuant to an amended
and restated registration rights agreement, we have agreed, subject to certain
limitations and under certain circumstances, to register for sale any shares of
our stock held by Explorer. We will enter into the amended and restated
registration rights agreement with Explorer at the closing of Explorer's
investment.
Stockholders Rights Plan Amendment. Pursuant to our investment agreement
with Explorer, we have amended our stockholders rights plan to provide that
neither Explorer nor its affiliates shall be an "acquiring person" for purposes
of activating the rights that were issued pursuant to our stockholders rights
plan. The amendment also exempts direct and indirect transferees of Explorer,
other than in transfers through an underwriter or national securities exchange,
from the definition of an "acquiring person."
Advisory Agreement Side Letter. We have agreed that upon the closing of the
rights offering The Hampstead Group, L.L.C., an affiliate of Explorer, will have
fulfilled all of its obligations under the amended and restated advisory
agreement to provide certain specified financial advisory, consulting and
operational services, including, but not limited to, assistance in our efforts
to refinance, repay or extend certain indebtedness and assistance in efforts to
manage our capitalization and liquidity. As a result, the advisory fee payable
to Hampstead under the advisory agreement will be earned but will only be
payable at such time as all of the conditions to payment of the advisory fee
contained in the advisory agreement are met. These conditions include the
extension, repayment or refinancing of the outstanding balances of our senior
unsecured notes maturing on June 15, 2002 as well as the extension, refinancing
or repayment of our $175 million senior secured revolving credit facility. The
advisory fee that will be payable is equal to 1% of the amount of refinanced
indebtedness (based on the maximum amount available to be drawn in the case of
revolving credit facilities) up to a maximum fee of $3.1 million. If Hampstead
provides additional services, we will be required to pay them a customary
advisory fee.
Vote Required for Approval of the Amendment to our Articles of Incorporation to
Amend Certain Terms of the Articles Supplementary for the Series C Convertible
Preferred Stock
The proposed amendment to our Articles of Incorporation to amend certain
terms of the Articles Supplementary for the Series C Convertible Preferred Stock
must be approved by the affirmative vote of a majority of the voting power of
our issued and outstanding shares of common stock and Series C preferred stock
voting together as a class and the affirmative vote of at least two-thirds of
all issued and outstanding shares of Series C preferred stock, voting separately
as a class. Explorer has committed to vote its shares of Series C preferred
stock, representing approximately 45.5% of the voting shares and all of the
outstanding shares of Series C preferred stock, in favor of this proposal.
Reason for Seeking Stockholder Approval
The Articles Supplementary for the Series C Convertible Preferred Stock and
our Articles of Incorporation require that a majority of all shares of common
stock and Series C preferred stock voting together as a class, and at least
two-thirds of the Series C preferred stock, voting separately, as a class vote
in favor of any amendments to the Articles Supplementary for the Series C
Convertible Preferred Stock.
Recommendation of Board of Directors
The Board of Directors unanimously recommends a vote FOR the approval of
the amendment to our Articles of Incorporation to amend certain terms of the
Articles Supplementary for the Series C Convertible Preferred Stock.
PROPOSAL 3 - APPROVAL OF THE AMENDMENTS TO THE ARTICLES OF INCORPORATION
AND BYLAWS INCREASING THE MAXIMUM NUMBER OF DIRECTORS
Article V, Section 3 of our Articles of Incorporation and Article III,
Section 1 of our Bylaws currently provide that Omega shall have not less than
five nor more than nine directors. Any increase in the number of authorized
directors requires the affirmative vote of the holders of 80% of the shares of
our common stock. The Board of Directors has approved and recommends that you
approve amendments to our Articles of Incorporation and to our Bylaws that
increase the maximum number of directors from nine to eleven, and that provide
that any future increase in the number of directors can be effected by an
amendment to our Bylaws approved by our Board or our stockholders.
The purpose of these amendments to our Articles of Incorporation and to our
Bylaws is to enable Omega to take timely advantage of the availability of
well-qualified candidates and to increase our ability to attract high-quality
individuals to serve as directors of Omega. The Board of Directors has deemed
these amendments to be in the best interest of Omega because it believes that
the presence of additional talented individuals with industry experience will
enhance our ability to meet the challenges we face in an increasingly
competitive market. We have also agreed with Explorer that if stockholders
approve the amendments to increase the size of our Board of Directors, the total
number of directors will be fixed at ten. If stockholders approve the increase
in the size of the Board of Directors, the Board of Directors intends to appoint
our Chief Executive Officer, C. Taylor Pickett, to serve as a member of our
Board of Directors.
In addition, as a result of the proposed amendments, future increases in
the maximum number of directors can be made by an amendment to our Bylaws
approved by the Board of Directors or the affirmative vote of the holders of a
majority of the voting power of our issued and outstanding voting securities.
The purpose of this change is to give the Board of Directors greater flexibility
in determining the proper size of the Board of Directors, without the
requirement that Omega obtain stockholder approval of any such change.
Accordingly, it is proposed that the last paragraph of Article V, Section 3
of our Articles of Incorporation be amended to read as follows:
"The number of Directors may be increased or decreased from time to time in
such manner as may be provided in the Bylaws."
Accordingly, it is also proposed that the first two sentences of Article III,
Section 1 of our Bylaws be amended to read as follows:
"The number of Directors shall be not less than five (5) nor more than
eleven (11) until changed by amendment of these Bylaws subject, however, to
any rights of the holders of any series of preferred stock to elect
additional directors. Subject to any rights of holders of preferred stock,
the exact number of Directors shall be ten (10) until changed, within the
limits specified, by a Bylaw amending this section duly adopted by the
Board of Directors or Stockholders."
Any person who is appointed as a director would stand for re-election at the
next annual meeting of stockholders following his or her appointment.
Required Vote for Approval of the Amendment to our Articles of Incorporation and
Bylaws
The affirmative vote of the holders of 80% of the shares of common stock is
required to approve the amendments to our Articles of Incorporation and our
Bylaws to increase the size of the Board of Directors.
Recommendation of Board of Directors
The Board of Directors unanimously recommends a vote "FOR" the approval of
the amendment to our Articles of Incorporation and Bylaws to increase the
maximum size of the Board of Directors from nine to eleven members.
RELATIONSHIP WITH INDEPENDENT AUDITORS
Ernst & Young LLP audited our financial statements for each of the years
ended December 31, 1998, 1999 and 2000. Representatives of Ernst & Young LLP are
expected to be present at the Special 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 stockholders at the
Special Meeting.
STOCKHOLDERS PROPOSALS
____________ is the date by which proposals of stockholders intended to be
presented at the Special Meeting of Stockholders, held on or about
______________, must be received by us for inclusion in the Proxy Statement and
form of proxy relating to that meeting. No business other than that stated in
the notice shall be transacted at any meeting without the unanimous written
consent of all stockholders present at the meeting pursuant to our Bylaws.
EXPENSES OF SOLICITATION
The total cost of this solicitation will be borne by us. In addition to use
of the mails, proxies may be solicited by our directors, officers and regular
employees of Omega personally and by telephone, telex or facsimile. We 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. We have also engaged Georgeson & Company Inc.
to solicit proxies for a fee not to exceed $7,500, plus out-of-pocket expenses.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
We are subject to the informational requirements of the Exchange Act.
Pursuant to the requirements of the Exchange Act, we file annual, quarterly and
special reports with the Securities and Exchange Commission. The following
documents or portions of documents filed by us with the Securities and Exchange
Commission are incorporated herein by reference.
(i) Annual Report on Form 10-K for fiscal year ended December 31, 2000;
(ii) Quarterly Report on Form 10-Q for the quarter ended March 31, 2001;
(iii) Quarterly Report on Form 10-Q for the quarter ended June 30, 2001;
(iv) Quarterly Report on Form 10-Q for the quarter ended September 30,
2001; and
(v) All other reports filed by us pursuant to Section 13(a) or 15(d) of
the Exchange Act after the date of this Proxy Statement and prior to
the date of the Special Meeting.
All documents subsequently filed by Omega pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act prior to the date on which the Special Meeting
is held shall be deemed to be incorporated by reference in this Proxy Statement
and to be a part hereof from the date of filing of such documents.
Any statement contained in a document incorporated herein shall be deemed
to be modified or superseded for purposes of this Proxy Statement to the extent
that a statement contained herein or in any other subsequently filed document
which also is incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Proxy
Statement.
Copies of our Annual Report on Form 10-K for the fiscal year ended December
31, 2000 and our Quarterly Report on Form 10-Q for the quarter ended September
30, 2001 accompany this Proxy Statement. The Explorer investment agreements have
been previously filed as exhibits to a Schedule 13 D/A filed on behalf of
Explorer on October 29, 2001. Copies of all documents are incorporated herein by
reference (not including the exhibits to such documents, unless such exhibits
are specifically incorporated by reference in this Proxy Statement) and will be
provided without charge to each person to whom this Proxy Statement is
delivered, upon written or oral request. Copies of this Proxy Statement as
amended or supplemented from time to time, or any other documents (or parts of
documents) that constitute part of this Proxy Statement will be provided without
charge to each such person, upon written or oral request. Requests should be
directed to Omega Healthcare Investors, Inc., Attn: Investor Relations, 900
Victors Way, Suite 350, Ann Arbor, Michigan 48108, (734) 887-0200. These
documents are also filed electronically through the Securities and Exchange
Commission's Electronic Data Gathering, Analysis and Retrieval system, and may
be accessed at the Securities and Exchange Commission's internet website, which
is located at http://www.sec.gov. You may read and copy any reports, statements
or other information that we file with the Securities and Exchange Commission at
the Securities and Exchange Commission's public reference room at 450 Fifth
Street, Washington, D.C. 20549, or at the public reference rooms in New York,
New York and Chicago, Illinois. Please call the Securities and Exchange
Commission at 1-800-SEC-0330 for further information on the public reference
rooms.
OTHER MATTERS
The Board of Directors knows of no other business to be presented at the
Special Meeting, but if other matters do properly come before the Special
Meeting, it is intended that the persons named in the proxy will vote on said
matters in accordance with their best judgment.
C. TAYLOR PICKETT
Chief Executive Officer
____________, 2001
Ann Arbor, Michigan
INDEX TO APPENDICES
Investment Agreement..................................................Appendix A
Articles Supplementary for Series D Convertible Preferred Stock.......Appendix B
Opinion of Shattuck Hammond Partners LLC..............................Appendix C
Amended and Restated Articles Supplementary for Series C
Convertible Preferred Stock......................................Appendix D
OMEGA HEALTHCARE INVESTORS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROXY
The undersigned hereby appoints C. Taylor Pickett and Robert O. Stephenson 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. ("Omega") held of record by the undersigned on
____________, 2001 at the Special Meeting of Stockholders to be held on
___________________ , 2001 or any adjournment thereof.
This Proxy when properly executed will be voted in the manner directed herein by
the undersigned. If no specification is made, this Proxy will be voted FOR:
1. The issuance to Explorer Holdings, L.P. of shares of our common stock
either in connection with Explorer's commitment to invest $22.76
million plus an amount equal to the aggregate subscription price of
any shares of common stock not purchased in the rights offering by
other stockholders or upon the conversion of shares of Series D
preferred stock issued to Explorer in lieu of common stock if we close
Explorer's investment prior to receiving the stockholder approval
sought pursuant to the proxy statement to issue common stock to
Explorer, and any change of control that may result from such
issuance.
2. An amendment to our Articles of Incorporation, which is our corporate
charter, amending the terms of our Articles Supplementary for the
Series C Convertible Preferred Stock by removing the provisions
prohibiting Explorer from voting in excess of 49.9% of our common
stock, by changing the number and manner in which holders of our
Series C and Series D preferred stock can appoint directors if we fail
to pay dividends for a specified period of time, by providing that the
subscription price in the rights offering will not result in an
adjustment to the conversion price of our Series C preferred stock and
by making certain other technical changes to reflect the possible
issuance of the Series D preferred stock.
3. The amendments to our Articles of Incorporation and our Bylaws to
increase the size of the Board of Directors from nine to eleven
members, and to provide that any future increase in the number of
directors can be effected by an amendment to our Bylaws approved by
our Board or our stockholders.
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.
(Continued, and to be marked, dated and signed, on the other side)
SEE REVERSE SIDE
-- FOLD AND DETACH HERE --
[X] (Please mark your votes as in this example.
The Directors recommend a vote "FOR" Proposals 1, 2 and 3.
FOR AGAINST ABSTAIN
1. The issuance to Explorer Holdings, L.P. of shares of our common stock [ ] [ ] [ ]
either in connection with Explorer's commitment to invest $22.76 million
plus an amount equal to the aggregate subscription price of any shares of
common stock not purchased in the rights offering by other stockholders or
upon the conversion of shares of Series D preferred stock issued to
Explorer in lieu of common stock if we close Explorer's investment prior to
receiving the stockholder approval sought pursuant to the proxy statement
to issue common stock to Explorer, and any change of control that may
result from such issuance.
2. An amendment to our Articles of Incorporation, which is our corporate [ ] [ ] [ ]
charter, amending the terms of our Articles Supplementary for the Series C
Convertible Preferred Stock by removing the provisions prohibiting Explorer
from voting in excess of 49.9% of our common stock, by changing the number
and manner in which holders of our Series C and Series D preferred stock
can appoint directors if we fail to pay dividends for a specified period of
time, by providing that the subscription price in the rights offering will
not result in an adjustment to the conversion price of our Series C
preferred stock and by making certain other technical changes to reflect
the possible issuance of the Series D preferred stock.
3. The amendments to our Articles of Incorporation and our Bylaws to increase [ ] [ ] [ ]
the size of the Board of Directors from nine to eleven members, and to
provide that any future increase in the number of directors can be effected
by an amendment to our Bylaws approved by our Board or our stockholders.
--------------------------------------------------------------------------------
NOTE: Please sign exactly as your 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 Special Meeting in person. [ ]
SIGNATURE(S) DATE
NOTE:Please sign exactly as your 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 --
Appendix A
INVESTMENT AGREEMENT
INVESTMENT AGREEMENT (this "Agreement"), dated as of October 29, 2001,
by and among Omega Healthcare Investors, Inc., a Maryland corporation (the
"Company"), and Explorer Holdings, L.P., a Delaware limited partnership
("Purchaser").
I. SHARE PURCHASE
1.1 Share Purchase. (a) The Board of Directors of the Company has
authorized the issuance and sale to Purchaser hereunder of that number of newly
issued shares (the "Shares") of (i) Series D Preferred Stock of the Company, par
value $1.00 per share (the "Series D Preferred Stock", having the designations,
voting powers, preferences and relative, participating, optional and other
special rights, qualifications, limitations and restrictions thereof, set forth
in the Articles Supplementary attached hereto as Exhibit A (the "Series D
Articles Supplementary"), or (ii) if the Company Stockholder Approval shall have
been obtained on or prior to the Closing Date, Common Stock, in each case equal
to the Share Amount. The "Share Amount" shall mean (i) in the case of Series D
Preferred Stock, that number of shares of Series D Preferred Stock that would
upon conversion on the date of issuance of the Series D Preferred result in the
issuance of a number of shares of Common Stock equal to the quotient of (A) the
difference between $50 million and the gross proceeds received by the Company
from the sale of Common Stock in the Rights Offering (such difference, the
"Unsubscribed Purchase Amount") divided by (B) the Rights Offering Exercise
Price (as defined in Exhibit G) and (ii) in the case of Common Stock, that
number of shares of Common Stock equal to the quotient of (A) the Unsubscribed
Purchase Amount divided by (B) the Rights Offering Exercise Price.
(b) At the Closing, the Company will issue and sell to Purchaser, and
Purchaser will purchase from the Company, the Shares for an aggregate purchase
price equal to the Unsubscribed Purchase Amount.
1.2 Unsubscribed Purchase Amount. The Unsubscribed Purchase Amount will be
payable on the Closing Date in cash by bank wire transfer of immediately
available funds to an account of the Company designated by the Company by
written notice to Purchaser at least two Business Days prior to the Closing.
1.3 Closing. Subject to the satisfaction or waiver by Purchaser of the
conditions set forth in Article V, the closing (the "Closing") of the purchase
and sale of the Shares will take place at the offices of Jones, Day, Reavis &
Pogue, 599 Lexington Avenue, New York, New York at 10:00 a.m. local time within
the later of (i) ten Business Days after the expiration date of the Rights
Offering (the "Closing Date") and (ii) the date of closing of the Rights
Offering if it occurs.
1.4 Closing Deliveries. (a) At or prior to the Closing, Purchaser will
deliver to the Company:
(i) the Unsubscribed Purchase Amount, in accordance with Section 1.2;
(ii) an Amended and Restated Stockholders Agreement in the form
attached hereto as Exhibit B (the "Stockholders Agreement"), duly executed
by Purchaser;
(iii) an Amended and Restated Registration Rights Agreement in the
form attached hereto as Exhibit C (the "Registration Rights Agreement"),
duly executed by Purchaser; and
(iv) a letter relating to the Advisory Agreement between the Company
and The Hampstead Group, L.L.C. (the "Advisory Agreement") , in the form
attached hereto as Exhibit D (the "Advisory Letter"), duly executed by The
Hampstead Group, L.L.C.
(b) At or prior to the Closing, the Company will deliver to Purchaser:
(i) such number of validly issued stock certificates evidencing the
Shares, registered in the name of Purchaser or its Affiliates, as Purchaser
requests at least three Business Days prior to the Closing;
(ii) the Stockholders Agreement duly executed by the Company;
(iii) the Registration Rights Agreement duly executed by the Company;
(iv) the Advisory Letter, duly executed by the Company;
(v) the legal opinion of Powell, Goldstein, Frazer & Murphy LLP,
counsel to the Company, addressed to Purchaser and dated as of the Closing
Date, generally as to the matters set forth in Sections 2.1 (as to the
Company only), 2.2, 2.3(a), 2.4 and 2.7(a)(i) and (ii);
(vi) the Bank Agreements; and
(vii) the amendment to the Company Rights Agreement, in the form
attached hereto as Exhibit E (the "Rights Amendment"), duly executed by the
Company and First Chicago Trust Company.
(c) At or prior to the Closing, the Company and Purchaser will deliver to
each other such other supporting documents and certificates as the other party
may reasonably request.
(d) At or prior to the Closing, if Series D Preferred Stock shall be issued
on the Closing Date, the Series D Articles Supplementary shall have been filed
and accepted for record by the appropriate Maryland governmental authority, and
shall have become effective in accordance with the laws of the State of
Maryland.
1.5 Use of Proceeds. The Company shall use the proceeds from the issuance
and sale of the Shares and the Common Stock issued in the Rights Offering to pay
indebtedness of the Company and for general working capital purposes.
II. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Purchaser, except as set
forth in the letter, dated the date hereof, from the Company to Purchaser
specifically referencing this Agreement and delivered prior to or simultaneously
with the execution of this Agreement and initialed by the parties hereto (the
"Company Disclosure Letter"), as follows:
2.1 Existence; Good Standing; Corporate Authority. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Maryland. The Company is duly licensed or qualified to do
business as a foreign corporation and is in good standing under the laws of each
state in which the character of the properties owned or leased by it or in which
the transaction of its business makes such qualification necessary, except where
the failure to be so qualified or to be in good standing would not have a
Company Material Adverse Effect. The Company has all requisite corporate power
and authority to own, operate and lease its properties and carry on its business
as now conducted. The copies of the Company's Articles of Restatement, as
amended (the "Charter") and bylaws delivered to Purchaser on the Closing Date
are true, correct and complete. As used in this Agreement, the term "Company
Material Adverse Effect" means any change, effect, event or condition that has
had or could reasonably be expected to (i) have a material adverse effect on the
business, results of operations or financial condition of the Company and its
Subsidiaries, taken as a whole, or (ii) prevent or materially delay the
Company's ability to consummate the transactions contemplated hereby; provided,
however, that without waiving any representation, warranty or covenant in no
event will any of the following constitute a Company Material Adverse Effect:
(a) a change in the trading prices of any of the Company's securities, in and of
itself; (b) effects, changes, events, circumstances or conditions generally
affecting the long-term care or real estate finance industries or arising from
changes in general business or economic conditions, provided that the effect
thereof is not materially disproportionate on the Company and its Subsidiaries
than the effect on similarly situated companies; (c) effects, changes, events,
circumstances or conditions directly attributable to out-of-pocket fees and
expenses (including without limitation legal, accounting, investigatory,
investment banking and other fees and expenses) incurred in connection with the
transactions contemplated by the Transaction Documents; (d) any effects,
changes, events, circumstances or conditions resulting from the announcement or
pendency of any of the transactions provided for in the Transaction Documents;
(e) any effects, changes, events, circumstances or conditions resulting from
compliance by Purchaser or the Company with the terms of, or the taking of any
actions specifically required to be taken in, the Transaction Documents; (f) the
effect of the financial condition of any operator of any of the Company
Properties described in Section 2.1 of the Company Disclosure Letter; (g) the
effect of any operator of any of the Company Properties in bankruptcy
proceedings as of the date hereof rejecting leases to Company Properties or
Material Contacts; (h) the effect of any matters specifically disclosed in the
Company Disclosure Letter; and (i) the effect of the closure of any of the
securities exchanges on which the Company's securities are then traded for a
period of not more than four consecutive trading days. As used in this
Agreement, the term "Subsidiary" (i) when used with respect to any Person, means
any corporation or other Person, whether incorporated or unincorporated, of
which such Person directly or indirectly owns or controls more than 50% of the
securities or other interests having by their terms ordinary voting power to
elect a majority of the board of directors or others performing similar
functions and (ii) when used with respect to the Company, shall also include
each of the following entities: (1) Bayside Street II, Inc., a Delaware
corporation, (2) Bayside Alabama Healthcare Second, Inc., an Alabama
corporation, (3) Bayside Arizona Healthcare Second, Inc., an Arizona
corporation, and (4) Bayside Colorado Healthcare Second, Inc., a Colorado
corporation.
2.2 Authorization, Validity and Effect of Agreement. The Company has the
requisite corporate power and authority to execute and deliver this Agreement
and all agreements and documents contemplated hereby to be executed and
delivered by it. This Agreement and the consummation by the Company of the
transactions contemplated hereby have been duly authorized by all requisite
corporate action. This Agreement, the Stockholders Agreement, the Registration
Rights Agreement, the Bank Amendments, the Advisory Letter, the Series D
Articles Supplementary and the Rights Amendment (collectively, the "Transaction
Documents") have been (or, in the case of agreements to be delivered at the
Closing, will be at the Closing) duly and validly executed and delivered by the
Company and constitute (or, in the case of agreements to be delivered at the
Closing, will constitute at the Closing) the valid and binding obligations of
the Company, enforceable against the Company in accordance with their respective
terms, except that (i) such enforceability may be subject to applicable
bankruptcy, insolvency or other similar laws now or hereinafter in effect
affecting creditors' rights generally, (ii) the availability of the remedy of
specific performance or injunctive or other forms of equitable relief may be
subject to equitable defenses and would be subject to the discretion of the
court before which any proceeding therefor may be brought, and (iii) rights to
indemnification may be limited by public policy considerations.
