DEF 14A: Definitive proxy statements
Published on April 24, 2007
UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington
D.C. 20549
SCHEDULE
14A
INFORMATION
REQUIRED IN PROXY STATEMENT
SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the Securities
Exchange
Act of 1934 (Amendment No. __)
Filed
by
Registrant [X]
Filed
by
a Party other than the Registrant [ ]
Check
the
appropriate box:
[
] Preliminary
Proxy Statement
[
] Confidential,
for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive
Proxy Statement
[
] Definitive
Additional Materials
[
] Soliciting
Material Pursuant to Rule 14a-12
Omega
Healthcare
Investors, Inc.
(Name
of
Registrant as Specified in Charter)
(Name
of
Person(s) Filing Proxy Statement, if other than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
[X] No
fee
required.
[
] Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
| (1) |
Title
of each class of securities to which transaction
applies:__________________________
|
| (2) |
Aggregate
number of securities to which transaction
applies:__________________________
|
| (3) |
Per
unit price or other underlying value of transaction computed pursuant
to
Exchange Act Rule 0-11 (set forth the amount on which the filing
fee is
calculated and state how it was
determined):________________________________________________________________
|
| (4) |
Proposed
maximum aggregate value of
transaction:_________________________________
|
| (5) |
Total
fee
paid:_______________________________________________________________
|
[
] Fee
paid
previously with preliminary materials.
|
[
]
|
Check
box if any part of the fee is offset as provided by Exchange Act
Rule
0-11(a)(2) and identify the filing for which the offsetting fee
was paid
previously. Identify the previous filing by registration statement
number,
or the Form of Schedule and the date of its
filing.
|
| (1) |
Amount
previously
paid:_______________________________________________________
|
| (2) |
Form,
Schedule or Registration Statement
No.:_____________________________________
|
| (3) |
Filing
party:_________________________________________________________________
|
| (4) |
Date
filed:__________________________________________________________________
|
OMEGA
HEALTHCARE INVESTORS, INC.
9690
Deereco Road, Suite 100
Timonium,
Maryland 21093
(410)
427-1700
_______________
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
May
24, 2007
________________
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, May 24, 2007, at 10:00 A.M. EDT, for the
following purposes:
1. To
elect
two members to the Board of Directors;
2. To
ratify
the selection of Ernst & Young LLP as our independent auditor for the fiscal
year 2007; and
3. To
transact such other business as may properly come before the meeting or any
adjournment thereof.
The
nominees for election as directors are Edward Lowenthal and Stephen D. Plavin,
each of whom presently serves as a director of Omega.
The
Board
of Directors has fixed the close of business on April 20, 2007 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,
C.
Taylor
Pickett
Chief
Executive Officer
April
24,
2007
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.
-1-
OMEGA
HEALTHCARE INVESTORS, INC.
9690
Deereco Road, Suite 100
Timonium,
Maryland 21093
(410)
427-1700
PROXY
STATEMENT
FOR
ANNUAL
MEETING OF STOCKHOLDERS
May
24, 2007
The
accompanying proxy is solicited by the 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.
EDT on
Thursday, May 24, 2007, and any adjournments of the meeting. It is anticipated
that this proxy material will be mailed on or about April 27, 2007, to our
common stockholders of record on April 20, 2007.
A
copy of
our Annual Report for the year ended December 31, 2006, 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 20, 2007, the record date,
there were 66,918,359 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 affirmative vote of a majority of the shares of common stock
in
person or by proxy at the Annual Meeting will be necessary to approve the
proposal to ratify our independent auditors. The affirmative vote of a majority
of the shares of our common stock present in person or by proxy and entitled
to
vote will be necessary to approve all other proposals and matters that may
come
before the Annual Meeting for stockholder consideration.
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 all of the matters
to be
voted upon at the Annual Meeting, broker non-votes and the decision to withhold
authority to vote for any, or all, of the director nominees named above or
for
the proposal to ratify our independent auditors will have no impact on the
outcome of the voting.
As
of the
record date, our directors and executive officers beneficially owned 1,556,114
shares of our common stock (representing 2.3% 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.
-2-
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 the 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 as amended and supplemented
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
Nominating and Corporate Governance Committee of the 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 term 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
|
Directors
|
Year
First
Became
a
Director
|
Business
Experience During Past 5 Years
|
Term
to Expire
in
|
|
Edward
Lowenthal (62)
|
1995
|
Mr.
Lowenthal
is
a Director and has served in this capacity since October 17, 1995.
Mr.
Lowenthal also serves as a director of WRP, REIS, Inc. (a private
provider
of real estate market information and valuation technology), American
Campus Communities (NYSE:ACC) (a public developer, owner and operator
of
student housing at the university level), Desarrolladora Homex
(NYSE: HXM)
(a Mexican homebuilder) and serves as a trustee of the Manhattan
School of
Music. From January 1997 to March 2002, Mr. Lowenthal served as
President
and Chief Executive Officer of Wellsford Real Properties, Inc.
(AMEX:WRP)
(a real estate merchant bank) and was President of the predecessor
of
Wellsford Real Properties, Inc. since 1986. Mr. Lowenthal also
previously
served as a director of Ark Restaurants (Nasdaq:ARKR) (a publicly
traded
owner and operator of restaurants).
|
2010
|
|
Directors
|
Year
First
Became
a
Director
|
Business
Experience During Past 5 Years
|
Term
to Expire
in
|
|
Stephen
D. Plavin (47)
|
2000
|
Mr.
Plavin is
a Director and has served in this capacity since July 17, 2000.
Mr. Plavin
has been Chief Operating Officer of Capital Trust, Inc., (NYSE:CT)
a New
York City-based mortgage real estate investment trust (“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.
|
2010
|
-3-
Continuing
Directors
|
Directors
|
Year
First
Became
a
Director
|
Business
Experience During Past 5 Years
|
Term
to Expire
in
|
|
Thomas
F. Franke (77)
|
1992
|
Mr.
Franke
is
a Director and has served in this capacity since March 31, 1992.
Mr.
