SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. __)
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Check the appropriate box:
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[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 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.
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
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or the Form of Schedule and the date of its filing.
(1) Amount previously paid:____________________________________________________
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(4) Date filed:________________________________________________________________
OMEGA HEALTHCARE INVESTORS, INC.
9690 DEERECO ROAD, SUITE 100
TIMONIUM, MARYLAND 21093
(410) 427-1700
---------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JUNE 3, 2004
----------------
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, June 3, 2004, at 10:00 A.M.
EST, for the following purposes:
1. To elect two members to our Board of Directors;
2. To consider and vote upon a proposal to amend our Articles of
Incorporation to increase the number of authorized shares of our
preferred stock from 10,000,000 to 20,000,000 shares;
3. To approve the Omega Healthcare Investors, Inc. 2004 Stock Incentive
Plan; and
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The nominees for election as directors are Edward Lowenthal and Stephen D.
Plavin, each of whom presently serves as a director of Omega.
Our Board of Directors has fixed the close of business on April 26, 2004 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 Omega's Board of Directors,
/s/ C. TAYLOR PICKETT
C. Taylor Pickett
Chief Executive Officer
April 27, 2004
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
JUNE 3, 2004
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, June 3, 2004, and any adjournments of the meeting. It is anticipated
that this proxy material will be mailed on or about April 30, 2004, to our
common stockholders of record on April 26, 2004.
A copy of our Annual Report for the year ended December 31, 2003, 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 April 26, 2004, the record date, there were 46,327,948 of outstanding
shares of common stock, par value $.10 per share. Each holder of shares of
common stock is entitled to one vote per share on all matters properly brought
before the Annual 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 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. The proposal to amend our Articles of Incorporation
to increase the number of shares of authorized and issuable shares of preferred
stock must be approved by the affirmative vote of a majority of the shares of
issued and outstanding common stock voting together as a class. In order for the
2004 Stock Incentive Plan to be approved, the number of "for" votes cast at the
meeting for this proposal must be at least a majority of all votes cast
(including both "against" votes and abstentions) and the total number of votes
cast with respect to this proposal (regardless of whether they are "for" votes,
"against" votes or abstentions) must represent more than 50% of all of the
shares entitled to vote on the proposal.
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.
The New York Stock Exchange treats "for" votes, "against" votes and abstentions
as votes cast, but does not treat "broker non-votes" as votes cast. A so-called
"broker non-vote" occurs when a broker, holding stock as nominee, does not
receive voting instructions from the beneficial owner. 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. Because the proposals to amend our Articles
of Incorporation and to approve the 2004 Stock Incentive Plan are non-routine
matters under New York Stock Exchange rules, brokerage firms, banks and other
nominees who hold shares on behalf of their clients in "street name" are not
permitted to vote the shares if their clients do not provide instructions
(either vote "for," or vote "against" or "abstain") on each of these proposals.
Accordingly, if a majority of the shares entitled to vote are recorded as
"broker non-votes" on any of these proposals, such proposals will not be
approved even if all of the shares voted are "for" votes.
As of the record date, our directors and executive officers beneficially
owned 1,713,871 shares of our common stock (representing 3.7% of the votes
entitled to be cast at the meeting).
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 six 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, two directors will be elected by the holders of our
common stock to hold office for a term of three years or, in each case, until
their respective successors have been duly elected and qualified.
Our Board of Directors has nominated Edward Lowenthal and Stephen D. Plavin
for election as 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.
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 two nominees.
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
-----------------------------------------------------------------------------------------------------
Edward Lowenthal (59)............. 1995 Mr. Lowenthal is a Director and has 2004
served in this 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., 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.
Stephen D. Plavin (44)............ 2000 Mr. Plavin is a Director and has served 2004
in this 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.
CONTINUING DIRECTORS
YEAR
FIRST
BECAME A TERM TO
DIRECTORS DIRECTOR BUSINESS EXPERIENCE DURING PAST 5 YEARS EXPIRE IN
-----------------------------------------------------------------------------------------------------
Bernard J. Korman (72)............ 1993 Mr. Korman is Chairman of the Board and 2006
has served in this capacity since March
8, 2004. Mr. Korman has been Chairman of
the Board of Trustees of Philadelphia
Health Care Trust, a private healthcare
foundation, since December 1995 and
Chairman of the Board of The Pep Boys,
Inc. since May 28, 2003. 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 previously a
director of Omega Worldwide, Inc.
Thomas F. Franke (74)........... 1992 Mr. Franke is a Director and has served 2006
in this 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 a private healthcare
firm operating in the United States and
is a principal owner of a private hotel
firm in the United Kingdom. Mr. Franke
was a founder and previously a director
of Principal Healthcare Finance Limited
and Omega Worldwide, Inc.
Harold J. Kloosterman (62)...... 1992 Mr. Kloosterman is a Director and has 2005
served in 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.
C. Taylor Pickett (42).......... 2002 Mr. Pickett is the Chief Executive 2005
Officer and has 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 previously a
director of Omega Worldwide, Inc.
RECOMMENDATION
Our Board of Directors unanimously recommends a vote FOR the election of Messrs.
Lowenthal and Plavin.
PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding beneficial ownership
of our capital stock as of March 31, 2004:
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.
COMMON STOCK SERIES A PREFERRED SERIES B PREFERRED SERIES D PREFERRED
PERCENT PERCENT PERCENT PERCENT
NUMBER OF OF NUMBER OF OF NUMBER OF OF NUMBER OF OF
BENEFICIAL OWNER SHARES CLASS(1) SHARES CLASS(13) SHARES CLASS(14) SHARES CLASS(15)
------------------------------------------------------------------------------------------------------------------------------------
C. Taylor Pickett............. 656,518 (2) 1.4% -- -- -- -- -- --
Daniel J. Booth............... 79,069 (3) 0.2% -- -- -- -- -- --
R. Lee Crabill, Jr............ 91,861 (4) 0.2% -- -- -- -- -- --
Robert O. Stephenson.......... 109,841 (5) 0.2% -- -- -- -- -- --
Thomas F. Franke.............. 67,834 (6)(7) 0.1% 3,400 0.1% 2,000 0.1% -- --
Harold J. Kloosterman......... 106,594 (8)(9) 0.2% -- -- -- -- -- --
Bernard J. Korman............. 548,080 (7) 1.2% 200 * 1,300 0.1% -- --
Edward Lowenthal.............. 31,221 (10) * -- -- 100 * -- --
Stephen D. Plavin............. 22,853 (11) * -- -- -- -- -- --
Directors and executive
officers as a group (9
persons)...................... 1,713,871 (12) 3.7% 3,600 0.2% 3,400 0.2% -- --
5% BENEFICIAL OWNERS:
None
-----------
* Less than 0.10%
(1) Based on 46,327,624 shares of our common stock outstanding as of March 31,
2004.
(2) Includes stock options that are exercisable within 60 days to acquire
267,296 shares.
(3) Includes stock options that are exercisable within 60 days to acquire 8,333
shares.
(4) Includes stock options that are exercisable within 60 days to acquire 5,833
shares.
(5) Includes stock options that are exercisable within 60 days to acquire 2,604
shares.
(6) Includes 47,141 shares owned by a family limited liability company (Franke
Family LLC) of which Mr. Franke is a member.
(7) Includes stock options that are exercisable within 60 days to acquire 5,000
shares.
(8) Includes shares owned jointly by Mr. Kloosterman and his wife, and 35,206
shares held solely in Mr. Kloosterman's wife's name.
(9) Includes stock options that are exercisable within 60 days to acquire 6,999
shares.
(10) Includes stock options that are exercisable within 60 days to acquire 8,001
shares.
(11) Includes stock options that are exercisable within 60 days to acquire
11,999 shares.
(12) Includes stock options that are exercisable within 60 days to acquire
321,065 shares.
(13) Based on 2,300,000 shares of Series A preferred stock outstanding on March
31, 2004.
(14) Based on 2,000,000 shares of Series B preferred stock outstanding on March
31, 2004.
(15) Based on 4,739,500 shares of Series D preferred stock outstanding on March
31, 2004.
DIRECTORS AND OFFICERS OF OUR COMPANY
BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
In connection with the sale of Explorer Holdings, L.P.'s ("Explorer")
shares of Omega common stock in March 2004, we terminated the Stockholders
Agreement with Explorer, pursuant to which Explorer had the right to designate a
certain number of directors to our Board. Following the sale of Explorer's
shares of Omega common stock, Messrs. Decker, Erickson, Mahowald and McNamara,
each of whom were designees of Explorer, resigned from our Board of Directors.
As a result of the resignations of the foregoing directors, our Board of
Directors reduced the size of our Board from ten members to six and appointed
Mr. Korman to serve as the non-executive Chairman of our Board of Directors. Mr.
Decker previously served in that capacity.
The members of our Board of Directors on the date of this proxy statement,
and the committees of our Board on which they serve, are identified below.
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NOMINATING AND
CORPORATE
DIRECTOR AUDIT COMPENSATION INVESTMENT GOVERNANCE
COMMITTEE COMMITTEE COMMITTEE COMMITTEE
-------------------------------------------------------------------------------------------------------------
Thomas F. Franke........ XX X
-------------------------------------------------------------------------------------------------------------
Harold J. Kloosterman... X X XX XX
-------------------------------------------------------------------------------------------------------------
Bernard J. Korman *..... X X X
-------------------------------------------------------------------------------------------------------------
Edward Lowenthal........ X X X
-------------------------------------------------------------------------------------------------------------
C. Taylor Pickett....... X
-------------------------------------------------------------------------------------------------------------
Stephen D. Plavin....... XX X X
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* Chairman of the Board
XX Chairman of the Committee
X Member
Our Board of Directors held nine meetings during 2003. All members of our
Board of Directors attended more than 75% of our Board of Directors or Committee
meetings held during 2003. A majority of the members of the Board of Directors
meets the New York Stock Exchange listing standards for independence. Each of
the members of the Audit Committee, Compensation Committee and Nominating and
Corporate Governance Committee meets the New York Stock Exchange listing
standards for independence. While we encourage our directors to attend our
Annual Meeting of Stockholders, we currently do not have a formal policy
regarding director attendance. None of our directors attended the 2003 Annual
Meeting of Stockholders.
AUDIT COMMITTEE
The Audit Committee met four times in 2003. Its primary function is to
assist our 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 our Board of Directors. On April 20, 2004, our Board of
Directors adopted a revised Audit Committee Charter, a copy of which is attached
to this proxy statement as Appendix A and will be available on our website at
www.omegahealthcare.com.
Each of the members of the Audit Committee is financially literate, as
required of audit committee members by the New York Stock Exchange. Our Board
has determined that Mr. Plavin is qualified to serve as an "audit committee
financial expert" as such term is defined in Item 401 (h) of Regulation S-K
promulgated by the SEC. The Board made a qualitative assessment of Mr. Plavin's
level of knowledge and experience based on a number of factors, including his
formal education and his experience as Chief Operating Officer of Capital Trust,
Inc., a New York City-based mortgage REIT and investment management company,
where his is responsible for all lending and portfolio management activities.
Mr. Plavin holds an M.B.A. from J.L. Kellogg Graduate School of Management at
Northwestern University.
COMPENSATION COMMITTEE
The Compensation Committee met four times during 2003 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 responsibilities of the Compensation Committee are more
fully described in its charter, which will be made available on our website.
On March 26, 2004, our Board of Directors selected the members of the
Compensation Committee for the coming year, as shown in the table above.