2.3 Capitalization; Rights Agreement. (a) The authorized capital stock of
the Company consists of 100,000,000 shares of the Company's common stock, par
value $0.10 per share (the "Common Stock"), 2,300,000 shares of 9.25% Series A
Preferred Stock, par value $1.00 per share (the "Series A Preferred Stock"),
2,000,000 shares of 8.625% Series B Preferred Stock, par value $1.00 per share
(the "Series B Preferred Stock"), 2,000,000 shares of Series C Convertible
Preferred Stock, par value $1.00 per share (the "Series C Preferred Stock"), and
100,000 shares of Series A Junior Participating Preferred Stock, par value $1.00
per share. As of the close of business on October 26, 2001 (the "Measurement
Date"), (i) 20,076,024 shares of Common Stock were issued and outstanding, each
of which was duly authorized, validly issued, fully paid and nonassessable and
issued free of any preemptive rights, (ii) 2,300,000 shares of Series A
Preferred Stock were issued and outstanding, each of which was duly authorized,
validly issued, fully paid and nonassessable and issued free of any preemptive
rights, (iii) 2,000,000 shares of Series B Preferred Stock were issued and
outstanding, each of which was duly authorized, validly issued, fully paid and
nonassessable and issued free of any preemptive rights, and (iv) 1,048,420
shares of Series C Preferred Stock were issued and outstanding, each of which
was duly authorized, validly issued, fully paid and nonassessable and issued
free of any preemptive rights. Section 2.3 of the Company Disclosure Schedule
sets forth (i) the number of shares of Common Stock reserved for issuance under
the stock option plans listed in Section 2.3 of the Company Disclosure Letter
(the "Stock Option Plans"), (ii) the aggregate number of shares of Common Stock
underlying outstanding options under the Stock Option Plans as more particularly
described in Section 2.3 of the Company Disclosure Letter (including the holders
thereof, the expiration date, the exercise prices thereof and the dates of
grant), and (iii) the aggregate number of Deferred Compensation Units issued and
outstanding pursuant to the Company's 1993 Deferred Compensation Plan as of the
close of business on October 26, 2001. Since the Measurement Date, no additional
shares of capital stock of the Company have been issued and no other options,
warrants or other rights to acquire shares of the Company's capital stock
(collectively, the "Rights To Acquire") have been granted. Except as described
in the second preceding sentence, the Company has no outstanding bonds,
debentures, notes or other securities or obligations the holders of which have
the right to vote or which are or were convertible into or exercisable for,
voting securities, capital stock or other equity ownership interests in the
Company. Except as set forth in Section 2.3 of the Company Disclosure Letter,
there are not at the date of this Agreement any existing options, warrants,
calls, subscriptions, convertible securities or other Rights To Acquire which
obligate the Company or any of its Subsidiaries to issue, exchange, transfer or
sell any shares of capital stock of the Company or any of its Subsidiaries other
than shares of Common Stock issuable under the Stock Option Plans or awards
granted pursuant thereto. There are no outstanding contractual or legal
obligations of the Company or any of its Subsidiaries (x) to repurchase, redeem
or otherwise acquire any shares of capital stock of the Company or any of its
Subsidiaries, or (y) to vote or to dispose of any shares of the capital stock of
any of its Subsidiaries. Except as contemplated by this Agreement or the
transactions contemplated hereby, none of the Company or any of its Subsidiaries
has any obligation to issue, transfer or sell any shares of the capital stock or
other securities of the Company or any of its Subsidiaries.
(b) The Company has taken all necessary action so that neither the
execution, delivery and performance of the Transaction Documents nor the
consummation of the transactions contemplated hereby and thereby shall (i) cause
Purchaser or any of its Affiliates to become an "Acquiring Person" or (ii)
result in the occurrence of a "Triggering Event" or "Distribution Date" (as such
terms are defined in the Company Rights Agreement, dated as of May 12, 1999, as
amended on May 11, 2000 (the "Company Rights Agreement"), between the Company
and First Chicago Trust Company, as rights agent). The board of directors of the
Company (the "Company Board") has approved, and the Company has entered into,
the Rights Amendment. Pursuant to the Rights Amendment, among other things,
neither the execution, delivery and performance of the Transaction Documents nor
the consummation of the transactions contemplated hereby or thereby will (x)
result in the distribution of separate certificates representing Rights (as
defined in the Company Rights Agreement), (y) cause the Rights to become
exercisable, or (z) result in the occurrence of a "Triggering Event" or a
"Distribution Date" (as such terms are defined the Company Rights Agreement).
2.4 Validity of Shares, Etc. Each of the Shares has been duly authorized
for issuance and, when issued to Purchaser for the consideration set forth
herein and as otherwise provided herein, will be duly and validity issued, fully
paid, non-assessable and free of preemptive rights. Upon issuance of the Shares
in accordance with the terms and conditions of this Agreement or upon conversion
(if applicable) of the Shares from time to time, Purchaser will acquire good and
valid title to such shares of Common Stock, free and clear of any and all liens,
claims, security interests, encumbrances, restrictions on voting or alienation
or otherwise, or adverse interests (collectively, "Liens"), except as may be
created by Purchaser, the Transaction Documents or by applicable securities
Laws.
2.5 Subsidiaries. Section 2.5 of the Company Disclosure Letter lists all of
the Subsidiaries of the Company. Each of the Company's Subsidiaries is a
corporation, partnership or limited liability company duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation or organization, has the corporate, partnership or similar power
and authority to own its properties and to carry on its business as it is now
being conducted, and is duly qualified to do business and is in good standing in
each jurisdiction in which the ownership of its property or the conduct of its
business requires such qualification, except for jurisdictions in which such
failure to be so qualified or to be in good standing would not have a Company
Material Adverse Effect. The Company owns, directly or indirectly, all of the
outstanding shares of capital stock (or other ownership interests having by
their terms ordinary voting power to elect a majority of directors or others
performing similar functions with respect to such Subsidiary) of each of the
Company's Subsidiaries, free and clear of all Liens, except as set forth in
Section 2.5 of the Company Disclosure Letter. Each of the outstanding shares of
capital stock (or such other ownership interests) of each of the Company's
Subsidiaries is duly authorized, validly issued, fully paid and nonassessable.
2.6 Other Interests. Except for interests in the Company's Subsidiaries and as
set forth in Section 2.6 of the Company Disclosure Letter, neither the Company
nor any of the Company's Subsidiaries owns, directly or indirectly, any material
interest or investment (whether equity or debt) in any domestic or foreign
corporation, company, partnership, joint venture, business, trust or entity. 2.7
No Conflict; Required Filings and Consents. (a) Except as set forth in Section
2.7 of the Company Disclosure Letter, the execution, delivery and performance of
the Transaction Documents by the Company do not, and the consummation by the
Company of the transactions contemplated hereby and thereby will not, (i)
conflict with or violate the articles of incorporation or bylaws or equivalent
organizational documents of the Company or any of its Subsidiaries, (ii) subject
to the Company making any filings, notifications or registrations and obtaining
any approvals identified in Section 2.7(b), conflict with or violate any
domestic or foreign statute, rule, regulation or other legal requirement ("Law")
or order, judgment, injunction or decree ("Order") applicable to the Company or
any of its Subsidiaries or by which any property or asset of the Company or any
of its Subsidiaries is bound or affected, or (iii) result in any breach of or
constitute a default (or an event which with or without notice or lapse of time
or both would become a default) under, result in the loss of a material benefit
under, or give to others any right of purchase or sale, or any right of
termination, amendment, acceleration, increased payments or cancellation of, or
result in the creation of a Lien on any property or asset of the Company or any
of its Subsidiaries pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which the Company or any of its Subsidiaries is a party or by which the
Company or any of its Subsidiaries or any property or asset of the Company or
any of its Subsidiaries is bound or affected, except, in the case of clauses
(ii) and (iii), for any such conflicts, violations, breaches, defaults, events,
losses, rights, payments, cancellations, encumbrances or other occurrences that,
individually or in the aggregate, would not have a Company Material Adverse
Effect, or (iv) result in the loss of the Company's status as a real estate
investment trust ("REIT") under Section 856 of the Internal Revenue Code of
1986, as amended (the "Code").
(b) The execution, delivery and performance of the Transaction Documents by
the Company do not, and the consummation by the Company of the transactions
contemplated hereby and thereby will not, require any consent, approval,
authorization or permit of, or filing with or notification to, any governmental
or regulatory authority, domestic or foreign, including without limitation any
quasi-governmental, supranational, statutory, environmental entity and any stock
exchange, court or arbitral body (each a "Governmental Entity") under any Law,
except (i) for (A) applicable requirements, if any, under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (B) applicable
requirements, if any, of the Securities Act and the Securities Exchange Act of
1934, as amended (the "Exchange Act") and (C) the consents, approvals and
authorizations set forth in Section 2.7 of the Company Disclosure Letter, and
(ii) where the failure to obtain any such consent, approval, authorization or
permit, or to make any such filing or notification, would not, individually or
in the aggregate, have a Company Material Adverse Effect.
2.8 Compliance with Laws. Except as set forth in Section 2.8 of the Company
Disclosure Letter, neither the Company nor any of its Subsidiaries is in
conflict with, or in default or violation of, (a) any Law or Order applicable to
the Company or any of its Subsidiaries or by which any property or asset of the
Company or any of its Subsidiaries is bound or affected (provided that no
representation or warranty is made in this Section 2.8 with respect to
Environmental Laws) or (b) any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which the Company or any of its Subsidiaries is a party or by which the
Company or any of its Subsidiaries or any property or asset of the Company or
any of its Subsidiaries is bound or affected, and to the Knowledge of the
Company, neither the Company nor any of its Subsidiaries is under review or
investigation with respect to or has been threatened to be charged with or given
notice of any violation of any Law or Order, except in each case for such
conflicts, defaults, violations, reviews or investigations that would not,
individually or in the aggregate, have a Company Material Adverse Effect. The
Company and its Subsidiaries hold all licenses, permits, orders, registrations
and other authorizations ("Permits") and have taken all actions required by
applicable Law or regulations of any Governmental Entity in connection with
their business as now conducted, except where the failure to obtain any such
item or to take any such action would not, individually or in the aggregate,
have a Company Material Adverse Effect.
2.9 SEC Documents. (a) The Company has timely filed all forms, reports and
documents required to be filed by it with the Securities and Exchange Commission
(the "SEC") since January 1, 1999 (collectively, the "Company Reports"). As of
their respective dates, the Company Reports and any such reports, forms and
other documents filed by the Company with the SEC after the date of this
Agreement and until the Closing Date (i) complied, or will comply, in all
material respects with the applicable requirements of the Securities Act of
1933, as amended (the "Securities Act"), the Exchange Act and the rules and
regulations thereunder and (ii) did not, and will not, contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements made therein, in the light of
the circumstances under which they were made, not misleading. The representation
in clause (ii) of the preceding sentence does not apply to any misstatement or
omission in any Company Report filed prior to the date of this Agreement which
was superseded by a subsequent Company Report filed prior to the date of this
Agreement. No Subsidiary of the Company is required to file any periodic reports
with the SEC under the Exchange Act.
(b) Each of the financial statements included in or incorporated by
reference into the Company Reports (including the related notes and schedules)
(the "Company Financial Statements") presents fairly, in all material respects,
the consolidated financial position of the Company and its Subsidiaries as of
its date and, to the extent applicable, the results of operations, retained
earnings or cash flows, as the case may be, of the Company and its Subsidiaries
for the periods set forth therein (subject, in the case of unaudited statements,
to normal year-end audit adjustments, none of which will be material in amount),
in each case in accordance with United States generally accepted accounting
principles consistently applied ("GAAP") during the periods involved, except as
may be noted therein.
2.10 No Undisclosed Material Liabilities. There are no material liabilities
or obligations of the Company or any of its Subsidiaries of any kind whatsoever,
whether accrued, contingent, absolute, determined, determinable or otherwise
that would result in such a liability, other than (a) liabilities or obligations
disclosed in the Company Financial Statements or in Section 2.10 of the Company
Disclosure Letter and (b) liabilities or obligations incurred in the ordinary
course of business consistent with past practices since July 1, 2001 that would
not have, individually or in the aggregate, a Company Material Adverse Effect.
2.11 Litigation. Except as disclosed in Section 2.11 of the Company
Disclosure Letter or such of the following as would not have a Company Material
Adverse Effect, and other than personal injury and other routine tort litigation
arising from the ordinary course of operations of the Company and its
Subsidiaries which are covered by adequate insurance, as of the date of this
Agreement, there are no actions, suits or proceedings pending, publicly
announced or, to the Knowledge of the Company, threatened against or affecting
the Company or any of its Subsidiaries and there are no Orders of any
Governmental Entity outstanding against the Company or any of its Subsidiaries.
2.12 Absence of Certain Changes. From July 1, 2001 through the date of this
Agreement, the Company and its Subsidiaries have conducted their respective
businesses in the ordinary course consistent with past practice and there has
not been any Company Material Adverse Effect.
2.13 Taxes. (a) Each of the Company and its Subsidiaries and any
consolidated, combined, unitary or aggregate group for tax purposes of which the
Company or any Subsidiary of the Company is or has been a member has timely
filed all Tax Returns required to be filed by it (after giving effect to any
extension properly granted by a Tax Authority having authority to do so) and has
timely paid (or the Company has timely paid on its behalf) all material Taxes
required to be paid by it (whether or not shown on such Tax Returns), except
Taxes that are being contested in good faith by appropriate proceedings and for
which the Company or the applicable Subsidiary of the Company shall have set
aside on its books adequate reserves.
(b) The Company (i) for all taxable years commencing with its initial
taxable year and through December 31, 2000 has been properly subject to taxation
as a REIT within the meaning of Section 856 of the Code and has qualified as a
REIT for such years, (ii) has operated since December 31, 2000 in such a manner
as to qualify as a REIT (determined without regard to the dividends paid
deduction requirements for the current year) for the taxable year beginning
January 1, 2001 determined as if the taxable year of the REIT ended as of the
Closing, and (iii) has not taken or omitted to take any action that would result
in loss of or a challenge to its status as a REIT, and no such challenge is
pending or, to the Company's Knowledge, threatened. The Company has complied,
and reasonably expects to continue complying, with the income qualification
tests set out in Section 856(c)(2) and (3) of the Code. Neither the Company nor
any Subsidiary has received, or reasonably expects to receive, any material rent
that does not qualify as "rents from real property" within the meaning of
Section 856(d) of the Code, including rent attributable to personal property
under Section 856(d)(1)(C), any contingent rent under Section 856(d)(2)(A) of
the Code, or any rent from a related-party tenant under Section 856(d)(2)(B) of
the Code. Neither the Company nor any Subsidiary has received, or reasonably
expects to receive, any contingent interest that does not qualify as "interest"
under Section 856(f) of the Code or any income from a shared appreciation
provision, as described under Section 856(j) of the Code, that is subject to the
prohibited transaction tax under Section 857(b)(6).
(c) For purposes of this Agreement, (i) "Taxes" means all taxes, charges,
fees, levies or other assessments imposed by any United States Federal, state,
or local taxing authority or by any non-U.S. taxing authority, including, but
not limited to, income, gross receipts, excise, property, sales, use, transfer,
payroll, license, ad valorem, value added, withholding, social security,
national insurance (or other similar contributions or payments), franchise,
estimated, severance, stamp, and other taxes (including any interest, fines,
penalties or additions attributable to or imposed on or with respect to any such
taxes, charges, fees, levies or other assessments), (ii) "Tax Return" means any
return, report, information return or other document (including any related or
supporting information and, where applicable, profit and loss accounts and
balance sheets) with respect to Taxes, and (iii) "Tax Authority" shall mean the
Internal Revenue Service and any other domestic or foreign bureau, department,
entity, agency or other Governmental Entity responsible for the administration
of any Tax.
2.14 Properties. (a) Except as would not have a Company Material Adverse
Effect, the Company or one of its Subsidiaries owns marketable fee simple or
leasehold title to, or a valid first priority mortgage Lien on, all of the real
properties identified as such in the Company Reports (collectively with all
buildings, structures and other improvements thereon, the "Company Properties"
and each, collectively with all buildings, structures and other improvements
thereon, a "Company Property").
(b) Each material certificate, permit or license from any Governmental
Entity having jurisdiction over any of the Company Properties and each
agreement, easement or other right which is necessary to permit the lawful use
and operation of the buildings and improvements on any of the Company Properties
or which is material to the operation of the property have been obtained and are
in full force and effect, except to the extent that the failure to obtain or
maintain any such certificate, permit, license, agreement, easement or other
right would not have a Company Material Adverse Effect. Neither the Company nor
any of its Subsidiaries has received written notice of any violation of any Law
with respect to any of the Company Properties which, individually or in the
aggregate, would have a Company Material Adverse Effect.
2.15 Contracts. Except as set forth in Section 2.15 of the Company
Disclosure Letter, neither the Company nor any of its Subsidiaries is in breach
or default under any material contract nor, to the Knowledge of the Company, is
any other party to any material contract in breach or default thereunder, in
either case except for such breaches and defaults of any material contract,
either individually or in the aggregate, that would not have a Company Material
Adverse Effect.
2.16 Environmental Matters. (a) Except as disclosed in Section 2.16 of the
Company Disclosure Letter and for such exceptions to any of the following that,
individually or in the aggregate, would not have a Company Material Adverse
Effect, (A) none of the Company nor any of its Subsidiaries nor any other Person
has caused or permitted (i) the presence of any Hazardous Substances on any of
the Company's Properties, (ii) any spills, releases, discharges or disposal of
Hazardous Substances to have occurred or be presently occurring on or from the
Company Properties as a result of any construction on or operation and use of
the Company Properties, (B) (i) the Company and its Subsidiaries have complied
with all applicable local, state and federal Environmental Laws, including all
regulations, ordinances and administrative and judicial orders relating to the
generation, sale, storage, handling, transport and disposal of any Hazardous
Substances, (ii) the Company and its Subsidiaries have obtained, currently
maintain and, as currently operating are in compliance with, all Permits
necessary under any Environmental Law ("Environmental Permits") for the conduct
of the business and operations of the Company and its Subsidiaries in the manner
now conducted, and, to the Knowledge of the Company, there are no actions or
proceedings pending or threatened to revoke or materially modify such Permits;
(iii) no Hazardous Substances have been used, stored, manufactured, treated,
processed or transported to or from any such Company Property by the Company and
its Subsidiaries or any other Person, except as necessary to the customary
conduct of business and in compliance with Law and in a manner that does not
result in any material liability under applicable Environmental Laws; and (iv)
the Company and its Subsidiaries have not received any written notice of
potential responsibility, letter of inquiry or written notice of alleged
liability from any Person regarding such Company Property or the business
conducted thereon. For the purposes of this Section 2.16 only, "Company
Properties" shall be deemed to include all property formerly owned, operated or
leased by the Company or its current or former Subsidiaries, solely, however, as
to the period of time when such property was so owned, operated or leased by the
Company or its current or former Subsidiaries.
(b) For purposes of this Agreement, the term (i) "Environmental Laws" means
any national, federal, state or local Law (including, without limitation, common
law), Order, Permit or any agreement with any Governmental Entity or other third
party (whether domestic or foreign) relating to: (A) releases or threatened
releases of Hazardous Substances or materials containing Hazardous Substances;
(B) the manufacture, processing, distribution, handling, transport, use,
treatment, storage or disposal of Hazardous Substances or materials containing
Hazardous Substances; or (C) pollution of the environment, and (ii) "Hazardous
Substances" means: (A) those materials, pollutants and/or substances defined in
or regulated under the following federal statutes and their state counterparts,
as each may be amended from time to time, and all regulations thereunder: the
Hazardous Materials Transportation Act of 1980, the Resource Conservation and
Recovery Act, the Comprehensive Environmental Response, Compensation and
Liability Act, the Clean Water Act, the Safe Drinking Water Act, the Atomic
Energy Act, the Federal Insecticide, Fungicide and Rodenticide Act, the Toxic
Substances Control Act and the Clean Air Act; (B) petroleum and petroleum
products including crude oil and any fractions thereof; (C) natural gas,
synthetic gas and any mixtures thereof; (D) radon; (E) asbestos; (F) any other
contaminant; and (G) any materials, pollutants and/or substance with respect to
which any Governmental Entity requires environmental investigation, monitoring,
reporting or remediation.
2.17 Company Benefit Plans; ERISA Compliance. (a) Each Company Benefit Plan
has been administered in accordance with its terms, all applicable Laws,
including ERISA and the Code, except to the extent that the failure to so
administer the applicable plan would not have a Company Material Adverse Effect.
All contributions to, and payments from, each Company Benefit Plan and "multiple
employer plan" (within the meaning of Section 3(40) of ERISA) that are required
to be made in accordance with such Plans and applicable Laws (including ERISA
and the Code) have been timely made.
(b) Except as set forth on Section 2.17(b) of the Company Disclosure
Letter, the consummation of the transactions contemplated by this Agreement will
not, either alone or in combination with another event, (i) entitle any current
or former employee, officer or director of the Company to severance pay,
unemployment compensation or any other payment or (ii) accelerate the time of
payment or vesting, or increase the amount of compensation, equity rights or
benefits due any such employee, officer or director.
(c) The execution, delivery or performance of the transactions contemplated
by the Transaction Documents does not constitute a "Change in Control" under the
employment agreements, incentive stock option or nonqualified stock option
agreements of any of the Company's officers (such agreements, the "Company
Change in Control Agreements"). The Compensation Committee of the Company Board
has taken all appropriate action to confirm that none of the issuance of the
Shares to Purchaser, the issuance of shares of Common Stock to Purchaser upon
conversion (if applicable) of the Shares or the execution and delivery by the
Company of any of the Transaction Documents shall result in any adjustment
pursuant to Section 5.2 of the Company's 2000 Stock Incentive Plan.
(f) "Company Benefit Plan" means each compensation, bonus, pension, profit
sharing, deferred compensation, incentive compensation, stock ownership, stock
purchase, stock option or other stock related fringe benefit, retirement,
vacation, disability, death benefit, supplemental unemployment benefits,
hospitalization, medical, dental, life, severance, post-employment benefits or
other plan, agreement, arrangement, policies or understanding, or employment
severance, retention, consulting, change of control or similar agreement whether
formal or informal, oral or written, providing benefits to any current or former
employee, officer, director or shareholder of the Company or any of its
Subsidiaries or to which the Company or any of its Subsidiaries contributes or
is or was obligated to contribute.
2.18 No Brokers. The Company has not entered into any contract, arrangement
or understanding with any Person or firm which may result in the obligation of
the Company or Purchaser to pay any investment banker's or finder's fees,
brokerage or agent's commissions or other like payments in connection with the
negotiations leading to this Agreement or the consummation of the transactions
contemplated hereby, except that the Company has retained Shattuck Hammond
Partners LLC as its financial advisor (the "Financial Advisor"), the
arrangements with which have been disclosed to Purchaser prior to the date
hereof. The Company will pay all amounts owed pursuant to the foregoing
arrangements.