Franke is Chairman and a principal owner of Cambridge Partners,
Inc., an
owner, developer and manager of multifamily housing in Grand Rapids,
Michigan. He is also a principal owner of Laurel Healthcare (a
private
healthcare firm operating in the United States) and is a principal
owner
of Abacus Hotels LTD. (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.
|
2009
|
|
Bernard
J. Korman (75)
|
1993
|
Mr.
Korman is
Chairman of the Board and has served in this capacity since March
8, 2004.
He has served as a director since October 19, 1993. Mr. Korman
has been
Chairman of the Board of Trustees of Philadelphia Health Care Trust,
a
private healthcare foundation, since December 1995. Mr. Korman
is also a
director of The New America High Income Fund, Inc. (NYSE:HYB) (financial
services), Medical Nutrition USA, Inc. (OTC:MDNU.OB) (develops
and
distributes nutritional products) and NutraMax Products, Inc. (OTC:NUTP)
(consumer health care products). He was formerly President, Chief
Executive Officer and Director of MEDIQ Incorporated (OTC:MDDQP)
(health
care services) from 1977 to 1995. Mr. Korman served as a trustee
of
Kramont Realty Trust (NYSE:KRT) (real estate investment trust)
from June
2000 until its merger in April 2005 and of The Pep Boys, Inc. (NYSE:PBY)
and also served as The Pep Boys, Inc.’s Chairman of the Board from May 28,
2003 until his retirement from such board in September 2004. Mr.
Korman
was previously a director of Omega Worldwide, Inc.
|
2009
|
-4-
|
Directors
|
Year
First
Became
a
Director
|
Business
Experience During Past 5 Years
|
Term
to Expire
in
|
|
Harold
J. Kloosterman (65)
|
1992
|
Mr.
Kloosterman is a
Director and has 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. (now Jones
Lang
LaSalle).
|
2008
|
|
C.
Taylor Pickett (45)
|
2002
|
Mr.
Pickett is
the Chief Executive Officer of our company and has served in this
capacity
since June, 2001. Mr. Pickett is also a Director and has served
in this
capacity 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.
|
2008
|
RECOMMENDATION
The
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 April 13, 2007 for:
| · |
each
of our directors and the named executive officers appearing in the
table
under “Executive Compensation —Summary Compensation Table”;
and
|
| · |
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.
-5-
|
Common
Stock
|
Series
D Preferred
|
|||||||||||||||
|
Beneficial
Owner
|
Number
of
Shares
|
Percent
of
Class(1)
|
Number
of
Shares
|
Percent
of
Class(19)
|
||||||||||||
|
C.
Taylor Pickett
|
397,742
|
(2
|
)
|
0.6
|
%
|
—
|
—
|
|||||||||
|
Daniel
J. Booth
|
122,889
|
(3
|
)
|
0.2
|
%
|
—
|
—
|
|||||||||
|
R.
Lee Crabill, Jr.
|
91,667
|
(4
|
)
|
0.1
|
%
|
—
|
—
|
|||||||||
|
Robert
O. Stephenson
|
136,458
|
(5
|
)
|
0.2
|
%
|
—
|
—
|
|||||||||
|
Thomas
F. Franke
|
86,176
|
(6)
(7
|
)
|
0.1
|
%
|
—
|
—
|
|||||||||
|
Harold
J. Kloosterman
|
83,597
|
(8)
(9
|
)
|
0.1
|
%
|
—
|
—
|
|||||||||
|
Bernard
J. Korman
|
563,422
|
(10
|
)
|
0.8
|
%
|
—
|
—
|
|||||||||
|
Edward
Lowenthal
|
40,968
|
(11)(12
|
)
|
0.1
|
%
|
—
|
—
|
|||||||||
|
Stephen
D. Plavin
|
33,195
|
(13
|
)
|
0.0
|
%
|
—
|
—
|
|||||||||
|
Directors
and executive officers as a group (9 persons)
|
1,556,114
|
(14
|
)
|
2.3
|
%
|
—
|
—
|
|||||||||
|
5%
Beneficial Owners:
|
||||||||||||||||
|
ING
Clarion Real Estate Securities, L.P.
|
8,849,289
|
(15
|
)
|
13.2
|
%
|
|||||||||||
|
Nomura
Asset Management Co., LTD.
|
3,934,600
|
(16
|
)
|
5.9
|
%
|
|||||||||||
|
The
Vanguard Group, Inc.
|
3,461,503
|
(17
|
)
|
5.1
|
%
|
|||||||||||
|
ING
Groep N.V.
|
9,713,849
|
(18
|
)
|
14.4
|
%
|
|||||||||||
| (1) |
Based
on 67,230,859
shares of our common stock outstanding as of April
13, 2007.
|
| (2) |
Includes
125,000 shares
of restricted common stock that vested on December 31, 2006 based on
achievement of $0.30 per share of common stock per fiscal quarter
in
“Adjusted Funds from Operations.”
|
| (3) |
Includes
75,000 shares
of restricted common stock that vested on December 31, 2006 based on
achievement of $0.30 per share of common stock per fiscal quarter
in
“Adjusted Funds from Operations.”
|
| (4) |
Includes
57,500 shares
of restricted common stock that vested on December 31, 2006 based on
achievement of $0.30 per share of common stock per fiscal quarter
in
“Adjusted Funds from Operations.”
|
| (5) |
Includes
60,000 shares
of restricted common stock that vested on December 31, 2006 based on
achievement of $0.30 per share of common stock per fiscal quarter
in
“Adjusted Funds from Operations.”
|
| (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 4,668
shares.
|
| (8) |
Includes
shares owned jointly by Mr. Kloosterman and his wife, and 10,827
shares
held solely in Mr. Kloosterman’s wife’s name.
|
| (9) |
Includes
stock options that are exercisable within 60 days to acquire 9,000
shares.
|
| (10) |
Includes
stock options that are exercisable within 60 days to acquire 7,001
shares.
|
| (11) |
Includes
1,400 shares owned by his wife through an individual retirement
account.
|
| (12) |
Includes
stock options that are exercisable within 60 days to acquire 7,335
shares.
|
| (13) |
Includes
stock options that are exercisable within 60 days to acquire 14,000
shares.
|
| (14) |
Includes
stock options that are exercisable within 60 days to acquire 42,004
shares.