INDEPENDENT DIRECTORS COMMITTEE
The Independent Directors Committee met six times during 2003 and has
responsibility for passing upon those issues with respect to which a conflict
may have existed between us and Explorer. Since Explorer is no longer a related
party, the Independent Directors Committee no longer exists as a separate
committee. See "Nominating and Corporate Governance Committee" below.
INVESTMENT COMMITTEE
Our Board of Directors did not have a standing Investment Committee in
2003. On March 26, 2004, our Board of Directors selected members of the
Investment Committee for the coming year, as shown in the table above. Its
primary function is to assist our Board of Directors in developing strategies in
growing our portfolio.
NOMINATING AND CORPORATE GOVERNANCE COMMITTEE
Our Board of Directors did not have a standing Nominating and Corporate
Governance Committee in 2003 and the functions that would typically be performed
by this Committee were performed by the entire Board of Directors. On February
18, 2004, our Board of Directors selected members of the Nominating and
Corporate Governance Committee for the coming year, as shown in the table above.
This Committee identifies potential nominees to our Board of Directors and
reviews their qualifications and experience. The process for identifying and
evaluating nominees to our Board is initiated by identifying candidates who meet
the criteria for selection as a nominee and have the specific qualities or
skills being sought based on input from members of our Board and, if the
Nominating and Corporate Governance Committee deems appropriate, a third-party
search firm. Nominees for director are selected based on their depth and breadth
of experience, industry experience, financial background, integrity, ability to
make independent analytical inquiries and willingness to devote adequate time to
director duties, among other criteria. The Committee also develops and
implements policies and practices relating to corporate governance.
The Nominating and Corporate Governance Committee will consider written
proposals from stockholders for nominees as director. Any such nomination should
be submitted to the Nominating and Corporate Governance Committee through our
Secretary in accordance with the procedures and time frame described in our
Bylaws and as set forth under "Stockholder Proposals" below.
COMMUNICATING WITH THE BOARD OF DIRECTORS
Our Board of Directors provides a process for stockholders to communicate
with them. Interested stockholders may contact our directors by writing to them
at our headquarters: Omega Healthcare Investors, Inc., 9690 Deereco Road, Suite
100, Timonium, Maryland 21093, or by contacting them through our website at
www.omegahealthcare.com. Communications addressed to our Board of Directors will
be reviewed by our Secretary or Chief Financial Officer and directed to the
appropriate director or directors for their consideration.
CORPORATE GOVERNANCE MATERIALS
Our Corporate Governance Guidelines, Code of Business Conduct and the
charters of the Audit Committee, Compensation Committee and Nominating and
Corporate Governance Committee will be made available through our website at
www.omegahealthcare.com.
COMPENSATION OF DIRECTORS
For the year ended December 31, 2003, each non-employee director received a
cash payment equal to $15,000 per year, payable in quarterly installments of
$3,750. 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
$3,750 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. At the director's option, the quarterly cash payment of director's fees may
be payable in shares of common stock. In addition, each non-employee director
was entitled to receive fees equal to $1,500 per meeting for attendance at each
regularly scheduled meeting of our Board of Directors. For each teleconference
or called special meeting of our Board of Directors, each non-employee director
received $1,500 for meetings. 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.
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.
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 2003, 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 100.0% of such employee's maximum potential bonus.
LONG TERM INCENTIVES
In 2003, the Committee did not make any grants under its 2000 Stock
Incentive Plan or its 1993 Deferred Compensation Plan.
2003 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, 2003, the Committee awarded Mr.
Pickett an annual cash bonus of $463,500, an amount equal to 100.0% 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 during 2003, 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 $1.0 million to any of the named executive
officers unless the compensation is paid pursuant to a plan which is
performance-related, non-discretionary and has been approved by our
stockholders. We did not pay any compensation during 2002 that would be subject
to Section 162(m). We believe that, because we qualify as a REIT under the
Internal Revenue Code and therefore are not subject to federal income taxes on
our income to the extent distributed, the payment of compensation that does not
satisfy the requirements of Section 162(m) will not generally affect our net
income, although to the extent that compensation does not qualify for deduction
under Section 162(m) a larger portion of stockholder distributions may be
subject to federal income taxation as dividend income rather than return of
capital. We do not believe that Section 162(m) will materially affect the
taxability of stockholder distributions, although no assurance can be given in
this regard due to the variety of factors that affect the tax position of each
stockholder. For these reasons, Section 162(m) does not directly govern the
Compensation Committee's compensation policy and practices.
Compensation Committee of the Board of Directors
/s/ Thomas F. Franke
/s/ Harold J. Kloosterman
/s/ Bernard J. Korman
/s/ Edward Lowenthal
/s/ Stephen D. Plavin
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth, for the years ended December 31, 2003, 2002
and 2001, the compensation for services in all capacities to us of each person
who served as chief executive officer during the year ended December 31, 2003
and the four most highly compensated executive officers serving at December 31,
2003.
LONG-TERM COMPENSATION
ANNUAL COMPENSATION AWARD(S) PAYOUTS
------------------- ------- -------
RESTRICTED SECURITIES ALL
STOCK UNDERLYING LTIP OTHER
NAME AND AWARD(S) OPTIONS/ PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($) SARS(#) ($) ($)(1)
------------------------------------------------------------------------------------------------------------------------------------
C. Taylor Pickett.......... 2003 463,500 463,500 -- -- -- 6,000 (1)
Chief Executive Officer 2002 450,000 191,250 -- -- -- 6,000 (1)
(from June 12, 2001) 2001 250,673 250,500 116,000 (2) 1,120,000 -- --
Daniel J. Booth............ 2003 283,250 141,625 -- -- -- 6,000 (1)
Chief Operating Officer 2002 275,000 58,438 -- -- -- 4,125 (1)
(from October 15, 2001) 2001 58,349 30,000 -- 350,000 -- --
R. Lee Crabill, Jr......... 2003 221,450 110,750 -- -- -- 6,000 (1)
Senior Vice President 2002 215,000 45,688 -- -- -- 19,285 (4)
(from July 30, 2001) 2001 91,237 45,500 -- 245,000 -- 21,851 (3)
Robert O. Stephenson....... 2003 221,450 110,750 -- -- -- 6,000 (1)
Chief Financial Officer 2002 215,000 45,688 -- -- -- 4,300 (1)
(from August 1, 2001) 2001 89,583 45,500 -- 325,000 -- --
-----------
(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, which vested 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. In connection with this employment agreement, we issued Mr.
Pickett 50,000 shares of our restricted common stock on June 12, 2001, which
vested during 2003. 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 40% of the shares on December 31, 2003; and will vest as to 20% of
the shares on each of October 1, 2004, October 1, 2005 and January 1, 2006, and
the nonqualified stock option vested on October 1, 2003, provided that 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 40% of the shares on December 31, 2003; and will vest as to 20% of
the shares on each of August 1, 2004, August 1, 2005 and January 1, 2006, and
the nonqualified stock option vested on August 1, 2003, provided that 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 $215,000 per year, subject to increase by us,
and he is eligible for an annual bonus of up to 50% of his base salary based on
criteria determined by the Compensation Committee. In connection with his
employment agreement, Mr. Crabill was granted an incentive stock option to
purchase 133,333 shares of our common stock and a nonqualified stock option to
purchase 41,667 shares of our common stock. The incentive stock option has
vested as to 50% of the shares on December 31, 2003; and will vest as to 25% of
the shares on each of August 1, 2004 and August 1, 2005, and the nonqualified
stock option will vest as to 50% of the shares after Mr. Crabill completes two
years of service and will become ratably vested as to the remainder of the
shares on a monthly basis over the next 24 months of service following that two
year anniversary, provided Mr. Crabill continues to work for us on the
applicable vesting date.
Our agreement with Mr. Crabill contains severance and accelerated option
vesting provisions similar to those in Mr. Pickett's agreement described above.
Mr. Crabill is required to execute a release of claims against us as a condition
to the payment of severance benefits. He is also subject to restrictions on his
use of confidential information and our trade secrets that are the same as those
in our agreement with Mr. Pickett described above.
OPTION GRANTS/SAR GRANTS
There were no options or stock appreciation rights ("SARs") granted to the
named executive officers during 2003.
AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
The following table summarizes options and SARs exercised during 2003 and
presents the value of unexercised options and SARs held by the named executive
officers at December 31, 2003.
NUMBER OF VALUE OF
SECURITIES UNEXERCISED
UNDERLYING IN-THE-MONEY
SHARES UNEXERCISED OPTIONS/SARS AT
ACQUIRED OPTIONS/ SARS AT FISCAL
ON VALUE FISCAL YEAR-END (#) YEAR-END ($)
EXERCISE REALIZED UNEXERCISABLE (U) UNEXERCISABLE (U)
NAME (#) ($) EXERCISABLE (E) EXERCISABLE (E)
----------------------------------------------------------------------------------------------------
C. Taylor Pickett........... 20,000 110,000 468,219(U) $ 3,157,548(U)
-- -- 631,781(E) $ 4,281,452(E)
Daniel J. Booth............. -- -- 145,833(U) $ 915,331(U)
-- -- 204,167(E) $ 1,283,169(E)
R. Lee Crabill, Jr.......... -- -- 98,750(U) $ 619,633(U)
-- -- 146,250(E) $ 919,317(E)
Robert O. Stephenson........ -- -- 165,985(U) $ 1,067,032(U)
-- -- 159,015(E) $ 1,016,968(E)
LONG-TERM INCENTIVE PLAN
For the period from August 14, 1992, the date of commencement of our
operations, through December 31, 2003, 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 as of December 31, 2003.
------------------------------------------------------------------------------------------------------------
(a) (b) (c)
------------------------------------------------------------------------------------------------------------
Number of securities
Number of securities remaining available for
to be issued upon Weighted-average future issuance under
exercise of exercise price of equity compensation plans
Plan category outstanding options, outstanding options, (excluding securities
warrants and rights warrants and rights reflected in column (a))
------------------------------------------------------------------------------------------------------------
Equity compensation
plans approved by
security holders 2,282,630 $3.20 566,332
------------------------------------------------------------------------------------------------------------
Equity compensation
plans not approved by
security holders -- -- --
------------------------------------------------------------------------------------------------------------
Total 2,282,630 $3.20 566,332
------------------------------------------------------------------------------------------------------------
DEFINED BENEFIT OR ACTUARIAL PLAN
For the period from August 14, 1992, the date of commencement of our
operations, through December 31, 2003, 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
--------- ------------ ---------
12/31/98 100 100 100
3/31/99 78 85 105
6/30/99 91 94 112
9/30/99 76 80 105
12/31/99 48 64 121
3/31/00 26 62 124
6/30/00 18 73 121
9/30/00 26 75 119
12/31/00 17 72 110
3/31/01 10 86 97
6/30/01 13 104 103
9/30/01 15 102 88
12/31/01 27 108 97
3/31/02 23 124 97
6/30/02 34 129 84
9/30/02 26 127 70
12/31/02 17 133 76
3/31/03 10 137 73
6/30/03 23 174 84
9/30/03 13 189 87
12/31/03 16 208 79
----------
* 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.
PROPOSAL 2 - PROPOSAL TO AMEND OUR ARTICLES OF INCORPORATION TO INCREASE
NUMBER OF AUTHORIZED SHARES OF PREFERRED STOCK
Our Board of Directors has approved, deems advisable and recommends that
our stockholders vote in favor of, an amendment to Article IV, Section 1 of the
Articles of Incorporation increasing the authorized preferred stock from
10,000,000 to 20,000,000 shares (the "Preferred Stock Amendment"). The full text
of the Preferred Stock Amendment is set forth as part of Appendix B and is
incorporated by reference.