2.19 Proxy and Registration Statement. The proxy statement (as amended or
supplemented, the "Proxy Statement") to be mailed to the holders of Common Stock
of the Company (the "Company Stockholders") in connection with the meeting of
the Company Stockholders (the "Company Stockholders Meeting") to approve (i) the
issuance to Purchaser of shares of Common Stock upon the conversion of the
Series D Preferred (including any change in control resulting therefrom), (ii)
the amendment of the Company's Charter and Bylaws to increase the size of the
Board that may be authorized to eleven members, and (iii) the amendment to the
terms of the Series C Preferred contemplated by the Amended Series C Articles
Supplementary (the matters to be considered for approval, the "Stockholder
Approval Matters" and such approval, the "Stockholder Approval"), and the
registration statement to be mailed to the Company Stockholders in connection
with the Rights Offering (as amended or supplemented, the "Registration
Statement"), at the date mailed to the Company Stockholders and at the time of
the Company Stockholders Meeting, in the case of the Proxy Statement, and on the
effective date of the Registration Statement, on the date mailed to the Company
Stockholders, and on the date of closing of the Rights Offering, in the case of
the Registration Statement, (i) will comply in all material respects with the
applicable requirements of the Securities Act, the Exchange Act and the rules
and regulations thereunder and (ii) will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
2.20 Fairness Opinion. The Company has received the opinion of the
Financial Advisor, dated October 29, 2001, to the effect that, as of such date,
the Financial Terms of the Investment Agreement (as defined in the Financial
Advisor's opinion), taken as a whole, are fair to the Company from a financial
point of view, a signed copy of which has been delivered to Purchaser.
2.21 Voting Requirements. The affirmative vote of no more than the holders
of a majority of the issued and outstanding shares of Common Stock (giving
effect to the conversion of the Series C Preferred), voting as a single class,
at the Company Stockholders Meeting to approve the Stockholder Approval Matters
(the "Company Stockholder Approval"), is the only vote of the holders of any
class or series of the Company's capital stock necessary to approve the
transactions contemplated hereby.
2.22 State Takeover Statues. The limitations on "business combinations" (as
defined in Subtitle 6 of Title 3 of the Maryland General Corporation Law
("MGCL")) and the Charter and the limitations on voting rights of shares of
stock acquired in a "control share acquisition" (as defined in Subtitle 7 of
Title 3 of the MGCL) are not applicable to the transactions contemplated hereby.
There is no other provision of the MGCL or the Company's bylaws or Charter under
which special voting or waiting period requirements would become applicable, or
Purchaser would not have rights possessed by other stockholders, had the Company
issued to Purchaser all Shares and shares of Common Stock upon conversion of the
Shares (if applicable) prior to the date hereof.
2.23 Statements True and Correct. The representations made by the Company
pursuant to this Agreement and the Company Disclosure Letter do not contain as
of the date hereof any untrue statement of material fact or omit to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
III. REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to the Company as follows:
3.1 Existence; Good Standing; Corporate Authority. Purchaser is a limited
partnership duly formed, validly existing and in good standing under the laws of
the State of Delaware. Purchaser is duly licensed or qualified to do business as
a limited partnership and is in good standing in each jurisdiction in which the
character of the properties owned or leased by it or in which the transaction of
its business makes such qualification necessary, except where the failure to be
so qualified or to be in good standing would not have a Purchaser Material
Adverse Effect. A "Purchaser Material Adverse Effect" means any change, effect,
event or condition that has had or could reasonably be expected to (i) have a
material adverse effect on the business, results of operations or financial
condition of Purchaser and its Subsidiaries, taken as a whole, provided,
however, that no event referred to in clauses (b), (c), (d) or (e) of the
proviso to the definition of Company Material Adverse Effect will, as applied to
Purchaser, constitute a Purchaser Material Adverse Effect, or (ii) prevent or
materially delay Purchaser's ability to consummate the transactions contemplated
hereby. Purchaser has all requisite limited partnership power and authority to
own, operate and lease its properties and carry on its business as now
conducted.
3.2 Authorization, Validity and Effect of Transaction Documents. Purchaser
has all requisite limited partnership power and authority to execute and deliver
the Transaction Documents to be executed by it. Each Transaction Document to
which Purchaser is a party and the consummation by Purchaser of the transactions
contemplated hereby and thereby have been duly and validly authorized by the
general partner of Purchaser and the applicable governing body of Purchaser's
general partner, and no other action on the part of Purchaser or Purchaser's
general partner is necessary to authorize such Transaction Documents or to
consummate the transactions contemplated hereby or thereby. All Transaction
Documents executed and delivered by Purchaser constitute the valid and binding
obligations of Purchaser, enforceable against it in accordance with their
respective terms, except that (i) the enforceability hereof and thereof may be
subject to applicable bankruptcy, insolvency or other similar laws now or
hereinafter in effect affecting creditors' rights generally, (ii) the
availability of the remedy of specific performance or injunctive or other forms
of equitable relief may be subject to equitable defenses and would be subject to
the discretion of the court before which any proceeding therefor may be brought,
and (iii) rights to indemnification may be limited by public policy
considerations.
3.3 No Conflict; Required Filings and Consents. (a) The execution, delivery
and performance of each Transaction Document to which Purchaser is a party do
not, and the consummation by Purchaser of the transactions contemplated hereby
and thereby will not, (i) conflict with or violate the articles of
incorporation, bylaws or other similar constituent documents of Purchaser or any
of its Subsidiaries, (ii) subject to Purchaser making any filings, notifications
or registrations and obtaining any approvals, consents or authorizations
identified in Section 3.3(b), conflict with or violate any Law or Order
applicable to Purchaser or any of its Subsidiaries or by which any property or
asset of Purchaser or any of its Subsidiaries is bound or affected, or (iii)
result in any breach of or constitute a default (or an event which with notice
or lapse of time or both would become a default) under, result in the loss of a
material benefit under, or give to others any right of termination, amendment,
acceleration, increased payments or cancellation of, or result in the creation
of a Lien on any property or asset of Purchaser or any of its Subsidiaries
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which Purchaser
or any of its Subsidiaries is a party or by which Purchaser or any of its
Subsidiaries or any property or asset of Purchaser or any of its Subsidiaries is
bound or affected, except in the case of clauses (ii) and (iii), for any such
conflicts, violations, breaches, defaults, events, losses, rights, payments,
cancellations, encumbrances or other occurrences that would not, individually or
in the aggregate, have a Purchaser Material Adverse Effect.
(b) The execution, delivery and performances of each Transaction Document
to which Purchaser is a party do not, and the consummation of the transactions
contemplated hereby and thereby by it will not, require any consent, approval,
authorization or permit of, or filing with or notification to, any Governmental
Entity, except for (A) applicable requirements, if any, of the Securities Act
and the Exchange Act and (B) where failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would not,
individually or in the aggregate, have a Purchaser Material Adverse Effect.
3.4 No Brokers. Purchaser has not entered into any contract, arrangement or
understanding with any Person or firm which may result in the obligation of the
Company or any Subsidiary of the Company to pay any investment banker's or
finder's fees, brokerage or agent's commissions or other like payments in
connection with the negotiations leading to this Agreement or the consummation
of the transactions contemplated hereby, any such amounts to be the sole
liability of Purchaser.
3.5 Proxy and Registration Statement. None of the information provided by
Purchaser or its officers, directors, representatives, agents or employees
specifically for inclusion in the Proxy Statement or the Registration Statement
will, in the case of the Proxy Statement, on the date the Proxy Statement is
first mailed to the Company Stockholders or at the time of the Company
Stockholders Meeting, and, in the case of the Registration Statement, on the
effective date of the Registration Statement, on the date mailed to the Company
Stockholders, and on the date of closing of the Rights Offering contain any
untrue statement of a material fact, or will omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
3.6 Sufficient Funds. Purchaser will have sufficient funds available to (a)
pay all amounts required to be paid pursuant to this Agreement when due and (b)
pay all nonreimbursable fees, costs and expenses incurred by Purchaser in
connection with this Agreement and the transactions contemplated herein.
3.7 Investment Intent. Purchaser is purchasing the Shares to be purchased
by it for its own account and for investment purposes, and does not intend to
redistribute the Shares (except in a transaction or transactions exempt from
registration under the federal and state securities laws or pursuant to an
effective registration statement under such laws). Purchaser acknowledges that
the Shares have not been registered under the Securities Act or any state blue
sky or securities Laws and that the transfer of the Shares may be subject to
compliance with such Laws (in addition to the restrictions set forth in the
Stockholders Agreement). As of the date hereof, Purchaser has no present
intention to transfer the Shares.
3.8 Investor Sophistication; Etc. Purchaser is an "accredited investor" as
defined in Regulation D under the Securities Act, has such knowledge and
experience in financial business matters that it is capable of evaluating the
merits and risks of an investment in the Shares, and, without limiting the scope
or effect of any of the representations and warranties of the Company in Article
II or Purchaser's indemnification rights under Article VI, has had access to
such information as it has deemed necessary in order to formulate an informed
decision to purchase the Shares. Purchaser is not an "investment company" within
the meaning of the Investment Company Act of 1940, as amended.
IV. COVENANTS
4.1 Filings, Reasonable Efforts. Upon the terms and subject to the
conditions set forth in this Agreement, each of the parties will use all
commercially reasonable efforts to take, or cause to be taken, all actions, and
to do, or cause to be done, and to assist and cooperate with the other parties
in doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the transactions
contemplated by this Agreement, including without limitation (i) obtaining of
all necessary actions or nonactions, waivers, consents and approvals from
Governmental Entities and making of all necessary registrations and filings
(including filings with Governmental Entities) and taking of all reasonable
steps as may be necessary to obtain an approval or waiver from, or to avoid an
action or proceeding by, any Governmental Entity, (ii) obtaining, in writing, of
all necessary consents, approvals or waivers from third parties in form
reasonably satisfactory to Purchaser, and (iii) executing and delivering any
additional instruments necessary to consummate the transactions contemplated by,
and to fully carry out the purposes of, this Agreement.
4.2 Publicity. The initial press release relating to this Agreement will be
in the form of a joint press release previously agreed between Purchaser and the
Company and thereafter the Company and Purchaser will, subject to their
respective legal obligations (including requirements of stock exchanges and
other similar regulatory bodies), consult with each other, and use reasonable
efforts to agree upon the text of any press release, before issuing any such
press release or otherwise making public statements with respect to the
transactions contemplated hereby and in making any filings with any Governmental
Entity or with any national securities exchange with respect thereto.
4.3 Proxy Statement. The Company will promptly prepare the Proxy Statement
and file it with the SEC as soon as practicable after the date hereof and will
use its commercially reasonable best efforts to have the Proxy Statement cleared
by the SEC within 75 calendar days after the date of filing and promptly
thereafter will mail the Proxy Statement to the Company Stockholders in order
for the Company Stockholders Meeting to occur within 90 calendar days after the
date hereof. Purchaser will use its commercially reasonable best efforts to
cooperate with the Company in the preparation and finalization of the Proxy
Statement. Any Proxy Statement will disclose the recommendation of the Company
Board as of the date hereof that the Company Stockholders approve the
Stockholder Approval Matters. The Company agrees not to mail the Proxy Statement
to the Stockholders until Purchaser confirms that the information provided by
Purchaser continues to be accurate. If at any time prior to the Company
Stockholders Meeting any event or circumstance relating to the Company or any of
its Subsidiaries or Affiliates, or its or their respective officers or
directors, should be discovered by the Company that is required to be set forth
in a supplement to any Proxy Statement, the Company will inform Purchaser,
supplement such Proxy Statement and mail such supplement to the Company
Stockholders. The Company will promptly advise the Purchaser of any oral or
written comments to the Proxy Statement from the SEC or the issuance of any stop
order with respect to the Proxy Statement. The Company will provide the
Purchaser and its counsel with a reasonable opportunity to review and comment on
the Proxy Statement and any amendment or supplement thereto prior to filing such
with the SEC, and will provide the Purchaser with a copy of all such filings
made with the SEC.
4.4 NYSE Listing. The Company will use its best efforts to cause the shares
of the Common Stock to be issued hereunder or upon the conversion of the Series
D Preferred Stock, if applicable, and the shares of Common Stock to be issued in
the Rights Offering to be approved for listing on The New York Stock Exchange
("NYSE"), subject to official notice of issuance.
4.5 Company Stockholders Meeting. (a) (a) The Company will take all action
necessary in accordance with applicable Law and its Charter and bylaws to duly
call, give notice of, convene and hold a special meeting of the Company
Stockholders as promptly as practicable (but in no event later than 90 calendar
days after the date hereof) and to include for consideration and vote at the
Company Stockholders Meeting the Stockholder Approval Matters. The Company Board
will recommend approval of the Stockholder Approval Matters and the Company will
take all lawful action to solicit such approval, including without limitation
timely mailing of the Proxy Statement. In the event the Stockholder Approval
Matters are not approved at the Company Stockholders Meeting, the Company will
(i) use reasonable efforts to obtain as promptly as practicable a waiver from
the NYSE of Stockholder Approval of the conversion of the Series D Preferred
Stock into Common Stock and (ii) if such waiver is not obtained prior to March
1, 2002, convene and hold a meeting of the Company Stockholders at least one
time during each six month period commencing on the date of the first Company
Stockholders Meeting and include for consideration and vote at such Company
Stockholders Meeting, and recommend approval of, the Stockholder Approval
Matters until such matters have been approved in accordance with the rules and
regulations of NYSE.
(b) Purchaser will, and will cause its Affiliates and any other entity that
becomes an assignee of any voting securities of the Company owned by Purchaser
or its Affiliates to, vote such securities in favor of the Stockholder Approval
Matters at each meeting of the Company Stockholders in which such matters are
considered.
4.6 REIT-Related Matters. (a) The Company will take such further actions
and engage in such further transactions as Purchaser reasonably requests to
preserve the Company's status as a REIT under the Code (including with respect
to the period following the Closing Date) and to avoid the payment of any Taxes
under Sections 857(b), 859(f), 860(c) or 4981 of the Code. The Company will not
make or rescind any express or deemed election relative to Taxes (unless
required by Law or necessary to preserve the Company's status as a REIT or the
status of any Subsidiary as a partnership for federal income Tax purposes or as
a qualified REIT subsidiary under Section 856(i) of the Code, as the case may
be).
(b) The Company Board will take no action that would render Section 4 of
Article V of the Charter applicable to, and will not exercise any right provided
under such section with respect to, Purchaser or to the transactions
contemplated by the Transaction Documents.
(c) Purchaser will take such actions as may be required to ensure that
Purchaser's manner of holding ownership of the Company's securities will not
cause REIT disqualification under Section 856(a)(6) of the Code and will not
cause more than 9.9% of the value of the Company's securities to be owned,
directly or indirectly, by an individual as determined under the REIT provisions
of the Code, including Section 544 of the Code.
4.7 Rights Offering. (a) (a) As promptly as practical after the date
hereof, the Company shall establish a record date (the "Record Date") for the
distribution to all holders of Common Stock as of the Record Date a right (the
"Right") to purchase shares of Common Stock on the terms set forth on Exhibit G
hereto (such offering, the "Rights Offering"). The Company will promptly prepare
the Registration Statement and file it with the SEC as soon as practicable after
the date hereof and will use its commercially reasonable best efforts to have
the Registration Statement cleared by the SEC within 30 calendar days after the
date of filing and promptly thereafter will mail the prospectus included as part
of such Registration Statement to the Company Stockholders as of the Record
Date.
4.8 Further Action. Each of the parties hereto will use all commercially
reasonable efforts to take, or cause to be taken, all appropriate action, do or
cause to be done all things reasonably necessary, proper or advisable under
applicable law, and execute and deliver such documents and other papers, as may
be required to carry out the provisions of the Transaction Documents and
consummate and make effective the transactions contemplated hereby and thereby.
4.9 Other Matters. The Company will use all reasonable efforts to arrange
for the signature of the Rights Amendment by First Chicago Trust Company as soon
as practicable after the date hereof. Promptly after the receipt of Stockholder
Approval with respect to the Amended and Restated Series C Articles
Supplementary in the form attached hereto as Exhibit F (the "Amended Series C
Articles Supplementary"), the Company will cause the Amended Series C Articles
Supplementary to be filed and accepted for record by the appropriate Maryland
governmental authority. Notwithstanding anything in the Amended Series C
Articles Supplementary or any of the other Transaction Documents to the
contrary, the letter agreement, dated January 31, 2001, between Purchaser and
the Company shall remain in full force and effect, and all references therein to
the Articles Supplementary for the Series C Preferred Stock shall include the
Amended Series C Articles Supplementary.
4.10 No Participation in Rights Offering or Adjustment to Series C
Preferred. Purchaser agrees that, notwithstanding anything to the contrary in
the Articles Supplementary for the Series C Preferred Stock, (i) Purchaser shall
not be entitled to any dividend distributed in the Rights Offering in respect of
its Series C Preferred Stock and (ii) there shall be no adjustment to the
conversion price of the Series C Preferred Stock as a result of the declaration
of a dividend, or distribution or exercise of Rights, in the Rights Offering.
V. CONDITIONS TO CLOSING
5.1 Conditions to Each Party's Obligations. The respective obligations of
each party to consummate the transactions contemplated by this Agreement are
subject to there not being in effect on the Closing Date any Order or Law
enacted, entered, promulgated, enforced or issued by any court of competent
jurisdiction or other Governmental Entity or other legal restraint or
prohibition preventing the consummation of the transactions contemplated by this
Agreement (a "Governmental Restraint").
5.2 Conditions to Obligations of Purchaser. The obligations of Purchaser to
consummate the transactions contemplated by this Agreement are subject to the
satisfaction or waiver, at or prior to the Closing of each of the following
conditions:
(a) Litigation. No action, suit or proceeding shall have been commenced or
threatened in writing by or before any court or other Governmental Entity
against Purchaser, the Company or any of their respective Affiliates, seeking to
restrain or materially and adversely alter the transactions contemplated hereby
or by the other documents contemplated hereby, which (i) is reasonably likely to
render it impossible or unlawful to consummate the transactions contemplated
hereby or thereby, or (ii) in the good faith judgment of Purchaser could
reasonably be expected to have a Company Material Adverse Effect or materially
limit or restrict the rights of the Purchaser under the Transaction Documents.
(b) Rights Amendment. The Rights Amendment shall continue to be in effect
and no "Triggering Event," "Distribution Date" or "Stock Acquisition Date" shall
have occurred pursuant to and as defined in the Company Rights Agreement.
(c) Bank Agreements. Fleet Bank, N.A. and The Provident Bank shall have (i)
entered into amendments to their respective loan agreements with the Company on
terms and conditions satisfactory to each of Purchaser and the Company in their
respective sole discretion, (ii) waived any and all then-existing covenant
defaults, as well as the waiver of the right to assert a default or give notice
of an event which, with the giving of notice and/or the passing of time, could
become an event of default under such agreements, and (iii) with respect to
Fleet, extended the current maturity date of its loan by not less than 12 months
(such agreements, the "Bank Agreements").
Each of the conditions set forth in this Section 5.2 shall be deemed satisfied,
without any further action by the Company or Purchaser, upon the closing of the
Rights Offering (provided that the Closing Condition described in Exhibit G has
been satisfied).
VI. INDEMNIFICATION
6.1 Indemnification of Purchaser. (a) Right of Indemnification. Subject to
the terms of this Article VI, the Company covenants and agrees to indemnify and
hold harmless each of Purchaser and its Affiliates and their respective
partners, members, officers, directors, employees, attorneys, advisors and
agents controlling, and any person or entity controlling, controlled by or under
common control with, any of the foregoing within the meaning of either Section
15 of the Securities Act or Section 20 of the Exchange Act, including without
limitation The Hampstead Group, L.L.C. and its Affiliates (collectively, the
"Indemnified Parties"), from and against all losses, claims, liabilities,
damages, costs (including without limitation costs of preparation and reasonable
attorneys' fees and charges) and reasonable expenses (including without
limitation expenses incurred in connection with investigating, preparing or
defending any action, claim or proceeding, whether or not in connection with
pending or threatened litigation in which any Indemnified Party is a party) or
actions in respect thereof suffered by any Indemnified Party, directly or
indirectly, arising out of (i) any inaccuracy in or breach of any of the
representations, warranties, covenants or agreements made by the Company in this
Agreement or in any other document contemplated hereby or (ii) any actual or
threatened claim against such Indemnified Party by a person or entity related to
or arising out of or in connection with any Transaction Document or any actions
taken by any Indemnified Party pursuant hereto or thereto or in connection with
the transactions contemplated hereby or thereby (whether or not the transactions
contemplated hereby or thereby are consummated) (collectively, "Losses").
(b) Losses. The Company will not be liable to any Indemnified Party for any
Losses to the extent, but only to the extent, that it is finally judicially
determined by a court of competent jurisdiction (which determination is not
subject to appeal) that such Losses resulted primarily from (i) such Indemnified
Party's breach of this Agreement, (ii) a misstatement or omission contained in a
report filed by such Indemnified Party pursuant to the Exchange Act, the
Securities Act or any other Law unless such misstatement or omission relates to
information furnished or confirmed by or on behalf of the Company, or (iii) a
misstatement or omission contained in a report filed by the Company pursuant to
the Exchange Act, the Securities Act or any other Law based on information
furnished in writing by the Indemnified Party to the Company expressly for use
therein. The indemnification provisions of this Section 6.1 are expressly
intended to cover Losses relating to an Indemnified Party's own negligence. The
Company will promptly reimburse each Indemnified Party for all such Losses as
they are incurred. If the foregoing indemnity is unavailable to any Indemnified
Party or insufficient to hold any Indemnified Party harmless, then the Company
will contribute to the amount paid or payable by such Indemnified Party as a
result of such Loss in such proportion as is appropriate to reflect the relative
fault of the Company, on the one hand, and such Indemnified Party, on the other,
as well as any other relevant equitable considerations. The relative fault of
the Company, on the one hand, and any Indemnified Party, on the other, will be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission to state a material fact, has been taken by, or relates to
information supplied by, the Company or such Indemnified Party, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent any such action, statement or omission. The amount paid or payable by a
party as a result of any Losses will be deemed to include any reasonable legal
or other fees or expenses incurred by such party in connection with any action,
suit or proceeding. The parties hereto agree that it would not be just and
equitable if contribution pursuant to this paragraph were determined by prorata
allocation or by any other method of allocation that does not take account of
the equitable considerations referred to above. No person or entity guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) will be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
(c) Threshold. No Indemnified Party will be entitled to indemnification
pursuant to this Section 6.1 with respect to any Losses in respect of breaches
of representations and warranties until the aggregate amount of all such Losses
suffered by Indemnified Parties in the aggregate exceeds $500,000 (the
"Threshold"), whereupon Indemnified Parties will be entitled to indemnification
pursuant to this Section 6.1 from the Company for the full amount of all such
Losses suffered by Indemnified Parties (regardless of the Threshold) up to an
aggregate total amount of the Unsubscribed Purchase Amount (the "Cap"). The
foregoing provision of this Section 6.1(c) notwithstanding, the Threshold and
the Cap will not apply with respect to any Loss or Losses relating directly or
indirectly to claims of any nature whatsoever (i) relating to, resulting from or
arising out of any breach of any covenant or agreement made by the Company in
this Agreement or in any Transaction Documents or (ii) against any Indemnified
Party or Parties made by or on behalf of any director or officer of the Company
or any of its Subsidiaries.