|
| (15) |
Based
on a Schedule 13G filed by ING Clarion
Real Estate Securities, L. P. on March 7, 2007. ING
Clarion
Real Estate Securities, L.P. is located at 259 N. Radnor Chester
Road,
Suite 205 Radnor, PA 19087. Includes 4,801,428 shares of common stock
over
which ING Clarion Real Estate Securities, L.P. has sole voting power
or
power to direct the vote.
|
| (16) |
Based
on a Schedule 13G filed by Nomura
Asset Management Co., LTD. on February 12, 2007. Nomura Asset Management
Co., LTD. is located at 1-12-1, Nihonbashi, Chuo-ku, Toyko, Japan
103-8260. Includes 3,934,600 shares of common stock over which Nomura
Asset Management Co., LTD. has sole voting power or power to direct
the
vote.
|
| (17) |
Based
on a Schedule 13G filed by The
Vanguard Group, Inc. on February 14, 2007. The Vanguard Group, Inc.
is
located at 100 Vanguard Blvd. Malvern, PA 19355. Includes 85,883
shares of
common stock over which The Vanguard Group, Inc. has sole voting
power or
power to direct the vote.
|
-6-
| (18) |
Based
on a Schedule 13G filed by ING
Groep N.V. on February 14, 2007. ING Groep N.V. is located at
Amstelveenseweg 500, 1081 KL Amsterdam, The Netherlands. Includes
9,713,849 shares of common stock over which ING Groep N.V. has sole
voting
power or power to direct the vote.
|
| (19) |
Based
on 4,739,500 shares of Series D preferred stock outstanding at March
31,
2007.
|
DIRECTORS
AND OFFICERS OF OUR COMPANY
Board
of Directors and Committees of the Board
The
members of the Board of Directors on the date of this proxy statement and
the
committees of the Board on which they serve are identified below.
|
|
Audit
|
Compensation
|
Investment
|
Nominating
and Corporate
|
|
Director
|
Committee
|
Committee
|
Committee
|
Governance
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
|
|
|
*
|
Chairman
of the Board
|
|
|
XX
|
Chairman
of the Committee
|
|
|
X
|
Member
|
The
Board
of Directors held seven meetings during 2006. All members of the Board of
Directors attended more than 75% of the Board of Directors or Committee meetings
held during 2006. Mr. Korman, as Chairman of the Board, presides over any
meeting, including regularly scheduled executive sessions of the non-management
directors. If Mr. Korman is not present at such a session, the presiding
director is chosen by a vote of those present at the session. Except for
Mr.
Pickett, all of the members of the Board of Directors meet the New York Stock
Exchange listing standards for independence. While the Board of Directors
has
not adopted any categorical standards of independence, in making these
independence determinations, the Board of Directors noted that no director
other
than Mr. Pickett (a) received direct compensation from our company other
than
director annual retainers and meeting fees, (b) had any relationship with
our
company or a third party that would preclude independence, or (c) had any
business relationship with our company and its management, other than as
a
director of our company. 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. Last
year,
one member of our Board of Directors attended the annual meeting.
Audit
Committee
The
Audit
Committee met twelve times in 2006. Its primary function is to assist the
Board
of Directors in fulfilling its oversight responsibilities with respect to:
(i)
the financial information to be provided to stockholders and the Securities
and
Exchange Commission (“SEC”); (ii) the system of internal controls that
management has established; and (iii) the external independent audit process.
In
addition, the Audit Committee selects our company’s independent auditors and
provides an avenue for communication between the independent auditors, financial
management and the Board of Directors. On January 16, 2007, the Board of
Directors adopted a revised Audit Committee charter, a copy of which is attached
to this proxy statement as Appendix A and is also 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. The Board of Directors
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 of Directors 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 he 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.
-7-
Compensation
Committee
The
Compensation Committee met five times during 2006 and has responsibility
for the
compensation of our key management personnel and administration of our 2004
Stock Incentive Plan, 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 is available on our website at www.omegahealthcare.com.
Investment
Committee
The
Investment Committee met two times during 2006 and has responsibility for
developing strategies in growing our portfolio.
Nominating
and Corporate Governance Committee
The
Nominating and Corporate Governance Committee met one time during 2006 and
has
responsibility for identifying potential nominees to the Board of Directors
and
reviewing their qualifications and experience. The process for identifying
and
evaluating nominees to the 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 the Board of Directors
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 Nominating and
Corporate Governance 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 and the Audit Committee
The
Board
of Directors and our Audit Committee have established procedures to enable
anyone who has a concern about our conduct, or any employee who has a concern
about our accounting, internal controls or auditing matters, to communicate
that
concern directly to the non-management members of the Board of Directors
or the
Audit Committee, as applicable. These communications may be confidential
or
anonymous, and may be submitted in writing or through the Internet. The
employees have been provided with direct and anonymous access to each of
the
members of the Audit Committee. Our company’s Code of Business Conduct and
Ethics prohibits any employee of our company from retaliating or taking adverse
action against anyone raising or helping resolve a concern about our
company.
Interested
parties may contact our non-management 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 the non-management members of the Board of Directors
will be reviewed by our corporate communications liaison, which is our outside
legal counsel, and will be directed to the appropriate director or directors
for
their consideration. The
corporate communications liaison may not “filter out” any direct communications
from being presented to the non-management
members of the Board
of
Directors and Audit Committee members without instruction from the directors
or
committee members. The corporate
communications liaison
is
required to maintain a record of all communications received that were addressed
to one or more directors, including those determined to be inappropriate
communications. Such record will include the name of the addressee, the
disposition by the corporate
communications liaison
and, in
the case of communications determined to be inappropriate, a brief description
of the nature of the communication. The corporate
communications liaison
is
required to provide a copy of any additions to the record upon request of
any
member of the Board of Directors.
Corporate
Governance Materials
The
Corporate Governance Guidelines, Code of Business Conduct and Ethics and
the
charters of the Audit Committee, Compensation Committee and Nominating and
Corporate Governance Committee are available free of charge through our website
at www.omegahealthcare.com
and are
available in print to any shareholder who requests them.
