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:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] 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.
9690 Deereco Road, Suite 100
Timonium, Maryland 21093
(410) 427-1700
---------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
April 3, 2003
----------------
To our Stockholders:
The Annual Meeting of Stockholders of Omega Healthcare Investors, Inc.
("Omega") will be held at the Holiday Inn Select, Baltimore-North, 2004
Greenspring Drive, Timonium, Maryland on Thursday, April 3, 2003, at 10:00 A.M.
EST, for the following purposes:
1. To elect three members to the Board of Directors;
2. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The nominees for election as directors are Daniel A. Decker, Thomas F.
Franke and Bernard J. Korman, each of whom presently serves as a director of
Omega.
The Board of Directors has fixed the close of business on March 5, 2003 as
the record date for the determination of stockholders who are entitled to notice
of and to vote at the meeting or any adjournments thereof.
We encourage you to attend the meeting. Whether you are able to attend or
not, we urge you to indicate your vote on the enclosed proxy card FOR the
election of directors. Please sign, date and return the proxy card promptly in
the enclosed envelope. If you attend the meeting, you may vote in person even if
you previously have mailed a proxy card.
By order of the Board of Directors,
C. Taylor Pickett
Chief Executive Officer
March 3, 2003
Timonium, Maryland
--------------------------------------------------------------------------------
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 will be included with this mailing. In either
event, we urge you to vote promptly.
--------------------------------------------------------------------------------
OMEGA HEALTHCARE INVESTORS, INC.
9690 Deereco Road, Suite 100
Timonium, Maryland 21093
(410) 427-1700
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
April 3, 2003
The accompanying proxy is solicited by our Board of Directors to be voted
at the Annual Meeting of Stockholders to be held at the Holiday Inn Select,
Baltimore-North, 2004 Greenspring Drive, Timonium, Maryland at 10:00 A.M. EST on
Thursday, April 3, 2003, and any adjournments of the meeting. It is anticipated
that this proxy material will be mailed on or about March 7, 2003, to our common
stockholders of record on March 5, 2003.
A copy of our Annual Report for the year ended December 31, 2002, including
financial statements, is enclosed.
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
As of March 5, 2003, the record date, there were of 37,149,445 outstanding
shares of common stock, par value $.10 per share and 1,048,420 shares of Series
C Convertible Preferred Stock ("Series C preferred stock"). Each holder of
shares of common stock is entitled to one vote per share on all matters properly
brought before the Annual 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 Annual Meeting on an as-converted basis. The 1,048,420 shares
of Series C preferred stock outstanding as of March 5, 2003 are convertible into
16,774,720 shares of common stock and accordingly an aggregate of 53,924,165
votes are entitled to be cast by the holders of common stock and Series C
preferred stock at the meeting.
VOTING
The presence at the Annual 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 Annual Meeting. Under our Bylaws, directors are elected by a
plurality of the votes cast at the Annual Meeting.
As of the record date, our directors and executive officers beneficially
owned 31,020,361 shares of our common stock (representing 57.5% of the votes
entitled to be cast at the meeting), including 29,313,798 shares beneficially
owned by directors as a result of their affiliation with Explorer Holdings, L.P.
("Explorer"). Excluding shares beneficially owned by Explorer, shares held by
directors and executive officers of our company entitle them to exercise
approximately 3.2% of the voting power of the shares entitled to vote at the
Annual Meeting on an as-converted basis.
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.
With respect to the election of directors, broker non-votes and the decision to
withhold authority to vote for any or all of the director nominees named above
will have no impact on the outcome of the voting. 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 -- ELECTION OF DIRECTORS
Director Nominees and Voting Requirements.
There are currently ten members of our Board of Directors. Pursuant to our
Articles of Incorporation, the directors have been divided into three groups. At
this year's Annual Meeting, three directors will be elected by the holders of
our common stock and Series C preferred stock, voting together as a single
class, to hold office for a term of three years or, in each case, until their
respective successors have been duly elected and qualified.
The Board of Directors has nominated Daniel A. Decker, Thomas F. Franke and
Bernard J. Korman for election as directors. The holders of the Series A and
Series B preferred stock (voting together as a single class) have the right to
elect two additional directors to our Board of Directors in accordance with the
terms of the Series A and Series B preferred stock and our Bylaws since
dividends on the Series A and Series B preferred stock have been in arrears for
more than 18 months. No persons have been validly nominated for these positions
in accordance with our Bylaws, and nominations are now closed for the Annual
Meeting. Explorer, the sole holder of the Series C preferred stock, also has the
right to elect two other additional directors to our Board of Directors in
accordance with the terms of the Series C preferred stock and our Bylaws. By
letter dated January 21, 2003, Explorer, without waiving its rights under the
terms of the Series C preferred stock or the Stockholders Agreement described
below, has advised us that it is not currently seeking the election of the two
additional directors resulting from the Series C dividend arrearage unless the
holders of the Series A and Series B preferred stock seek to elect additional
directors.
Unless authority to vote for the election of directors has been
specifically withheld, the persons named in the accompanying proxy card intend
to vote FOR the election of the nominees named above to hold office for the
terms indicated above or until their respective successors have been duly
elected and qualified.
Under our Bylaws, directors are elected by a plurality of the votes cast at
the Annual Meeting. As a result, broker non-votes and the decision to withhold
authority to vote for any or all of the director nominees named above will have
no impact on the outcome of the voting.
If any nominee becomes unavailable for any reason (which event is not
anticipated), the shares represented by the enclosed proxy may (unless the proxy
contains instructions to the contrary) be voted for such other person or persons
as may be determined by the holders of the proxies. In no event would the proxy
be voted for more than three nominees.
Stockholders Agreement with Explorer Holdings, L.P.
On July 14, 2000, Explorer invested $100.0 million in exchange for
1,000,000 shares of Omega's Series C preferred stock. In connection with
Explorer's Series C investment, Omega entered into a Stockholders Agreement with
Explorer dated July 14, 2000. As a condition to the closing of Explorer's
additional $31.3 million investment in February 2002, we amended the
Stockholders Agreement with Explorer to provide that Explorer would 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,
currently not to exceed six directors. The Stockholders Agreement provides that
Explorer shall be entitled to designate a majority of the total number of
directors so long as Explorer owns a majority of our issued and outstanding
voting securities. Explorer currently beneficially owns a majority of our voting
securities and therefore would be entitled to designate a majority of our
directors. Explorer has agreed to 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, so long as Explorer owns at least 15% of our voting
securities. Explorer has the right to elect additional preferred stock directors
if the dividends on shares of the Series C preferred stock are in arrears for
four or more dividend periods. By letter dated January 21, 2003, Explorer
advised us that it does not currently intend to designate additional directors
at this time, although reserving its rights under the Stockholders Agreement and
under the terms of the Series C preferred stock to do so. The Stockholders
Agreement terminates February 20, 2007. (See "Certain Transactions - Explorer
Holdings, L.P., Dividend and Governance Right Deferral.")