We presently have outstanding or reserved for issuance the following series
of non-voting preferred stock:
Shares Shares Liquidation
Series Authorized Outstanding Preference
-------------------------------------------------------------
Series A(1) 3,000,000 2,300,000 $25
Series B 2,000,000 2,000,000 $25
Series D 4,739,500 4,739,500 $25
(1) We have notified holders of our Series A Cumulative Preferred Stock
that, effective April 30, 2004, we will redeem such shares at the per
share redemption price of $25.00, plus all accrued and unpaid
dividends.
Following the redemption of the Series A Cumulative Preferred Stock on
April 30, 2003, we intend to re-classify the 3,000,000 shares of Series A
Cumulative Preferred Stock as preferred stock without designation as to class or
series, and such shares would be available for designation and issuance in the
future.
PURPOSE AND EFFECT OF THE PREFERRED STOCK AMENDMENT
Our Board of Directors has authority to issue shares of authorized
preferred stock in one or more classes or series having such rights and
preferences as may be determined by the Board, subject to the limits provided by
Maryland law, including dividend rights and rights upon liquidation, and any
conversion, redemption, sinking fund or voting rights. No stockholder approval
is required for the issuance of authorized shares of preferred stock except to
the extent mandated by rules of the New York Stock Exchange or any other
exchange on which our common stock is then listed for trading. All shares of
preferred stock must be senior to all common stock in the payment of dividends
and/or upon liquidation. Holders of preferred stock are not entitled, as a
matter of right, to preemptive rights or rights to subscribe for any other of
our securities. Prior to the issuance of shares of any class or series, Articles
Supplementary establishing the class or series and determining its relative
rights and preferences must be filed with the Maryland State Department of
Assessments and Taxation as part of an Articles of Amendment to the Articles of
Incorporation. If the Preferred Stock Amendment is adopted, it will become
effective upon filing of the Articles of Amendment with the Maryland State
Department of Assessments and Taxation.
The ability of our Board of Directors to issue separate classes or series
of preferred stock provides flexibility to tailor senior securities in response
to terms specifically negotiated by investors. Our Board of Directors wishes to
preserve maximum flexibility to issue preferred stock in public offerings, in
private transactions with institutional investors or in the acquisition of
income-producing properties when the investor wishes to hold a senior security.
In order to maintain its status as a real estate investment trust for federal
income tax purposes, we are required to distribute 90% of its REIT taxable
income. Accordingly, our ability to grow depends on our ability to access
external sources of capital at attractive rates. Our Board of Directors believes
that our ability to raise capital will be enhanced by having as flexible a
capital structure as possible. Our Board of Directors intends to issue preferred
stock for the purpose of raising capital and not for the purpose of making a
takeover of our company more difficult.
Our Board of Directors has no present commitments, plans or proposals for
the issuance of any shares of preferred stock. Issuance of classes or series of
preferred stock could result in one or more of the following detriments:
o The preferred stock will have priority over the common stock in the
payment of dividends and/or liquidating distributions.
o The issuance of preferred stock bearing preferential dividends,
whether at fixed or floating rates, could reduce funds from operations
available for distribution to holders of our common stock.
o Conversion of shares of any class or series of preferred stock that is
convertible into our common stock could result in diluting the
interests of holders of common stock.
o In addition, class voting rights (whether granted by the specific
terms of the preferred stock or by law) could delay or prevent a
change of control of our company.
The affirmative vote of a majority of the total votes cast on this proposal
is required for approval of the proposal to increase the number of authorized
shares of preferred stock from 10,000,000 to 20,000,000.
Our Board of Directors unanimously recommends a vote "FOR" Proposal 2. All
proxies solicited by our Board of Directors will be so voted unless stockholders
specify in their proxies a contrary choice.
PROPOSAL 3 - APPROVAL OF THE
OMEGA HEALTHCARE INVESTORS, INC.
2004 STOCK INCENTIVE PLAN
On April 20, 2004, our Board of Directors approved the Omega Healthcare
Investors, Inc. 2004 Stock Incentive Plan, the full text of which is set forth
as Appendix C and is made a part hereof.
The 2004 Stock Incentive Plan provides us with increased flexibility to
grant equity-based compensation to certain employees, directors and consultants
for the purpose of giving them a proprietary interest in our company and
providing us with a means to attract and retain key personnel. Our Board of
Directors has approved and seeks stockholder approval of the 2004 Stock
Incentive Plan. Our Board of Directors has reserved 3,000,000 shares of our
common stock for issuance pursuant to awards that may be made under the 2004
Stock Incentive Plan, subject to adjustment as provided therein. Shares of stock
as to stock incentives that are forfeited, canceled, expired or terminate are
again available for issuance under the 2004 Stock Incentive Plan.
The following description of the 2004 Stock Incentive Plan is qualified in
its entirety by reference to the applicable provisions of the plan document.
ELIGIBILITY
Stock incentives may be granted to our employees, directors, and
consultants, or any of our affiliates; provided, however, that an incentive
stock option may only be granted to our employees or employees of our
subsidiaries.
ADMINISTRATION
Awards under the 2004 Stock Incentive Plan will be determined by the
Compensation Committee of our Board of Directors, the members of which are
selected by our Board of Directors.
AWARDS
The 2004 Stock Incentive Plan permits the Compensation Committee to make
awards of shares of our common stock and awards of derivative securities related
to the value of our common stock. These discretionary awards may be made on an
individual basis, or pursuant to a program approved by the Committee for the
benefit of a group of eligible persons.
The 2004 Stock Incentive Plan permits the Compensation Committee to make
awards of a variety of stock incentives, including equity-based incentives,
including stock awards, restricted stock units, options to purchase shares of
our common stock, stock appreciation rights, phantom shares, dividend equivalent
rights and similar rights.
The 2004 Stock Incentive Plan provides that each non-employee director will
receive an initial grant of an option to purchase 10,000 shares when first
elected. Annually thereafter, each non-employee director will receive an
additional grant of an option to purchase 1,000 shares. Each option granted to a
non-employee director will vest on a three-year graded vesting schedule.
The number of shares of our common stock as to which a stock incentive is
granted and to whom any stock incentive is granted shall be determined by the
Compensation Committee, subject to the provisions of the 2004 Stock Incentive
Plan. Stock incentives issuable may be made exercisable or settled at such
prices and may be made terminable under such terms as are established by the
Compensation Committee, to the extent not otherwise inconsistent with the terms
of the 2004 Stock Incentive Plan. The Compensation Committee may make the
vesting or payment of stock incentives subject to the performance goals.
Performance goals may be described in terms of company-wide objectives or in
terms of objectives that are related to performance of the division, affiliate,
department or function within our company or an affiliate. The performance goals
established by the Compensation Committee for any performance period under the
2004 Stock Incentive Plan will consist of one or more of the following:
o earnings per share and/or growth in earnings per share in relation to
target objectives, excluding the effect of extraordinary or
nonrecurring items;
o operating cash flow and/or growth in operating cash flow in relation
to target objectives;
o cash available in relation to target objectives;
o net income and/or growth in net income in relation to target
objectives, excluding the effect of extraordinary or nonrecurring
items;
o revenue and/or growth in revenue in relation to target objectives;
o total shareholder return (measured as the total of the appreciation of
and dividends declared on our common stock) in relation to target
objectives;
o return on invested capital in relation to target objectives;
o return on shareholder equity in relation to target objectives;
o return on assets in relation to target objectives; and
o return on common book equity in relation to target objectives.
The maximum number of shares of our common stock with respect to which
options or stock appreciation rights may be granted during any fiscal year as to
any eligible recipient shall not exceed 1,100,000 shares, to the extent required
by Section 162(m) of the Internal Revenue Code for the grant to qualify as
qualified performance-based compensation.
Stock incentives generally shall not be transferable or assignable during a
holder's lifetime.
OPTIONS
Options may be made exercisable at a price not less than the fair market
value of our common stock on the date that the option is awarded or the last
business day preceding. The Compensation Committee shall determine the fair
market value of our common stock until such time as our common stock is publicly
traded. Except for adjustments in the event of a recapitalization or similar
event, the option exercise price may not be reduced after the date of grant of
an option and no option may be cancelled or surrendered in exchange for an
option with a lower exercise price.
The Compensation Committee may permit an option exercise price to be paid
in cash or by the delivery of previously-owned shares of our common stock, or to
be satisfied through a cashless exercise executed through a broker or by having
a number of shares of our common stock otherwise issuable at the time of
exercise withheld. The 2004 Stock Incentive Plan permits the grant of both
incentive and non-qualified stock options.
STOCK APPRECIATION RIGHTS
Stock appreciation rights may be granted separately or in connection with
another stock incentive, and the Compensation Committee may provide that they
are exercisable at the discretion of the holder or that they will be paid at a
time or times certain or upon the occurrence or non-occurrence of certain
events. Stock appreciation rights may be settled in shares of our common stock
or in cash, according to terms established by the Compensation Committee with
respect to any particular award.
STOCK AWARDS
The Compensation Committee may grant shares of our common stock or
restricted stock units to a participant, subject to such restrictions and
conditions, if any, as the Compensation Committee shall determine.
OTHER STOCK INCENTIVES
Dividend equivalent rights, performance units, restricted stock units and
phantom shares may be granted in such numbers or units and may be subject to
such conditions or restrictions as the Compensation Committee shall determine
and shall be payable in cash or shares of our common stock, as the Compensation
Committee may determine.
The terms of particular stock incentives may provide that they terminate,
among other reasons, upon the holder's termination of employment or other status
with respect to our company, upon a specified date, upon the holder's death or
disability, or upon the occurrence of a change in control of our company. Stock
incentives may also include exercise, conversion or settlement rights to a
holder's estate or personal representative in the event of the holder's death or
disability. At the Compensation Committee's discretion, stock incentives that
are held by an employee who suffers a termination of employment may be
cancelled, accelerated, paid or continued, subject to the terms of the
applicable stock incentive agreement and to the provisions of the 2004 Stock
Incentive Plan.
BENEFITS TO NAMED EXECUTIVE OFFICERS AND OTHERS
The Compensation Committee has not yet made any determination as to which
eligible participants will be granted options and dividend equivalent rights
under the 2004 Stock Incentive Plan in the future. Consequently, the benefits
and or amounts that will be received in the future by the persons or groups
shown in the table below pursuant to the 2004 Stock Incentive Plan are not
presently determinable.
DIVIDEND
NUMBER OF OPTIONS EQUIVALENT
NAME AND POSITION GRANTED RIGHTS
-----------------------------------------------------------------------------------------------
C. Taylor Pickett, Chief Executive Officer -- --
Daniel J. Booth, Chief Operating Officer -- --
R. Lee Crabill, Jr., Senior Vice President -- --
of Operations
Robert O. Stephenson, Chief Financial Officer -- --
Executive Group -- --
Non-Executive Director Group -- --
Non-Executive Officer Employee Group -- --
RECAPITALIZATIONS AND REORGANIZATIONS
The number of shares of our common stock reserved for issuance in
connection with the grant or settlement of stock incentives or to which a stock
incentive is subject, as the case may be, and the exercise price of each option
are subject to adjustment in the event of any recapitalization of our company or
similar event effected without receipt of consideration by us.
In the event of certain corporate reorganizations, stock incentives may be
substituted, cancelled, accelerated, cashed-out or otherwise adjusted by the
Compensation Committee, provided such adjustment is not inconsistent with the
express terms of the 2004 Stock Incentive Plan or the applicable stock incentive
agreement.
AMENDMENT OR TERMINATION
Although the 2004 Stock Incentive Plan may be amended by our Board of
Directors without stockholder approval, our Board of Directors also may
condition any such amendment upon stockholder approval if stockholder approval
is deemed necessary or appropriate in consideration of tax, securities or other
laws.