-8-
Conflicts
of Interest Policies
We
have a
written policy regarding related party transactions under which we have
determined that we will not engage in any purchase, sale or lease of property
or
other business transaction in which our officers or directors have a direct
or
indirect material interest without the approval by resolution of a majority
of
those directors who do not have an interest in such transaction. It is generally
our policy to enter into or ratify related party transactions only when our
Board of Directors, acting through our Audit Committee, determines that the
related person transaction in question is in, or is not inconsistent with,
our
best interests and the interests of our stockholders. We are currently unaware
of any transactions with our company in which our directors or officers have
a
material interest.
EXECUTIVE
COMPENSATION
Compensation
Discussion and Analysis
Our
Compensation Discussion and Analysis (“CD&A”) addresses the following
topics:
| · |
the
members and role of our Compensation Committee (the “Committee”);
|
| · |
our
compensation-setting process;
|
| · |
our
compensation philosophy and policies regarding executive compensation;
|
| · |
the
components of our executive compensation program; and
|
| · |
our
compensation decisions for fiscal year 2006 and for the first quarter
of
2007.
|
In
this
Compensation Discussion and Analysis section, the terms “we,” “our,” “us” and
the “Committee” refer to the Compensation Committee of Omega Healthcare
Investors, Inc.’s Board of Directors.
The
Compensation Committee
Committee
Members and Independence
Thomas
F.
Franke, Harold J. Kloosterman, Bernard J. Korman, Edward Lowenthal, and Stephen
D. Plavin are the members of the Committee. Mr. Franke, who has served on
our
Board of Directors since 1992, is the Chairman of the Committee. Each member
of
the Committee qualifies as an independent director under the New York Stock
Exchange listing standards and under our Board of Directors’ standards of
independence.
Role
of the Committee
The
Committee’s responsibilities and function are governed by its charter, which the
Board of Directors has adopted and a copy of which is available at our website
at www.omegahealthcare.com.
The
Committee administers our 2004 Stock Incentive Plan, our 2000 Stock Incentive
Plan and our 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.
The
Committee is responsible to the Board of Directors for the following
activities:
| · |
The
Committee determines and approves the compensation for the Chief
Executive
Officer and our other executive officers. In doing so, the Committee
evaluates their performance in light of goals and objectives reviewed
by
the Committee and such other factors as the Committee deems appropriate
in
our best interests and in satisfaction of any applicable requirements
of
the New York Stock Exchange and any other legal or regulatory
requirements.
|
| · |
The
Committee reviews and recommends for the Board of Directors’ approval (or
approves, where applicable) the adoption and amendment of our director
and
executive officer incentive compensation and equity-based plans.
The
Committee has the responsibility for recommending to the Board the
level
and form of compensation and benefits for
directors.
|
| · |
The
Committee may administer our incentive compensation and equity-based
plans
and may approve such awards thereunder as the Committee deems
appropriate.
|
-9-
| · |
The
Committee reviews and monitors succession plans for the Chief Executive
Officer and our other senior executives.
|
| · |
The
Committee meets to review and discuss with management the CD&A
required by the SEC rules and regulations. The Committee recommends
to the
Board of Directors whether the CD&A should be included in our proxy
statement or other applicable SEC filings. The Committee prepares
a
Compensation Committee Report for inclusion in our applicable filings
with
the SEC. Such reports state whether the Committee reviewed and discussed
with management the CD&A, and whether, based on such review and
discussion, the Committee recommended to the Board of Directors that
the
CD&A be included in our proxy statement or other applicable SEC
filings.
|
| · |
The
Committee should be consulted with respect to any employment agreements,
severance agreements or change of control agreements that are entered
into
between us and any executive officer.
|
| · |
To
the extent not otherwise inconsistent with its obligations and
responsibilities, the Committee may form subcommittees (which shall
consist of one or more members of the Committee) and delegate authority
to
such subcommittees hereunder as it deems
appropriate.
|
| · |
The
Committee reports to the Board of Directors as it deems appropriate
and as
the Board of Directors may request.
|
| · |
The
Committee performs such other activities consistent with its charter,
our
Bylaws, governing law, the rules and regulations of the New York
Stock
Exchange and such other requirements applicable to us as the Committee
or
the Board of Directors deems necessary or
appropriate.
|
The
responsibilities of a member of the Committee are in addition to those
responsibilities set out for a member of the Board.
Committee
Meetings
The
Committee meets as often as necessary to perform its duties and
responsibilities. The Committee met four times during the year ended December
31, 2006 and thus far has held eight
meetings
in 2007. Mr. Franke works, from time to time, with Mr. Pickett and other
members
of the Committee to establish the agenda. The Committee typically meets in
executive sessions without management and meets with Omega’s legal counsel and
outside advisors when necessary.
The
Committee receives and reviews materials in advance of its meetings. These
materials include information that management believes will be helpful to
the
Committee as well as materials the Committee has requested. Depending upon
the
agenda for the particular meeting, these materials may include, among other
things:
| · |
reports
from compensation consultants or legal
counsel;
|
| · |
a
comparison of the compensation of our executives and directors compared
to
our competitors prepared by members of the Committee, by management
at the
Committee’s request or by a compensation consultant engaged by the
Committee;
|
| · |
financial
reports on year-to-date performance versus budget and compared to
prior
year performance, as well as other financial data regarding us and
our
performance;
|
| · |
reports
on our strategic plan and budgets for future
periods;
|
| · |
information
on the executive officers’ stock ownership and option holdings; and
|
| · |
reports
on the levels of achievement of individual and corporate
objectives.
|
-10-
The
Compensation Committee Process
Committee
Advisors
The
Compensation Committee charter grants the Committee the sole and direct
authority to engage and terminate advisors and compensation consultants and
to
approve their fees and retention terms. These advisors and consultants report
directly to the Committee, and we are responsible for paying their
fees.
The
Committee had previously engaged a consulting group in 2004, The Schonbraun
McCann Group LLP (“Schonbraun”), in connection with determining the compensation
of our executive officers for the current fiscal year, and the Committee
also
retained Schonbraun in late 2006 in connection with determining the compensation
and incentive arrangements for our executive officers for fiscal year 2007.