(d) Survival. No Indemnified Party will be entitled to give a Notice of
Claim with respect to any actual or alleged breach of any representation or
warranty herein after the second anniversary of the date of the Closing.
6.2 Procedure for Claims. (a) Notice of Claim. After obtaining knowledge of
any claim or demand which has given rise to, or could reasonably give rise to, a
claim for indemnification under this Article VI (referred to herein as an
"Indemnification Claim"), an Indemnified Party will be required to give written
notice to the Company of such Indemnification Claim ("Notice of Claim"). A
Notice of Claim will be given with respect to all Indemnification Claims,
whether or not the Threshold has been reached; provided, however, that the
failure to give Notice of Claim to the Company will not relieve the Company from
any liability that it may have to an Indemnified Party hereunder to the extent
that the Company is not prejudiced by such failure. The Notice of Claim will be
required to set forth the amount (or a reasonable estimate) of the Loss or
Losses suffered, or which may be suffered, by an Indemnified Party as a result
of such Indemnification Claim, whether or not the Threshold has been reached,
and a brief description of the facts giving rise to such Indemnification Claim.
The Indemnified Party will furnish to the Company such information (in
reasonable detail) it may have with respect to such Indemnification Claim
(including copies of any summons, complaint or other pleading which may have
been served on it and any written claim, demand, invoice, billing or other
document evidencing or asserting the same).
(b) Third Party Claim. (i) If the claim or demand set forth in the Notice
of Claim is a claim or demand asserted by a third party (a "Third Party Claim"),
the Company will have 15 calendar days after the date of receipt by the Company
of the Notice of Claim (the "Notice Date") to notify the Indemnified Parties in
writing of the election by the Company to defend the Third Party Claim on behalf
of the Indemnified Parties, provided, however, that the Company will be entitled
to assume the defense of any such Third Party Claim only if it unconditionally
and irrevocably undertakes to indemnify all Indemnified Parties in respect
thereof (subject to any applicable limitations set forth in Section 6.1).
(ii) If the Company elects to defend a Third Party Claim on behalf of the
Indemnified Parties, the Indemnified Parties will make available to the Company
and their agents and representatives all records and other materials in their
possession which are reasonably required in the defense of the Third Party
Claim, and the Company will pay all expenses payable in connection with the
defense of the Third Party Claim as they are incurred (subject to any applicable
limitations set forth in Section 6.1).
(iii) In no event may the Company settle or compromise any Third Party
Claim without the Indemnified Parties' consent, which may not be unreasonably
withheld, provided, however, that if a settlement is presented by the Company to
the Indemnified Parties for approval and the Indemnified Parties withhold their
consent thereto, then any amount by which the final Losses (including reasonable
attorneys' fees and charges) resulting from the resolution of the matter exceeds
the sum of the rejected settlement amount plus attorneys' fees incurred to such
date will be excluded from the amount covered by the indemnification provided
for in this Agreement and shall be borne by the Indemnified Parties.
(iv) If the Company elects to defend a Third Party Claim, the Indemnified
Parties will have the right to participate in the defense of the Third Party
Claim, at the Indemnified Parties' expense (and without the right to
indemnification for such expense under this Agreement), provided, however, that
the reasonable fees and expenses of counsel retained by the Indemnified Parties
will be at the expense of the Company if (A) the use of the counsel chosen by
the Company to represent the Indemnified Parties would present such counsel with
a conflict of interest; (B) the parties to such proceeding include both
Indemnified Parties and the Company and there may be legal defenses available to
Indemnified Parties which are different from or additional to those available to
the Company; (C) within 10 calendar days after being advised by the Company of
the identity of counsel to be retained to represent Indemnified Parties, they
shall have objected to the retention of such counsel for valid reasons (which
shall be stated in a written notice to the Company), and the Company shall not
have retained different counsel satisfactory to the Indemnified Parties; or (D)
the Company shall have authorized the Indemnified Parties to retain a single
separate counsel at the expense of the Company, such authorization to be made by
the directors who are not designees of Purchaser or its Affiliates.
(v) If the Company does not elect to defend a Third Party Claim, or does
not defend a Third Party Claim in good faith, the Indemnified Parties will have
the right, in addition to any other right or remedy it may have hereunder, at
the sole and exclusive expense of the Company, to defend such Third Party Claim.
(c) Cooperation in Defense. The Indemnified Parties will cooperate with the
Company in the defense of a Third Party Claim and make reasonably available the
facts relating to the Third Party Claim. Subject to the foregoing, (i) no
Indemnified Party will have any obligation to participate in the defense of or
to defend any Third Party Claim and (ii) no Indemnified Parties' defense of, or
their participation in, the defense of any Third Party Claim will in any way
diminish or lessen their right to indemnification as provided in this Agreement.
6.3 Indemnification of the Company. Purchaser will indemnify and hold
harmless the Company and its current and future officers, directors, employees
and agents from and against all Losses suffered by any of them as a result of
any inaccuracy in or breach of any of the representations, warranties or
covenants made by Purchaser hereunder. The procedures for and limits on
indemnification in respect of the obligations of Purchaser under this Section
6.3 will be the same as those set forth in Section 6.1 and 6.2.
6.4 Non-Exclusivity of Indemnification. The rights of any Indemnified Party
hereunder will not be exclusive of the rights of any Indemnified Party under any
other agreement or instrument to which the Company is a party. Nothing in such
other agreement or instrument will be interpreted as limiting or otherwise
adversely affecting an Indemnified Party's rights hereunder and nothing in this
Agreement will be interpreted as limiting or otherwise adversely affecting the
Indemnified Party's rights under any such other agreement or instrument;
provided, however, that no Indemnified Party will be entitled hereunder to
recover more than its indemnified Losses. The indemnity, contribution and
expense reimbursement obligation of the Company in this Agreement will be in
addition to any liability the Company may otherwise have. The obligations of the
Company to each Indemnified Party will be separate obligations, and the
liability of the Company to any Indemnified Party will not be extinguished
solely because any other Indemnified Party is not entitled to indemnity or
contribution hereunder.
6.5 Survival of Indemnification. The provisions of this Article VI will
survive notwithstanding any termination hereof or the Closing of any of the
transactions contemplated hereby.
VII. TERMINATION AND WAIVER
7.1 Termination by Mutual Consent. This Agreement may be terminated at any
time prior to the Closing Date by the mutual consent of Purchaser and the
Company.
7.2 Termination by Purchaser. This Agreement may be terminated by Purchaser
if the Closing shall not have occurred on or before January 15, 2002 (the
"Outside Date"); provided, however, (i) that Purchaser may not terminate this
Agreement pursuant to this Section 7.2 if Purchaser's failure to fulfill any of
its obligations under this Agreement shall have been the reason that the Closing
shall not have occurred on or before the Outside Date and (ii) if the
Registration Statement has not been declared effective by the SEC on or prior to
December 1, 2001 (other than due to the Company's breach of its obligation under
Section 4.7 of this Agreement), the Outside Date will be extended beyond
December 31, 2001 on a day-for-day basis by that number of days beyond December
1, 2001 that the Registration Statement has not been declared effective, not to
exceed 30 calendar days.
VIII. GENERAL PROVISIONS
8.1 Notices. Any notice or other communication required to be given
hereunder shall be in writing, and sent by reputable courier service (with proof
of service), by hand delivery or by facsimile (followed on the same day by
delivery by courier service (with proof of delivery) or by hand delivery),
addressed as follows:
If to Purchaser:
Explorer Holdings, L.P.
4200 Texas Commerce Tower West
2200 Ross Avenue
Dallas, Texas 75201
Attn: William T. Cavanaugh, Jr.
Fax No.: (214) 220-4949
With copies to:
Jones, Day, Reavis & Pogue
599 Lexington Avenue
New York, New York 10022
Attn: Thomas W. Bark
Fax No.: (212) 755-7306
If to the Company:
Omega Healthcare Investors, Inc.
900 Victors Way, Suite 350
Ann Arbor, Michigan 48108
Attn: Chief Financial Officer
Fax No.: (734) 887-0322
With copies to:
Powell, Goldstein, Frazer & Murphy LLP
191 Peachtree Street, N.E.
Suite 1600
Atlanta, Georgia 30303
Attn: Rick Miller or Eliot Robinson
Fax No.: (404) 572-6999
or to such other address as any party will specify by written notice so given,
and such notice will be deemed to have been delivered as of the date so
telecommunicated or personally delivered.
8.2 Assignment; Binding Effect. Neither this Agreement nor any of the
rights, interests or obligations hereunder will be assigned by any party hereto
(whether by operation of Law or otherwise) without the prior written consent of
the other party, except that Purchaser will have the right to assign to any
direct or indirect wholly owned subsidiary of Purchaser or to the partners of
Purchaser any and all rights and obligations of Purchaser under this Agreement,
provided, that any such assignment will not relieve Purchaser from any of its
obligations hereunder. Any assignment not granted in accordance with the
foregoing shall be null and void. Subject to the first sentence of this Section
8.2, this Agreement will be binding upon and will inure to the benefit of the
parties hereto and their respective successors and assigns. Notwithstanding
anything contained in this Agreement to the contrary, except for the provisions
of Article VI, nothing in this Agreement, expressed or implied, is intended to
confer on any Person other than the parties hereto or their respective heirs,
successors, executors, administrators and assigns any rights, remedies,
obligations or liabilities under or by reason of this Agreement.
8.3 Entire Agreement. This Agreement, the Company Disclosure Letter, the
other Transaction Documents and any documents delivered by the parties in
connection herewith or therewith, constitute the entire agreement among the
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings among the parties with respect thereto, including,
without limitation, any draft proposal or letter of intent with respect to the
transactions contemplated herein.
8.4 Amendment. This Agreement may be amended by the parties hereto, by
action taken by their respective Boards of Directors, or other equivalent
governing bodies, at any time before or after approval of matters presented to
the Company Stockholders, but after any such Company Stockholder approval, no
amendment will be made which by Law requires the further approval of the Company
Stockholders without obtaining such further approval. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.
8.5 Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of Delaware, without regard to its
conflict of laws principles.
8.6 Counterparts. This Agreement may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered will be an
original, but all such counterparts will together constitute one and the same
instrument. Each counterpart may consist of a number of copies hereof each
signed by less than all, but together signed by all of the parties hereto. A
facsimile copy of a signature page shall be deemed to be an original signature
page.
8.7 Headings. Headings of the Articles and Sections of this Agreement are
for the convenience of the parties only, and will be given no substantive or
interpretive effect whatsoever.
8.8 Certain Definitions/Interpretations. (a) For purposes of this
Agreement:
(i) An "Affiliate" of any Person means another Person that, directly
or indirectly, through one or more intermediaries, controls, is controlled
by, or is under common control with, such first Person;
(ii) "Business Day" means any day other than a Saturday, Sunday or day
on which banks in New York, New York are authorized or required by Law to
close;
(iii) "Knowledge" of any Person which is not an individual means the
actual knowledge of any of such Person's officers after reasonable inquiry;
and
(iv) "Person" means an individual, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization or other entity.
(b) When a reference is made in this Agreement to an Article, Section,
Exhibit or Annex, such reference will be to an Article or Section of, or an
Annex or Exhibit to, this Agreement unless otherwise indicated. Whenever the
words "include," "includes" or "including" are used in this Agreement, they will
be deemed to be followed by the words "without limitation", except when used in
conjunction with a negative predicate. The words "hereof," "herein" and
"hereunder" and words of similar import when used in this Agreement will refer
to this Agreement as a whole and not to any particular provision of this
Agreement. All terms used herein with initial capital letters have the meanings
ascribed to them herein and all terms defined in this Agreement will have such
defined meanings when used in any certificate or other document made or
delivered pursuant hereto unless otherwise defined therein. The definitions
contained in this Agreement are applicable to the singular as well as the plural
forms of such terms and to the masculine as well as to the feminine and neuter
genders of such term. Any agreement, instrument or statute defined or referred
to herein or in any agreement or instrument that is referred to herein means
such agreement, instrument or statute as from time to time amended, modified or
supplemented, including (in the case of agreements or instruments) by written
waiver or written consent and (in the case of statutes) by succession of
comparable successor statutes and references to all attachments thereto and
instruments incorporated therein. References to a Person are also to its
permitted successors and assigns.
8.9 Waivers. Except as provided in this Agreement, no action taken pursuant
to this Agreement, including without limitation any investigation by or on
behalf of any party, will be deemed to constitute a waiver by the party taking
such action of compliance with any representations, warranties, covenants or
agreements contained in this Agreement. The waiver by any party hereto of a
breach of any provision hereunder will not operate or be construed as a waiver
of any prior or subsequent breach of the same or any other provision hereunder.
At any time any party hereto may (a) extend the time for the performance of any
of the obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto, and (c) waive compliance with any of the
agreements or conditions contained herein. Any such extension or waiver shall be
valid only if set forth in an instrument in writing signed by the party or
parties to be bound thereby.
8.10 Severability. Any term or provision of this Agreement which is invalid
or unenforceable in any jurisdiction will, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision will be interpreted
to be only so broad as is enforceable.
8.11 Enforcement of Agreement. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement was
not performed in accordance with its specific terms or was otherwise breached.
It is accordingly agreed that the parties will be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof, this being in addition to any other remedy to
which they are entitled at law or in equity.
8.12 Expenses. Without limiting the generality or effect of any other
provision hereof, including without limitation Section 6.1 or any agreement or
instrument contemplated hereby, whether or not the Closing occurs, the Company
will reimburse Purchaser for all Purchaser Expenses at the Closing or the
termination of this Agreement, and from time to time thereafter promptly upon
request by Purchaser, not to exceed $1 million. As used in this Agreement,
"Purchaser Expenses" shall be an amount equal to all out-of-pocket costs and
expenses of Purchaser and Purchaser's partners incurred in connection with this
Agreement and the transactions contemplated hereby and any litigation associated
therewith (including, without limitation, all fees and expenses payable to
accountants, counsel, consultants and due diligence expenses, but expressly
excluding the costs of Purchaser's employees and Purchaser's overhead).
"Purchaser Expenses" shall not include (i) any out-of-pocket costs and expenses
of Purchaser or its Affiliates for which Purchaser or its Affiliates would be
entitled to indemnification pursuant to Article VI or to payment pursuant to the
Advisory Agreement and (ii) any fee payable to The Hampstead Group, L.L.C.
pursuant to the Advisory Agreement in respect of the transactions contemplated
by this Agreement.
8.13 Jurisdiction; Consent to Service of Process. (a) Each party hereby
irrevocably and unconditionally submits, for itself and its property, to the
exclusive jurisdiction of any state or federal court located in the State of
Delaware (a "Delaware Court"), and any appellate court from any such court, in
any suit, action or proceeding arising out of or relating to this Agreement, or
for recognition or enforcement of any judgment resulting from any such suit,
action or proceeding, and each party hereby irrevocably and unconditionally
agrees that all claims in respect of any such suit, action or proceeding may be
heard and determined in a Delaware Court.
(b) It will be a condition precedent to each party's right to bring any
such suit, action or proceeding that such suit, action or proceeding, in the
first instance, be brought in a Delaware Court (unless such suit, action or
proceeding is brought solely to obtain discovery or to enforce a judgment), and
if each such court refuses to accept jurisdiction with respect thereto, such
suit, action or proceeding may be brought in any other court with jurisdiction;
provided that the foregoing will not apply to any suit, action or proceeding by
a party seeking indemnification or contribution pursuant to this Agreement or
otherwise in respect of a suit, action or proceeding against such party by a
third party if such suit, action or proceeding by such party seeking
indemnification or contribution is brought in the same court as the suit, action
or proceeding against such party.
(c) No party may move to (i) transfer any such suit, action or proceeding
from a Delaware Court to another jurisdiction, (ii) consolidate any such suit,
action or proceeding brought in a Delaware Court with a suit, action or
proceeding in another jurisdiction, or (iii) dismiss any such suit, action or
proceeding brought in a Delaware Court for the purpose of bringing the same in
another jurisdiction.
(d) Each party hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, (i) any objection which it
may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement in a Delaware Court,
(ii) the defense of an inconvenient forum to the maintenance of such suit,
action or proceeding in any such court, and (iii) the right to object, with
respect to such suit, action or proceeding, that such court does not have
jurisdiction over such party. Each party irrevocably consents to service of
process in any manner permitted by law. Notwithstanding the foregoing, this
Section 8.13 will not apply to any suit, action or proceeding to enforce a
judgment of a Delaware Court.
8.14 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES
ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING, CLAIM OR
COUNTERCLAIM, WHETHER IN CONTRACT OR TORT, AT LAW OR IN EQUITY, ARISING OUT OF
OR IN ANY WAY RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
8.15 No Strict Construction. The parties hereto have participated jointly
in the negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties hereto, and no presumption or burden of
proof shall arise favoring or disfavoring any party by virtue of the authorship
of any of the provisions of this Agreement.
[Remainder of page intentionally blank]
IN WITNESS WHEREOF, the parties have executed this Agreement and caused the
same to be duly delivered on their behalf on the day and year first written
above.
OMEGA HEALTHCARE INVESTORS, INC.
By:__________________________
C. Taylor Pickett
Chief Executive Officer
EXPLORER HOLDINGS, L.P.
By: Explorer Holdings GenPar, LLC,
its General Partner
By:__________________________
William T. Cavanaugh, Jr.
Vice President
Appendix B
OMEGA HEALTHCARE INVESTORS, INC.
ARTICLES SUPPLEMENTARY
FOR SERIES D CONVERTIBLE PREFERRED STOCK
OMEGA HEALTHCARE INVESTORS, INC., a Maryland corporation (the "Company"),
hereby certifies to the State Department of Assessments and Taxation of Maryland
that:
FIRST: Pursuant to authority contained in the charter of the Company (the
"Charter"), 1,000,000 shares of authorized but unissued shares of the Company's
Preferred Stock have been duly classified by the Board of Directors of the
Company (the "Board") as authorized but unissued shares of the Company's Series
D Preferred Stock.
SECOND: A description of the Series D Preferred Stock is as follows:
1. Designation and Number. A series of Preferred Stock, designated the
"Series D Convertible Preferred Stock" (the "Series D Preferred Stock"), is
hereby established. The number of shares of the Series D Preferred Stock shall
be 1,000,000, subject to increase pursuant to Section 4(b) prior to payment by
the Company of any dividend in shares of Series D Preferred Stock in accordance
with Section 4.
2. Maturity. The Series D Preferred Stock has no stated maturity.
3. Rank. The Series D Preferred Stock will, with respect to dividend rights
and rights upon liquidation, dissolution or winding up of the Company, rank (i)
senior to all classes or series of Common Stock of the Company, and to all
equity securities ranking junior to the Series D Preferred Stock with respect to
dividend rights or rights upon liquidation, dissolution or winding up of the
Company, (ii) on a parity with the Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock and all other equity securities issued by the
Company the terms of which specifically provide that such equity securities rank
on a parity with the Series D Preferred Stock with respect to dividend rights or
rights upon liquidation, dissolution or winding up of the Company (the "Parity
Preferred"), and (iii) junior to all existing and future indebtedness of the
Company. The term "equity securities" does not include convertible debt
securities, which will rank senior to the Series D Preferred Stock prior to
conversion of such debt securities.
4. Dividends. (a) Except as set forth in Section 4(b), if the Stockholder
Approval Date does not occur on or prior to January 31, 2002, holders of shares
of the Series D Preferred Stock are entitled to receive, out of funds legally
available for the payment of dividends, preferential cumulative dividends at the
greater of (i) 10% per annum of the Liquidation Preference per share (equivalent
to a fixed annual amount of $_____ per share) and (ii) the amount per share
declared or paid or set aside for payment based on the number of shares of
Common Stock into which such shares of Series D Preferred Stock are then
convertible in accordance with Section 8. Subject to the preceding sentence,
dividends on each share of the Series D Preferred Stock shall be cumulative
commencing from the date of issuance (the "Issue Date") of such share of Series
D Preferred Stock and shall be payable in arrears for each period ended July 31,
October 31, January 31 and April 30 (each a "Dividend Period") on or before the
15th day of August, November, February and May of each year, or, if not a
Business Day, the next succeeding Business Day (each, a "Dividend Payment
Date"). Any dividend payable on shares of the Series D Preferred Stock for any
partial period will be computed based on the actual number of days elapsed
(commencing with and including the date of issuance of such shares) and on the
basis of a 360-day year consisting of twelve 30-day months. Dividends will be
payable to holders of record as they appear in the stock records of the Company
at the close of business on the applicable record date, which shall be the last
day of the preceding calendar month prior to the applicable Dividend Payment
Date or on such other date designated by the Board that is not more than 30 nor
less than 10 days prior to such Dividend Payment Date (each, a "Dividend Record
Date").
(b) Dividends will be payable, (1) at the election of the holders of a
majority of the Series D Preferred Stock, in respect of any period after June
30, 2002 and (2) at the election of the Board, in respect of any period on or
prior to June 30, 2002, either (i) by the issuance as of the relevant Dividend
Payment Date of additional shares of fully paid, nonassessable Series D
Preferred Stock having an aggregate liquidation preference equal to the amount
of such accrued dividends or (ii) in cash. In the event that dividends are
declared and paid pursuant to clause (i), (A) such dividends will be deemed paid
in full and will not accumulate and (B) prior to paying any such dividends, the
Board will take such action as is necessary to increase the number of authorized
shares of Series D Preferred Stock by the number of shares to be issued pursuant
to this Section 4, including but not limited to the filing of Articles
Supplementary with the State Department of Assessments and Taxation of Maryland
in accordance with Article VII of the Charter. The Company will deliver
certificates representing shares of Series D Preferred Stock issued pursuant to
this Section 4(b) promptly after the relevant Dividend Payment Date.
(c) No dividends on shares of Series D Preferred Stock shall be declared by
the Board or paid or set apart for payment by the Company at such time as the
terms and provisions of any agreement of the Company, including any agreement
relating to its indebtedness, prohibits such declaration, payment or setting
apart for payment or provides that such declaration, payment or setting apart
for payment would constitute a breach thereof or a default thereunder, or if
such declaration or payment shall be restricted or prohibited by law.
(d) Notwithstanding the foregoing, dividends on the Series D Preferred
Stock will accrue whether or not the Company has earnings, whether or not there
are funds legally available for the payment of such dividends and whether or not
such dividends are declared. Accrued but unpaid dividends on the Series D
Preferred Stock will not bear interest.
(e) Except as set forth in the next sentence, no dividends will be declared
or paid or set apart for payment on any capital stock of the Company or any
other series of Preferred Stock ranking, as to dividends, on a parity with or
junior to the Series D Preferred Stock (other than a dividend in shares of the
Company's Common Stock or in shares of any other class of stock ranking junior
to the Series D Preferred Stock as to dividends and upon liquidation) for any
period unless full cumulative dividends have been or contemporaneously are
declared and paid or declared and a sum sufficient for the payment thereof is
set apart for such payment on the Series D Preferred Stock for all past dividend
periods and the then current dividend period. When dividends are not paid in
full (or a sum sufficient for such full payment is not so set apart) upon the
Series D Preferred Stock and the shares of any other series of Preferred Stock
ranking on a parity as to dividends with the Series D Preferred Stock, all
dividends declared upon the Series D Preferred Stock and any other series of
Preferred Stock ranking on a parity as to dividends with the Series D Preferred
Stock shall be declared pro rata so that the amount of dividends declared per
share of Series D Preferred Stock and such other series of Preferred Stock shall
in all cases bear to each other the same ratio that accrued dividends per share
on the Series D Preferred Stock and such other series of Preferred Stock (which
shall not include any accrual in respect of unpaid dividends for prior dividend
periods if such Preferred Stock does not have a cumulative dividend) bear to
each other.