TAX CONSEQUENCES
The following discussion outlines generally the federal income tax
consequences of participation in the 2004 Stock Incentive Plan. Individual
circumstances may vary and each participant should rely on his or her own tax
counsel for advice regarding federal income tax treatment under the 2004 Stock
Incentive Plan.
NON-QUALIFIED OPTIONS
A participant will not recognize income upon the grant of an option or at
any time prior to the exercise of the option or a portion thereof. At the time
the participant exercises a non-qualified option or portion thereof, he or she
will recognize compensation taxable as ordinary income in an amount equal to the
excess of the fair market value of our common stock on the date the option is
exercised over the price paid for our common stock, and we will then be entitled
to a corresponding deduction.
Depending upon the period shares of our common stock are held after
exercise, the sale or other taxable disposition of shares acquired through the
exercise of a non-qualified option generally will result in a short- or
long-term capital gain or loss equal to the difference between the amount
realized on such disposition and the fair market value of such shares when the
non-qualified option was exercised.
INCENTIVE STOCK OPTIONS
A participant who exercises an incentive stock option will not be taxed at
the time he or she exercises the option or a portion thereof. Instead, he or she
will be taxed at the time he or she sells our common stock purchased pursuant to
the option. The participant will be taxed on the difference between the price he
or she paid for our common stock and the amount for which he or she sells our
common stock. If the participant does not sell the stock prior to two years from
the date of grant of the option and one year from the date the stock is
transferred to him or her, the participant will be entitled to capital gain or
loss treatment based upon the difference between the amount realized on the
disposition and the aggregate exercise price and we will not get a corresponding
deduction. If the participant sells the stock at a gain prior to that time, the
difference between the amount the participant paid for the stock and the lesser
of the fair market value on the date of exercise or the amount for which the
stock is sold, will be taxed as ordinary income and we will be entitled to a
corresponding deduction; if the stock is sold for an amount in excess of the
fair market value on the date of exercise, the excess amount is taxed as capital
gain. If the participant sells the stock for less than the amount he or she paid
for the stock prior to the one or two year periods indicated, no amount will be
taxed as ordinary income and the loss will be taxed as a capital loss.
Exercise of an incentive option may subject a participant to, or increase a
participant's liability for, the alternative minimum tax.
OTHER STOCK INCENTIVES
A participant will not recognize income upon the grant of certain equity
incentives such as a stock appreciation right, dividend equivalent right,
performance unit award or phantom share. Generally, at the time a participant
receives payment under any equity incentive, he or she will recognize
compensation taxable as ordinary income in an amount equal to the cash or the
fair market value of our common stock received, and we will then be entitled to
a corresponding deduction.
A participant will not be taxed upon the grant of a stock award if such
award is not transferable by the participant or is subject to a "substantial
risk of forfeiture," as defined in the Internal Revenue Code. However, when the
shares of our common stock that are subject to the stock award are transferable
by the participant and are no longer subject to a substantial risk of
forfeiture, the participant will recognize compensation taxable as ordinary
income in an amount equal to the fair market value of the stock subject to the
stock award, less any amount paid for such stock, and we will then be entitled
to a corresponding deduction. However, if a participant so elects at the time of
receipt of a stock award, he or she may include the fair market value of the
stock subject to the stock award, less any amount paid for such stock, in income
at that time and we also will be entitled to a corresponding deduction at that
time.
The 2004 Stock Incentive Plan is not qualified under Section 401(a) of the
Code.
VOTING REQUIRED FOR APPROVAL
In order for the 2004 Stock Incentive Plan to be approved, the number of
"for" votes cast at the meeting for this proposal must be at least a majority of
all votes cast (including both "against" votes and abstentions) and the total
number of votes cast with respect to this proposal (regardless of whether they
are "for" votes, "against" votes or abstentions) must represent more than 50% of
all of the shares entitled to vote on the proposal. Our Board of Directors has
approved the 2004 Stock Incentive Plan and believes it is advisable and in the
best interest of our company. Accordingly, our Board of Directors unanimously
recommends that the stockholders vote "FOR" the 2004 Stock Incentive Plan.
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. On April 20, 2004, the
Board of Directors adopted a revised Audit Committee Charter, a copy of which is
attached to this proxy statement as Appendix A and will be available at our
website.
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 2003 audited
consolidated financial statements, reports as follows:
1) The Audit Committee has reviewed and discussed Omega's 2003 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 Independence Standards Board
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 2003 audited consolidated
financial statements with management and discussions with Ernst &
Young LLP, the Audit Committee recommended to the Board of Directors
that Omega's 2003 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, 2001, 2002 and 2003. 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. Approval of our independent auditors is not a matter required to be
submitted to stockholders.
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 2002 and 2003 and the reviews of the financial
statements included in the company's Forms 10-Q for fiscal years 2002 and 2003
were approximately $216,000 and $167,000, respectively.
AUDIT RELATED FEES
There were no 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 for fiscal years 2002 and 2003.
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 $149,000 and $33,000 for fiscal years 2002 and 2003,
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 2002 and 2003 were
approximately $71,000 and $0, 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. In 2002, 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. In connection with the proposed CMBS
transaction, the placement agent engaged the transaction support group based in
a different office of Ernst & Young LLP, which does not provide services to our
company, 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 in connection with the proposed CMBS transaction were
$1.2 million for due diligence and other services provided to the placement
agent by this transaction support group of 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 five percent 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
January 1, 2005 is the date by which proposals of stockholders intended to
be presented at the 2005 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.
ANNUAL REPORT
A copy of our annual report for the year ended December 31, 2003
accompanies this proxy statement and is incorporated herein by reference.
Additional copies may be obtained by writing to Robert O. Stephenson at our
principal executive offices, at the address set forth below.
A copy of our annual report on Form 10-K will be provided, without charge,
upon written request addressed to Mr. Stephenson at our principal executive
offices at 9690 Deereco Road, Suite 100, Timonium, Maryland 21093.
Our annual report to stockholders and Form 10-K are also available on our
website at www.omegahealthcare.com.
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.
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
April 27, 2004
Timonium, Maryland
APPENDIX A
AUDIT COMMITTEE CHARTER
OMEGA HEALTHCARE INVESTORS, INC.
APRIL 20, 2004
I. PURPOSE
The Board of Directors (the "Board") of Omega Healthcare Investors, Inc.
(the "Company") has established the Audit Committee (the "Committee") to assist
the Board in fulfilling its oversight responsibilities of (1) the integrity of
the Company's financial statements, (2) the Company's compliance with legal and
regulatory requirements, (3) the independent auditor's qualifications and
independence, and (4) the performance of the Company's internal audit function
and independent auditors.
II. COMPOSITION
The Committee will be comprised of at least three members of the Board.
Each member will be both independent and financially literate. The Board must
determine that at least one member has the level of accounting and financial
expertise as required by the applicable rules and regulations of the principal
trading market for the Company's common stock. Each member will be free of any
relationship that, in the opinion of the Board, would interfere with his or her
individual exercise of independent judgment. Applicable laws and regulations
will be followed in evaluating a member's independence.
No committee member will simultaneously serve on the audit committees of
more than three public companies unless the Board affirmatively determines that
such simultaneous service would not impair the ability of such member to serve
on the Committee. The members of the Committee will be elected annually at the
organizational meeting of the full Board and will be listed in the annual report
to shareholders.
III. RESPONSIBILITIES
A. SCOPE OF RESPONSIBILITY AND AUTHORITY. The primary responsibility of the
Committee is to oversee the Company's financial reporting process on behalf of
the Board and report the results of its activities to the Board. The Committee
will be directly responsible for the appointment and dismissal, compensation and
oversight of the Company's independent auditors and may not delegate such
responsibilities to others. The Committee does not prepare financial statements
on behalf of the Company or perform the Company's audits, and its members are
not the Company's auditors and do not certify the Company's financial
statements. These functions are performed by the Company's management and
independent auditors.
The Committee may retain (and determine and receive from the Company the
appropriate funding for) experts to advise or assist it, including outside
counsel, accountants, financial analysts or others.
In addition to the matters set forth herein, the Committee will perform
such other functions as required by law, the Company's Articles of Incorporation
or Bylaws, or the Board.
B. RESPONSIBILITIES AND DUTIES. The Committee will meet at least four times
a year, with authority to convene additional meetings as circumstances require.
In carrying out its oversight responsibilities, the Committee will:
1. Meet at the request of the Chief Financial Officer or the independent
auditors and will meet at least once every quarter or more frequently
as circumstances dictate.
2. Meet separately, periodically with (a) management, (b) the Company's
internal auditors (whether in-house or out-sourced), and (c) the
Company's independent auditors to discuss issues and concerns
warranting Committee attention.
3. Recommend to the Board whether the Company's financial statements
should be included in the Company's annual report on Form 10-K.
4. Prepare the Committee report to be included in the Company's annual
proxy statement.
5. Review and discuss with management the policies and guidelines for
earnings press releases and financial information and earnings
guidance provided to analysts and ratings agencies.
6. Review and discuss with management the policies and guidelines for
risk assessment and management.
7. Report its actions to the Board.
C. RELATIONSHIPS WITH INDEPENDENT AUDITORS. In order to retain independent
auditors to review the records and accounts of the Company, the Committee will:
1. Have the sole authority to appoint, retain, compensate, evaluate and
terminate the independent auditors to conduct Company audits or to
perform permissible non-audit services, with the independent auditors
ultimately accountable to the Committee with respect to audit and
related work.
2. Review the independent auditors' scope and audit plan prior to the
commencement of the audit.
3. Pre-approve any services to be performed by the independent auditors,
or establish policies pursuant to which services to be performed by
the independent auditor will be pre-approved.
4. Determine the scope of the audit and the associated fees to be paid to
the independent auditors (for both audit and permissible non-audit
work).
5. Discuss with the independent auditors any relationships that may
affect the auditors' independence and confirm and oversee the
independence of the auditors.
6. Pre-approve the Company's hiring of any employees or former employees
of the independent auditors or establish policies with respect to any
such hiring.
7. Obtain and review annually a report by the independent auditors
describing (a) the auditing firm's internal quality control
procedures, (b) any material issues raised by its most recent quality
control review, or peer review, or any inquiry or investigation within
the preceding five years and steps taken to resolve those issues, and
(c) all relationships between the independent auditors and the
Company.
In its review of the independent auditors, the Committee will direct the
independent auditors to provide the Committee with timely reports of:
(a) all critical accounting policies and practices,
(b) all alternative treatments of financial information within generally
accepted accounting principles that have been discussed with
management, effects of using such alternatives, and the treatment
preferred by the independent auditing firm, and
(c) other material written communications between the independent auditors
and management.
D. COMPANY FINANCIAL STATEMENTS. Prior to the release or filing of the
Company's financial statements, the Committee will review with management and
the independent auditors the Company's annual and quarterly financial statements
and related footnotes as well as disclosures under "Management's Discussion and
Analysis of Financial Condition and Results of Operations." The Committee will
also review at least annually:
1. With the independent auditors and management, their processes for
assessment of material misstatements, identification of the notable
risk areas, and their response to those risks.
2. The independent auditors' qualitative judgment about the quality, not
just the acceptability, of accounting principles, use of estimates,
bases for determining the amounts of estimates, and financial
disclosures.
3. With the independent auditors any significant difficulties or disputes
with management encountered during the course of the audit, including
management's response.
4. With the independent auditors the management letter provided by the
independent auditors and the Company's response.
5. Any financial or non-financial arrangements of the Company that do not
appear on the financial statements of the Company and their related
risks.