Schonbraun has not performed and has agreed not to perform in the future
any
work for us other than work for which it is engaged by the Committee. During
late 2006 and early 2007, Schonbraun presented to the Committee analysis
that
included, but was not limited to, the status of our current compensation
scheme
as compared to our peer companies, the methodologies behind the research
and
analysis it used to determine the comparisons, the techniques it used to
standardize the compensation schemes of peer companies in order to permit
more
accurate comparisons against our policies, and a proposed incentive compensation
plan for executive officers. The Committee also requested that Schonbraun
evaluate our current director compensation and prepare a proposal with respect
to compensation for our directors in 2007.
Peer
companies included in Schonbraun’s 2006/2007 analysis were Alexandria Real
Estate Equities, Inc., BioMed Realty Trust, Corporate Office Properties Trust
Inc., Digital Realty Trust, Inc., First Potomac Realty Trust, Glenborough
Realty
Trust Incorporated, Health Care REIT, Inc., Healthcare Realty Trust, LTC
Properties, Inc., Medical Properties Trust Inc., Nationwide Health Properties,
Inc., Parkway Properties, Inc., Republic Property Trust, Ventas, Inc.,
Washington Real Estate Investment Trust and Windrose Medical Properties Trust.
Analyses performed included a comparison of the total return to the stockholders
of the respective companies, a comparison of salaries of comparable officers
for
each company and a comparison of the terms of officer employment agreements.
Also,
our
Chief Executive Officer meets with the Committee upon the Committee’s request to
provide information to the Committee regarding management’s views regarding its
performance as well as other factors the Chief Executive Officer believes
should
impact the compensation of our executive officers. In addition, the Chief
Executive Officer provides his recommendation to the Committee regarding
the
compensation of the executive officers and the business and performance targets
for incentive awards and bonuses.
Annual
Evaluation
The
Committee meets in one or more executive sessions each year to evaluate the
performance of our named executive officers, to determine their bonuses for
the
prior year, to establish bonus metrics for the current year, to set their
salaries for the current year, and to approve any grants to them of equity
incentive compensation, as the case may be.
The
Committee also performs an annual evaluation of its performance and the adequacy
of its charter and reports to our Board of Directors regarding this evaluation.
Compensation
Policy
Historically,
the policy and the guidelines followed by the Committee have been directed
toward providing compensation and incentives 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;
|
|
5)
|
Align
the interests of our executive officers with the interests of our
stockholders; and
|
|
6)
|
Encourage
executives to achieve meaningful levels of ownership of our
stock.
|
-11-
Elements
of Compensation
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 issuance of the executive
employment contracts during 2004. Additionally, in connection with the issuance
of these contracts, the Committee hired Schonbraun in 2004 to conduct a review
and analysis of our peer group companies and to provide the Committee with
executive base salaries of individuals then employed in similar positions
in
such companies. The employment agreements for each of the executive officers
established a base annual salary and provided that the base salary should
be
reviewed on an annual basis to determine if increases are
warranted.
In
2006
and 2007, the Committee evaluated and established the annual executive officer
salaries for each fiscal year in connection with its annual review of
management’s performance and based on input from our Chairman of the Board and
our Chief Executive Officer. The Committee undertook this evaluation and
determination at the beginning of fiscal year 2006 and 2007 so that it could
have available data for the recently completed prior fiscal year and so that
it
could set expectations for the beginning fiscal year. 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 officer, as well as our overall performance and the achievement
of our
strategic objectives and budgets. The Committee viewed work performance as
the
single most important measurement factor, followed by team-building skills
and
decision-making responsibilities.
We
accrue
salaries as they are earned by our officers, and thus all salaries earned
during
the year are expensed in the year earned. Each officer must include his salary
in his taxable income in the year during which he receives it. We withhold
appropriate tax withholdings from the salaries of the respective
officers.
Annual
Cash Bonus
Our
historical compensation practices have embodied the principle that annual
cash
bonuses that are based primarily on achieving objectives that enhance long-term
stockholder value are desirable in aligning stockholder and management
interests.
The
Committee has considered our overall financial performance for the fiscal
year
and the performance of the specific areas of our company under each incumbent
officer’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 and have been awarded in accordance
with the terms of each executive officer’s employment agreement.
In
2006,
the executive officers were eligible for a cash bonus at the Committee’s
discretion based on the objective, subjective and personal performance goals
set
by the Committee. This bonus is in addition to any special bonus that may
be
paid at the discretion of the Board of Directors. In determining the amount
of
the annual cash bonuses, the Committee considered a variety of factors,
including the individual performance of each executive officer along with
our
achievement of certain financial benchmarks, the successful implementation
of
asset management initiatives, control of expenses and satisfaction of our
strategic objectives. Considering these factors, the Committee set annual
cash
bonuses related to fiscal year 2006 for Messrs. Pickett, Booth, Stephenson,
and
Crabill at $463,500, $158,500, $114,750 and $123,000, respectively.
We
accrue
estimated bonuses for our executive officers throughout the year service
is
performed relating to such bonuses, and thus bonuses are expensed in the
year
they are earned, assuming they are approved by our Board of Directors. Each
officer must include his bonus in his taxable income in the year during which
he
receives it, which is generally in the year following the year it is earned.
We
withhold appropriate tax withholdings from the bonus amounts awarded.
Restricted
Stock Incentives
In
2004,
we entered into restricted stock agreements with four executive officers
under
the Omega Healthcare Investors, Inc. 2004 Stock Incentive Plan. A total of
317,500 shares of restricted stock were granted, which equated to approximately
$3.3 million of deferred compensation. The shares vest thirty-three and
one-third percent (33 ⅓%) on each of January 1, 2005, January 1, 2006 and
January 1, 2007 so long as the executive officer remains employed on the
vesting
date, with vesting accelerating upon a qualifying termination of employment,
upon the occurrence of a change of control (as defined in the restricted
stock
agreements), death or disability. In addition, we also entered into performance
restricted stock unit agreements with our four executive officers. A total
of
317,500 performance restricted stock units were granted under the Omega
Healthcare Investors, Inc. 2004 Stock Incentive Plan. The performance restricted
stock units were fully vested as December 31, 2006 following our attaining
$0.30
per share of common stock per fiscal quarter in “Adjusted Funds from Operations”
(as defined in the performance restricted stock unit agreement) for two (2)
consecutive quarters. Dividend equivalents (plus an interest factor based
on our
company’s cost of borrowing) accrued on unvested shares and were paid, according
to the terms of the stock grant, because the performance restricted stock
units
vested. Dividend equivalents on vested performance restricted stock units
are
paid currently. Pursuant to the terms of the performance restricted stock
unit
agreements, each of the executive officers will not receive the vested shares
attributable to the performance restricted stock units until the earlier
of
January 1, 2008, such executive officer is terminated without cause or quits
for
good reason (as defined in the performance restricted stock unit agreement),
or
the death or disability (as defined in the performance restricted stock unit
agreement) of the executive officer.