Information Regarding Directors
The following information relates to the nominees for election as directors
of Omega and the other persons whose terms as directors continue after this
meeting. Individuals not standing for election at the Annual Meeting are
presented under the heading "Continuing Directors."
Director Nominees
Year First
Became a Term to
Directors Director Business Experience During Past 5 Years Expire in
--------- -------- --------------------------------------- ---------
Daniel A. Decker* (50)....... 2000 Mr. Decker is Chairman of the Board and has 2006
served in this capacity since July 17, 2000.
Mr. Decker also served as Executive Chairman from
March 2001 until June 12, 2001 when Mr. Pickett
joined us as Chief Executive Officer. Mr. Decker
has been an officer of The Hampstead Group,
L.L.C., a privately-held equity investment firm
based in Dallas, Texas, since 1990. Mr. Decker
previously served as a director of various other
public companies, including Bristol Hotel Company
(NYSE), Wyndham Hotel Company (NYSE), Malibu
Entertainment International Inc., and the Forum
Group (NASDAQ).
Thomas F. Franke (73)........ 1992 Mr. Franke is a Director and has served in this 2006
capacity since March 31, 1992. Mr. Franke is
Chairman and principal owner of Cambridge
Partners, Inc., an owner, developer and manager of
multifamily housing in Grand Rapids and Ann Arbor,
Michigan. He is also the principal owner of
private healthcare firms operating in the United
States and the United Kingdom and is a principal
owner of a private hotel firm in the United
Kingdom. Mr. Franke was a founder and director of
Principal Healthcare Finance Limited and Omega
Worldwide, Inc.
Bernard J. Korman (71)....... 1993 Mr. Korman is a Director and has served in this 2006
capacity since October 19, 1993. Mr. Korman has
been Chairman of the Board of Trustees of
Philadelphia Health Care Trust, a private
healthcare foundation, since December 1995. He was
formerly President, Chief Executive Officer and
Director of MEDIQ Incorporated (health care
services) from 1977 to 1995. Mr. Korman is also a
director of the following public companies: The
New America High Income Fund, Inc. (financial
services), The Pep Boys, Inc. (auto supplies),
Kramont Realty Trust (real estate investment
trust), and NutraMax Products, Inc. (consumer
health care products). Mr. Korman was a director
of Omega Worldwide, Inc.
Continuing Directors
Year First
Became a Term to
Directors Director Business Experience During Past 5 Years Expire in
--------- -------- --------------------------------------- ---------
Thomas W. Erickson* (52)..... 2000 Mr. Erickson is a Director and has served in this 2005
capacity since July 17, 2000. Mr. Erickson served
as our Interim Chief Executive Officer from
October 1, 2000 until June 12, 2001. Mr. Erickson
has served as Interim President and Chief
Executive Officer of Luminex Corporation (NASDAQ)
since September 2002. In addition, Mr. Erickson
was Co-Founder, President and Chief Executive
Officer for CareSelect Group, Inc., a physician
practice management company from 1994 to 2001 and
has served as President and Chief Executive
Officer of ECG Ventures, Inc., a venture capital
company from 1994 to present. Earlier in his
career, Mr. Erickson held several management
positions at American Hospital Supply
Corporation. He currently is Chairman of the
Board of LifeCare Hospitals, Inc. and serves on
the Board of Directors of Omega Healthcare
Investors, Inc. (NYSE).
Harold J. Kloosterman (61)... 1992 Mr. Kloosterman is a Director and has served in 2005
this capacity since September 1, 1992.
Mr. Kloosterman has served as President since 1985
of Cambridge Partners, Inc., a company he formed
in 1985. He has been involved in the development
and management of commercial, apartment and
condominium projects in Grand Rapids and Ann
Arbor, Michigan and in the Chicago area.
Mr. Kloosterman was formerly a Managing Director
of Omega Capital from 1986 to 1992.
Mr. Kloosterman has been involved in the
acquisition, development and management of
commercial and multifamily properties since 1978.
He has also been a senior officer of LaSalle
Partners, Inc.
Edward Lowenthal (58)........ 1995 Mr. Lowenthal is a Director and has served in this 2004
capacity since October 17, 1995. From January 1997
to March 2002, Mr. Lowenthal served as President
and Chief Executive Officer of Wellsford Real
Properties, Inc. (AMEX:WRP), a real estate
merchant bank since 1997, and was President of the
predecessor of Wellsford Real Properties, Inc.
since 1986. Mr. Lowenthal also serves as a
director of REIS, Inc. (a provider of real estate
market information and valuation technology),
Corporate Renaissance Group, Inc. (a mutual fund),
Equity Residential Properties Trust, Great Lakes
REIT and a trustee of the Manhattan School of
Music.
Christopher W. Mahowald* (41). 2000 Mr. Mahowald is a Director and has served in this 2004
capacity since October 17, 2000. Mr. Mahowald has
served as President of EFO Realty since January
1997 where he is responsible for the origination,
analysis, structuring and execution of new
investment activity and asset management relating
to EFO Realty's existing real estate assets.
Donald J. McNamara* (49)..... 2000 Mr. McNamara is a Director and has served in this 2005
capacity since October 17, 2000. Mr. McNamara is
the founder of The Hampstead Group, L.L.C., a
privately-held equity investment firm based in
Dallas, Texas, and has served as its Chairman
since its inception in 1989. He has served as
Chairman of the Board of Directors of FelCor
Lodging Trust (NYSE:FCH) since its merger with
Bristol Hotel Company in July 1998. Mr. McNamara
has also served as a director of Franklin Covey
Co. (NYSE:FC) since May 1999. Mr. McNamara also
currently serves as a trustee of St. Mark's School
in Texas and a trustee of the Virginia Tech
Foundation.
C. Taylor Pickett (41)....... 2002 Mr. Pickett is the Chief Executive Officer and has 2005
served in this capacity since June 12, 2001. He
has served on the Board of Directors since May 30,
2002. Prior to joining our company, Mr. Pickett
served as the Executive Vice President and Chief
Financial Officer from January 1998 to June 2001
of Integrated Health Services, Inc., a public
company specializing in post-acute healthcare
services. He also served as Executive Vice
President of Mergers and Acquisitions from May
1997 to December 1997 of Integrated Health
Services. Prior to his roles as Chief Financial
Officer and Executive Vice President of Mergers
and Acquisitions, Mr. Pickett served as the
President of Symphony Health Services, Inc. from
January 1996 to May 1997. Mr. Pickett was also a
director of Omega Worldwide, Inc.