6. With management and the independent auditors the effect of regulatory
and accounting initiatives as well as accounting principles and their
alternatives that have a significant effect on the Company's financial
statements.
7. Any transactions or courses of dealing with parties related to the
Company.
8. Any other matters related to the annual Company audit, including those
matters that are required to be communicated to the Committee under
applicable law and generally accepted auditing standards.
E. OVERSIGHT OF CORPORATE COMPLIANCE FUNCTION. The Committee will:
1. Establish procedures whereby employees can confidentially and
anonymously submit to the Committee concerns or issues regarding the
Company's accounting or auditing matters.
2. Establish procedures for the receipt, retention and treatment of
complaints regarding accounting or auditing matters, including their
controls.
3. Discuss with the independent auditors whether they believe or have any
reason to believe that an illegal act has occurred, regardless of
whether they believe it will materially affect the Company's financial
statements.
4. Review any transactions with related parties and the procedures used
to identify related parties.
5. Perform an evaluation of its performance at least annually to
determine whether it is functioning effectively.
F. AUDIT COMMITTEE FORMALITIES AND CHARTER. The Committee will:
1. Review and reassess annually the adequacy of this Charter and
recommend any changes to the Board.
2. Report periodically to the Board on the Committee's activities and
findings, including any issues regarding the quality or integrity of
the Company's financial statements, the Company's compliance with
legal or regulatory requirements, the performance and independence of
the Company's independent auditors or the performance of the internal
auditors.
3. Cause appropriate minutes of the Committee's meetings to be kept.
APPENDIX B
OMEGA HEALTHCARE INVESTORS, INC.
ARTICLES OF AMENDMENT
OMEGA HEALTHCARE INVESTORS, INC., a Maryland corporation having its
principal Maryland office at 9690 Deereco Road, Suite 100, Timonium, Maryland
21093 (the "Company"), hereby certifies to the State Department of Assessments
and Taxation of Maryland that:
FIRST: The board of directors of the Company, at a meeting duly convened
and held on April 20, 2004, adopted a resolution in which it was set forth the
following amendment to the charter of the Company (the "Charter"), declaring
that said amendment to the Charter was advisable and directing that it be
submitted for action thereon at a meeting of the stockholders of the Company to
be held on June 3, 2004.
SECOND: Notice setting forth the aforesaid amendment of the Charter and
stating that a purpose of the meeting of the stockholders would be to take
action therein, was given as required by law to all stockholders entitled to
vote thereon. The amendment of the Charter of the Company as hereinafter set
forth was approved by the stockholders of the Company at said meeting by the
affirmative vote required by law and the Charter.
THIRD: The Charter is hereby amended by striking out Section 1 of Article
IV in its entirety and inserting in lieu thereof the following:
ARTICLE IV
CAPITAL STOCK
SECTION 1. The total number of shares of capital stock which the
corporation shall have authority to issue is One Hundred Twenty Million
(120,000,000) of which One Hundred Million (100,000,000) shall be shares of
Common Stock having a par value of $.10 per share and Twenty Million
(20,000,000) shall be shares of Preferred Stock having a par value of $1.00 per
share. The aggregate par value of all said shares shall be Thirty Million
Dollars ($30,000,000). Prior to the increase, the aggregate par value of all
said shares was Twenty Million Dollars ($20,000,000).
FOURTH: (a) The total number of shares of all classes of stock of the
Company heretofore authorized, and the number and par value of the shares of
each class, were as follows:
------------------------------ ------------------------
Common Stock Par Value
------------------------------ ------------------------
100,000,000 $.10 per share
------------------------------ ------------------------
Preferred Stock Par Value
------------------------------ ------------------------
10,000,000 $1.00 per share
------------------------------ ------------------------
(b) The total number of shares of all classes of stock of the Company as
increased, and the number and par value of the shares of each class, are as
follows:
------------------------------ ------------------------
Common Stock Par Value
------------------------------ ------------------------
100,000,000 $.10 per share
------------------------------ ------------------------
Preferred Stock Par Value
------------------------------ ------------------------
20,000,000 $1.00 per share
------------------------------ ------------------------
(c) The aggregate par value of all shares of all classes of stock of the
Company heretofore authorized was $20,000,000. The aggregate par value of all
shares of all classes of stock as increased by this amendment is $30,000,000.
This amendment has the effect of increasing the aggregate par value of all
shares of all classes of stock of the Company by $10,000,000.
FIFTH: The undersigned Chief Executive Officer of the Company acknowledges
the Articles of Amendment to be the corporate act of the Company and, as to all
matters or facts required to be verified under oath, the undersigned Chief
Executive Officer 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 of Amendment to
be executed under seal in its name and on its behalf by its Chief Executive
Officer and attested to by its Secretary on this ___ day of June, 2004.
ATTEST OMEGA HEALTHCARE INVESTORS, INC.
By: /s/ DANIEL J. BOOTH By: /s/ C. TAYLOR PICKETT
Daniel J. Booth C. Taylor Pickett
Secretary Chief Executive Officer
APPENDIX C
OMEGA HEALTHCARE INVESTORS, INC.
2004 STOCK INCENTIVE PLAN
OMEGA HEALTHCARE INVESTORS, INC.
2004 STOCK INCENTIVE PLAN
TABLE OF CONTENTS
SECTION I. DEFINITIONS...................................................1
1.1 DEFINITIONS.....................................................1
SECTION 2 THE STOCK INCENTIVE PLAN.......................................3
2.1 PURPOSE OF THE PLAN.............................................3
2.2 STOCK SUBJECT TO THE PLAN.......................................3
2.3 ADMINISTRATION OF THE PLAN......................................4
2.4 ELIGIBILITY AND LIMITS..........................................4
2.5 NON-EMPLOYEE DIRECTOR STOCK OPTION GRANTS.......................4
SECTION 3 TERMS OF STOCK INCENTIVES......................................4
3.1 TERMS AND CONDITIONS OF ALL STOCK INCENTIVES....................4
3.2 TERMS AND CONDITIONS OF OPTIONS.................................5
(a) Option Price...............................................5
(b) Option Term................................................5
(c) Payment....................................................5
(d) Conditions to the Exercise of an Option....................6
(e) Termination of Incentive Stock Option......................6
(f) Special Provisions for Certain Substitute Options..........6
3.3 TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS...............6
(a) Settlement.................................................6
(b) Conditions to Exercise.....................................6
3.4 TERMS AND CONDITIONS OF STOCK AWARDS............................6
3.5 TERMS AND CONDITIONS OF DIVIDEND EQUIVALENT RIGHTS..............7
(a) Payment....................................................7
(b) Conditions to Payment......................................7
3.6 TERMS AND CONDITIONS OF PERFORMANCE UNIT AWARDS.................7
(a) Payment....................................................7
(b) Conditions to Payment......................................7
3.7 TERMS AND CONDITIONS OF PHANTOM SHARES..........................7
(a) Payment....................................................7
(b) Conditions to Payment......................................7
3.8 TERMS AND CONDITIONS OF RESTRICTED STOCK UNITS....................7
(a) Payment....................................................7
(b) Conditions to Payment......................................8
3.9 TREATMENT OF AWARDS UPON TERMINATION OF EMPLOYMENT................8
SECTION 4 RESTRICTIONS ON STOCK..........................................8
4.1 ESCROW OF SHARES................................................8
4.2 RESTRICTIONS ON TRANSFER........................................8
SECTION 5 GENERAL PROVISIONS.............................................8
5.1 WITHHOLDING.....................................................8
5.2 CHANGES IN CAPITALIZATION; MERGER; LIQUIDATION..................9
5.3 CASH AWARDS.....................................................9
5.4 COMPLIANCE WITH CODE............................................9
5.5 RIGHT TO TERMINATE EMPLOYMENT...................................9
5.6 NON-ALIENATION OF BENEFITS......................................9
5.7 RESTRICTIONS ON DELIVERY AND SALE OF SHARES; LEGENDS............9
5.8 LISTING AND LEGAL COMPLIANCE...................................10
5.9 TERMINATION AND AMENDMENT OF THE PLAN..........................10
5.10 STOCKHOLDER APPROVAL...........................................10
5.11 CHOICE OF LAW..................................................10
5.12 EFFECTIVE DATE OF PLAN.........................................10
OMEGA HEALTHCARE INVESTORS, INC.
2004 STOCK INCENTIVE PLAN
SECTION I. DEFINITIONS
1.1 Definitions. Whenever used herein, the masculine pronoun will be deemed
to include the feminine, and the singular to include the plural, unless the
context clearly indicates otherwise, and the following capitalized words and
phrases are used herein with the meaning thereafter ascribed:
(a) "Affiliate" means:
(1) Any Subsidiary or Parent,
(2) An entity that directly or through one or more
intermediaries controls, is controlled by, or is under
common control with the Company, as determined by the
Company, or
(3) Any entity in which the Company has such a significant
interest that the Company determines it should be deemed an
"Affiliate," as determined in the sole discretion of the
Company.
(b) "Board of Directors" means the board of directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means the Compensation Committee of the Board of
Directors.
(e) "Company" means Omega Healthcare Investors, Inc., a Maryland
corporation.
(f) "Disability" has the same meaning as provided in the long-term
disability plan or policy maintained or, if applicable, most
recently maintained, by the Company or, if applicable, any
Affiliate of the Company for the Participant. If no long-term
disability plan or policy was ever maintained on behalf of the
Participant or, if the determination of Disability relates to an
Incentive Stock Option, Disability means that condition described
in Code Section 22(e)(3), as amended from time to time. In the
event of a dispute, the determination of Disability will be made
by the Committee and will be supported by advice of a physician
competent in the area to which such Disability relates.
(g) "Dividend Equivalent Rights" means certain rights to receive cash
payments as described in Section 3.5.
(h) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time.
(i) "Fair Market Value" with regard to a date means:
(1) the price at which Stock shall have been sold on that date
or the last trading date prior to that date as reported by
the national securities exchange selected by the Committee
on which the shares of Stock are then actively traded or, if
applicable, as reported by the NASDAQ Stock Market.
(2) if such market information is not published on a regular
basis, the price of Stock in the over-the-counter market on
that date or the last business day prior to that date as
reported by the NASDAQ Stock Market or, if not so reported,
by a generally accepted reporting service.
(3) if Stock is not publicly traded, as determined in good faith
by the Committee with due consideration being given to (i)
the most recent independent appraisal of the Company, if
such appraisal is not more than twelve months old and (ii)
the valuation methodology used in any such appraisal.
For purposes of Paragraphs (1), (2), or (3) above, the Committee may use
the closing price as of the applicable date, the average of the high and
low prices as of the applicable date or for a period certain ending on such
date, the price determined at the time the transaction is processed, the
tender offer price for shares of Stock, or any other method which the
Committee determines is reasonably indicative of the fair market value.
(j) "Incentive Stock Option" means an incentive stock option within
the meaning of Section 422 of the Internal Revenue Code.
(k) "Option" means a Non-Qualified Stock Option or an Incentive Stock
Option.
(l) "Over 10% Owner" means an individual who at the time an Incentive
Stock Option is granted owns Stock possessing more than 10% of
the total combined voting power of the Company or one of its
Subsidiaries, determined by applying the attribution rules of
Code Section 424(d).
(m) "Non-Qualified Stock Option" means a stock option that is not an
Incentive Stock Option.
(n) "Parent" means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company if, with
respect to Incentive Stock Options, at the time of the granting
of the Option, each of the corporations other than the Company
owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in
such chain. A Parent shall include any entity other than a
corporation to the extent permissible under Section 424(f) or
regulations and rulings thereunder.
(o) "Participant" means an individual who receives a Stock Incentive
hereunder.