-12-
In
2006,
the Committee did not make any grants under the 2004 Stock Incentive Plan,
2000
Stock Incentive Plan or 1993 Deferred Compensation Plan to any executive
officer
or employee.
We
account for all stock and option awards in accordance with Statement of FAS
No.
123R. Executive officers recognize taxable income from stock option awards
when
a vested option is exercised. We generally receive a corresponding tax deduction
for compensation expense in the year of exercise. The amount included in
the
executive officer’s wages and the amount we may deduct is equal to the most
recent closing common stock price on the date the stock options are exercised
less the exercise price multiplied by the number of stock options exercised.
We
do not pay or reimburse any executive officer for any taxes due upon exercise
of
a stock option or upon vesting of an award.
Retirement
Savings Opportunities
All
employees may participate in our 401(k) Retirement Savings Plan (“401(k) Plan”).
We provide this plan to help our employees save some amount of their cash
compensation for retirement in a tax efficient manner. Under
the
401(k)
Plan,
employees are eligible to make contributions, and we, at our discretion,
may
match contributions and make a profit sharing contribution.
We do
not provide an option for our employees to invest in our stock in the 401(k)
plan.
Health
and Welfare Benefits
We
provide a competitive benefits package to all full-time employees which includes
health and welfare benefits, such as medical, dental, disability insurance,
and
life insurance benefits. The plans under which these benefits are offered
do not
discriminate in scope, terms or operation in favor of officers and directors
and
are available to all salaried employees. We have no structured executive
perquisite benefits (e.g., club memberships or company vehicles) for any
executive officer, including the named executive officers, and we currently
do
not provide supplemental pensions to our employees, including the named
executive officers.
2006
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 September
1,
2004 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 our long-term interests, 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, 2006, the Committee awarded Mr. Pickett an
annual
cash bonus of $463,500. This bonus was determined by the Committee substantially
in accordance with the policies described above relating to all of our executive
officers.
COMPENSATION
COMMITTEE REPORT
The
Committee reviewed and discussed the CD&A with management, and based on this
review and discussion, the Committee recommended to the Board of Directors
that
the CD&A be included in this annual proxy statement and the Annual Report on
Form 10-K for the year ended December 31, 2006.
-13-
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. Section 162(m) disallows a federal income tax
deduction for compensation over $1.0 million to any of the named executive
officers unless the compensation is paid pursuant to a plan that is
performance-related, non-discretionary and has been approved by our
stockholders. We did not pay any compensation during 2006 that would be subject
to Section 162(m). We believe that, because we qualify as a REIT under the
Internal Revenue Code and therefore are not subject to federal income taxes
on
our income to the extent distributed, the payment of compensation that does
not
satisfy the requirements of Section 162(m) will not generally affect our
net
income, although to the extent that compensation does not qualify for deduction
under Section 162(m), a larger portion of stockholder distributions may be
subject to federal income taxation as dividend income rather than return
of
capital. We do not believe that Section 162(m) will materially affect the
taxability of stockholder distributions, although no assurance can be given
in
this regard due to the variety of factors that affect the tax position of
each
stockholder. For these reasons, Section 162(m) does not directly govern the
Compensation Committee’s compensation policy and practices.
Compensation
Committee of the Board of Directors
/s/
Thomas F. Franke
/s/
Harold J. Kloosterman
/s/
Bernard J. Korman
/s/
Edward Lowenthal
/s/
Stephen D. Plavin
-14-
Summary
Compensation Table
|
Name
and Principal Position
(A)
|
Year
(B
|
)
|
Salary
($
(C
|
)
)
|
Bonus
($
(1
(D
|
)
)
)
|
Stock
Awards
($
(2
(E
|
)
)
)
|
Option
Awards
($
(F
|
)
)
|
Non-Equity
Incentive Plan Compensation ($
(G
|
)
)
|
Change
in Pension Value and Non-qualified Deferred Compensation
Earnings
(H
|
)
|
All
Other Compen-
sation
($
(3
(I
|
)
)
)
|
Total
($
(J
|
)
)
|
||||||||||
|
Taylor
Pickett
|
2006
|
$
|
515,000
|
$
|
463,500
|
$
|
1,317,500
|
$
|
--
|
$
|
--
|
$
|
--
|
$
|
343,211
|
$
|
2,639,211
|
|||||||||||
|
Robert
Stephenson
|
2006
|
$
|
255,000
|
$
|
114,750
|
$
|
632,400
|
$
|
--
|
$
|
--
|
$
|
--
|
$
|
168,172
|
$
|
1,170,322
|
|||||||||||
|
Dan
Booth
|
2006
|
$
|
317,000
|
$
|
158,500
|
$
|
790,500
|
$
|
--
|
$
|
--
|
$
|
--
|
$
|
208,566
|
$
|
1,474,566
|
|||||||||||
|
Lee
Crabill
|
2006
|
$
|
246,000
|
$
|
123,000
|
$
|
606,050
|
$
|
--
|
$
|
--
|
$
|
--
|
$
|
161,441
|
$
|
1,136,491
|
|
(1)
|
This
amount represents the bonuses related to the performance in 2006
but paid
in 2007.
|
|
(2)
|
The
restricted common stock units were granted in 2004 and earned in
2006 because
we attained $0.30 per share of common stock per fiscal quarter
in
“Adjusted Funds from Operations,” which target was previously set in 2004
by the Committee, valued at grant date price of $10.54 times the
number of
units earned.
|
(3) This
amount includes: (i) dividends
on units paid in January 2007 (see footnote 2 above);
(ii) interest
earned on dividends on units paid in January 2007 (see footnote 2
above);
|
(iii)
|
dividends
on restricted stock that was paid during 2006, which vested on
January 1,
2007; and
|
(iv) 401(k)
matching contributions.