Stephen D. Plavin** (43)..... 2000 Mr. Plavin is a Director and has served in this 2004
capacity since July 17, 2000. Mr. Plavin has been
Chief Operating Officer of Capital Trust, Inc., a
New York City-based mortgage REIT and investment
management company and has served in this capacity
since 1998. In this role, Mr. Plavin is
responsible for all of the lending, investing and
portfolio management activities of Capital
Trust, Inc.
* Director designated by Explorer pursuant to the Stockholders Agreement.
** Independent Director approved by Explorer pursuant to the Stockholders
Agreement.
RECOMMENDATION
The Board of Directors unanimously recommends a vote FOR the election of
Messrs. Decker, Franke and Korman.
PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding beneficial ownership
of our capital stock as of February 28, 2003:
o each of our directors and the named executive officers appearing in
the table under "Executive Compensation --Compensation of Executive
Officers;" 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 9690 Deereco Road, Suite 100, Timonium, Maryland 21093.
Information regarding the beneficial ownership of the Series C preferred stock
is set forth in footnote 3 to the table below.
Common Stock Series A Preferred Series B Preferred
------------ ------------------ ------------------
Number of Percent of Number of Percent of Number of Percent of
Beneficial Owner Shares Class(1) Shares Class(17) Shares Class(18)
---------------- ------ -------- ------ --------- ------ ---------
C. Taylor Pickett.................... 143,103 (2) 0.3% -- -- -- --
Daniel J. Booth...................... 33,333 (3) * -- -- -- --
R. Lee Crabill, Jr................... 33,333 (3) * -- -- -- --
Robert O. Stephenson................. 37,697 (4) * -- -- -- --
Daniel A. Decker..................... 29,328,466 (5) (6) 54.4% -- -- -- --
Thomas W. Erickson................... 111,362 (7) 0.2% -- -- -- --
Thomas F. Franke..................... 64,878 (8) (9) 0.1% 6,300 0.3% -- --
Harold J. Kloosterman................ 103,638 (8) (10) 0.2% -- -- -- --
Bernard J. Korman.................... 544,790 (11) 1.0% 200 * 1,300 *
Edward Lowenthal..................... 22,931 (12) * -- -- 100 *
Christopher W. Mahowald.............. 24,062 (6) * 16,500 (15) 0.7% -- --
Donald J. McNamara................... 29,870,003 (5) (6) (13) 55.4% 4,800 (16) 0.2% 9,959 0.5%
Stephen D. Plavin.................... 16,563 (6) * -- -- -- --
Directors and executive officers as
a group (13 persons)................. 31,020,361 (14) 57.5% 27,800 1.2% 11,359 0.6%
5% Beneficial Owners:
Explorer Holdings, L.P.
4200 Texas Commerce Tower West
2200 Ross Avenue
Dallas, TX 75201..................... 29,313,798 (5) 54.4%
-----------
* Less than 0.10%
(1) Based on 53,924,165 shares of our common stock outstanding as of February
28, 2003, including 16,774,720 shares of our common stock issuable upon
conversion of Series C preferred stock. See Note (5) below.
(2) Includes 50,000 unvested shares of Restricted Stock granted in June 2001
and stock options that are exercisable within 60 days to acquire 43,103
shares.
(3) Includes stock options that are exercisable within 60 days to acquire
33,333 shares.
(4) Includes stock options that are exercisable within 60 days to acquire
36,231 shares.
(5) Based on Amendment No. 8 to Schedule 13D filed by Explorer Holdings, L.P.
on May 15, 2002. Represents shares of our common stock issuable upon
conversion of 1,048,420 shares of Series C preferred stock and 12,539,078
shares of common stock owned by Explorer. Hampstead Investment Partners
III, L.P. ("Hampstead") holds the ultimate controlling interest in
Explorer. Messrs. McNamara and Decker disclaim beneficial ownership of the
Series C preferred stock and the common stock, which they may be deemed to
beneficially own because of their ownership interests in Hampstead, which
holds the ultimate controlling interest in Explorer.
(6) Includes stock options that are exercisable within 60 days to acquire 7,665
shares.
(7) Includes stock options that are exercisable within 60 days to acquire
92,665 shares.
(8) Includes stock options that are exercisable within 60 days to acquire 5,999
shares.
(9) Includes 47,141 shares owned by a family limited liability company (Franke
Family LLC) of which Mr. Franke is a Member.
(10) Includes shares owned jointly by Mr. Kloosterman and his wife, and 35,206
shares held solely in Mr. Kloosterman's wife's name.
(11) Includes stock options that are exercisable within 60 days to acquire 5,665
shares.
(12) Includes stock options that are exercisable within 60 days to acquire 8,666
shares.
(13) Includes 373,215 shares held by a partnership established by Mr. McNamara
for the benefit of certain members of Mr. McNamara's family, 7,546 shares
held by a charitable foundation established by Mr. McNamara, and 1,466
shares held by a trust established by Mr. McNamara for non-family members
of which Mr. McNamara is the trustee. Mr. McNamara disclaims any beneficial
ownership of the shares held by the partnership, the foundation and the
trust.
(14) Includes 50,000 unvested shares of restricted stock and stock options that
are exercisable within 60 days to acquire 295,654 shares. Includes shares
of our common stock issuable upon conversion of Series C preferred stock
and shares of common stock owned by Explorer. See Note (5).
(15) Includes 300 shares held solely in Mr. Mahowald's wife's name.
(16) Includes 800 shares held by a trust established by Mr. McNamara for
non-family members of which Mr. McNamara is the trustee. Mr. McNamara
disclaims any beneficial ownership of the shares held by the trust.
(17) Based on 2,300,000 shares of Series A preferred stock outstanding on
February 28, 2003.
(18) Based on 2,000,000 shares of Series B preferred stock outstanding on
February 28, 2003.
DIRECTORS AND OFFICERS OF OUR COMPANY
Board of Directors and Committees of the Board
The Board of Directors held seven meetings during 2002. All members of the
Board of Directors attended more than 75% of the Board of Directors or Committee
meetings held during 2002.
The Board of Directors has an Audit Committee consisting of Messrs.
Kloosterman, Korman and Plavin, a Compensation Committee consisting of Messrs.