(f) Except as provided in the immediately preceding paragraph, unless full
cumulative dividends on the Series D Preferred Stock have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof is set apart for payment for all past dividend periods and the
then current dividend period, no dividends (other than in shares of Common Stock
or other shares of capital stock ranking junior to the Series D Preferred Stock
as to dividends and upon liquidation) shall be declared or paid or set aside for
payment nor shall any other distribution be declared or made upon the Common
Stock, or any other capital stock of the Company ranking junior to or on a
parity with the Series D Preferred Stock as to dividends or upon liquidation,
nor shall any shares of Common Stock, or any other shares of capital stock of
the Company ranking junior to or on a parity with the Series D Preferred Stock
as to dividends or upon liquidation be redeemed, purchased or otherwise acquired
for any consideration (or any moneys be paid to or made available for a sinking
fund for the redemption of any such shares) by the Company (except by conversion
into or exchange for other capital stock of the Company ranking junior to the
Series D Preferred Stock as to dividends and upon liquidation or redemption or
for the purpose of preserving the Company's qualification as a real estate
investment trust under the Internal Revenue Code of 1986, as amended (the
"Code")). Holders of shares of the Series D Preferred Stock shall not be
entitled to any dividend, whether payable in cash, property or stock, in excess
of full cumulative dividends on the Series D Preferred Stock as provided above.
Any dividend payment made on shares of the Series D Preferred Stock shall first
be credited against the earliest accrued but unpaid dividend due with respect to
such shares which remains payable.
5. Liquidation Preference. Upon any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Company, each holder of shares
of Series D Preferred Stock shall, at the election of such holder, be entitled
to be paid out of the assets of the Company legally available for distribution
to its shareholders the Liquidation Preference (as defined in Section 10(e))
before any distribution of assets is made to holders of Common Stock or any
other class or series of capital stock of the Company that ranks junior to the
Series D Preferred Stock as to liquidation rights. The Company will promptly
provide to the holders of Series D Preferred Stock written notice of any event
triggering the right to receive such Liquidation Preference. After payment of
the full amount of the Liquidation Preference, plus any accrued and unpaid
dividends to which they are entitled, the holders of Series D Preferred Stock
will have no right or claim to any of the remaining assets of the Company. A
Change in Control (as defined in Section 10(b)), or the sale, lease or
conveyance of all or substantially all of the property, business or assets of
the Company shall be deemed to constitute a liquidation, dissolution or winding
up of the Company for purposes of Section 5 of these Articles Supplementary only
and shall not be deemed a liquidation, dissolution or winding up of the Company
for any other series of Preferred Stock unless the terms of such series of
Preferred Stock expressly provide.
In determining whether a distribution (other than upon voluntary or involuntary
liquidation) by dividend, redemption or other acquisition of shares of stock of
the Company or otherwise is permitted under the Maryland General Corporation Law
(the "MGCL"), no effect shall be given to amounts that would be needed if the
Company would be dissolved at the time of the distribution, to satisfy the
preferential rights upon distribution of holders of shares of stock of the
Company whose preferential rights upon distribution are superior to those
receiving the distribution.
6. Redemption. The Series D Preferred Stock is not redeemable without the
consent of the holder of such share of Series D Preferred Stock.
7. Voting Rights. (a) Holders of the Series D Preferred Stock will not have
any voting rights, except as set forth below.
(b) Whenever dividends on any shares of Series D Preferred Stock shall be
in arrears for two or more Dividend Periods (a "Preferred Dividend Default"),
the number of directors then constituting the Board shall be increased by two
(if not already increased by reason of a similar arrearage with respect to the
Series C Preferred Stock). The holders of such shares of Series D Preferred
Stock and the holders of Series C Preferred Stock upon which like voting rights
have been conferred and are exercisable (voting together as a single class) will
be entitled to fill the vacancies thereby created by the addition of such number
of directors of the Company determined pursuant to the first sentence of this
Section 7(b) (the "Additional Series C/D Preferred Stock Directors") at a
special meeting called by the holders of record of at least 20% of the Series D
Preferred Stock or the holders of record of at least 20% of the Series C
Preferred Stock until all dividends accumulated on such shares of Series D
Preferred Stock and Series C Preferred Stock for the past dividend periods and
the dividend for the then current dividend period shall have been fully paid or
declared and a sum sufficient for the payment thereof set aside. In any vote to
elect or remove additional directors pursuant to this Section 7, each such
holder of shares of Series D Preferred Stock and Series C Preferred Stock
entitled to vote will be entitled to one vote for each share held by such
holder. In the event the directors of the Company are divided into classes, each
such vacancy shall be apportioned among the classes of directors to prevent
stacking in any one class and to ensure that the number of directors in each of
the classes of directors are as equal as possible. Each Additional Series C/D
Preferred Stock Director, as a qualification for election as such (and
regardless of how elected), shall submit to the Board a duly executed, valid,
binding and enforceable letter of resignation from the Board, to be effective
upon the date upon which all dividends accumulated on such shares of Series D
Preferred Stock and Series C Preferred Stock for the past dividend periods and
the dividend for the then current dividend period shall have been fully paid or
declared and a sum sufficient for the payment thereof set aside for payment,
whereupon the terms of office of all persons elected as Additional Series C/D
Preferred Stock Directors by the holders of such shares of Series D Preferred
Stock and Series C Preferred Stock shall, upon the effectiveness of their
respective letters of resignation, forthwith terminate, and the number of
directors then constituting the Board shall be reduced accordingly. A quorum for
any such meeting shall exist if the holders of at least a majority of the
outstanding shares of Series D Preferred Stock and Series C Preferred Stock so
entitled to vote are represented in person or by proxy at such meeting. Such
Additional Series C/D Preferred Stock Directors shall be elected upon the
affirmative vote of a plurality (based on the number of votes entitled to be
cast) of the shares of Series D Preferred Stock and Series C Preferred Stock so
entitled to vote that are present and voting in person or by proxy at a duly
called and held meeting at which a quorum is present. If and when all
accumulated dividends and the dividend for the then current dividend period on
such shares of Series D Preferred Stock and Series C Preferred Stock shall have
been paid in full or declared and a sum sufficient for the payment thereof in
full shall have been set aside, the holders thereof shall be divested of the
foregoing voting rights (subject to revesting in the event of each and every
Preferred Dividend Default) and the term of office of each Additional Series C/D
Preferred Stock Director so elected shall terminate. Any Additional Series C/D
Preferred Stock Director may be removed at any time with or without cause by,
and shall not be removed otherwise than by the vote of, the holders of record of
a majority of the outstanding shares of the Series D Preferred Stock and Series
C Preferred Stock entitled to vote (voting together as a single class). So long
as a Preferred Dividend Default shall continue, any vacancy in the office of an
Additional Series C/D Preferred Stock Director may be filled by written consent
of the Additional Series C/D Preferred Stock Directors remaining in office, or
if none remains in office, by a vote of the holders of record of a majority of
the outstanding shares of Series D Preferred Stock and Series C Preferred Stock
so entitled to vote (voting together as a single class). The Additional Series
C/D Preferred Stock Directors shall each be entitled to one vote per director on
any matter.
(c) So long as any shares of Series D Preferred Stock remain outstanding,
the Company will not, without the affirmative vote or consent of the holders of
at least two-thirds of the shares of the Series D Preferred Stock outstanding at
the time, given in person or by proxy, either in writing or at a meeting (voting
together with any other classes of Preferred Stock adversely affected in the
same manner as a single class), amend, alter or repeal the provisions of the
Charter or the Articles Supplementary, whether by merger, consolidation or
otherwise (an "Event"), so as to materially and adversely affect any right,
preference, privilege or voting power of the Series D Preferred Stock or the
holders thereof, including without limitation, the creation of any series of
Preferred Stock ranking senior to the Series D Preferred Stock with respect to
payment of dividends or the distribution of assets upon liquidation, dissolution
or winding up, but not including the creation or issuance of Parity Preferred.
(d) Except as expressly stated in these Articles Supplementary, the Series
D Preferred Stock shall not have any relative, participating, optional or other
special voting rights and powers and the consent of the holders thereof shall
not be required for the taking of any corporate action, including but not
limited to, any merger or consolidation involving the Company or a sale of all
or substantially all of the assets of the Company, irrespective of the effect
that such merger, consolidation or sale may have upon the rights, preferences or
voting power of the holders of the Series D Preferred Stock.
8. Conversion. The holders of Series D Preferred Stock shall have the
following conversion rights with respect to such shares:
8.1 Automatic Conversion. Each share of Series D Preferred Stock (including
all accrued and unpaid dividends thereon) shall automatically be converted into
fully paid and nonassessable shares of Common Stock upon the earlier of (i) the
date the holders of a majority of the shares of Common Stock (giving effect to
the conversion of the Series C Preferred) present and entitled to vote at a duly
convened meeting of the Company's stockholders vote to approve the issuance of
Common Stock pursuant to Section 8 hereof (such date, the "Stockholder Approval
Date") or (ii) the date the New York Stock Exchange waives any requirement for
stockholder approval of the conversion of the Series D Preferred into Common
Stock under its rules and policies.
8.2 Conversion Price. Each share of Series D Preferred Stock will be
converted into such number of shares of Common Stock as is equal to the quotient
obtained by dividing the Original Issue Price for such share by the Conversion
Price (as defined below) in effect at the time of conversion. The Conversion
Price initially shall be equal to $______ per share of Common Stock, subject to
adjustment from time to time as provided herein (the "Conversion Price") from
and after the Issue Date, irrespective of whether the Series D Preferred Stock
is convertible at such time.
8.3 Mechanics of Conversion. Upon the occurrence of an event specified in
Section 8.1 above, the outstanding shares of Series D Preferred Stock shall be
converted automatically without any further action by the holders of such shares
and whether or not the certificates representing such shares are surrendered to
the Company or its transfer agent; provided, however, that the Company shall not
be obligated to issue certificates evidencing the shares of Common Stock
issuable upon such conversation unless the certificates evidencing such shares
of Series D Preferred Stock are either delivered to the Company or its transfer
agent as provided below, or the holder notifies the Company or its transfer
agent that such certificates have been lost, stolen or destroyed and executes an
agreement satisfactory to the Company to indemnify the Company from any loss
incurred by it in connection with such certificates. Promptly following the
conversion of the Series D Preferred Stock, the holders thereof shall surrender
the certificates representing such shares at the office of the Company or any
transfer agent for the Series D Preferred Stock, as applicable. Thereupon, there
shall be issued and delivered to such holder promptly at such office and in its
names as shown on such surrendered certificate or certificates, or such other
name or names as such holder shall notify the Company in writing, a certificate
or certificates for the number of shares of Common Stock into which the shares
of Series D Preferred Stock surrendered were convertible on the date on which
such conversion occurred.
8.4 Adjustment for Stock Splits and Combinations. If the Company at any
time or from time to time after the Issue Date effects a subdivision of the
outstanding Common Stock, the Conversion Price then in effect immediately before
that subdivision shall be proportionately decreased, and conversely, if the
Company at any time or from time to time after the Issue Date combines the
outstanding Common Stock into a smaller number of shares, the Conversion Price
then in effect immediately before the combination shall be proportionately
increased. Any adjustment under this Section 8.4 shall become effective at the
close of business on the date such subdivision or combination becomes effective.
8.5 Adjustment for Certain Dividends and Distributions. If the Company at
any time or from time to time after the Issue Date makes, or fixes a record date
for the determination of holders of Common Stock entitled to receive, a dividend
or other distribution payable in additional Common Stock, then and in each such
event the Conversion Price then in effect shall be decreased as of the time of
such issuance or, in the event such record date is fixed, as of the close of
business on such record date, by multiplying the Conversion Price then in effect
by a fraction (1) the numerator of which is the total number of shares of Common
Stock issued and outstanding immediately prior to the time of such issuance or
the close of business on such record date, and (2) the denominator of which
shall be the total number of shares of Common Stock issued and outstanding
immediately prior to the time of such issuance or the close of business on such
record date plus the number of shares of Common Stock issuable in payment of
such dividend or distribution; provided, however, that if such record date is
fixed and such dividend is not fully paid or if such distribution is not fully
made on the date fixed therefor, the Conversion Price shall be recomputed
accordingly as of the close of business on such record date and thereafter the
Conversion Price shall be adjusted pursuant to this Section 8.5 as of the time
of actual payment of such dividends or distributions.
8.6 Adjustments for Other Dividends and Distributions. In the event the
Company at any time or from time to time after the Issue Date makes, or fixes a
record date for the determination of holders of Common Stock entitled to
receive, a dividend or other distribution payable in securities of the Company
other than Common Stock or other assets or property of the Company (other than
ordinary cash dividends and any special dividends necessary to preserve the
Company's qualification as a REIT), then and in each such event provision shall
be made so that the holders of Series D Preferred Stock shall receive upon
conversion thereof, in addition to the number of shares of Common Stock
receivable thereupon, the amount of securities of the Company or other assets or
property of the Company which they would have received had their Series D
Preferred Stock been converted into Common Stock on the date of such event and
had they thereafter, during the period from the date of such event to and
including the conversion date, retained such securities or other assets or
property of the Company receivable by them as aforesaid during such period,
subject to all other adjustments called for during such period under this
Section 8 with respect to the rights of the holders of the Series D Preferred
Stock.
8.7 Adjustment for Reclassification, Exchange and Substitution. In the
event that at any time or from time to time after the Issue Date, the Common
Stock or other securities as provided herein issuable upon the conversion of the
Series D Preferred Stock are changed into the same or a different number of
shares of any class or classes of stock, whether by recapitalization,
reclassification or otherwise (other than a subdivision or combination of shares
or stock dividend or a reorganization, merger, consolidation or sale of assets,
provided for elsewhere in this Section 8), then and in any such event each
holder of Series D Preferred Stock shall have the right thereafter to convert
such Series D Preferred Stock into the kind and amount of stock and other
securities and property receivable upon such recapitalization, reclassification
or other change, by holders of Common Stock or other securities as provided
herein into which such shares of Series D Preferred Stock could have been
converted immediately prior to such recapitalization, reclassification or
change, all subject to further adjustment as provided herein.
8.8 Reorganizations, Mergers, Consolidations or Transfers of Assets. If at
any time or from time to time after the Issue Date there is a capital
reorganization of the Common Stock or other securities issuable upon conversion
of Series D Preferred Stock as provided herein (other than a recapitalization,
subdivision, combination, reclassification or exchange of shares provided for
elsewhere in this Section 8) or a merger or consolidation or statutory binding
share exchange of the Company with or into another Person, or the transfer of
all or substantially all of the Company's properties and assets to any other
Person and such capital reorganization, merger, consolidation or transfer does
not constitute a Change in Control, then, as a part of such capital
reorganization, merger, consolidation, exchange or transfer, provision shall be
made so that the holders of Series D Preferred Stock shall thereafter be
entitled to receive upon conversion of Series D Preferred Stock the number of
shares of stock or other securities, cash or property to which a holder of the
number of shares of Common Stock or other securities deliverable upon conversion
of the Series D Preferred Stock would have been entitled on such capital
reorganization, merger, consolidation, exchange or transfer. In any such case,
appropriate adjustment shall be made in the application of the provisions of
this Section 8 with respect to the rights of the holders of the Series D
Preferred Stock after the capital reorganization, merger, consolidation,
exchange or transfer to the end that the provisions of this Section 8 (including
adjustment of the Conversion Price then in effect and the number of shares
receivable upon conversion of the Series D Preferred Stock) shall be applicable
after that event and be as nearly equivalent as may be practicable.
8.9 Sale of Shares Below Fair Market Value. (a) If at any time or from time
to time after the Issue Date, the Company issues or sells, or is deemed by the
express provisions of this Section 8.9 to have issued or sold, Additional Common
Stock (as defined below), other than as a dividend or other distribution on any
class of stock as provided in Section 8.5 above and other than upon a
subdivision or combination of Common Stock as provided in Section 8.4 above, for
an Effective Price (as defined below) less than the Fair Market Value, then and
in each such case the then existing Conversion Price shall be reduced, as of the
opening of business on the date of such issue or sale, to a price determined by
multiplying that Conversion Price by a fraction (i) the numerator of which shall
be equal to the sum of (A) the number of shares of Common Stock issued and
outstanding at the close of business on the Business Day immediately preceding
the date of such issue or sale, (B) the number of shares of Common Stock which
the aggregate consideration received (or by the express provisions hereof is
deemed to have been received) by the Company for the total number of shares of
Additional Common Stock so issued or sold would purchase at such Fair Market
Value, (C) the number of shares of Common Stock into which all outstanding
Series C Preferred Stock and Series D Preferred Stock would be convertible at
the close of business on the Business Day immediately preceding the date of such
issuance or sale (whether or not the Series D Preferred Stock is then
convertible), and (D) the number of shares of Common Stock underlying all
Convertible Securities (as defined below) at the close of business on the
Business Day immediately preceding the date of such issuance or sale, and (ii)
the denominator of which shall be equal to the sum of (A) the number of shares
of Common Stock issued and outstanding at the close of business on the date of
such issuance or sale after giving effect to such issuance or sale of Additional
Common Stock, (B) the number of shares of Common Stock into which all
outstanding Series C Preferred Stock and Series D Preferred Stock would be
convertible at the close of business on the Business Day immediately preceding
the date of such issuance or sale (whether or not the Series D Preferred Stock
is then convertible), and (C) the number of shares of Common Stock underlying
all Convertible Securities at the close of business on the Business Day
immediately preceding the date of such issuance or sale.
(b) For the purpose of making any adjustment required under this Section
8.9, the consideration for any issuance or sale of securities shall be deemed to
be (A) to the extent it consists of cash, equal to the gross amount paid in such
issuance or sale, (B) to the extent it consists of property other than cash,
equal to the Fair Market Value of that property, and (C) if Additional Common
Stock, Convertible Securities (as defined below) or rights or options to
purchase either Additional Common Stock or Convertible Securities are issued or
sold together with other stock, securities or assets of the Company for a
consideration which covers both, that portion of the consideration so received
that is determined in good faith by the Board to be allocable to such Additional
Common Stock, Convertible Securities or rights or options.
(c) For the purpose of the adjustment required under this Section 8.9, if
the Company issues or sells any rights or options for the purchase of, or stock
or other securities convertible into or exchangeable or exercisable for,
Additional Common Stock (such convertible or exchangeable or exercisable stock
or securities being hereinafter referred to as "Convertible Securities") and if
the Effective Price of such Additional Common Stock is less than the Fair Market
Value, then in each case the Company shall be deemed to have (i) issued at the
time of the issuance of such rights or options or Convertible Securities the
number of shares of Additional Common Stock issuable upon exercise, conversion
or exchange thereof irrespective of whether the holders thereof have the fully
vested legal right to exercise, convert or exchange the Convertible Securities
for Additional Common Stock and (ii) received as consideration for the issuance
of such Additional Common Stock an amount equal to the total amount of the
consideration, if any, received by the Company for the issuance of such rights
or options or Convertible Securities, plus, in the case of such rights or
options, the consideration, if any, payable to the Company upon the exercise of
such rights or options, plus, in the case of Convertible Securities, the
consideration, if any, payable to the Company (other than by cancellation of
liabilities or obligations evidenced by such Convertible Securities) upon the
exercise, conversion or exchange thereof. No further adjustment of the
Conversion Price, as adjusted upon the issuance of such rights, options or
Convertible Securities, shall be made as a result of the actual issuance of
Additional Common Stock on the exercise of any such rights or options or the
conversion or exchange of any such Convertible Securities. If any such rights or
options or the conversion or exchange privilege represented by any such
Convertible Securities shall expire without having been exercised, the
Conversion Price as adjusted upon the issuance of such rights, options or
Convertible Securities shall be readjusted to the Conversion Price which would
have been in effect had an adjustment been made on the basis that the only
shares of Additional Common Stock so issued were the shares of Additional Common
Stock, if any, actually issued or sold on the exercise of such rights or options
or rights of conversion or exchange of such Convertible Securities, and such
shares of Additional Common Stock, if any, were issued or sold for the
consideration actually received by the Company upon such exercise, plus the
consideration, if any, actually received by the Company for the granting of the
rights or options whether or not exercised, plus the consideration received for
issuing or selling the Convertible Securities actually converted or exchanged,
plus the consideration, if any, actually received by the Company (other than by
cancellation of liabilities or obligations evidenced by such Convertible
Securities) on the conversion or exchange of such Convertible Securities.
(d) "Additional Common Stock" shall mean all Common Stock issued or
issuable by the Company after the Issue Date, whether or not subsequently
reacquired or retired by the Company, other than (i) Common Stock issued or
issuable upon conversion of, or as a dividend on, any Series C Preferred Stock
or Series D Preferred Stock, (ii) Common Stock issued or issuable pursuant to
any employee benefit plan or similar plan or arrangement intended to provide
compensation and other benefits to officers, directors, employees and
consultants of the Company provided that such plans and any grants or awards
thereunder have been approved by the Board or a committee thereof, (iii)
securities issued by the Company in payment of a purchase price to the seller or
any Person who beneficially owns equity securities of such seller for any
acquisition of assets or a business, which acquisition is approved by the Board,
or (iv) Common Stock issued or issuable pursuant to the Rights Offering, the
Investment Agreement or upon issuance or conversion of the Series D Preferred
Stock. The "Effective Price" of Additional Common Stock shall mean the quotient
determined by dividing the total number of shares of Additional Common Stock
issued or sold, or deemed to have been issued or sold by the Company, by the
aggregate consideration received, or deemed to have been received, by the
Company for such Additional Common Stock. The share numbers in this Section
8.9(d) shall be appropriately adjusted for any stock dividends, combinations,
splits, reverse splits, recapitalizations and similar events affecting the
securities of the Company.
8.10 Certificate of Adjustment. In each case of an adjustment or
readjustment of the Conversion Price or the number of shares of Common Stock or
other securities issuable upon conversion of the Series D Preferred Stock, the
Company, at its expense, shall cause the Chief Financial Officer of the Company
to compute such adjustment or readjustment in accordance with the provisions
hereof and prepare a certificate showing such adjustment or readjustment, and
shall mail such certificate, by first class mail, postage prepaid, to each
registered holder of the Series D Preferred Stock at the holder's address as
shown in the Company's books. The certificate shall set forth such adjustment or
readjustment, showing in detail the facts upon which such adjustment or
readjustment is based, including a statement of (1) the consideration received
or deemed to be received by the Company for any Additional Common Stock issued
or sold or deemed to have been issued or sold, (2) the Conversion Price in
effect immediately prior to the occurrence of the event giving rise to such
adjustment, (3) the number of shares of Additional Common Stock, and (4) the
type and amount, if any, of other property which at the time would be received
upon conversion of the Series D Preferred Stock.