(p) "Performance Goals" means the measurable performance objectives,
if any, established by the Committee for a Performance Period
that are to be achieved with respect to a Stock Incentive granted
to a Participant under the Plan. Performance Goals may be
described in terms of Company-wide objectives or in terms of
objectives that are related to performance of the division,
Affiliate, department or function within the Company or an
Affiliate in which the Participant receiving the Stock Incentive
is employed or on which the Participant's efforts have the most
influence. The achievement of the Performance Goals established
by the Committee for any Performance Period will be determined
without regard to the effect on such Performance Goals of any
acquisition or disposition by the Company of a trade or business,
or of substantially all of the assets of a trade or business,
during the Performance Period and without regard to any change in
accounting standards by the Financial Accounting Standards Board
or any successor entity. The Performance Goals established by the
Committee for any Performance Period under the Plan will consist
of one or more of the following:
(1) earnings per share and/or growth in earnings per share in
relation to target objectives, excluding the effect of
extraordinary or nonrecurring items;
(2) operating cash flow and/or growth in operating cash flow in
relation to target objectives;
(3) cash available in relation to target objectives;
(4) net income and/or growth in net income in relation to target
objectives, excluding the effect of extraordinary or
nonrecurring items;
(5) revenue and/or growth in revenue in relation to target
objectives;
(6) total shareholder return (measured as the total of the
appreciation of and dividends declared on the Common Stock)
in relation to target objectives;
(7) return on invested capital in relation to target objectives;
(8) return on shareholder equity in relation to target
objectives;
(9) return on assets in relation to target objectives; and
(10) return on common book equity in relation to target
objectives
If the Committee determines that, as a result of a change in the business,
operations, corporate structure or capital structure of the Company, or the
manner in which the Company conducts its business, or any other events or
circumstances, the Performance Goals are no longer suitable, the Committee
may in its discretion modify such Performance Goals or the related minimum
acceptable level of achievement, in whole or in part, with respect to a
period as the Committee deems appropriate and equitable, except where such
action would result in the loss of the otherwise available exemption of the
Stock Incentive under Section 162(m) of the Code. In such case, the
Committee will not make any modification of the Performance Goals or
minimum acceptable level of achievement.
(q) "Performance Period" means, with respect to a Stock Incentive, a
period of time within which the Performance Goals relating to
such Stock Incentive are to be measured. The Performance Period
will be established by the Committee at the time the Stock
Incentive is granted.
(r) "Performance Unit Award" refers to a performance unit award as
described in Section 3.6.
(s) "Phantom Shares" refers to the rights described in Section 3.7.
(t) "Plan" means the Omega Healthcare Investors, Inc. 2000 Stock
Incentive Plan.
(u) "Restricted Stock Unit" refers to the rights described in Section
3.8.
(v) "Stock" means Company's common stock.
(w) "Stock Appreciation Right" means a stock appreciation right
described in Section 3.3.
(x) "Stock Award" means a stock award described in Section 3.4.
(y) "Stock Incentive Agreement" means an agreement between the
Company and a Participant or other documentation evidencing an
award of a Stock Incentive.
(z) "Stock Incentive Program" means a written program established by
the Committee, pursuant to which Stock Incentives are awarded
under the Plan under uniform terms, conditions and restrictions
set forth in such written program.
(aa) "Stock Incentives" means, collectively, Dividend Equivalent
Rights, Incentive Stock Options, Non-Qualified Stock Options,
Phantom Shares, Stock Appreciation Rights and Stock Awards,
Performance Unit Awards and Restricted Stock Units.
(bb) "Subsidiary" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if, at
the time of the granting of the Option, each of the corporations
other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all
classes of stock in one of the other corporations in the chain. A
"Subsidiary" shall include any entity other than a corporation to
the extent permissible under Section 424(f) or regulations or
rulings thereunder.
(cc) "Termination of Employment" means the termination of the
employee-employer relationship between a Participant and the
Company and its Affiliates, regardless of whether severance or
similar payments are made to the Participant for any reason,
including, but not by way of limitation, a termination by
resignation, discharge, death, Disability or retirement. The
Committee will, in its absolute discretion, determine the effect
of all matters and questions relating to a Termination of
Employment, including, but not by way of limitation, the question
of whether a leave of absence constitutes a Termination of
Employment.
SECTION 2 THE STOCK INCENTIVE PLAN
2.1 Purpose of the Plan. The Plan is intended to (a) provide incentive to
officers, employees, directors and consultants of the Company and its Affiliates
to stimulate their efforts toward the continued success of the Company and to
operate and manage the business in a manner that will provide for the long-term
growth and profitability of the Company; (b) encourage stock ownership by
officers, employees, directors and consultants by providing them with a means to
acquire a proprietary interest in the Company, acquire shares of Stock, or to
receive compensation which is based upon appreciation in the value of Stock; and
(c) provide a means of obtaining, rewarding and retaining officers, employees,
directors, and consultants.
2.2 Stock Subject to the Plan. Subject to adjustment in accordance with
Section 5.2, three million (3,000,000) shares of Stock (the "Maximum Plan
Shares") are hereby reserved exclusively for issuance upon exercise or payment
pursuant to Stock Incentives. The shares of Stock attributable to the nonvested,
unpaid, unexercised, unconverted or otherwise unsettled portion of any Stock
Incentive that is forfeited or cancelled or expires or terminates for any reason
without becoming vested, paid, exercised, converted or otherwise settled in full
will again be available for purposes of the Plan.
2.3 Administration of the Plan. The Plan is administered by the Committee.
The Committee has full authority in its discretion to determine the officers,
key employees, directors and consultants of the Company or its Affiliates to
whom Stock Incentives will be granted and the terms and provisions of Stock
Incentives, subject to the Plan. Subject to the provisions of the Plan, the
Committee has full and conclusive authority to interpret the Plan; to prescribe,
amend and rescind rules and regulations relating to the Plan; to determine the
terms and provisions of the respective Stock Incentive Agreements and to make
all other determinations necessary or advisable for the proper administration of
the Plan. The Committee's determinations under the Plan need not be uniform and
may be made by it selectively among persons who receive, or are eligible to
receive, awards under the Plan (whether or not such persons are similarly
situated). The Committee's decisions are final and binding on all Participants.
2.4 Eligibility and Limits. Stock Incentives may be granted only to
officers, employees, directors, and consultants of the Company, or any Affiliate
of the Company; provided, however, that an Incentive Stock Option may only be
granted to an employee of the Company or any Subsidiary. In the case of
Incentive Stock Options, the aggregate Fair Market Value (determined as at the
date an Incentive Stock Option is granted) of stock with respect to which stock
options intended to meet the requirements of Code Section 422 become exercisable
for the first time by an individual during any calendar year under all plans of
the Company and its Subsidiaries may not exceed $100,000; provided further, that
if the limitation is exceeded, the Incentive Stock Option(s) which cause the
limitation to be exceeded will be treated as Non-Qualified Stock Option(s).
2.5 Non-Employee Director Stock Option Grants. A Non-Qualified Stock Option
with respect to 10,000 shares of Stock shall be granted to each non-employee
director as of the date he is first elected as a non-employee director of the
Company. An additional Non-Qualified Stock Option with respect to 1,000 shares
of Stock shall be granted to each non-employee director of the Company as of
each January 1 following the initial grant. Each Stock Option granted to a
non-employee director will vest with respect to 1/3 of the grant on the first
anniversary of the grant, with respect to an additional 1/3 of the grant on the
second anniversary of the grant, and with respect to the final 1/3 on the third
anniversary of the grant; provided that an Optionee will cease to vest when he
or she ceases to provide services to the Company as an employee, consultant, or
director.
The existence of the preceding formula grants shall not be construed to
preclude further grants of Options or other Stock Incentives to non-employee
directors of the Company.
SECTION 3 TERMS OF STOCK INCENTIVES
3.1 Terms and Conditions of All Stock Incentives.
(a) The number of shares of Stock as to which a Stock Incentive may
be granted will be determined by the Committee in its sole
discretion, subject to the provisions of Section 2.2 as to the
total number of shares available for grants under the Plan and
subject to the limits on Options and Stock Appreciation Rights in
the following sentence. On such date as required by Section
162(m) of the Code and the regulations thereunder for
compensation to be treated as qualified performance based
compensation, the maximum number of shares of Stock with respect
to which Options or Stock Appreciation Rights may be granted
during any calendar year period to any employee may not exceed
1,100,000. If, after grant, an Option is cancelled, the cancelled
Option shall continue to be counted against the maximum number of
shares for which options may be granted to an employee as
described in this Section 3.1. If, after grant, the exercise
price of an Option is reduced or the base amount on which a Stock
Appreciation Right is calculated is reduced, the transaction
shall be treated as the cancellation of the Option or the Stock
Appreciation Right, as applicable, and the grant of a new Option
or Stock Appreciation Right, as applicable. If an Option or Stock
Appreciation Right is deemed to be cancelled as described in the
preceding sentence, the Option or Stock Appreciation Right that
is deemed to be canceled and the Option or Stock Appreciation
Right that is deemed to be granted shall both be counted against
the maximum number of shares for which Options or Stock
Appreciation Rights may be granted to an employee as described in
this Section 3.1.
(b) Each Stock Incentive will either be evidenced by a Stock
Incentive Agreement in such form and containing such terms,
conditions and restrictions as the Committee may determine to be
appropriate, including without limitation, Performance Goals that
must be achieved as a condition to vesting or payment of the
Stock Incentive, or be made subject to the terms of a Stock
Incentive Program, containing such terms, conditions and
restrictions as the Committee may determine to be appropriate,
including without limitation, Performance Goals that must be
achieved as a condition to vesting or payment of the Stock
Incentive. Each Stock Incentive Agreement or Stock Incentive
Program is subject to the terms of the Plan and any provisions
contained in the Stock Incentive Agreement or Stock Incentive
Program that are inconsistent with the Plan are null and void.
(c) The date a Stock Incentive is granted will be the date on which
the Committee has approved the terms and conditions of the Stock
Incentive and has determined the recipient of the Stock Incentive
and the number of shares covered by the Stock Incentive, and has
taken all such other actions necessary to complete the grant of
the Stock Incentive.
(d) Any Stock Incentive may be granted in connection with all or any
portion of a previously or contemporaneously granted Stock
Incentive. Exercise or vesting of a Stock Incentive granted in
connection with another Stock Incentive may result in a pro rata
surrender or cancellation of any related Stock Incentive, as
specified in the applicable Stock Incentive Agreement or Stock
Incentive Program.
(e) Stock Incentives are not transferable or assignable except by
will or by the laws of descent and distribution and are
exercisable, during the Participant's lifetime, only by the
Participant; or in the event of the Disability of the
Participant, by the legal representative of the Participant; or
in the event of death of the Participant, by the legal
representative of the Participant's estate or if no legal
representative has been appointed, by the successor in interest
determined under the Participant's will; provided, however, that
the Committee may waive any of the provisions of this Section or
provide otherwise as to any Stock Incentives other than Incentive
Stock Options.
(f) The Committee may establish rules and procedures to permit a
holder of a Stock Incentive to defer recognition of taxable
income upon the exercise or vesting of a Stock Incentive.
3.2 Terms and Conditions of Options. Each Option granted under the Plan
must be evidenced by a Stock Incentive Agreement. At the time any Option is
granted, the Committee will determine whether the Option is to be an Incentive
Stock Option described in Code Section 422 or a Non-Qualified Stock Option, and
the Option must be clearly identified as to its status as an Incentive Stock
Option or a Non-Qualified Stock Option. Incentive Stock Options may only be
granted to employees of the Company or any Subsidiary. At the time any Incentive
Stock Option granted under the Plan is exercised, the Company will be entitled
to legend the certificates representing the shares of Stock purchased pursuant
to the Option to clearly identify them as representing the shares purchased upon
the exercise of an Incentive Stock Option. An Incentive Stock Option may only be
granted within ten (10) years from the earlier of the date the Plan is adopted
or approved by the Company's stockholders.