Franke, Kloosterman and McNamara and an Independent Directors Committee
consisting of Messrs. Franke, Kloosterman, Korman, Lowenthal and Plavin.
The Board of Directors does not have a standing Nominating Committee and
the functions that would typically be performed by this Committee are performed
by the entire Board of Directors, except that each nominee that is not
designated by Explorer pursuant to the Stockholders Agreement will be designated
by the Independent Directors Committee.
The Audit Committee met three times in 2002. Its primary function is to
assist the Board of Directors in fulfilling its oversight responsibilities with
respect to (i) the financial information to be provided to stockholders and the
Securities and Exchange Commission ("SEC"); (ii) the system of internal controls
that management has established; and (iii) the external audit process. In
addition, the Audit Committee selects our company's independent accountants and
provides an avenue for communication between the independent accountants,
financial management and the Board of Directors.
The Compensation Committee met twice during 2002 and has responsibility for
the compensation of our key management personnel and administration of our 2000
Stock Incentive Plan and our 1993 Deferred Compensation Plan.
The Independent Directors Committee met once during 2002 and has
responsibility for passing upon those issues with respect to which a conflict
may exist between us and Explorer, including issues with respect to the
allocation of costs between us and Explorer pursuant to the Advisory Agreement
between Omega and Explorer. (See "Certain Transactions - Explorer Holdings,
L.P., Advisory Agreement.")
Compensation of Directors
For the year ended December 31, 2002, each non-employee director received a
cash payment equal to $10,000 per year, payable in quarterly installments of
$2,500. Each non-employee director also received a quarterly grant of shares of
common stock equal to the number of shares determined by dividing the sum of
$2,500 by the fair market value of the common stock on the date of each
quarterly grant, currently set at February 15, May 15, August 15, and November
15. In addition, each non-employee director is entitled to receive fees equal to
$1,000 per meeting for attendance at each regularly scheduled meeting of the
Board of Directors. For each teleconference or called special meeting of the
Board of Directors, each non-employee director will receive $1,000 for meetings
with a duration in excess of 15 minutes and $500 for meetings with a duration of
less than 15 minutes. In addition, we reimbursed the directors for travel
expenses incurred in connection with their duties as directors. Employee
directors received no compensation for service as directors.
The cash compensation, not including reimbursement for expenses, paid by us
in consideration of Mr. Decker's and Mr. McNamara's service on the Board of
Directors as Explorer designees was paid directly to Explorer under the advisory
agreement.
Each non-employee director was awarded options with respect to 10,000
shares at the date the plan was adopted or upon their initial election as a
director. Each non-employee director is also awarded an additional option grant
with respect to 1,000 shares on January 1 of each year they serve as a director.
All grants have been and will be at an exercise price equal to 100% of the fair
market value of our common stock on the date of the grant. Non-employee director
options vest one third after each year for three years.
Compensation Committee Interlocks and Insider Participation
Mr. McNamara is currently a member of the Compensation Committee. Mr.
McNamara is an affiliate of Explorer, and therefore may be deemed to have an
interest in the agreements and transactions described under "Certain
Transactions - Explorer Holdings, L.P."
EXECUTIVE COMPENSATION
Compensation Committee Report
The Compensation Committee (the "Committee") administers our 2000 Stock
Incentive Plan and 1993 Deferred Compensation Plan, and has responsibility for
other incentive and benefit plans. The Committee determines the compensation of
our executive officers and reviews with the Board of Directors all aspects of
compensation for our executive officers.
Historically, our policy and the guidelines followed by the Committee have
been directed toward providing compensation to our executive officers in order
to achieve the following objectives:
1) Assist in attracting and retaining talented and well-qualified
executives;
2) Reward performance and initiative;
3) Be competitive with other healthcare real estate investment trusts;
4) Be significantly related to accomplishments and our short-term and
long-term successes, particularly measured in terms of growth in funds
from operations on a per share basis; and
5) Encourage executives to achieve meaningful levels of ownership of our
stock.
The following is a discussion of each element of our executive
compensation:
Annual Base Salary
Our approach to base compensation levels has been to offer competitive
salaries in comparison with prevailing market practices. The Committee examined
market compensation levels and trends in connection with the hiring of the
executives during 2001. Additionally, the Committee has also considered the pool
of executives who currently are employed in similar positions in public
companies, with emphasis on salaries paid by healthcare real estate investment
trusts.
The Committee has evaluated executive officer salary decisions in
connection with an annual review and based on input from our Chairman of the
Board of Directors and our Chief Executive Officer. In undertaking the annual
review, the Committee considered the decision-making responsibilities of each
position and the experience, work performance and team-building skills of each
incumbent. The Committee has viewed work performance as the single most
important measurement factor, followed by team-building skills and
decision-making responsibilities.
Annual Cash Bonus
Our historical compensation practices have embodied the principle that
annual cash bonuses should be based primarily on achieving objectives that
enhance long-term stockholder value, and that meaningful stock ownership by
management, including the grant of stock options in connection with their hiring
and as part of our company's rights offering, is desirable in aligning
stockholder and management interests.
The Committee has considered overall company performance and the
performance of the specific areas of the company under the incumbent's direct
control. It was the Committee's view that this balance supported the
accomplishment of overall objectives and rewarded individual contributions by
executive officers. Individual annual bonuses for each named executive have been
consistent with market practices for positions with comparable decision-making
responsibilities.
In 2002, Mr. Pickett was eligible for a cash bonus of up to 100% of his
annual base salary and the other executive officers were eligible for a cash
bonus of up to 50% of their annual base salaries. In determining the amount of
the annual cash bonuses, the Committee considered a variety of factors,
including sustained levels of recurring Funds from Operations, the successful
implementation of asset management initiatives, control of expenses and
satisfaction of Omega's strategic objectives. Considering these factors, the
Committee paid each of the senior executives, including Mr. Pickett, a cash
bonus equal to 42.5% of such employee's maximum potential bonus.
Long Term Incentives
In 2002, the Committee did not make any grants under its 2000 Stock
Incentive Plan or its 1993 Deferred Compensation Plan.
2002 Chief Executive Officer Compensation
In connection with retaining the services of Mr. Pickett to act as our
Chief Executive Officer, we entered into an Employment Agreement dated June 12,
2001, with Mr. Pickett. The Committee believes that the terms of the Employment
Agreement are consistent with the duties and scope of responsibilities assigned
to Mr. Pickett as Chief Executive Officer. In order to align Mr. Pickett's
interests with the long-term interests of Omega, Mr. Pickett's compensation
package includes significant equity-based compensation, including stock options
and restricted stock. For a detailed description of the terms of the Employment
Agreement see "Compensation and Severance Agreements - C. Taylor Pickett
Employment Agreement" below.