8.11 Notices of Record Date. In the event of (i) any taking by the Company
of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend or
other distribution or (ii) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company, any
merger or consolidation of the Company with or into any other entity, or any
transfer of all or substantially all of the assets of the Company to any other
person or any voluntary or involuntary dissolution, liquidation or winding up of
the Company, the Company shall mail to each holder of Series D Preferred Stock
at least ten days prior to the record date specified therein, a notice
specifying (1) the date on which any such record is to be taken for the purpose
of such dividend or distribution and a description of such dividend or
distribution, (2) the date on which any such reorganization, reclassification,
transfer, consolidation, merger, dissolution, liquidation or winding up is
expected to become effective, and (3) the date, if any, that is to be fixed, as
to when the holders of record of Common Stock (or other securities) shall be
entitled to exchange their Common Stock (or other securities) for securities or
other property deliverable upon such reorganization, reclassification, transfer,
consolidation, merger, dissolution, liquidation or winding up.
8.12 Fractional Shares. No fractional shares of Common Stock shall be
issued upon conversion of Series D Preferred Stock. In lieu of any fractional
share to which the holder would otherwise be entitled (calculated based on the
aggregate number of shares of Common Stock to which such holder is entitled upon
such conversion), the Company shall pay cash equal to the product of such
fraction multiplied by the Fair Market Value of one share of Common Stock on the
date of conversion.
8.13 Reservation of Stock Issuable Upon Conversion. The Company shall at
all times reserve and keep available out of its authorized but unissued Common
Stock, solely for the purpose of effecting the conversion of the Series D
Preferred Stock, such number of shares of its Common Stock and other securities,
if any, issuable upon conversion thereof as expressly provided in Section 8 as
shall from time to time be sufficient to effect the conversion of all
outstanding Series D Preferred Stock.
8.14 Notices. Any notice required or permitted by this Section 8 to be
given to a holder of Series D Preferred Stock or to the Company shall be in
writing and be deemed given upon the earlier of actual receipt or five days
after the same has been deposited in the United States mail, by certified or
registered mail, return receipt requested, postage prepaid, and addressed (i) to
each holder of record at the address of such holder appearing on the books of
the Company, or (ii) to the Company at its registered office, or (iii) to the
Company or any holder, at any other address specified in a written notice given
to the other for the giving of notice.
8.15 Payment of Taxes. The Company will pay all taxes (other than taxes
based upon income) and other governmental charges that may be imposed with
respect to the issue and delivery of Common Stock upon conversion of Series D
Preferred Stock, including without limitation any tax or other charge imposed in
connection with the issue and delivery of Common Stock or other securities, if
any, issuable upon conversion thereof as expressly provided in Section 8 in a
name other than that in which the Series D Preferred Stock so converted were
registered.
8.16 Cancellation of Shares. Any shares of Series D Preferred Stock which
are converted in accordance with Section 8 or which are redeemed, repurchased or
otherwise acquired by the Company, shall be canceled and added to the authorized
but undesignated Preferred Stock of the Company but shall not be reissued as
Series D Preferred Stock.
9. Restrictions on Ownership and Transfer. Once there is a completed public
offering of the Series D Preferred Stock, if the Board shall, at any time and in
good faith, be of the opinion that actual or constructive ownership of at least
9.9% or more of the value of the outstanding capital stock of the Company has or
may become concentrated in the hands of one owner (other than Explorer Holdings,
L.P. and its direct and indirect equity owners), the Board shall have the power
(i) by means deemed equitable by the Board, and pursuant to written notice, to
call for the purchase from any shareholder of the corporation a number of shares
of Series D Preferred Stock sufficient, in the opinion of the Board, to maintain
or bring the direct or indirect ownership of such beneficial owner to no more
than 9.9% of the value of the outstanding capital stock of the corporation, and
(ii) to refuse to transfer or issue shares of Series D Preferred Stock to any
person whose acquisition of such Series D Preferred Stock would, in the opinion
of the Board, result in the direct or indirect ownership by that person of more
than 9.9% of the value of the outstanding capital stock of the Company. The
purchase price for any shares of Series D Preferred Stock shall be equal to the
fair market value of the shares reflected in the closing sales price for the
shares, if then listed on a national securities exchange, or if the shares are
not then listed on a national securities exchange, the purchase price shall be
equal to the Liquidation Preference of such shares of Series D Preferred Stock.
Payment of the purchase price shall be made within thirty days following the
date set forth in the notice of call for purchase, and shall be made in such
manner as may be determined by the Board. From and after the date fixed for
purchase by the Board, as set forth in the notice, the holder of any shares so
called for purchase shall cease to be entitled to distributions and other
benefits with respect to such shares, excepting only the right to payment of the
purchase price fixed as aforesaid. Any transfer of Series D Preferred Stock that
would create an actual or constructive owner of more than 9.9% of the value of
the outstanding shares of capital stock of this Company shall be deemed void ab
initio and the intended transferee shall be deemed never to have had an interest
therein. If the foregoing provision is determined to be void or invalid by
virtue of any legal decision, statute, rule or regulation, then the transferee
of such Series D Preferred Stock shall be deemed, at the option of the Company,
to have acted as agent on behalf of the Company in acquiring such shares and to
hold such shares on behalf of the Company.
Notwithstanding anything herein to the contrary, nothing herein shall authorize
the Company or its transfer agent to refuse to transfer any shares of Series D
Preferred Stock, passing either by voluntary transfer, by operation of law, or
under the last will and testament of any shareholder, if such transfer would
not, in the written opinion of counsel to the transferor reasonably acceptable
to the Company, disqualify the Company as a Real Estate Investment Trust under
the Code. Nothing herein contained shall limit the ability of the Company to
impose or to seek judicial or other imposition of additional restrictions if
deemed necessary or advisable to preserve the Company's tax status as a
qualified Real Estate Investment Trust.
10. Certain Defined Terms. In addition to the terms defined elsewhere in
these Articles Supplementary or the Charter, the following terms will have the
following meanings when used herein with initial capital letters:
(a) "Business Day" means any day (other than a day which is a Saturday,
Sunday or legal holiday in New York City, or any day on which banks in New York
City are authorized by law to close).
(b) "Change in Control" means the occurrence of any of the following in one
or a series of related transactions: (A) any consolidation, merger,
reorganization, share exchange or other form of business combination transaction
involving the Company in which the holders of the Company's Voting Stock
immediately before such transaction do not, immediately after such transaction,
retain Voting Stock representing a majority of the voting power of the acquiring
entity, the Company or the entity surviving such transaction or (B) the sale,
transfer or assignment of Voting Stock of the Company representing a majority of
the voting power of the Company to an acquiring Person; provided, however, that
any transaction described in clause (A) or (B) in which Voting Stock of the
Company or the acquiring or surviving entity in such transaction representing a
majority of the voting power of such Person is acquired by or from Explorer
Holdings, L.P., its partners and/or their respective Affiliates in one
transaction or a series of related transactions shall not be deemed a Change in
Control.
(c) "Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
(d) "Fair Market Value" of any security or other asset means:
(i) In the case of any security:
(A) if the security is traded on a securities exchange, the
weighted average trading volume of the per share closing prices of the
security on such exchange over the five trading day period ending
three trading days prior to the date on which such value is measured;
(B) if the security is traded over-the-counter, the weighted
average trading volume of the per share closing bid prices of the
security over the five trading day period ending three trading days
prior to the date on which such value is measured; or
(C) if there is no public market for such security that meets the
criteria set forth in (A) or (B) above, the Fair Market Value shall be
the per share fair market value of such security as of the date on
which such value is measured, as determined in good faith by the
Board.
(ii) In the case of assets other than securities, the Fair Market
Value shall be the fair market value of such assets, as determined in
good faith by the Board.
(e) "Liquidation Preference" measured per share of Series D Preferred Stock
as of any date in question (the "Relevant Date"), means an amount equal to the
Original Issue Price of such share, plus an amount equal to any accrued and
unpaid dividends at the rate set forth in Section 4 hereof, if any, for such
share of Series D Preferred Stock. In connection with the determination of the
Liquidation Preference of a share of Series D Preferred Stock upon liquidation,
dissolution or winding up of the Company, the Relevant Date shall be the date of
distribution of amounts payable to stockholders in connection with any such
liquidation, dissolution or winding up.
(f) "Original Issue Price" means $___ per share of Series D Preferred
Stock, subject to appropriate adjustment to reflect any stock dividends,
combinations, splits, reverse splits, recapitalizations or similar events
affecting the Series D Preferred Stock after the Issue Date.
(g) "Person" means any individual, firm, corporation, partnership, limited
liability company, or group (within the meaning of Section 13(d)(3) of the
Exchange Act).
(h) "Rights Offering" means the offering of shares of common stock by the
Company pursuant to Section 4.7 of the Investment Agreement, dated as of October
29, 2001, relating to the Series D Preferred Stock (the "Investment Agreement").
(i) "Voting Stock" means, with respect to any Person, the shares of any
class or kind ordinarily having the power to vote for the election of directors
or other members of the governing body of such Person, and for purposes hereof,
the Series D Preferred Stock whether or not then convertible. For avoidance of
doubt, Common Stock and Series C Preferred Stock both constitute Voting Stock of
the Company; provided, however, that no class of Preferred Stock shall be deemed
to be Voting Stock by virtue of the rights of such holder upon any Preferred
Dividend Default.
11. Amendment; Waiver. Except as expressly prohibited by law, these
Articles Supplementary may be amended and any provision herein may be waived
with the approval of the holders of a majority of the Series D Preferred Stock
and a majority of the members of the Board who are not Affiliates of any holder
of Series D Preferred Stock. Any amendment or waiver so effected shall be
binding upon each holder of Series D Preferred Stock.
THIRD: The classification of authorized but unissued shares as set forth in
these Articles Supplementary does not increase the authorized capital of the
Company or the aggregate par value thereof.
FOURTH: These Articles Supplementary have been approved by the Board in the
manner and by the vote required by law.
FIFTH: The undersigned Vice President of the Company acknowledges these
Articles Supplementary to be the corporate act of the Company and, as to all
matters or facts required to be verified under oath, the undersigned Vice
President of the Company acknowledges that to the best of his or her knowledge,
information and belief, these matters and facts are true in all material
respects and that this statement is made under the penalties for perjury.
IN WITNESS WHEREOF, the Company has caused these Articles Supplementary to
be executed under seal in its name and on its behalf by its Vice President and
attested to by its Secretary on this ___ day of ________, 2001.
ATTEST OMEGA HEALTHCARE INVESTORS, INC.
By:_________________________ By:________________________
Secretary Vice President
Appendix C
[Shattuck Hammond Partners LLC Letterhead]
October 29, 2001
The Committee of Independent Directors and
The Board of Directors
Omega Healthcare Investors, Inc.
900 Victors Way
Ann Arbor, MI 48108
Members of the Committee of Independent Directors and the Board of Directors:
We understand that Omega Healthcare Investors, Inc. ("OHI") has entered into an
Investment Agreement (including the exhibits attached thereto), dated as of
October 29, 2001 (the "Investment Agreement"), with Explorer Holdings, L.P.
("Explorer"). Explorer currently owns, and its only investment in OHI is,
1,048,420 shares of OHI's Series C Preferred Stock, constituting all the shares
of that class presently outstanding (the "Preferred C") and representing
approximately 45.5% of OHI's common stock on an as converted basis. Pursuant to
the Investment Agreement as described in more detail below, among other things,
Explorer will commit to invest, subject to certain conditions being satisfied or
waived, up to $50.0 million (the "Capital Infusion Amount") in payment for OHI
common stock or a newly created security, Series D Preferred stock of OHI
("Preferred D") (the "Explorer Investment"). The actual amount of the Explorer
Investment will be equal to the difference between the Capital Infusion Amount
and the gross proceeds received by OHI through a Rights Offering (the "Rights
Offering") to OHI common stockholders other than Explorer (the "Unsubscribed
Purchase Amount"). If all rights offered in the Rights Offering were exercised,
we understand that the proportional ownership of OHI by stockholders other than
Explorer and by Explorer on an as converted basis would, upon Explorer's payment
of the Unsubscribed Purchase Amount and the issuance to it of shares of OHI
common stock, remain approximately the same as such ownership on the date of
this letter.
We understand that the price per common OHI share in the Rights Offering and the
price per common OHI share or the conversion price of the Preferred D to be paid
by Explorer will be the same; i.e., $2.92 per share as determined in accordance
with the provisions of the Investment Agreement. Explorer's commitment to fund
the Unsubscribed Purchase Amount is irrespective of the actual price per OHI
common share at the time of the expiration of the Rights Offering.
This opinion to the Committee of Independent Directors and the Board of
Directors of OHI addresses the fairness, from a financial point of view, to OHI
of the financial terms of the Investment Agreement taken as a whole (the
"Financial Terms of the Investment Agreement").
We further understand that the Investment Agreement, among other things,
includes the following Financial Terms which are more fully set forth in the
Investment Agreement:
o Distribution of Rights: OHI will undertake a Rights Offering whereby each
OHI common stockholder other than Explorer will receive a dividend of one
right ("Right") for every 2.15 shares of OHI common stock owned by such
stockholder on the record date. An OHI stockholder who exercises all of the
Rights issued to him or her will maintain their proportional interest in
OHI common stock on an as converted basis. Each Right will entitle the
holder to purchase one share of OHI common stock at the Exercise Price as
described below;
o Explorer Investment: Explorer will not receive any Rights pursuant to the
Rights Offering. Explorer commits within ten days after the expiration date
of the Rights Offering to purchase either OHI common stock or Preferred D
shares for an aggregate amount equal to the Unsubscribed Purchase Amount.
In this regard, if the issuance of OHI common stock has not been approved
by OHI's stockholders at the time of the Explorer Investment, the Explorer
Investment will be in the form of Preferred D shares which will be
substantially the same as the Preferred C and which will be automatically
converted into OHI common stock upon the earlier of receipt of stockholder
approval for the issuance of OHI common stock to Explorer and the date the
New York Stock Exchange waives any requirement under its rules and policies
for stockholder approval of the conversion of the Preferred D into OHI
common stock. We understand that Explorer has agreed to vote its Preferred
C shares in favor of stockholder approval;
o Over-Subscription Right: There will be no over-subscription right for
unexercised Rights;
o Transferability and Trading of Rights: The Rights will not be transferable
or assignable and will not trade as a separate security;
o Exercise Price: The exercise price of each Right (the "Exercise Price") is
$2.92 determined in accordance with the terms of the Investment Agreement;
o Closing Condition: The closing of the Rights Offering and the Explorer
Investment will be conditioned upon Fleet Bank, NA ("Fleet") and The
Provident Bank: (i) amending their loan agreements with OHI in a manner and
on terms and conditions satisfactory to each of OHI and Explorer in their
respective sole discretion; (ii) waiving any then existing defaults as well
as the right to assert a default based on OHI's current non-compliance with
certain covenants; and (iii) with respect to Fleet, extending the current
maturity date of its loan by no less than 12 months;
o Termination: OHI will have the right to amend the terms of or terminate the
Rights Offering at any time prior to the expiration of the subscription
period in the Rights Offering;
o Control of OHI: In the event that upon consummation of the Rights Offering
and the transactions contemplated by the Investment Agreement, Explorer
holds more than 50% of the voting securities of OHI, Explorer will have
voting control of OHI, the unrestricted right to vote the OHI voting
securities which it holds and the power to designate a majority of the
Directors of OHI subject to the following restrictions imposed by the
Investment Agreement and any other limitation or restriction imposed by
law: (i) a limitation on the number of Directors of OHI which Explorer can
designate; (ii) so long as Explorer holds at least 15% of the voting
securities of OHI, a commitment by Explorer to vote in favor of the
election of three directors who are "independent" under the rules of the
New York Stock Exchange and otherwise unaffiliated with Explorer and, upon
the increase in the number of directors to ten, one additional person who
is unaffiliated with Explorer; and (iii) except in a transaction approved
by a committee of the Board of OHI comprised entirely of independent
directors and under certain limited circumstances, a prohibition against
Explorer's acquiring beneficial ownership of more than 80% of the voting
securities of OHI then issued and outstanding; and
o Transferability of Voting Securities Owned by Explorer: Transfers by
Explorer of its voting securities that cause the transferee's beneficial
ownership to exceed 9.9% of OHI's total voting securities are subject to
the transferee agreeing to be bound by certain provisions of the Amended
and Restated Stockholders Agreement to be executed in connection with the
closing of the Rights Offering (the "Amended and Restated Stockholders
Agreement").
For the purposes of this opinion, we have:
(i) Reviewed the Investment Agreement (including the exhibits attached
thereto) between OHI and Explorer, dated as of October 29, 2001;
(ii) Reviewed the Investment Agreement between OHI and Explorer, dated as
of May 11, 2000 and the First Amendment thereto, dated June 2, 2000;
(iii)Reviewed the Stockholders Agreement between OHI and Explorer, dated
July 14, 2000, which will be superceded by the Amended and Restated
Stockholders Agreement;
(iv) Reviewed the following documents filed by OHI with the Securities and
Exchange Commission: Form 10-K for OHI for the year ended December 31,
2000; Forms 10-Q for the quarters ended March 31, and June 30, 2001;
2000 Annual Report; and Proxy Statement for the Annual Meeting of
Stockholders, dated as of April 18, 2001;
(v) Reviewed various reports and analyses prepared by OHI management;
(vi) Discussed the business, operations, projections, capital structure and
prospects of OHI with OHI's management;
(vii)Reviewed financial projections and other financial information
prepared by OHI management for the years ending December 31, 2001 and
2002;
(viii) Reviewed Explorer's pro forma ownership of OHI under various
assumptions related to the Rights Offering. With regard to this
review, we noted that Explorer's current ownership in OHI common stock
on an as converted basis is approximately 45.5% and based on various
assumptions concerning the number of shares of OHI common stock which
are purchased in the Rights Offering, Explorer's ownership of OHI's
voting securities on as converted basis could exceed 50%;
(ix) Discussed with management of OHI (a) OHI's efforts to negotiate with
its banks; (b) the financial implications for OHI if agreement for
covenant waivers and a term extension were not reached with OHI's
banks; (c) the importance to OHI of securing an equity or junior
capital investment in order to potentially obtain such waivers and
extensions; and (d) OHI's efforts to access alternative sources of
capital including the timing and risk of closing associated with such
alternative investments;
(x) Discussed with a principal of Explorer, among other things Explorer's:
(a) timing of the Explorer Investment; (b) additional due diligence
requirements; (c) definitive agreement requirements; and (d) ability
to make the investment contemplated in the Investment Agreement
without any additional approvals by Explorer's partners;
(xi) Reviewed publicly available financial and stock market data with
respect to publicly-traded companies in lines of business we believe
to be generally comparable to those of OHI;
(xii)Reviewed over a five year, twelve month and three month period ending
October 26, 2001 the trading price history of OHI's common stock;
(xiii) Reviewed over the twelve month and three month period ending October
26, 2001 the trading price history of OHI's Series A Preferred Stock
and Series B Preferred Stock;
(xiv)Reviewed the price and yield to maturity of OHI's senior unsecured
debt;
(xv) Reviewed the trading performance and other data of selected
publicly-traded companies which have undertaken a rights offering
since January 1, 2001;
(xvi)Reviewed the draft dated October 25, 2001 of OHI's Registration
Statement on Form S-1; and (xvii) Conducted such other studies,
analyses, investigations and inquiries, and considered such other
information, as we deemed relevant.
In rendering our opinion, we have assumed and relied upon the accuracy and
completeness of all documents and other information supplied or otherwise made
available to us by OHI or obtained by us from other sources, and we have relied
upon the assurances of the management of OHI that they are unaware of any
information or facts that would make the information provided to us incomplete
or misleading. We have further assumed that the Investment Agreement, including
but not limited to the Rights Offering, will not be amended after the date
hereof. While we have discussed the information provided to us with management
of OHI, we have not independently verified such information, undertaken an
independent appraisal of the assets or liabilities (contingent or otherwise) of
OHI or been furnished with any such appraisals of OHI. With respect to financial
forecasts furnished to us by OHI, we have been advised by the management of OHI,
and we have assumed, that they have been reasonably prepared and reflect
management's best currently available estimates and judgment as to the expected
future financial performance of such entities. The terms of our engagement did
not include soliciting interest in an investment transaction from investors, and
we have made no such solicitation.
Our opinion is necessarily based upon market, economic and other conditions that
exist and can be evaluated as of the date of this letter, and on information
available to us as of the date hereof. We disclaim any undertaking or obligation
to advise any person of any change in any fact or matter affecting the opinion
expressed herein that may come or be brought to our attention after the date
hereof.
As part of its investment banking business, Shattuck Hammond Partners LLC is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, secondary
distributions of securities, private placements and other purposes. We have
acted as financial advisor to the Committee of Independent Directors in
connection with a review of other financing alternatives that might be available
to OHI and a review of any proposals related to Explorer and will receive from
OHI a fee for such services and an additional fee upon the delivery of this
opinion.
The opinion expressed herein does not constitute a recommendation as to any
action the Committee of Independent Directors, the Board of Directors or any
stockholder of OHI should take in connection with the Investment Agreement. This
opinion addresses only the fairness, from a financial point of view, of the
Financial Terms of the Investment Agreement taken as a whole. Further, we
express no opinion herein as to the structure, terms (other than the Financial
Terms) or effect of any other aspect of the investment by Explorer or the Rights
Offering, including, without limitation, the tax consequences thereof or the
corporate governance changes occurring in connection therewith except to the
extent that such changes constitute Financial Terms of the Investment Agreement.
Based upon and subject to the foregoing, it is our opinion, as investment
bankers, that, as of the date hereof, the Financial Terms of the Investment
Agreement taken as a whole are fair to OHI from a financial point of view.
Very truly yours,
/s/ Shattuck Hammond Partners LLC
Shattuck Hammond Partners LLC
NOTE: DOUBLE UNDERLINED TEXT DENOTES ADDITION OF TEXT.
TEXT IN BRACKETS [ ] DENOTES DELETION OF TEXT.
Appendix D
OMEGA HEALTHCARE INVESTORS, INC.
AMENDED AND RESTATED ARTICLES SUPPLEMENTARY
====================
FOR SERIES C CONVERTIBLE PREFERRED STOCK
OMEGA HEALTHCARE INVESTORS, INC., a Maryland corporation (the "Company"),
hereby certifies to the State Department of Assessments and Taxation of Maryland
that:
FIRST: Pursuant to authority contained in the charter of the Company (the
"Charter"), 2,000,000 shares of authorized but unissued shares of the Company's
Preferred Stock have been duly classified by the Board of Directors of the
Company (the "Board") as authorized but unissued shares of the Company's Series
C Preferred Stock.
SECOND: A description of the Series C Preferred Stock is as follows:
1. Designation and Number. A series of Preferred Stock, designated the
"Series C Convertible Preferred Stock" (the "Series C Preferred Stock"), is
hereby established. The number of shares of the Series C Preferred Stock shall
be 2,000,000, subject to increase pursuant to Section 4(b) prior to payment by
the Company of any dividend in shares of Series C Preferred Stock in accordance
with Section 4.