Outstanding
Equity Awards at Fiscal Year End
|
Option
Awards
|
Stock
Awards
|
|||||||||||||||||||||||||||
|
Name
(A)
|
Number
of Securities Underlying Unexercised Options (#)
Exercisable
(B)
|
Number
of Securities Underlying Unexercised Options
(#)
Unexercisable
(C)
|
Equity
Incentive Plan Awards: Number of Securities Underlying Unexercised
Unearned Options
(#)
(D)
|
Option
Exercise Price
($)
(E)
|
Option
Expiration
Date
(F)
|
Number
of Shares or Units of Stock That Have Not Vested
(#)
(G)(1)
|
Market
Value of Shares or Units of Stock
That
Have Not Vested
($)
(H)(2)
|
Equity
Incentive Plan Awards: Number of Unearned Shares, Units or Other
Rights
That Have Not Vested
(#)
(I)
|
Equity
Incentive Plan Awards: Market or Payout Value of Unearned Shares,
Units or
Other Rights That Have Not Vested
($)
(J)
|
|||||||||||||||||||
|
Taylor
Pickett
|
41,666
|
$
|
738,322
|
|||||||||||||||||||||||||
|
Robert
Stephenson
|
20,000
|
$
|
354,400
|
|||||||||||||||||||||||||
|
Dan
Booth
|
25,000
|
$
|
443,000
|
|||||||||||||||||||||||||
|
Lee
Crabill
|
19,166
|
$
|
339,622
|
|||||||||||||||||||||||||
(1) These
balances represent unvested restricted stock at December 31, 2006, which
subsequently vested on January 1, 2007. These balances exclude performance
restricted stock units, which were vested as of December 31, 2006 but will
be
distributed on January 1, 2008. The performance criteria for the receipt
of
these units were met in 2006. Messrs. Pickett, Stephenson, Booth and Crabill
were awarded 125,000, 60,000, 75,000 and 57,500 of these performance restricted
stock units, respectively.
(2) The
market value is based on the closing price of our common stock on December
29,
2006 of $17.72.
-15-
Option
Exercises and Stock Vested
|
Option
Awards
|
Stock
Awards
|
||||||||||||
|
Name
(A)
|
Number
of Shares Acquired on Exercise
(#
(B
|
)
)
|
Value
Realized on Exercise
($
(1
(C
|
)
)
)
|
Number
of Shares Acquired on Vesting
(#
(D
|
)
)
|
Value
Realized on Vesting
($
(E
|
)
)
|
|||||
|
Taylor
Pickett
|
--
|
$
|
--
|
--
|
$
|
--
|
|||||||
|
Robert
Stephenson
|
80,274
|
$
|
785,891
|
--
|
$
|
--
|
|||||||
|
Dan
Booth
|
91,667
|
$
|
874,837
|
--
|
$
|
--
|
|||||||
|
Lee
Crabill
|
--
|
$
|
--
|
--
|
$
|
--
|
|||||||
|
(1)
|
This
amount represents the gain to the employee based on the market
price of
underlying shares at the date of exercise less the exercise
price.
|
Compensation
and Severance Agreements
C.
Taylor Pickett Employment Agreement
We
entered into an employment agreement with C. Taylor Pickett, dated as of
September 1, 2004, to be our Chief Executive Officer. The term of the agreement
expires on December 31, 2007.
Mr.
Pickett’s current base salary is $530,500 per year, subject to increase by us
and provides that he will be eligible for an annual bonus of up to 125% 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 125,000
shares
of our restricted common stock on September 10, 2004, which vested 33 1/3%
on
each of January 1, 2005, January 1, 2006, and January 1, 2007. Dividends
were
paid on unvested shares and a dividend equivalent per share was paid in an
amount equal to the dividend per share payable to stockholders of record
as of
July 30, 2004. Also in connection with this employment agreement, we issued
Mr.
Pickett 125,000 performance restricted stock units on September 10, 2004,
which
were fully vested as of December 31, 2006 because we had attained $0.30 per
share of common stock per fiscal quarter in “Adjusted Funds from Operations” (as
defined in the agreement) for two (2) consecutive quarters. Dividend equivalents
accrued on unvested shares and were paid upon vesting of the performance
restricted stock units. Dividend equivalents on vested performance restricted
stock units are paid currently. Pursuant to the terms of Mr. Pickett’s
performance restricted stock unit agreement, he will not receive the vested
shares attributable to his performance restricted stock units until the earlier
of January 1, 2008, he is terminated without cause or quits for good reason
(as
defined in the performance restricted stock unit agreement), or his death
or
disability (as defined in performance restricted stock unit
agreement).
If
we
terminate Mr. Pickett’s employment without “cause” or if he resigns for “good
reason,” he will be entitled to payment of his cash compensation (the sum of his
then current annual base salary plus average annual bonus payable based on
the
three completed fiscal years prior to termination of employment) for a period
of
three (3) years. “Cause” is defined in the employment agreement to include
events such as willful refusal to perform duties, willful misconduct in
performance of duties, unauthorized disclosure of confidential company
information, or fraud or dishonesty against us. “Good reason” is defined in the
employment agreement to include events such as our material breach of the
employment agreement or our relocation of Mr. Pickett’s employment to more than
50 miles away without his consent.
-16-
Mr.
Pickett is required to execute a release of claims against us as a condition
to
the payment of severance benefits. Severance is not paid if the term of the
employment agreement expires. Mr. Pickett’s restricted common stock and
performance restricted stock units will become fully vested upon the occurrence
of Mr. Pickett’s death, disability, termination of employment without cause or
resignation for good reason, or a “change in control” (as defined in the
respective restricted stock agreement). In the event of a termination by
us
without cause or by Mr. Pickett for good reason, benefits are grossed up
to
cover federal excise taxes. If Mr. Pickett dies during the term of the
employment agreement, his estate is entitled to a prorated bonus for the
year of
his death.
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.