For the fiscal year ended December 31, 2002, the Committee awarded Mr.
Pickett an annual cash bonus of $191,250, an amount equal to 42.5% of his
potential bonus. This bonus was determined by the Committee substantially in
accordance with the policies described above relating to all of our executive
officers.
Tax Deductibility of Executive Compensation
The SEC requires that this report comment upon our policy with respect to
Section 162(m) of the Internal Revenue Code. From time to time, Mr. McNamara
recused himself from the Compensation Committee meetings to enable the Committee
to qualify as a committee of outside directors as set forth in Section 162(m) of
the Internal Revenue Code. Section 162(m) disallows a federal income tax
deduction for compensation over $1.0 million to any of the named executive
officers unless the compensation is paid pursuant to a plan which is
performance-related, non-discretionary and has been approved by our
stockholders. We did not pay any compensation during 2002 that would be subject
to Section 162(m). We believe that, because we qualify as a REIT under the
Internal Revenue Code and therefore are not subject to federal income taxes on
our income to the extent distributed, the payment of compensation that does not
satisfy the requirements of Section 162(m) will not generally affect our net
income, although to the extent that compensation does not qualify for deduction
under Section 162(m) a larger portion of stockholder distributions may be
subject to federal income taxation as dividend income rather than return of
capital. We do not believe that Section 162(m) will materially affect the
taxability of stockholder distributions, although no assurance can be given in
this regard due to the variety of factors that affect the tax position of each
stockholder. For these reasons, Section 162(m) does not directly govern the
Compensation Committee's compensation policy and practices.
Compensation Committee of the
Board of Directors
/s/ Thomas F. Franke
/s/ Harold J. Kloosterman
/s/ Donald J. McNamara
Compensation of Executive Officers
The following table sets forth, for the years ended December 31, 2002 and
2001, the compensation for services in all capacities to Omega of each person
who served as chief executive officer during the year ended December 31, 2002
and the four most highly compensated executive officers serving at December 31,
2002.
Long-Term Compensation
Annual Compensation Award(s) Payouts
Restricted Securities All
Stock Underlying LTIP Other
Name and Award(s) Options/ Payouts Compensation
Principal Position Year Salary($) Bonus($) ($) SARs(#) ($) ($)(1)
------------------ ---- --------- -------- --- ------- --- ------
C. Taylor Pickett.......... 2002 450,000 191,250 -- -- -- 6,000 (1)
Chief Executive Officer 2001 250,673 250,500 116,000 (2) 1,120,000 -- --
(from June 12, 2001)
Daniel J. Booth............ 2002 275,000 58,438 -- -- -- 4,125 (1)
Chief Operating Officer 2001 58,349 30,000 -- 350,000 -- --
(from October 15, 2001)
R. Lee Crabill, Jr......... 2002 215,000 45,688 -- -- -- 19,285 (4)
Senior Vice President 2001 91,237 45,500 -- 245,000 -- 21,851 (3)
(from July 30, 2001)
Robert O. Stephenson....... 2002 215,000 45,688 -- -- -- 4,300 (1)
Chief Financial Officer 2001 89,583 45,500 -- 325,000 -- --
(from August 1, 2001)
-----------
(1) Consists of contributions to our 401(k) Profit-Sharing Plan.
(2) Represents a restricted stock award of 50,000 shares of our common stock to
Mr. Pickett on June 12, 2001, with shares vesting on June 12, 2003.
(3) Represents compensation to Mr. Crabill for reimbursement of moving
expenses.
(4) Consists of contributions to our 401(k) Profit-Sharing Plan and
compensation to Mr. Crabill for reimbursement of moving expenses.
Compensation and Severance Agreements
C. Taylor Pickett Employment Agreement
We entered into an employment agreement with C. Taylor Pickett dated as of
June 12, 2001, to be our Chief Executive Officer. The term of the agreement
expires on June 12, 2005.
Mr. Pickett's base salary is $450,000 per year, subject to increase by us
and provides that he will be eligible for an annual bonus of up to 100% of his
base salary based on criteria determined by the Compensation Committee of our
Board of Directors. We issued Mr. Pickett 50,000 shares of our restricted common
stock on June 12, 2001, which vest after he has completed two years of service.
In connection with the employment agreement, Mr. Pickett was granted an
incentive stock option to purchase 172,413 shares of our common stock and a
nonqualified stock option to purchase 627,587 shares of our common stock. The
incentive stock option has vested as to 25% of the shares on December 31, 2002;
as to an additional 25% after Mr. Pickett completes two years of service; as to
an additional 25% ratably on a monthly basis in 2004; and as to the final 25%
ratably on a monthly basis in the first six months of 2005, in each case
provided Mr. Pickett continues to work for us on the applicable vesting date.
The nonqualified stock option will become vested as to 50% of the shares after
Mr. Pickett completes two years of service and will become ratably vested as to
the remainder of the shares on a monthly basis over the next 24 months of
service following that two year anniversary.
If we terminate Mr. Pickett's employment without cause or if he resigns for
good reason, he will be entitled to payment of his base salary for a period of
12 months or, if shorter, for the remainder of the term of the agreement.
Additionally, Mr. Pickett will be entitled to payment of an amount equal to the
bonus paid in the prior year, payable in 12 monthly installments. Mr. Pickett is
required to execute a release of claims against us as a condition to the payment
of severance benefits. The vesting of Mr. Pickett's options may be subject to
acceleration upon the occurrence of certain events such as termination without
cause or resignation for good reason and will become fully vested if, within one
year following a change of control, he is terminated without cause or resigns
for good reason.
Mr. Pickett is restricted from using any of our confidential information
during his employment and for two years thereafter or from using any trade
secrets during his employment and for as long thereafter as permitted by
applicable law. Mr. Pickett is subject to covenants which prohibit him from
competing with us and from soliciting our customers or employees while he is
employed by us and for 12 months following his termination of employment.
Daniel J. Booth Employment Agreement
We entered into an employment agreement with Daniel J. Booth effective as
of October 15, 2001, to be our Chief Operating Officer. The term of the
agreement expires on January 1, 2006.
Mr. Booth's base salary is $275,000 per year, subject to increase by us,
and he is eligible for an annual bonus of up to 50% of his base salary based on
criteria determined by the Compensation Committee. In connection with his
employment agreement, Mr. Booth was granted an incentive stock option to
purchase 166,666 shares of our common stock and a nonqualified stock option to
purchase 83,334 shares of our common stock. The incentive stock option has
vested as to 20% of the shares on December 31, 2002; and will vest as to 20% of
the shares on each of October 1, 2003, October 1, 2004, October 1, 2005 and
January 1, 2006, and the nonqualified stock option will vest on October 1, 2003,
provided Mr. Booth continues to work for us on the applicable vesting date.