2. Maturity. The Series C Preferred Stock has no stated maturity.
3. Rank. The Series C Preferred Stock will, with respect to dividend rights
and rights upon liquidation, dissolution or winding up of the Company, rank (i)
senior to all classes or series of Common Stock of the Company, and to all
equity securities ranking junior to the Series C Preferred Stock with respect to
dividend rights or rights upon liquidation, dissolution or winding up of the
Company, (ii) on a parity with the Series A Preferred Stock, Series B Preferred
Stock, Series D Preferred Stock and all other equity securities issued by the
========================
Company the terms of which specifically provide that such equity securities rank
on a parity with the Series C Preferred Stock with respect to dividend rights or
rights upon liquidation, dissolution or winding up of the Company (the "Parity
============
Preferred"), and (iii) junior to all existing and future indebtedness of the
===========
Company. The term "equity securities" does not include convertible debt
securities, which will rank senior to the Series C Preferred Stock prior to
conversion of such debt securities.
=======================
4. Dividends. (a) Except as set forth in Section 4(b), holders of shares of
the Series C Preferred Stock are entitled to receive, out of funds legally
available for the payment of dividends, preferential cumulative dividends at the
greater of (i) 10% per annum of the Liquidation Preference per share (equivalent
to a fixed annual amount of $10.00 per share) and (ii) the amount per share
declared or paid or set aside for payment based on the number of shares of
Common Stock into which such shares of Series C Preferred Stock are then
convertible in accordance with Section 8 [(disregarding Section 8.17 for such
purpose)]. Dividends on each share of the Series C Preferred Stock shall be
cumulative commencing from the date of issuance of such share of Series C
Preferred Stock and shall be payable in arrears for each period ended July 31,
October 31, January 31 and April 30 (each a "Dividend Period") on or before the
15th day of August, November, February and May of each year, or, if not a
Business Day, the next succeeding Business Day (each, a "Dividend Payment
Date"). The first dividend will be paid on November 15, 2000, with respect to
the period commencing on the date of first issuance of Series C Preferred Stock
(the "Issue Date") and ending on October 31, 2000. Any dividend payable on
shares of the Series C Preferred Stock for any partial period will be computed
based on the actual number of days elapsed (commencing with and including the
date of issuance of such shares) and on the basis of a 360-day year consisting
of twelve 30-day months. Dividends will be payable to holders of record as they
appear in the stock records of the Company at the close of business on the
applicable record date, which shall be the last day of the preceding calendar
month prior to the applicable Dividend Payment Date or on such other date
designated by the Board that is not more than 30 nor less than 10 days prior to
such Dividend Payment Date (each, a "Dividend Record Date").
(b) For any Dividend Period ending prior to February 1, 2001, dividends
will be payable, at the election of the Board, (i) by the issuance as of the
relevant Dividend Payment Date of additional shares of fully paid, nonassessable
Series C Preferred Stock having an aggregate liquidation preference equal to the
amount of such accrued dividends or (ii) in cash. In the event that dividends
are declared and paid pursuant to clause (i), (A) such dividends will be deemed
paid in full and will not accumulate and (B) prior to paying any such dividends,
the Board will take such action as is necessary to increase the number of
authorized shares of Series C Preferred Stock by the number of shares to be
issued pursuant to this Section 4, including but not limited to the filing of
Articles Supplementary with the State Department of Assessments and Taxation of
Maryland in accordance with Article VII of the Charter. The Company will deliver
certificates representing shares of Series C Preferred Stock issued pursuant to
this Section 4(b) promptly after the relevant Dividend Payment Date. For any
Dividend Period ending after February 1, 2001, dividends will be payable in
cash.
(c) No dividends on shares of Series C Preferred Stock shall be declared by
the Board or paid or set apart for payment by the Company at such time as the
terms and provisions of any agreement of the Company, including any agreement
relating to its indebtedness, prohibits such declaration, payment or setting
apart for payment or provides that such declaration, payment or setting apart
for payment would constitute a breach thereof or a default thereunder, or if
such declaration or payment shall be restricted or prohibited by law.
(d) Notwithstanding the foregoing, dividends on the Series C Preferred
Stock will accrue whether or not the Company has earnings, whether or not there
are funds legally available for the payment of such dividends and whether or not
such dividends are declared. Accrued but unpaid dividends on the Series C
Preferred Stock will not bear interest and holders of the Series C Preferred
Stock will not be entitled to any distributions in excess of full cumulative
distributions described above. Except as set forth in the next sentence, no
dividends will be declared or paid or set apart for payment on any capital stock
of the Company or any other series of Preferred Stock ranking, as to dividends,
on a parity with or junior to the Series C Preferred Stock (other than a
dividend in shares of the Company's Common Stock or in shares of any other class
of stock ranking junior to the Series C Preferred Stock as to dividends and upon
liquidation) for any period unless full cumulative dividends have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof is set apart for such payment on the Series C Preferred Stock
for all past dividend periods and the then current dividend period. When
dividends are not paid in full (or a sum sufficient for such full payment is not
so set apart) upon the Series C Preferred Stock and the shares of any other
series of Preferred Stock ranking on a parity as to dividends with the Series C
Preferred Stock, all dividends declared upon the Series C Preferred Stock and
any other series of Preferred Stock ranking on a parity as to dividends with the
Series C Preferred Stock shall be declared pro rata so that the amount of
dividends declared per share of Series C Preferred Stock and such other series
of Preferred Stock shall in all cases bear to each other the same ratio that
accrued dividends per share on the Series C Preferred Stock and such other
series of Preferred Stock (which shall not include any accrual in respect of
unpaid dividends for prior dividend periods if such Preferred Stock does not
have a cumulative dividend) bear to each other.
(e) Except as provided in the immediately preceding paragraph, unless full
cumulative dividends on the Series C Preferred Stock have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof is set apart for payment for all past dividend periods and the
then current dividend period, no dividends (other than in shares of Common Stock
or other shares of capital stock ranking junior to the Series C Preferred Stock
as to dividends and upon liquidation) shall be declared or paid or set aside for
payment nor shall any other distribution be declared or made upon the Common
Stock, or any other capital stock of the Company ranking junior to or on a
parity with the Series C Preferred Stock as to dividends or upon liquidation,
nor shall any shares of Common Stock, or any other shares of capital stock of
the Company ranking junior to or on a parity with the Series C Preferred Stock
as to dividends or upon liquidation be redeemed, purchased or otherwise acquired
for any consideration (or any moneys be paid to or made available for a sinking
fund for the redemption of any such shares) by the Company (except by conversion
into or exchange for other capital stock of the Company ranking junior to the
Series C Preferred Stock as to dividends and upon liquidation or redemption or
for the purpose of preserving the Company's qualification as a real estate
investment trust under the Internal Revenue Code of 1986, as amended [)](the
====
"Code")). Holders of shares of the Series C Preferred Stock shall not be
========
entitled to any dividend, whether payable in cash, property or stock, in excess
of full cumulative dividends on the Series C Preferred Stock as provided above.
Any dividend payment made on shares of the Series C Preferred Stock shall first
be credited against the earliest accrued but unpaid dividend due with respect to
such shares which remains payable.
5. Liquidation Preference. Upon any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Company, [the holders] each
====
holder of shares of Series C Preferred Stock [are] shall, at the election of
====== ===========================
such holder, be entitled to be paid out of the assets of the Company legally
=================
available for distribution to its shareholders the Liquidation Preference (as
defined in Section 10(e)) before any distribution of assets is made to holders
of Common Stock or any other class or series of capital stock of the Company
that ranks junior to the Series C Preferred Stock as to liquidation rights. The
Company will promptly provide to the holders of Series C Preferred Stock written
notice of any event triggering the right to receive such Liquidation Preference.
After payment of the full amount of the Liquidation Preference, plus any accrued
and unpaid dividends to which they are entitled, the holders of Series C
Preferred Stock will have no right or claim to any of the remaining assets of
the Company. [The consolidation or merger of the Company with or into any other
corporation, trust or entity or of any other corporation with or into the
Company in a manner that constitutes a] A Change in Control (as defined in
=
Section 10(b)), or the sale, lease or conveyance of all or substantially all of
the property [or], business or assets of the Company[,] shall be deemed to
= =========
constitute a liquidation, dissolution or winding up of the Company for purposes
============
of Section 5 of these Articles Supplementary only and shall not be deemed a
================================================================================
liquidation, dissolution or winding up of the Company for any other series of
================================================================================
Preferred Stock unless the terms of such series of Preferred Stock expressly
================================================================================
provide.
=======
In determining whether a distribution (other than upon voluntary or involuntary
liquidation) by dividend, redemption or other acquisition of shares of stock of
the Company or otherwise is permitted under the Maryland General Corporation Law
(the "MGCL"), no effect shall be given to amounts that would be needed if the
Company would be dissolved at the time of the distribution, to satisfy the
preferential rights upon distribution of holders of shares of stock of the
Company whose preferential rights upon distribution are superior to those
receiving the distribution.
6. Redemption. The Series C Preferred Stock is not redeemable [, subject,
however, to the provisions in Section 9 of these Articles Supplementary] without
=======
the consent of the holder of such share of Series C Preferred Stock.
===================================================================
7. Voting Rights. (a) Holders of the Series C Preferred Stock will not have
any voting rights, except as set forth below. [Notwithstanding the provisions of
this Section 7, no holder of Series C Preferred Stock shall be entitled to vote
any shares of Series C Preferred Stock that would result in such holder and any
of its affiliates controlled by it or any group (as such term is used in Section
13(d)(3) of the Exchange Act) of which any of them is a member voting in excess
of 49.9% of the then-outstanding Voting Stock, except in any separate class vote
consisting solely of any one or more classes of Preferred Stock.]
(b) Each holder of shares of Series C Preferred Stock shall be entitled to
notice of any stockholder meeting in accordance with the bylaws of the Company
(the "Bylaws"), shall be entitled to a number of votes equal to the number of
shares of Common Stock into which the shares of Series C Preferred Stock held by
such holder could then be converted pursuant to Section 8[(giving effect to the
limitations on conversion in Section 8.17)], shall have voting rights and powers
equal to the voting rights and powers of the holders of Common Stock, and shall
vote together as a single class with holders of Common Stock, except as
expressly required by law. Fractional votes shall not be permitted, and any
fractional voting rights resulting from the right of any holder of Series C
Preferred Stock to vote on an as converted basis (after aggregating the shares
into which all shares of Series C Preferred Stock held such holder could be
converted) shall be rounded to the nearest whole number (with one-half being
rounded upward). The holders of Series C Preferred Stock shall have no separate
class or series vote on any matter except as expressly required by law or as
otherwise set forth in these Articles Supplementary.
(c) Whenever dividends on any shares of Series C Preferred Stock shall be
in arrears for four or more Dividend Periods (a "Preferred Dividend Default"),
the number of directors then constituting the Board shall be increased [, if
necessary, by such number that would, if such number were added to the number of
directors already designated by the holders of the Series C Preferred Stock
(whether pursuant to the Stockholders Agreement or otherwise), constitute a
majority of the Board] by two (if not already increased by reason of a similar
======
arrearage with respect to [any Parity] the Series D Preferred [(as hereinafter
============
defined))] Stock). The holders of such shares of Series C Preferred Stock
======
[(voting separately as a class with all other series of] and the holders of
===================
Series D Preferred Stock [ranking on a parity with the Series C Preferred Stock
========
as to dividends or upon liquidation, dissolution or winding up ("Parity
Preferred")] upon which like voting rights have been conferred and are
exercisable [)](voting together as a single class) will be entitled [to vote
=====================================
separately as a class, in order] to fill the vacancies thereby created [, for]
by the [election] addition of such [additional] number of directors of the
== ========
Company determined pursuant to the first sentence of this Section 7(c) (the
"Additional Series C/D Preferred Stock Directors") at a special meeting called
==========
by the holders of record of at least 20% of the Series C Preferred Stock or the
holders of record of at least 20% of [any series of Parity Preferred so in
arrears and entitled to vote (unless such request is received less than 90 days
before the date fixed for the next annual or special meeting of the
shareholders) or at the next annual meeting of shareholders, and at each
subsequent annual meeting] the Series D Preferred Stock until all dividends
=============================
accumulated on such shares of Series C Preferred Stock and [Parity] Series D
========
Preferred Stock for the past dividend periods and the dividend for the then
=====
current dividend period shall have been fully paid or declared and a sum
sufficient for the payment thereof set aside. In any vote to elect or remove
additional directors pursuant to this Section 7, each such holder of shares of
====
Series C Preferred Stock [or Parity] and Series D Preferred [so] Stock entitled
============ =====
to vote will be entitled to one vote for each [$1.00 amount of Liquidation
Preference attributable to the aggregate number of such shares] share held by
=====
such holder. In the event the directors of the Company are divided into classes,
each such vacancy shall be apportioned among the classes of directors to prevent
stacking in any one class and to ensure that the number of directors in each of
the classes of directors are as equal as possible. Each Additional Series C/D
==========
Preferred Stock Director, as a qualification for election as such (and
regardless of how elected), shall submit to the Board a duly executed, valid,
binding and enforceable letter of resignation from the Board, to be effective
upon the date upon which all dividends accumulated on such shares of Series C
Preferred Stock and [Parity] Series D Preferred Stock for the past dividend
======== =====
periods and the dividend for the then current dividend period shall have been
fully paid or declared and a sum sufficient for the payment thereof set aside
for payment, whereupon the terms of office of all persons elected as Additional
Series C/D Preferred Stock Directors by the holders of [the] such shares of
========== ==============
Series C Preferred Stock and [any Parity] Series D Preferred Stock shall, upon
======== =====
the effectiveness of their respective letters of resignation, forthwith
terminate, and the number of directors then constituting the Board shall be
reduced accordingly. A quorum for any such meeting shall exist if the holders of
==============
at least a majority of the outstanding shares of Series C Preferred Stock and
[shares of Parity Preferred upon which like voting rights have been conferred
and are exercisable] Series D Preferred Stock so entitled to vote are
===================================================
represented in person or by proxy at such meeting. Such Additional Series C/D
==========
Preferred Stock Directors shall be elected upon the affirmative vote of a
plurality (based on the number of votes entitled to be cast) of the shares of
====================================================
Series C Preferred Stock and [such Parity] Series D Preferred Stock so entitled
======== =================
to vote that are present and voting in person or by proxy at a duly called and
================
held meeting at which a quorum is present. If and when all accumulated dividends
and the dividend for the then current dividend period on [the] such shares of
==============
Series C Preferred Stock and Series D Preferred Stock shall have been paid in
==========================
full or declared and a sum sufficient for the payment thereof in full shall have
been set aside, the holders thereof shall be divested of the foregoing voting
rights(subject to revesting in the event of each and every Preferred Dividend
Default) and[, if and when all accumulated dividends and the dividend for the
then current dividend period on all series of Parity Preferred upon which like
voting rights have been conferred and are exercisable have been paid in full or
declared and a sum sufficient for the payment thereof in full shall have been
set aside,] the term of office of each Additional Series C/D Preferred Stock
==========
Director so elected shall terminate. Any Additional Series C/D Preferred Stock
==========
Director may be removed at any time with or without cause by, and shall not be
removed otherwise than by the vote of, the holders of record of a majority of
the outstanding shares of the Series C Preferred Stock and [Parity Preferred
upon which like voting rights have been conferred and are exercisable] Series D
========
Preferred Stock entitled to vote (voting together as a single class). So long as
================================ ======
a Preferred Dividend Default shall continue, any vacancy in the office of an
Additional Series C/D Preferred Stock Director may be filled by written consent
==========
of the Additional Series C/D Preferred Stock Directors remaining in office, or
==========
if none remains in office, by a vote of the holders of record of a majority of
the outstanding shares of Series C Preferred Stock and [Parity Preferred upon
which like voting rights have been conferred and are exercisable] Series D
========
Preferred Stock so entitled to vote (voting together as a single class). The
==================================== ======
Additional Series C/D Preferred Stock Directors shall each be entitled to one
==========
vote per director on any matter.
(d) Explorer Holdings, L.P. ("Explorer") hereby waives, for the period from
=======================================================================
the date hereof through and including December 31, 2002 (the "Governance Right
================================================================================
Deferral Period"), its rights under Section 7(c) of these Amended and Restated
================================================================================
Articles Supplementary to elect Additional Series C/D Preferred Stock Directors,
================================================================================
provided that the dividends on any shares of Series C Preferred Stock shall not
================================================================================
be in arrears for six or more Dividend Periods during the Governance Right
================================================================================
Deferral Period. For the avoidance of doubt, if (i) at any time during the
================================================================================
Governance Right Deferral Period the holders of any Parity Preferred shall be
================================================================================
entitled to elect Additional Preferred Stock Directors then Explorer shall be
================================================================================
entitled to simultaneously exercise its rights under Section 7(c) of these
================================================================================
Amended and Restated Articles Supplementary and (ii) on or after January 1, 2003
================================================================================
the dividends on any shares of Series C Preferred Stock shall then be in arrears
================================================================================
for four or more Dividend Periods (including any Dividend Periods prior to
================================================================================
January 1, 2003), the holders of the Series C Preferred Stock shall be entitled
================================================================================
to elect Additional Series C/D Preferred Stock Directors in accordance with the
================================================================================
provisions of Section 7(c) of these Amended and Restated Articles Supplementary.
================================================================================
(e) So long as any shares of Series C Preferred Stock remain outstanding,
the Company will not, without the affirmative vote or consent of the holders of
at least two-thirds of the shares of the Series C Preferred Stock outstanding at
the time, given in person or by proxy, either in writing or at a meeting (voting
[separately as a class] together with any other classes of Preferred Stock
adversely affected in the same manner [)] as a single class), amend, alter or
=================
repeal the provisions of the Charter or the Articles Supplementary, whether by
merger, consolidation or otherwise (an "Event"), so as to materially and
adversely affect any right, preference, privilege or voting power of the Series
C Preferred Stock or the holders thereof, including without limitation, the
creation of any series of Preferred Stock ranking senior to the Series C
Preferred Stock with respect to payment of dividends or the distribution of
assets upon liquidation, dissolution or winding up, but not including the
creation or issuance of Parity Preferred.
(f) Except as expressly stated in these Articles Supplementary, the Series
C Preferred Stock shall not have any relative, participating, optional or other
special voting rights and powers and the consent of the holders thereof shall
not be required for the taking of any corporate action, including but not
limited to, any merger or consolidation involving the Company or a sale of all
or substantially all of the assets of the Company, irrespective of the effect
that such merger, consolidation or sale may have upon the rights, preferences or
voting power of the holders of the Series C Preferred Stock.
8. Conversion. The holders of Series C Preferred Stock shall have the
following conversion rights with respect to such shares:
8.1 Optional Conversion. [Subject to the limitations on conversion in
Section 8.17, each] Each share of Series C Preferred Stock (including all
====
accrued and unpaid dividends thereon, to the extent declared) may be converted,
at any time at the option of the holder thereof, into fully paid and
nonassessable shares of Common Stock (and any other securities or property
expressly provided in this Section 8) as set forth in this Section 8.
8.2 Conversion Price.[Subject to the limitations on conversion in Section
8.17, each] Each share of Series C Preferred Stock may be converted into such
====
number of shares of Common Stock as is equal to the quotient obtained by
dividing the Original Issue Price for such share by the Conversion Price (as
defined below) in effect at the time of conversion. The Conversion Price
initially shall be equal to $6.25 per share of Common Stock, subject to
adjustment from time to time as provided herein (the "Conversion Price").
8.3 Mechanics of Conversion. A holder of Series C Preferred Stock who
desires to convert the same into Common Stock shall surrender the certificate or
certificates representing such shares, duly endorsed, at the office of the
Company or at the office of any transfer agent for the Series C Preferred Stock
or Common Stock, and shall give written notice to the Company at such office
that such holder elects to convert the same and shall state therein both the
number of shares of Series C Preferred Stock being converted and the name or
names in which the holder wishes the certificate or certificates for Common
Stock to be issued. The Company shall, as soon as practicable after such
surrender, issue and deliver at such office to such holder a certificate or
certificates representing the number of shares of Common Stock to which such
holder is entitled and a new certificate or certificates representing the number
of shares of Series C Preferred Stock represented by the certificate or
certificates surrendered by the holder minus the number of Series C Preferred
Stock so converted by the holder. Such conversion shall be deemed to have been
made immediately prior to the close of business on the date of such surrender of
the certificate representing the Series C Preferred Stock to be converted, and
the Person entitled to receive the Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder of such Common Stock on
such date. Any Series C Preferred Stock converted into Common Stock shall be
retired and may not be reissued by the Company.
8.4 Adjustment for Stock Splits and Combinations. If the Company at any
time or from time to time after the Issue Date effects a subdivision of the
outstanding Common Stock, the Conversion Price then in effect immediately before
that subdivision shall be proportionately decreased, and conversely, if the
Company at any time or from time to time after the Issue Date combines the
outstanding Common Stock into a smaller number of shares, the Conversion Price
then in effect immediately before the combination shall be proportionately
increased. Any adjustment under this Section 8.4 shall become effective at the
close of business on the date such subdivision or combination becomes effective.
8.5 Adjustment for Certain Dividends and Distributions. If the Company at
any time or from time to time after the Issue Date makes, or fixes a record date
for the determination of holders of Common Stock entitled to receive, a dividend
or other distribution payable in additional Common Stock, then and in each such
event the Conversion Price then in effect shall be decreased as of the time of
such issuance or, in the event such record date is fixed, as of the close of
business on such record date, by multiplying the Conversion Price then in effect
by a fraction (1) the numerator of which is the total number of shares of Common
Stock issued and outstanding immediately prior to the time of such issuance or
the close of business on such record date, and (2) the denominator of which
shall be the total number of shares of Common Stock issued and outstanding
immediately prior to the time of such issuance or the close of business on such
record date plus the number of shares of Common Stock issuable in payment of
such dividend or distribution; provided, however, that if such record date is
fixed and such dividend is not fully paid or if such distribution is not fully
made on the date fixed therefor, the Conversion Price shall be recomputed
accordingly as of the close of business on such record date and thereafter the
Conversion Price shall be adjusted pursuant to this Section 8.5 as of the time
of actual payment of such dividends or distributions.
8.6 Adjustments for Other Dividends and Distributions. In the event the
Company at any time or from time to time after the Issue Date makes, or fixes a
record date for the determination of holders of Common Stock entitled to
receive, a dividend or other distribution payable in securities of the Company
other than Common Stock or other assets or property of the Company (other than
ordinary cash dividends and, any special dividends necessary to preserve the
Company's qualification as a REIT [)] and the dividend payable pursuant to the
========================================
Rights Offering), then and in each such event provision shall be made so that
=================
the holders of Series C Preferred Stock shall receive upon conversion thereof,
in addition to the number of shares of Common Stock receivable thereupon, the
amount of securities of the Company or other assets or property of the Company
which they would have received had their Series C Preferred Stock been converted
into Common Stock on the date of such event and had they thereafter, during the
period from the date of such event to and including the conversion date,
retained such securities or other assets or property of the Company receivable
by them as aforesaid during such period, subject to all other adjustments called
for during such period under this Section 8 with respect to the rights of the
holders of the Series C Preferred Stock.