(a) Option Price. Subject to adjustment in accordance with Section
5.2 and the other provisions of this Section 3.2, the exercise
price (the "Exercise Price") per share of Stock purchasable under
any Option must be as set forth in the applicable Stock Incentive
Agreement, but in no event may it be less than the Fair Market
Value on the date the Option is granted. Except for adjustments
as contemplated by Section 5.2 hereof, in no event will the
Exercise Price per share of Stock of any Option be reduced after
the date of grant of the Option and no Option may be cancelled or
surrendered in exchange for an Option with a lower Exercise Price
per share of Stock. With respect to each grant of an Incentive
Stock Option to a Participant who is an Over 10% Owner, the
Exercise Price may not be less than 110% of the Fair Market Value
on the date the Option is granted.
(b) Option Term. Any Incentive Stock Option granted to a Participant
who is not an Over 10% Owner is not exercisable after the
expiration of ten (10) years after the date the Option is
granted. Any Incentive Stock Option granted to an Over 10% Owner
is not exercisable after the expiration of five (5) years after
the date the Option is granted. The term of any Non-Qualified
Stock Option must be as specified in the applicable Stock
Incentive Agreement.
(c) Payment. Payment for all shares of Stock purchased pursuant to
exercise of an Option will be made in any form or manner
authorized by the Committee in the Stock Incentive Agreement or
by amendment thereto, including, but not limited to, cash or, if
the Stock Incentive Agreement provides:
(1) by delivery to the Company of a number of shares of Stock
which have been owned by the holder for at least six (6)
months prior to the date of exercise having an aggregate
Fair Market Value of not less than the product of the
Exercise Price multiplied by the number of shares the
Participant intends to purchase upon exercise of the Option
on the date of delivery;
(2) in a cashless exercise through a broker; or
(3) by having a number of shares of Stock withheld, the Fair
Market Value of which as of the date of exercise is
sufficient to satisfy the Exercise Price.
In its discretion, and except to the extent precluded by the Sarbanes-Oxley
Act of 2002, as amended, the Committee also may authorize (at the time an
Option is granted or thereafter) Company financing to assist the
Participant as to payment of the Exercise Price on such terms as may be
offered by the Committee in its discretion. Payment must be made at the
time that the Option or any part thereof is exercised, and no shares may be
issued or delivered upon exercise of an option until full payment has been
made by the Participant. The holder of an Option, as such, has none of the
rights of a stockholder.
(d) Conditions to the Exercise of an Option. Each Option granted
under the Plan is exercisable by the Participant or any other
designated person, at such time or times, or upon the occurrence
of such event or events, and in such amounts, as the Committee
specifies in the Stock Incentive Agreement; provided, however,
that subsequent to the grant of an Option, the Committee, at any
time before complete termination of such Option, may accelerate
the time or times at which such Option may be exercised in whole
or in part, including, without limitation, upon a Change in
Control as defined in the Stock Incentive Agreement and may
permit the Participant or any other designated person to exercise
the Option, or any portion thereof, for all or part of the
remaining Option term, notwithstanding any provision of the Stock
Incentive Agreement to the contrary.
(e) Termination of Incentive Stock Option. With respect to an
Incentive Stock Option, in the event of Termination of Employment
of a Participant, the Option or portion thereof held by the
Participant which is unexercised will expire, terminate, and
become unexercisable no later than the expiration of three (3)
months after the date of Termination of Employment; provided,
however, that in the case of a holder whose Termination of
Employment is due to death or Disability, one (1) year will be
substituted for such three (3) month period; provided, further
that such time limits may be exceeded by the Committee under the
terms of the grant, in which case, the Incentive Stock Option
will be a Non-Qualified Option if it is exercised after the time
limits that would otherwise apply. For purposes of this
Subsection (e), Termination of Employment of the Participant will
not be deemed to have occurred if the Participant is employed by
another corporation (or a parent or subsidiary corporation of
such other corporation) which has assumed the Incentive Stock
Option of the Participant in a transaction to which Code Section
424(a) is applicable.
(f) Special Provisions for Certain Substitute Options.
Notwithstanding anything to the contrary in this Section 3.2, any
Option issued in substitution for an option previously issued by
another entity, which substitution occurs in connection with a
transaction to which Code Section 424(a) is applicable, may
provide for an exercise price computed in accordance with such
Code Section and the regulations thereunder and may contain such
other terms and conditions as the Committee may prescribe to
cause such substitute Option to contain as nearly as possible the
same terms and conditions (including the applicable vesting and
termination provisions) as those contained in the previously
issued option being replaced thereby.
3.3 Terms and Conditions of Stock Appreciation Rights. Each Stock
Appreciation Right granted under the Plan must be evidenced by a Stock Incentive
Agreement. A Stock Appreciation Right entitles the Participant to receive the
excess of (1) the Fair Market Value of a specified or determinable number of
shares of the Stock at the time of payment or exercise over (2) a specified or
determinable price which, in the case of a Stock Appreciation Right granted in
connection with an Option, may not be less than the Exercise Price for that
number of shares subject to that Option. A Stock Appreciation Right granted in
connection with a Stock Incentive may only be exercised to the extent that the
related Stock Incentive has not been exercised, paid or otherwise settled.
(a) Settlement. Upon settlement of a Stock Appreciation Right, the
Company must pay to the Participant the appreciation in cash or
shares of Stock (valued at the aggregate Fair Market Value on the
date of payment or exercise) as provided in the Stock Incentive
Agreement or, in the absence of such provision, as the Committee
may determine.
(b) Conditions to Exercise. Each Stock Appreciation Right granted
under the Plan is exercisable or payable at such time or times,
or upon the occurrence of such event or events, and in such
amounts, as the Committee specifies in the Stock Incentive
Agreement; provided, however, that subsequent to the grant of a
Stock Appreciation Right, the Committee, at any time before
complete termination of such Stock Appreciation Right, may
accelerate the time or times at which such Stock Appreciation
Right may be exercised or paid in whole or in part.
3.4 Terms and Conditions of Stock Awards. The number of shares of Stock
subject to a Stock Award and restrictions or conditions on such shares, if any,
will be as the Committee determines, and the certificate for such shares will
bear evidence of any restrictions or conditions. Subsequent to the date of the
grant of the Stock Award, the Committee has the power to permit, in its
discretion, an acceleration of the expiration of an applicable restriction
period with respect to any part or all of the shares of Stock awarded to a
Participant. The Committee may require a cash payment from the Participant in an
amount no greater than the aggregate Fair Market Value of the shares of Stock
awarded determined at the date of grant in exchange for the grant of a Stock
Award or may grant a Stock Award without the requirement of a cash payment.
3.5 Terms and Conditions of Dividend Equivalent Rights. A Dividend
Equivalent Right entitles the Participant to receive payments from the Company
in an amount determined by reference to any cash dividends paid on a specified
number of shares of Stock to Company stockholders of record during the period
such rights are effective. The Committee may impose such restrictions and
conditions on any Dividend Equivalent Right as the Committee in its discretion
shall determine, including the date any such right shall terminate and may
reserve the right to terminate, amend or suspend any such right at any time.
(a) Payment. Payment in respect of a Dividend Equivalent Right may be
made by the Company in cash or shares of Stock (valued at Fair
Market Value as of the date payment is owed) as provided in the
Stock Incentive Agreement or Stock Incentive Program, or, in the
absence of such provision, as the Committee may determine.
(b) Conditions to Payment. Each Dividend Equivalent Right granted
under the Plan is payable at such time or times, or upon the
occurrence of such event or events, and in such amounts, as the
Committee specifies in the applicable Stock Incentive Agreement
or Stock Incentive Program; provided, however, that subsequent to
the grant of a Dividend Equivalent Right, the Committee, at any
time before complete termination of such Dividend Equivalent
Right, may accelerate the time or times at which such Dividend
Equivalent Right may be paid in whole or in part.
3.6 Terms and Conditions of Performance Unit Awards. A Performance Unit
Award shall entitle the Participant to receive, at a specified future date,
payment of an amount equal to all or a portion of the value of a specified or
determinable number of units (stated in terms of a designated or determinable
dollar amount per unit) granted by the Committee. At the time of the grant, the
Committee must determine the base value of each unit, the number of units
subject to a Performance Unit Award, and the Performance Goals applicable to the
determination of the ultimate payment value of the Performance Unit Award. The
Committee may provide for an alternate base value for each unit under certain
specified conditions.
(a) Payment. Payment in respect of Performance Unit Awards may be
made by the Company in cash or shares of Stock (valued at Fair
Market Value as of the date payment is owed) as provided in the
applicable Stock Incentive Agreement or Stock Incentive Program
or, in the absence of such provision, as the Committee may
determine.
(b) Conditions to Payment. Each Performance Unit Award granted under
the Plan shall be payable at such time or times, or upon the
occurrence of such event or events, and in such amounts, as the
Committee shall specify in the applicable Stock Incentive
Agreement or Stock Incentive Program; provided, however, that
subsequent to the grant of a Performance Unit Award, the
Committee, at any time before complete termination of such
Performance Unit Award, may accelerate the time or times at which
such Performance Unit Award may be paid in whole or in part.
3.7 Terms and Conditions of Phantom Shares. Phantom Shares shall entitle
the Participant to receive, at a specified future date, payment of an amount
equal to all or a portion of the Fair Market Value of a specified number of
shares of Stock at the end of a specified period. At the time of the grant, the
Committee will determine the factors which will govern the portion of the
phantom shares so payable, including, at the discretion of the Committee, any
performance criteria that must be satisfied as a condition to payment. Phantom
Share awards containing performance criteria may be designated as performance
share awards.
(a) Payment. Payment in respect of Phantom Shares may be made by the
Company in cash or shares of Stock (valued at Fair Market Value
as of the date payment is owed) as provided in the applicable
Stock Incentive Agreement or Stock Incentive Program, or, in the
absence of such provision, as the Committee may determine.
(b) Conditions to Payment. Each Phantom Share granted under the Plan
is payable at such time or times, or upon the occurrence of such
event or events, and in such amounts, as the Committee may
specify in the applicable Stock Incentive Agreement or Stock
Incentive Program; provided, however, that subsequent to the
grant of a Phantom Share, the Committee, at any time before
complete termination of such Phantom Share, may accelerate the
time or times at which such Phantom Share may be paid in whole or
in part.
3.8 Terms and Conditions of Restricted Stock Units. If permitted by the
Committee, a Participant may defer the receipt of Stock from the exercise of an
Option or defer the receipt of Stock from a Stock Award or other Stock
Incentive. If a Participant defers receipt of such Stock, the Company's
obligation to issue the shares of Stock will be reflected in a bookkeeping
account in the form of Restricted Stock Units, with each unit representing the
Company's obligation to issue one share of Stock, or the cash value thereof. All
such deferrals shall be subject to such terms and conditions as the Committee
may establish.
(a) Payment. Payment in respect of Restricted Stock Units may be made
by the Company in cash or shares of Stock (valued at Fair Market
Value at the date payment is owed) as provided in the applicable
Stock Incentive Agreement or Stock Incentive Program, or in the
absence of such provision, as the Committee may determine.