Our agreement with Mr. Booth contains severance and accelerated option
vesting provisions similar to those in Mr. Pickett's agreement described above.
Mr. Booth is required to execute a release of claims against us as a condition
to the payment of severance benefits. He is also subject to restrictions on his
use of confidential information and our trade secrets that are the same as those
in our agreement with Mr. Pickett described above.
Robert O. Stephenson Employment Agreement
We entered into an employment agreement with Robert O. Stephenson effective
as of August 30, 2001, to be our Chief Financial Officer. The term of the
agreement expires on January 1, 2006.
Mr. Stephenson's base salary is $215,000 per year, subject to increase by
us, and he is eligible for an annual bonus of up to 50% of his base salary based
on criteria determined by the Compensation Committee. In connection with his
employment agreement, Mr. Stephenson was granted an incentive stock option to
purchase 181,155 shares of our common stock and a nonqualified stock option to
purchase 18,845 shares of our common stock. The incentive stock option has
vested as to 20% of the shares on December 31, 2002; and will vest as to 20% of
the shares on each of August 1, 2003, August 1, 2004, August 1, 2005 and January
1, 2006, and the nonqualified stock option will vest on August 1, 2003, provided
Mr. Stephenson continues to work for us on the applicable vesting date.
Our agreement with Mr. Stephenson contains severance and accelerated option
vesting provisions similar to those in Mr. Pickett's agreement described above.
Mr. Stephenson is required to execute a release of claims against us as a
condition to the payment of severance benefits. He is also subject to
restrictions on his use of confidential information and our trade secrets that
are the same as those in our agreement with Mr. Pickett described above.
R. Lee Crabill, Jr. Employment Agreement
We entered into an employment agreement with R. Lee Crabill, Jr. effective
as of July 30, 2001, to be our Senior Vice President of Operations. The term of
the agreement expires on July 30, 2005.
Mr. Crabill's base salary is $215,000 per year, subject to increase by us,
and he is eligible for an annual bonus of up to 50% of his base salary based on
criteria determined by the Compensation Committee. In connection with his
employment agreement, Mr. Crabill was granted an incentive stock option to
purchase 133,333 shares of our common stock and a nonqualified stock option to
purchase 41,667 shares of our common stock. The incentive stock option has
vested as to 25% of the shares on December 31, 2002; and will vest as to 25% of
the shares on each of August 1, 2003, August 1, 2004 and August 1, 2005, and the
nonqualified stock option will vest as to 50% of the shares after Mr. Crabill
completes two years of service and will become ratably vested as to the
remainder of the shares on a monthly basis over the next 24 months of service
following that two year anniversary, provided Mr. Crabill continues to work for
us on the applicable vesting date.
Our agreement with Mr. Crabill contains severance and accelerated option
vesting provisions similar to those in Mr. Pickett's agreement described above.
Mr. Crabill is required to execute a release of claims against us as a condition
to the payment of severance benefits. He is also subject to restrictions on his
use of confidential information and our trade secrets that are the same as those
in our agreement with Mr. Pickett described above.
Option Grants/SAR Grants
There were no options or stock appreciation rights ("SARs") granted to the
named executive officers during 2002.
Aggregated Options/SAR Exercises in Last Fiscal Year and Fiscal Year-End
Option/SAR Values
The following table summarizes options and SARs exercised during 2002 and
presents the value of unexercised options and SARs held by the named executive
officers at December 31, 2002.
Number of Securities In-the-Money
Shares Underlying Unexercised Options/SARs at
Acquired Options/ SARs at Fiscal
on Value Fiscal Year-End(#) Year-End($)
Exercise Realized Unexercisable(U) Unexercisable(U)
Name (#) ($) Exercisable(E) Exercisable(E)
---- --- --- -------------- --------------
C. Taylor Pickett................. -- -- 1,076,897(U) $1,257,194 (U)
43,103 (E) $ 61,206 (E)
Daniel J. Booth................... -- -- 316,667(U) $ 217,334 (U)
33,333 (E) $ 24,666 (E)
R. Lee Crabill, Jr................ -- -- 211,667(U) $ 144,734 (U)
33,333 (E) $ 24,666 (E)
Robert O. Stephenson.............. -- -- 288,769(U) $ 231,744 (U)
36,231 (E) $ 35,506 (E)
Long-Term Incentive Plan
For the period from August 14, 1992, the date of commencement of our
operations, through December 31, 2002, we have had no long-term incentive plans.
Equity Compensation Plan Information
The following table provides information about all equity awards under our
company's 2000 Stock Incentive Plan and 1993 Amended and Restated Stock Option
and Restricted Stock Plan.
(a) (b) (c)
------------------------------------------------------------------------------------------------------------------------------------
Number of securities remaining
Number of securities to be available for future issuance
issued upon exercise of Weighted-average exercise under equity compensation plans
outstanding options, price of outstanding (excluding securities reflected
Plan category warrants and rights options, warrants and rights in column (a))
------------------------------------------------------------------------------------------------------------------------------------
Equity compensation plans
approved by security holders 2,374,501 $3.15 618,489
------------------------------------------------------------------------------------------------------------------------------------
Equity compensation plans
not approved by security
holders -- -- --
------------------------------------------------------------------------------------------------------------------------------------
Total 2,374,501 $3.15 618,489
====================================================================================================================================
Defined Benefit or Actuarial Plan
For the period from August 14, 1992, the date of commencement of our
operations, through December 31, 2002, we have had no pension plans.
COMPARISON OF CUMULATIVE TOTAL RETURN*
Among: Omega Healthcare Investors, Inc.
Hybrid REIT Index**
S&P 500 Index
OHI INDEX HYBRID REITS S&P INDEX
12/31/97 100 100 100
3/31/98 111 93 114
6/30/98 107 86 118
9/30/98 102 71 106
12/31/98 97 66 129
3/31/99 76 56 135
6/30/99 88 62 145
9/30/99 74 53 135
12/31/99 46 42 156
3/31/00 25 41 159
6/30/00 18 48 155
9/30/00 25 50 153
12/31/00 16 47 141
3/31/01 9 57 124
6/30/01 13 68 132
9/30/01 14 67 113
12/31/01 26 71 125
3/31/02 23 82 125
6/30/02 33 85 108
9/30/02 25 84 90
12/31/02 16 88 97
----------
* Total return assumes reinvestment of dividends.