8.7 Adjustment for Reclassification, Exchange and Substitution. In the
event that at any time or from time to time after the Issue Date, the Common
Stock or other securities as provided herein issuable upon the conversion of the
Series C Preferred Stock are changed into the same or a different number of
shares of any class or classes of stock, whether by recapitalization,
reclassification or otherwise (other than a subdivision or combination of shares
or stock dividend or a reorganization, merger, consolidation or sale of assets,
provided for elsewhere in this Section 8), then and in any such event each
holder of Series C Preferred Stock shall have the right thereafter to convert
such Series C Preferred Stock into the kind and amount of stock and other
securities and property receivable upon such recapitalization, reclassification
or other change, by holders of Common Stock or other securities as provided
herein into which such shares of Series C Preferred Stock could have been
converted immediately prior to such recapitalization, reclassification or
change, all subject to further adjustment as provided herein.
8.8 Reorganizations, Mergers, Consolidations or Transfers of Assets. If at
any time or from time to time after the Issue Date there is a capital
reorganization of the Common Stock or other securities issuable upon conversion
of Series C Preferred Stock as provided herein (other than a recapitalization,
subdivision, combination, reclassification or exchange of shares provided for
elsewhere in this Section 8) or a merger or consolidation or statutory binding
share exchange of the Company with or into another Person, or the transfer of
all or substantially all of the Company's properties and assets to any other
Person and such capital reorganization, merger, consolidation or transfer does
not constitute a Change in Control, then, as a part of such capital
reorganization, merger, consolidation, exchange or transfer [(subject to the
provisions of Section 9)], provision shall be made so that the holders of the
Series C Preferred Stock shall thereafter be entitled to receive upon conversion
of Series C Preferred Stock the number of shares of stock or other securities,
cash or property to which a holder of the number of shares of Common Stock or
other securities deliverable upon conversion of the Series C Preferred Stock
would have been entitled on such capital reorganization, merger, consolidation,
exchange or transfer. In any such case, appropriate adjustment shall be made in
the application of the provisions of this Section 8 with respect to the rights
of the holders of the Series C Preferred Stock after the capital reorganization,
merger, consolidation, exchange or transfer to the end that the provisions of
this Section 8 (including adjustment of the Conversion Price then in effect and
the number of shares receivable upon conversion of the Series C Preferred Stock)
shall be applicable after that event and be as nearly equivalent as may be
practicable.
8.9 Sale of Shares Below Fair Market Value. (a) If at any time or from time
to time after the Issue Date, the Company issues or sells, or is deemed by the
express provisions of this Section 8.9 to have issued or sold, Additional Common
Stock (as defined below), other than as a dividend or other distribution on any
class of stock as provided in Section 8.5 above and other than upon a
subdivision or combination of Common Stock as provided in Section 8.4 above, for
an Effective Price (as defined below) less than the Fair Market Value, then and
in each such case the then existing Conversion Price shall be reduced, as of the
opening of business on the date of such issue or sale, to a price determined by
multiplying that Conversion Price by a fraction (i) the numerator of which shall
be equal to the sum of (A) the number of shares of Common Stock issued and
outstanding at the close of business on the Business Day immediately preceding
the date of such issue or sale, (B) the number of shares of Common Stock which
the aggregate consideration received (or by the express provisions hereof is
deemed to have been received) by the Company for the total number of shares of
Additional Common Stock so issued or sold would purchase at such Fair Market
Value, (C) the number of shares of Common Stock into which all outstanding
Series C Preferred Stock [are] and Series D Preferred Stock would be convertible
=====================================
at the close of business on the Business Day immediately preceding the date of
such issuance or sale (whether or not the Series D Preferred Stock is then
=======================================================
convertible), and (D) the number of shares of Common Stock underlying all
============
Convertible Securities (as defined below) at the close of business on the
Business Day immediately preceding the date of such issuance or sale, and (ii)
the denominator of which shall be equal to the sum of (A) the number of shares
of Common Stock issued and outstanding at the close of business on the date of
such issuance or sale after giving effect to such issuance or sale of Additional
Common Stock, (B) the number of shares of Common Stock into which all
outstanding Series C Preferred Stock [are] and Series D Preferred Stock would be
=====================================
convertible at the close of business on the Business Day immediately preceding
the date of such issuance or sale (whether or not the Series D Preferred Stock
=============================================
is then convertible), and (C) the number of shares of Common Stock underlying
=====================
all Convertible Securities at the close of business on the Business Day
immediately preceding the date of such issuance or sale.
(b) For the purpose of making any adjustment required under this Section
8.9, the consideration for any issuance or sale of securities shall be deemed to
be (A) to the extent it consists of cash, equal to the gross amount paid in such
issuance or sale, (B) to the extent it consists of property other than cash,
equal to the Fair Market Value of that property, and (C) if Additional Common
Stock, Convertible Securities (as defined below) or rights or options to
purchase either Additional Common Stock or Convertible Securities are issued or
sold together with other stock, securities or assets of the Company for a
consideration which covers both, that portion of the consideration so received
that is determined in good faith by the Board to be allocable to such Additional
Common Stock, Convertible Securities or rights or options.
(c) For the purpose of the adjustment required under this Section 8.9, if
the Company issues or sells any rights or options for the purchase of, or stock
or other securities convertible into or exchangeable or exercisable for,
Additional Common Stock (such convertible or exchangeable or exercisable stock
or securities being hereinafter referred to as "Convertible Securities") and if
the Effective Price of such Additional Common Stock is less than the Fair Market
Value, then in each case the Company shall be deemed to have (i) issued at the
time of the issuance of such rights or options or Convertible Securities the
number of shares of Additional Common Stock issuable upon exercise, conversion
or exchange thereof irrespective of whether the holders thereof have the fully
vested legal right to exercise, convert or exchange the Convertible Securities
for Additional Common Stock and (ii) received as consideration for the issuance
of such Additional Common Stock an amount equal to the total amount of the
consideration, if any, received by the Company for the issuance of such rights
or options or Convertible Securities, plus, in the case of such rights or
options, the consideration, if any, payable to the Company upon the exercise of
such rights or options, plus, in the case of Convertible Securities, the
consideration, if any, payable to the Company (other than by cancellation of
liabilities or obligations evidenced by such Convertible Securities) upon the
exercise, conversion or exchange thereof. No further adjustment of the
Conversion Price, as adjusted upon the issuance of such rights, options or
Convertible Securities, shall be made as a result of the actual issuance of
Additional Common Stock on the exercise of any such rights or options or the
conversion or exchange of any such Convertible Securities. If any such rights or
options or the conversion or exchange privilege represented by any such
Convertible Securities shall expire without having been exercised, the
Conversion Price as adjusted upon the issuance of such rights, options or
Convertible Securities shall be readjusted to the Conversion Price which would
have been in effect had an adjustment been made on the basis that the only
shares of Additional Common Stock so issued were the shares of Additional Common
Stock, if any, actually issued or sold on the exercise of such rights or options
or rights of conversion or exchange of such Convertible Securities, and such
shares of Additional Common Stock, if any, were issued or sold for the
consideration actually received by the Company upon such exercise, plus the
consideration, if any, actually received by the Company for the granting of the
rights or options whether or not exercised, plus the consideration received for
issuing or selling the Convertible Securities actually converted or exchanged,
plus the consideration, if any, actually received by the Company (other than by
cancellation of liabilities or obligations evidenced by such Convertible
Securities) on the conversion or exchange of such Convertible Securities.
(d) "Additional Common Stock" shall mean all Common Stock issued or
issuable by the Company after the Issue Date, whether or not subsequently
reacquired or retired by the Company, other than (i) Common Stock issued or
issuable upon conversion of, or as a dividend on, any Series C Preferred Stock
or Series D Preferred Stock, (ii) Common Stock issued or issuable pursuant to
============================
any employee benefit plan or similar plan or arrangement intended to provide
compensation and other benefits to officers, directors, employees and
consultants of the Company provided that such plans and any grants or awards
thereunder have been approved by the Board or a committee thereof, (iii)
securities issued by the Company in payment of a purchase price to the seller or
any Person who beneficially owns equity securities of such seller for any
acquisition of assets or a business, which acquisition is approved by the Board,
or [pursuant to the Additional Equity Financing (as defined in](iv) Common Stock
=================
issued or issuable pursuant to the Rights Offering, the Investment Agreement
====================================================
[dated as of May 11, 2000 (the "Investment Agreement"), by and between Explorer
Holdings, L.P. and the Company), and (iv) securities issued pursuant to the
Rights Offerings (as defined in Exhibit B to the Investment Agreement)] or upon
=======
issuance or conversion of the Series D Preferred Stock. The "Effective Price" of
======================================================
Additional Common Stock shall mean the quotient determined by dividing the total
number of shares of Additional Common Stock issued or sold, or deemed to have
been issued or sold by the Company, by the aggregate consideration received, or
deemed to have been received, by the Company for such Additional Common Stock.
The share numbers in this Section 8.9(d) shall be appropriately adjusted for any
stock dividends, combinations, splits, reverse splits, recapitalizations and
similar events affecting the securities of the Company.
8.10 Certificate of Adjustment. In each case of an adjustment or
readjustment of the Conversion Price or the number of shares of Common Stock or
other securities issuable upon conversion of the Series C Preferred Stock, the
Company, at its expense, shall cause the Chief Financial Officer of the Company
to compute such adjustment or readjustment in accordance with the provisions
hereof and prepare a certificate showing such adjustment or readjustment, and
shall mail such certificate, by first class mail, postage prepaid, to each
registered holder of the Series C Preferred Stock at the holder's address as
shown in the Company's books. The certificate shall set forth such adjustment or
readjustment, showing in detail the facts upon which such adjustment or
readjustment is based, including a statement of (1) the consideration received
or deemed to be received by the Company for any Additional Common Stock issued
or sold or deemed to have been issued or sold, (2) the Conversion Price in
effect immediately prior to the occurrence of the event giving rise to such
adjustment, (3) the number of shares of Additional Common Stock, and (4) the
type and amount, if any, of other property which at the time would be received
upon conversion of the Series C Preferred Stock.
8.11 Notices of Record Date. In the event of (i) any taking by the Company
of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend or
other distribution or (ii) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company, any
merger or consolidation of the Company with or into any other entity, or any
transfer of all or substantially all of the assets of the Company to any other
person or any voluntary or involuntary dissolution, liquidation or winding up of
the Company, the Company shall mail to each holder of Series C Preferred Stock
at least ten days prior to the record date specified therein, a notice
specifying (1) the date on which any such record is to be taken for the purpose
of such dividend or distribution and a description of such dividend or
distribution, (2) the date on which any such reorganization, reclassification,
transfer, consolidation, merger, dissolution, liquidation or winding up is
expected to become effective, and (3) the date, if any, that is to be fixed, as
to when the holders of record of Common Stock (or other securities) shall be
entitled to exchange their Common Stock (or other securities) for securities or
other property deliverable upon such reorganization, reclassification, transfer,
consolidation, merger, dissolution, liquidation or winding up.
8.12 Fractional Shares. No fractional shares of Common Stock shall be
issued upon conversion of Series C Preferred Stock. In lieu of any fractional
share to which the holder would otherwise be entitled (calculated based on the
=========================
aggregate number of shares of Common Stock to which such holder is entitled upon
================================================================================
such conversion), the Company shall pay cash equal to the product of such
=================
fraction multiplied by the Fair Market Value of one share of Common Stock on the
date of conversion.
8.13 Reservation of Stock Issuable Upon Conversion. The Company shall at
all times reserve and keep available out of its authorized but unissued Common
Stock, solely for the purpose of effecting the conversion of the Series C
Preferred Stock, such number of shares of its Common Stock and other securities,
if any, issuable upon conversion thereof as expressly provided in Section 8 as
shall from time to time be sufficient to effect the conversion of all
outstanding Series C Preferred Stock.
8.14 Notices. Any notice required or permitted by this Section 8 to be
given to a holder of Series C Preferred Stock or to the Company shall be in
writing and be deemed given upon the earlier of actual receipt or five days
after the same has been deposited in the United States mail, by certified or
registered mail, return receipt requested, postage prepaid, and addressed (i) to
each holder of record at the address of such holder appearing on the books of
the Company, or (ii) to the Company at its registered office, or (iii) to the
Company or any holder, at any other address specified in a written notice given
to the other for the giving of notice.
8.15 Payment of Taxes. The Company will pay all taxes (other than taxes
based upon income) and other governmental charges that may be imposed with
respect to the issue and delivery of Common Stock upon conversion of Series C
Preferred Stock, including without limitation any tax or other charge imposed in
connection with the issue and delivery of Common Stock or other securities, if
any, issuable upon conversion thereof as expressly provided in Section 8 in a
name other than that in which the Series C Preferred Stock so converted were
registered.
8.16 Cancellation of Shares. Any shares of Series C Preferred Stock which
are converted in accordance with Section 8 or which are redeemed, repurchased or
otherwise acquired by the Company, shall be canceled and added to the authorized
but undesignated Preferred Stock of the Company but shall not be reissued as
Series C Preferred Stock.
[8.17 Limitations on Conversions. Notwithstanding the provisions of this
Section 8, no holder of Series C Preferred Stock shall be permitted to convert a
number of its shares of Series C Preferred Stock which would result in such
holder and its Affiliates or any group (as such term is used in Section 13(d)(3)
of the Exchange Act) of which any of them is a member having beneficial
ownership, after giving effect to such conversion, of more than 49.9% of the
then-outstanding Voting Stock without the prior approval of the Board.]
9. Restrictions on Ownership and Transfer. Once there is a completed public
offering of the Series C Preferred Stock, if the Board shall, at any time and in
good faith, be of the opinion that actual or constructive ownership of at least
9.9% or more of the value of the outstanding capital stock of the Company has or
may become concentrated in the hands of one owner (other than Explorer Holdings,
L.P. and its direct and indirect equity owners), the Board shall have the power
(i) by means deemed equitable by the Board, and pursuant to written notice, to
call for the purchase from any shareholder of the corporation a number of shares
of Series C Preferred Stock sufficient, in the opinion of the Board, to maintain
or bring the direct or indirect ownership of such beneficial owner to no more
than 9.9% of the value of the outstanding capital stock of the corporation, and
(ii) to refuse to transfer or issue shares of Series C Preferred Stock to any
person whose acquisition of such Series C Preferred Stock would, in the opinion
of the Board, result in the direct or indirect ownership by that person of more
than 9.9% of the value of the outstanding capital stock of the Company. The
purchase price for any shares of Series C Preferred Stock shall be equal to the
fair market value of the shares reflected in the closing sales price for the
shares, if then listed on a national securities exchange, or if the shares are
not then listed on a national securities exchange, the purchase price shall be
equal to the Liquidation Preference of such shares of Series C Preferred Stock.
Payment of the purchase price shall be made within thirty days following the
date set forth in the notice of call for purchase, and shall be made in such
manner as may be determined by the Board. From and after the date fixed for
purchase by the Board, as set forth in the notice, the holder of any shares so
called for purchase shall cease to be entitled to distributions and other
benefits with respect to such shares, excepting only the right to payment of the
purchase price fixed as aforesaid. Any transfer of Series C Preferred Stock that
would create an actual or constructive owner of more than 9.9% of the value of
the outstanding shares of capital stock of this Company shall be deemed void ab
initio and the intended transferee shall be deemed never to have had an interest
therein. If the foregoing provision is determined to be void or invalid by
virtue of any legal decision, statute, rule or regulation, then the transferee
of such Series C Preferred Stock shall be deemed, at the option of the Company,
to have acted as agent on behalf of the Company in acquiring such shares and to
hold such shares on behalf of the Company.
Notwithstanding anything herein to the contrary, nothing herein shall authorize
==============================
the Company [and] or its transfer agent [may] to refuse to transfer any shares
== ==
of Series C Preferred Stock, passing either by voluntary transfer, by operation
of law, or under the last will and testament of any shareholder, if such
=
transfer would [or might,] not, in the written opinion of [the Board or counsel]
=== =======
counsel to the transferor reasonably acceptable to the Company, disqualify the
================================================
Company as a Real Estate Investment Trust under the [Internal Revenue] Code.
Nothing herein contained shall limit the ability of the Company to impose or to
seek judicial or other imposition of additional restrictions if deemed necessary
or advisable to preserve the Company's tax status as a qualified Real Estate
Investment Trust. [Nothing herein contained shall preclude settlement of any
transaction entered into through the facilities of the New York Stock Exchange.]
10. Certain Defined Terms. In addition to the terms defined elsewhere in
these Articles Supplementary or the Charter, the following terms will have the
following meanings when used herein with initial capital letters:
(a) "Business Day" means any day (other than a day which is a Saturday,
Sunday or legal holiday in New York City, or any day on which banks in New York
City are authorized by law to close).
(b) "Change in Control" means the [acquisition of the Company by means of
any transaction or] occurrence of any of the following in one or a series of
===============================================
related transactions [(including, without limitation, any reorganization,
merger, consolidation or other] : (A) any consolidation, merger, reorganization,
================================================
share exchange or other form of business combination transaction [), unless the
===============================
Company's stockholders of record as constituted immediately prior to such
acquisition will] involving the Company in which the holders of the Company's
============================================================
Voting Stock immediately before such transaction do not, immediately after such
=======================================================
[acquisition (by virtue of securities issued as consideration for the Company's
acquisition or otherwise), hold at least 50%] transaction, retain Voting Stock
=================================
representing a majority of the voting power of the [surviving or acquiring
========================
entity in approximately the same relative percentages after such acquisition or
sale as before such acquisition or sale.] acquiring entity, the Company or the
======================================
entity surviving such transaction or (B) the sale, transfer or assignment of
================================================================================
Voting Stock of the Company representing a majority of the voting power of the
================================================================================
Company to an acquiring Person; provided, however, that any transaction
================================================================================
described in clause (A) or (B) in which Voting Stock of the Company or the
================================================================================
acquiring or surviving entity in such transaction representing a majority of the
================================================================================
voting power of such Person is acquired by or from Explorer Holdings, L.P., its
================================================================================
partners and/or their respective Affiliates in one transaction or a series of
================================================================================
related transactions shall not be deemed a Change in Control.
=============================================================
(c) "Exchange Act" means the Securities Exchange Act of 1934, as amended,
=
and the rules and regulations promulgated thereunder.
=====================================================
(d) "Fair Market Value" of any security or other asset means:
(i) [in] In the case of any security:
==
(A) if the security is traded on a securities exchange, the weighted
average trading volume of the per share closing prices of the security on
such exchange over the five trading day period ending three trading days
prior to the date on which such value is measured;
(B) if the security is traded over-the-counter, the weighted average
trading volume of the per share closing bid prices of the security over the
five trading day period ending three trading days prior to the date on
which such value is measured; or
(C) if there is no public market for such security that meets the
criteria set forth in (A) or (B) above, the Fair Market Value shall be the
per share fair market value of such security as of the date on which such
value is measured, as determined in good faith by the Board.
(ii) In the case of assets other than securities, the Fair Market Value
shall be the fair market value of such assets, as determined in good faith by
the Board.
(e) "Liquidation Preference" measured per share of Series C Preferred Stock
as of any date in question (the "Relevant Date"), means an amount equal to the
Original Issue Price of such share [plus any declared but], plus an amount equal
======================
to any accrued and unpaid dividends, but without interest, at the rate set forth
==================
in Section 4 hereof, if any, for such share of Series C Preferred Stock. In
connection with the determination of the Liquidation Preference of a share of
Series C Preferred Stock upon liquidation, dissolution or winding up of the
Company, the Relevant Date shall be the date of distribution of amounts payable
to stockholders in connection with any such liquidation, dissolution or winding
up.
(f) "Original Issue Price" means $100 per share of Series C Preferred
Stock, subject to appropriate adjustment to reflect any stock dividends,
combinations, splits, reverse splits, recapitalizations or similar events
affecting the Series C Preferred Stock after the Issue Date.
(g) "Person" means any individual, firm, corporation, partnership, limited
liability company, or group (within the meaning of Section 13(d)(3) of the
Exchange Act).
(h) ["Stockholders Agreement" means the Stockholders Agreement by and
between Explorer Holdings, L.P. and the Company, dated the Issue Date.]"Rights
=======
Offering" means the offering of shares of Common Stock by the Company pursuant
================================================================================
to Section 4.7 of the Investment Agreement, dated as of October 29, 2001,
================================================================================
relating to the Series D Preferred Stock (the "Investment Agreement").
======================================================================
(i) "Voting Stock" means, with respect to [the Company] any Person, the
==========
shares of any class or kind ordinarily having the power to vote for the election
of directors or other members of the governing body of [the Company] such
====
Person, and for purposes hereof, the Series D Preferred Stock whether or not
================================================================================
then convertible. For avoidance of doubt, [(i)] Common Stock and Series C
=================
Preferred Stock both constitute Voting Stock of the Company [and (ii)];
=
provided, however, no class of Preferred Stock shall be deemed to be Voting
===================
Stock by virtue of the rights of such holder upon any Preferred Dividend
Default.
11. [Effect of Mergers, Consolidations and Other Business Combination
Transactions. In the event of any merger, consolidation or other business
combination transaction, the limitations on conversion in Section 8.17 and the
limitations on voting in Section 7(a) shall not impair, reduce or otherwise
modify the rights] Amendment; Waiver. Except as expressly prohibited by law,
============================================================
these Amended and Restated Articles Supplementary may be amended and any
================================================================================
provision herein may be waived with the approval of the holders of a majority of
================================================================================
the Series C Preferred Stock and a majority of the members of the Board who are
================================================================================
not Affiliates of any holder of Series C Preferred Stock [in such merger,
===============
consolidation or business combination transaction, such]. Any amendment or
=================
waiver so effected shall be binding upon each holder [being entitled to receive
=============================================
upon consummation of such merger, consolidation or other transaction in respect
of all shares] of Series C Preferred Stock [then held the consideration that is
receivable with respect to each share of Series C Preferred Stock without regard
to any limitation otherwise imposed by Section 7(a) or 8.17].
THIRD: The classification of authorized but unissued shares as set forth in
these Amended and Restated Articles Supplementary does not increase the
======================
authorized capital of the Company or the aggregate par value thereof.
FOURTH: These Amended and Restated Articles Supplementary have been
======================
approved by the Board in the manner and by the vote required by law.
FIFTH: The undersigned Vice President of the Company acknowledges these
Amended and Restated Articles Supplementary to be the corporate act of the
=====================
Company and, as to all matters or facts required to be verified under oath, the
undersigned Vice President of the Company acknowledges that to the best of his
or her knowledge, information and belief, these matters and facts are true in
all material respects and that this statement is made under the penalties for
perjury.
IN WITNESS WHEREOF, the Company has caused these Amended and Restated
=====================
Articles Supplementary to be executed under seal in its name and on its behalf
by its Vice President and attested to by its Secretary on this ___ day of [July,
2000]________, 2001.
==============
ATTEST OMEGA HEALTHCARE INVESTORS, INC.
By:_________________________ By:________________________
Secretary Vice President