(b) Conditions to Payment. Each Restricted Stock Unit granted under
the Plan is payable at such time or times or on the occurrence of
such event or events, and in such amounts as the Committee may
specify in the applicable Stock Incentive Agreement or Stock
Incentive Program; provided, however, that subsequent to the
grant of a Restricted Stock Unit, the Committee, at any time
before complete termination of such Restricted Stock Unit, may
accelerate the time or times at which the Restricted Stock Units
may be paid in whole or in part.
3.9 Treatment of Awards Upon Termination of Employment. Except as otherwise
provided by Plan Section 3.2(e), any award under this Plan to a Participant who
has experienced a Termination of Employment may be cancelled, accelerated, paid
or continued, as provided in the applicable Stock Incentive Agreement or Stock
Incentive Program, or, in the absence of such provision, as the Committee may
determine. The portion of any award exercisable in the event of continuation or
the amount of any payment due under a continued award may be adjusted by the
Committee to reflect the Participant's period of service from the date of grant
through the date of the Participant's Termination of Employment or such other
factors as the Committee determines are relevant to its decision to continue the
award.
SECTION 4 RESTRICTIONS ON STOCK
4.1 Escrow of Shares. Any certificates representing the shares of Stock
issued under the Plan will be issued in the Participant's name, but, if the
applicable Stock Incentive Agreement or Stock Incentive Program so provides, the
shares of Stock will be held by a custodian designated by the Committee (the
"Custodian"). Each applicable Stock Incentive Agreement or Stock Incentive
Program providing for transfer of shares of Stock to the Custodian must appoint
the Custodian as the attorney-in-fact for the Participant for the term specified
in the applicable Stock Incentive Agreement or Stock Incentive Program, with
full power and authority in the Participant's name, place and stead to transfer,
assign and convey to the Company any shares of Stock held by the Custodian for
such Participant, if the Participant forfeits the shares under the terms of the
applicable Stock Incentive Agreement or Stock Incentive Program. During the
period that the Custodian holds the shares subject to this Section, the
Participant is entitled to all rights, except as provided in the applicable
Stock Incentive Agreement or Stock Incentive Program, applicable to shares of
Stock not so held. Any dividends declared on shares of Stock held by the
Custodian must provide in the applicable Stock Incentive Agreement or Stock
Incentive Program, to be paid directly to the Participant or, in the
alternative, be retained by the Custodian or by the Company until the expiration
of the term specified in the applicable Stock Incentive Agreement or Stock
Incentive Program and shall then be delivered, together with any proceeds, with
the shares of Stock to the Participant or to the Company, as applicable.
4.2 Restrictions on Transfer. The Participant does not have the right to
make or permit to exist any disposition of the shares of Stock issued pursuant
to the Plan except as provided in the Plan or the applicable Stock Incentive
Agreement or Stock Incentive Program. Any disposition of the shares of Stock
issued under the Plan by the Participant not made in accordance with the Plan or
the applicable Stock Incentive Agreement or Stock Incentive Program will be
void. The Company will not recognize, or have the duty to recognize, any
disposition not made in accordance with the Plan and the applicable Stock
Incentive Agreement or Stock Incentive Program, and the shares so transferred
will continue to be bound by the Plan and the applicable Stock Incentive
Agreement or Stock Incentive Program.
SECTION 5 GENERAL PROVISIONS
5.1 Withholding. The Company must deduct from all cash distributions under
the Plan any taxes required to be withheld by federal, state or local
government. Whenever the Company proposes or is required to issue or transfer
shares of Stock under the Plan or upon the vesting of any Stock Award, the
Company has the right to require the recipient to remit to the Company an amount
sufficient to satisfy any federal, state and local tax withholding requirements
prior to the delivery of any certificate or certificates for such shares or the
vesting of such Stock Award. A Participant may pay the withholding obligation in
cash, or, if the applicable Stock Incentive Agreement or Stock Incentive Program
provides, a Participant may elect to have the number of shares of Stock he is to
receive reduced by, or with respect to a Stock Award, tender back to the
Company, the smallest number of whole shares of Stock which, when multiplied by
the Fair Market Value of the shares of Stock determined as of the Tax Date
(defined below), is sufficient to satisfy federal, state and local, if any,
withholding obligation arising from exercise or payment of a Stock Incentive (a
"Withholding Election"). A Participant may make a Withholding Election only if
both of the following conditions are met:
(a) The Withholding Election must be made on or prior to the date on
which the amount of tax required to be withheld is determined
(the "Tax Date") by executing and delivering to the Company a
properly completed notice of Withholding Election as prescribed
by the Committee; and
(b) Any Withholding Election made will be irrevocable except on six
months advance written notice delivered to the Company; however,
the Committee may in its sole discretion disapprove and give no
effect to the Withholding Election.
5.2 Changes in Capitalization; Merger; Liquidation.
(a) The number of shares of Stock reserved for the grant of Options,
Dividend Equivalent Rights, Performance Unit Awards, Phantom
Shares, Stock Appreciation Rights and Stock Awards; the number of
shares of Stock reserved for issuance upon the exercise or
payment, as applicable, of each outstanding Option, Dividend
Equivalent Right, Phantom Share and Stock Appreciation Right and
upon vesting or grant, as applicable, of each Stock Award; the
Exercise Price of each outstanding Option and the specified
number of shares of Stock to which each outstanding Dividend
Equivalent Right, Phantom Share and Stock Appreciation Right
pertains must be proportionately adjusted for any increase or
decrease in the number of issued shares of Stock resulting from a
subdivision or combination of shares or the payment of a stock
dividend in shares of Stock to holders of outstanding shares of
Stock or any other increase or decrease in the number of shares
of Stock outstanding effected without receipt of consideration by
the Company.
(b) In the event of a merger, consolidation, reorganization,
extraordinary dividend, spin-off, sale of substantially all of
the Company's assets, other change in capital structure of the
Company, tender offer for shares of Stock, or a change in control
of the Company (as defined by the Committee in the applicable
Stock Incentive Agreement) the Committee may make such
adjustments with respect to awards and take such other action as
it deems necessary or appropriate to reflect such merger,
consolidation, reorganization or tender offer, including, without
limitation, the substitution of new awards, or the adjustment of
outstanding awards, the acceleration of awards, the removal of
restrictions on outstanding awards, or the termination of
outstanding awards in exchange for the cash value determined in
good faith by the Committee of the vested and/or unvested portion
of the award. Any adjustment pursuant to this Section 5.2 may
provide, in the Committee's discretion, for the elimination
without payment therefor of any fractional shares that might
otherwise become subject to any Stock Incentive, but except as
set forth in this Section may not otherwise diminish the then
value of the Stock Incentive.
(c) The existence of the Plan and the Stock Incentives granted
pursuant to the Plan must not affect in any way the right or
power of the Company to make or authorize any adjustment,
reclassification, reorganization or other change in its capital
or business structure, any merger or consolidation of the
Company, any issue of debt or equity securities having
preferences or priorities as to the Stock or the rights thereof,
the dissolution or liquidation of the Company, any sale or
transfer of all or any part of its business or assets, or any
other corporate act or proceeding.
5.3 Cash Awards. The Committee may, at any time and in its discretion,
grant to any holder of a Stock Incentive the right to receive, at such times and
in such amounts as determined by the Committee in its discretion, a cash amount
which is intended to reimburse such person for all or a portion of the federal,
state and local income taxes imposed upon such person as a consequence of the
receipt of the Stock Incentive or the exercise of rights thereunder.
5.4 Compliance with Code. All Incentive Stock Options to be granted
hereunder are intended to comply with Code Section 422, and all provisions of
the Plan and all Incentive Stock Options granted hereunder must be construed in
such manner as to effectuate that intent.
5.5 Right to Terminate Employment. Nothing in the Plan or in any Stock
Incentive confers upon any Participant the right to continue as an employee or
officer of the Company or any of its Affiliates or affect the right of the
Company or any of its Affiliates to terminate the Participant's employment or
services at any time.
5.6 Non-Alienation of Benefits. Other than as provided herein, no benefit
under the Plan may be subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance or charge; and any attempt to do so
shall be void. No such benefit may, prior to receipt by the Participant, be in
any manner liable for or subject to the debts, contracts, liabilities,
engagements or torts of the Participant.
5.7 Restrictions on Delivery and Sale of Shares; Legends. Each Stock
Incentive is subject to the condition that if at any time the Committee, in its
discretion, shall determine that the listing, registration or qualification of
the shares covered by such Stock Incentive upon any securities exchange or under
any state or federal law is necessary or desirable as a condition of or in
connection with the granting of such Stock Incentive or the purchase or delivery
of shares thereunder, the delivery of any or all shares pursuant to such Stock
Incentive may be withheld unless and until such listing, registration or
qualification shall have been effected. If a registration statement is not in
effect under the Securities Act of 1933 or any applicable state securities laws
with respect to the shares of Stock purchasable or otherwise deliverable under
Stock Incentives then outstanding, the Committee may require, as a condition of
exercise of any Option or as a condition to any other delivery of Stock pursuant
to a Stock Incentive, that the Participant or other recipient of a Stock
Incentive represent, in writing, that the shares received pursuant to the Stock
Incentive are being acquired for investment and not with a view to distribution
and agree that the shares will not be disposed of except pursuant to an
effective registration statement, unless the Company shall have received an
opinion of counsel that such disposition is exempt from such requirement under
the Securities Act of 1933 and any applicable state securities laws. The Company
may include on certificates representing shares delivered pursuant to a Stock
Incentive such legends referring to the foregoing representations or
restrictions or any other applicable restrictions on resale as the Company, in
its discretion, shall deem appropriate.
5.8 Listing and Legal Compliance. The Committee may suspend the exercise or
payment of any Stock Incentive so long as it determines that securities exchange
listing or registration or qualification under any securities laws is required
in connection therewith and has not been completed on terms acceptable to the
Committee.
5.9 Termination and Amendment of the Plan. The Board of Directors at any
time may amend or terminate the Plan without stockholder approval; provided,
however, that the Board of Directors may condition any amendment on the approval
of stockholders of the Company if such approval is necessary or advisable with
respect to tax, securities or other applicable laws. No such termination or
amendment without the consent of the holder of a Stock Incentive may adversely
affect the rights of the Participant under such Stock Incentive.
5.10 Stockholder Approval. The Plan must be submitted to the stockholders
of the Company for their approval within twelve (12) months before or after the
adoption of the Plan by the Board of Directors of the Company. If such approval
is not obtained, any Stock Incentive granted hereunder will be void.
5.11 Choice of Law. The laws of the State of Maryland shall govern the
Plan, to the extent not preempted by federal law, without reference to the
principles of conflict of laws.
5.12 Effective Date of Plan. This Plan was approved by the Board of
Directors as of ________________, 2004.
OMEGA HEALTHCARE INVESTORS, INC.
By:
--------------------------------------
Title:
-----------------------------------
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
April 26, 2004 at the Annual Meeting of Stockholders to be held on June 3, 2004
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:
Edward Lowenthal and Stephen D. Plavin
2. The amendment to our Articles of Incorporation to increase the number
of authorized shares of our preferred stock from 10,000,000 to
20,000,000 shares.
3. To approve the Omega Healthcare Investors, Inc. 2004 Stock Incentive
Plan.
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:
Edward Lowenthal and Stephen D. Plavin
(Instruction: To withhold authority to vote for any individual
nominee, write that nominee's name here.)
2. To consider and vote upon a proposal
to amend our Articles of Incorporation
to increase the number of authorized
shares of our preferred stock from
10,000,000 to 20,000,000 shares. [ ] [ ] [ ]
3. To approve the Omega Healthcare Investors,
Inc. 2004 Stock Incentive Plan. [ ] [ ] [ ]
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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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-- FOLD AND DETACH HERE --