** The Hybrid REIT Index is published by National Association of Real Estate
Investment Trusts, Inc. ("NAREIT"), Washington, D.C. It is comprised of
Hybrid REITs (REITs who both own properties and make loans to real estate
owners and operators) traded on the New York Stock Exchange and the
American Stock Exchange. A list of those REITs is available by request to
us or NAREIT.
THIS GRAPH REPRESENTS HISTORICAL STOCK PRICE PERFORMANCE AND IS NOT
NECESSARILY INDICATIVE OF ANY FUTURE STOCK PRICE PERFORMANCE.
THE REPORTS OF THE COMPENSATION COMMITTEE AND THE AUDIT COMMITTEE AND THE
PERFORMANCE GRAPH THAT APPEARS ABOVE SHALL NOT BE DEEMED TO BE SOLICITING
MATERIAL OR TO BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE
SECURITIES ACT OF 1933 OR THE SECURITIES EXCHANGE ACT OF 1934 OR INCORPORATED BY
REFERENCE IN ANY DOCUMENT SO FILED.
CERTAIN TRANSACTIONS
Explorer Holdings, L.P.
Explorer owns 1,048,420 shares of Series C preferred stock and 12,539,078
shares of our common stock, representing 54.4% of our outstanding voting power
as of February 28, 2003. Daniel A. Decker, our Chairman of the Board of
Directors, is a partner of the investment partnership that controls Explorer.
Donald J. McNamara, the Chairman of such partnership, is also one of our
directors. Christopher W. Mahowald is one of our directors and holds an equity
investment in Explorer. Explorer is currently entitled to designate a majority
of the members of our Board of Directors pursuant to our Stockholders Agreement
with Explorer. (See "Stockholders Agreement with Explorer Holdings, L.P.")
Series C Investment Agreement. Under the terms of an investment agreement dated
May 11, 2000 between us and Explorer in connection with Explorer's purchase of
Series C preferred stock and an investment agreement dated October 25, 2001
between us and Explorer in connection with Explorer's additional investment, we
agreed to reimburse Explorer for its out-of-pocket expenses, up to a maximum
amount of $2.5 million, incurred in connection with the Series C investment and
up to $1.0 million incurred in connection with Explorer's additional investment.
To date, we have reimbursed Explorer for approximately $2.2 million of these
expenses including $0.4 million in 2002.
Advisory Agreement. Under the terms of an amended and restated advisory
agreement dated October 4, 2000 between us and an affiliate of Explorer, we have
agreed to pay Explorer an advisory fee if such affiliate provides assistance to
us in connection with the evaluation of growth opportunities or other financing
matters. On June 1, 2001, in connection with such affiliate's 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 assist in efforts to manage our
capitalization and liquidity, we agreed to pay such affiliate a fee equal to 1%
of the aggregate amount of our indebtedness that is refinanced, repaid or
extended, 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. Upon the
closing of the rights offering and Explorer's investment on February 21, 2002,
such affiliate had fulfilled all of its obligations under the agreement and was
paid the $3.1 million.
Direct Expenses. In addition to the Series C Investment costs and the advisory
fee costs of $3.1 million, we agreed to reimburse Explorer for Explorer's direct
expenses. To date, we have reimbursed Explorer for approximately $0.6 million of
such direct expenses, including $12,000 in 2002.
Dividend and Governance Right Deferral. We entered into a dividend deferral
letter agreement dated November 15, 2000 with Explorer relating to the extension
of the dividend payment payable in connection with our Series C preferred stock
for the dividend period ended October 31, 2000. The deferral period expired on
April 2, 2001. The amount of the deferred dividend payment was $4.67 million
representing the total unpaid preferential cumulative dividend for the October
2000 dividend. In exchange for the deferral, we also agreed to pay Explorer a
fee equal to 10% of the daily unpaid principal balance of the unpaid dividend
amount from November 15, 2000 until the dividend was paid. Under certain
circumstances, the portion of the unpaid dividend amount and fee which is not
paid in cash may be payable with additional shares of Series C preferred stock.
Shares of Series C preferred stock issued pursuant to this agreement are valued
at $100 per share, the stated per share liquidation preference, and are
convertible into our common stock at $6.25 per share. In consideration of the
payment of the deferral fee, Explorer agreed that the deferral of the subject
dividend would not be considered an unpaid dividend and, as a result, the
October 31, 2000 dividend period will not be included in the determination of
when Explorer's right to elect additional directors will vest. In full payment
of our obligations under the dividend deferral letter agreement, we issued
48,420 shares of Series C preferred stock to Explorer on April 2, 2001.
Omega Worldwide
Services Agreement. We entered into a services agreement with Omega Worldwide,
Inc. ("Worldwide") which provided for the allocation of indirect costs incurred
by us to Worldwide. The allocation of indirect costs was based on the
relationship of assets under our management to the combined total of those
assets and assets under Worldwide's management. Upon expiration of this
agreement on June 30, 2000, we entered into a new agreement requiring quarterly
payments from Worldwide of $37,500 for the use of offices and administrative and
financial services provided by us. Upon the reduction of our accounting staff,
the services agreement was renegotiated again on November 1, 2000 requiring
quarterly payments from Worldwide of $32,500. Costs allocated to Worldwide for
2001 and 2000 were $130,000 and $404,000, respectively. The former services
agreement expired in November 2001.
AUDIT COMMITTEE MATTERS
The Board of Directors has adopted a written charter for the Audit
Committee, a copy of which is included with our definitive proxy statement for
the 2001 Annual Meeting of Stockholders, which was filed on April 18, 2001 with
the Securities and Exchange Commission pursuant to Regulation 14A. The Board of
Directors reviews the Audit Committee Charter annually and is in the process of
updating the Audit Committee Charter.
Each of the members of our Audit Committee meets the requirements for
independence as defined by the standards of the New York Stock Exchange.
Audit Committee Report
The Audit Committee, with respect to the audit of Omega's 2002 audited
Consolidated Financial Statements, reports as follows:
1) The Audit Committee has reviewed and discussed Omega's 2002 audited
Consolidated Financial Statements with the company's management;
2) The Audit Committee has discussed with Ernst & Young LLP the matters
required to be discussed by SAS 61, which include, among other items,
matters related to the conduct of the audit of Omega's Consolidated
Financial Statements;
3) The Audit Committee has received written disclosures and the letter
from Ernst & Young LLP required by ISB Standard No. 1 (which relates
to the auditor's independence from Omega and its related entities) and
has discussed with Ernst & Young LLP its independence from Omega; and
4) Based on reviews and discussions of Omega's 2002 audited Consolidated
Financial Statements with management and discussions with Ernst &
Young LLP, the Audit Committee recommended to the Board of Directors
that Omega's 2002 audited Consolidated Financial Statements be
included in the company's Annual Report on Form 10-K.
Audit Committee of the Board of Directors
/s/ Bernard J. Korman
/s/ Harold J. Kloosterman
/s/ Stephen D. Plavin
RELATIONSHIP WITH INDEPENDENT AUDITORS
Independent Auditors
Ernst & Young LLP audited our financial statements for each of the years
ended December 31, 2000, 2001 and 2002. Representatives of Ernst & Young LLP are
expected to be present at the Annual Meeting and will be given the opportunity
to make a statement if they desire to do so. It is also expected that they will
be available to respond to appropriate questions from stockholders at the Annual
Meeting.
Audit Fees
The aggregate fees billed by Ernst & Young LLP for professional services
rendered to our company for the audit of the company's annual financial
statements for fiscal year 2001 and 2002 and the reviews of the financial
statements included in the company's Forms 10-Q for fiscal years 2001 and 2002
were approximately $193,000 and $216,000, respectively.
Audit-Related Fees
The aggregate fees billed by Ernst & Young LLP for professional services to
our company relating to employee benefit audits, due diligence related to
mergers and acquisitions, accounting consultations and audits in connection with
acquisitions, internal control reviews, attest services that are not required by
statute or regulation and consultation concerning financial accounting and
reporting standards, taken as a whole, were $0 for fiscal years 2001 and 2002.
Tax Fees
The aggregate fees billed by Ernst & Young LLP for professional services to
our company relating to tax compliance, tax planning and tax advice, taken as a
whole, were approximately $174,000 and $149,000 for fiscal years 2001 and 2002,
respectively.
Other Fees
The aggregate fees billed by Ernst & Young LLP for professional services to
our company rendered other than as stated under the captions "Audit Fees,"
"Audit-Related Fees" and "Tax Fees" above for fiscal years 2001 and 2002 were
approximately $4,000 and $71,000, respectively. We reimbursed certain fees and
expenses of an investment banking firm selected to act as placement agent in
connection with a planned commercial mortgage-backed securities ("CMBS")
transaction pursuant to our agreement with the placement agent. We were unable
to complete the proposed CMBS transaction due to the impact on our operators
resulting from reductions in Medicare reimbursement and concerns about potential
Medicaid rate reductions. The placement agent engaged the transaction support
group based in a different office of Ernst & Young LLP to provide the placement
agent with certain procedures agreed upon by Ernst & Young LLP and the placement
agent. Among the placement agent expenses that were reimbursed by us were $1.2
million for services provided to the placement agent by Ernst & Young LLP.
Determination of Auditor Independence
The Audit Committee has considered the provision of non-audit services by
our principal accountants and has determined that the provision of such services
was consistent with maintaining the independence of Ernst & Young LLP.
Audit Committee's Pre-Approval Policies
The Audit Committee's current practice is to pre-approve all audit services
and all permitted non-audit services to be provided to our company by our
independent auditor; provided, however pre-approval requirements for non-audit
services are not required if all such services (1) do not aggregate to more than
5% of total revenues paid by us to our accountant in the fiscal year when
services are provided; (2) were not recognized as non-audit services at the time
of the engagement; and (3) are promptly brought to the attention of the Audit
Committee and approved prior to the completion of the audit by the Audit
Committee.
STOCKHOLDER PROPOSALS
November 7, 2003 is the date by which proposals of stockholders intended to
be presented at the 2004 Annual Meeting of Stockholders must be received by us
for inclusion in our proxy statement and form of proxy relating to that meeting.
In addition, our Bylaws provide that in order for business to be brought
before the Annual Meeting, a stockholder must deliver or mail written notice to
our Secretary at our principal executive office not less than 60 days nor more
than 90 days prior to the first anniversary of the preceding year's Annual
Meeting, provided, however, that if the date of the Annual Meeting is advanced
by more than 30 days or delayed by more than 60 days from such anniversary date,
notice must be delivered not more than 90 days prior to such Annual Meeting nor
less than 60 days prior to such Annual Meeting or if later, not later than the
close of business on the tenth day following the day on which the date of such
meeting is publicly announced. The notice must state the stockholder's name,
address, class and number of shares of our stock and briefly describe the
business to be brought before the meeting, the reasons for conducting such
business at the meeting and any material interest of the stockholder and of the
beneficial owner, if any, on whose behalf the proposal is made. If the
stockholder intends to nominate a candidate for election as a director, in
addition to the requirements set forth above, the notice should include the name
of the nominee for election as a director, the age of the nominee, the nominee's
business address and experience during the past five years, the number of shares
of our stock beneficially held by the nominee, and such other information
concerning the nominee as would be required to be included in a proxy statement
soliciting proxies for the election of the nominee. The notice must also include
a description of all arrangements or understandings between such stockholder and
each proposed nominee and any other person pursuant to which the nominations are
to be made by such stockholder, a representation that such stockholder intends
to appear in person or by proxy at the meeting to nominate the person named in
the notice, and the consent of the nominee to serve as a director.
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 Shareholder
Communications, Inc. to solicit proxies for a fee not to exceed $10,000, plus
out-of-pocket expenses.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
To our knowledge, all filings required under Section 16 of the Securities
Exchange Act of 1934 were made on a timely basis, except that three transactions
for Christopher W. Mahowald were not timely reported on a Form 4. The foregoing
transactions were subsequently reported.
OTHER MATTERS
The Board of Directors knows of no other business that may be validly
presented at the Annual Meeting, but if other matters do properly come before
the Annual Meeting, it is intended that the persons named in the proxy will vote
on said matters in accordance with their best judgment.
/s/ C. TAYLOR PICKETT
Chief Executive Officer
March 3, 2003
Timonium, Maryland
OMEGA HEALTHCARE INVESTORS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROXY
The undersigned hereby appoints Robert O. Stephenson and Thomas H. Peterson 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
March 5, 2003 at the Annual Meeting of Stockholders to be held on April 3, 2003
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 Election of Directors
NOMINEES:
Daniel A. Decker, Thomas F. Franke and Bernard J. Korman
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" Proposal 1.
FOR AGAINST ABSTAIN
1. The Election of Directors [ ] [ ] [ ]
NOMINEES:
Daniel A. Decker, Thomas F. Franke and Bernard J. Korman.
(Instruction: To withhold authority to vote for any individual nominee,
write that nominee's name here.)
--------------------------------------------------------------------------------
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 Annual 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.
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