During
the period of employment and for one year thereafter, Mr. Pickett is obligated
not to provide managerial services or management consulting services to a
competing business. Competing businesses is defined to include a defined
list of
competitors and any other business with the primary purpose of leasing assets
to
healthcare operators or financing ownership or operation of senior, retirement
or healthcare related real estate. In addition, during the period of employment
and for one year thereafter, Mr. Pickett agrees not to solicit clients or
customers with whom he had material contact or to solicit our management
level
or key employees. If the term of the employment agreement expires at December
31, 2007 and as a result no severance is paid, then these provisions also
expire
at December 31, 2007.
Daniel
J. Booth Employment Agreement
We
entered into an employment agreement with Daniel J. Booth, dated as of September
1, 2004, to be our Chief Operating Officer. The term of the agreement expires
on
December 31, 2007.
Mr.
Booth’s current base salary is $326,500 per year, subject to increase by us and
provides that he will be eligible for an annual bonus of up to 75% 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. Booth 75,000 shares
of
our restricted common stock on September 10, 2004, which vested 33 1/3% on
each
of January 1, 2005, January 1, 2006, and January 1, 2007. Dividends were
paid on
unvested shares and a dividend equivalent per share was paid in an amount
equal
to the dividend per share payable to stockholders of record as of July 30,
2004.
Also in connection with this employment agreement, we issued Mr. Booth 75,000
performance restricted stock units on September 10, 2004, which were fully
vested as of December 31, 2006 because we had attained $0.30 per share of
common
stock per fiscal quarter in “Adjusted Funds from Operations” (as defined in the
agreement) for two (2) consecutive quarters. Dividend equivalents on vested
performance restricted stock units are paid currently. Pursuant to the terms
of
Mr. Booth’s performance restricted stock unit agreement, he will not receive the
vested shares attributable to his performance restricted stock units until
the
earlier of January 1, 2008, he is terminated without cause or quits for good
reason (as defined in the performance restricted stock unit agreement), or
his
death or disability (as defined in performance restricted stock unit
agreement).
If
we
terminate Mr. Booth’s employment without “cause” or if he resigns for “good
reason,” he will be entitled to payment of his cash compensation (the sum of his
then current annual base salary plus average annual bonus payable based on
the
three completed fiscal years prior to termination of employment) for a period
of
two (2) years. “Cause” is defined in the employment agreement to include events
such as willful refusal to perform duties, willful misconduct in performance
of
duties, unauthorized disclosure of confidential company information, or fraud
or
dishonesty against us. “Good reason” is defined in the employment agreement to
include events such as our material breach of the employment agreement or
our
relocation of Mr. Booth’s employment to more than 50 miles away without his
consent.
Mr.
Booth
is required to execute a release of claims against us as a condition to the
payment of severance benefits. Severance is not paid if the term of the
employment agreement expires. Mr. Booth’s restricted common stock and
performance restricted stock units will become fully vested upon the occurrence
of Mr. Booth’s death, disability, termination of employment without cause or
resignation for good reason, or a “change in control” (as defined in the
respective restricted stock agreement). In the event of a termination by
us
without cause or by Mr. Booth for good reason, benefits are grossed up to
cover
federal excise taxes. If Mr. Booth dies during the term of the employment
agreement, his estate is entitled to a prorated bonus for the year of his
death.
Mr.
Booth
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.
During
the period of employment and for one year thereafter, Mr. Booth is obligated
not
to provide managerial services or management consulting services to a competing
business. Competing businesses is defined to include a defined list of
competitors and any other business with the primary purpose of leasing assets
to
healthcare operators or financing ownership or operation of senior, retirement
or healthcare related real estate. In addition, during the period of employment
and for one year thereafter, Mr. Booth agrees not to solicit clients or
customers with whom he had material contact or to solicit our management
level
or key employees. If the term of the employment agreement expires at December
31, 2007 and as a result no severance is paid, then these provisions also
expire
at December 31, 2007.
-17-
Robert
O. Stephenson Employment Agreement
We
entered into an employment agreement with Robert O. Stephenson, dated as
of
September 1, 2004, to be our Chief Financial Officer. The term of the agreement
expires on December 31, 2007.
Mr.
Stephenson’s current base salary is $262,700 per year, subject to increase by us
and provides that he will be eligible for an annual bonus of up to 60% 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. Stephenson 60,000
shares of our restricted common stock on September 10, 2004, which vested
33
1/3% on each of January 1, 2005, January 1, 2006, and January 1, 2007. Dividends
were paid on unvested shares and a dividend equivalent per share was paid
in an
amount equal to the dividend per share payable to stockholders of record
as of
July 30, 2004. Also in connection with this employment agreement, we issued
Mr.
Stephenson 60,000 performance restricted stock units on September 10, 2004,
which were fully vested as of as of December 31, 2006 because we had attained
$0.30 per share of common stock per fiscal quarter in “Adjusted Funds from
Operation” (as defined in the agreement) for two (2) consecutive quarters.
Dividend equivalents on vested performance restricted stock units are paid
currently. Pursuant to the terms of Mr. Stephenson’s performance restricted
stock unit agreement, he will not receive the vested shares attributable
to his
performance restricted stock units until the earlier of January 1, 2008,
he is
terminated without cause or quits for good reason (as defined in the performance
restricted stock unit agreement), or his death or disability (as defined
in
performance restricted stock unit agreement).
If
we
terminate Mr. Stephenson’s employment without “cause” or if he resigns for “good
reason,” he will be entitled to payment of his cash compensation (the sum of his
then current annual base salary plus average annual bonus payable based on
the
three completed fiscal years prior to termination of employment) for a period
of
one and one half (1.5) years. “Cause” is defined in the employment agreement to
include events such as willful refusal to perform duties, willful misconduct
in
performance of duties, unauthorized disclosure of confidential company
information, or fraud or dishonesty against us. “Good reason” is defined in the
employment agreement to include events such as our material breach of the
employment agreement or our relocation of Mr. Stephenson’s employment to more
than 50 miles away without his consent.
Mr.
Stephenson is required to execute a release of claims against us as a condition
to the payment of severance benefits. Severance is not paid if the term of
the
employment agreement expires. Mr. Stephenson’s restricted common stock and
performance restricted stock units will become fully vested upon the occurrence
of Mr. Stephenson’s death, disability, termination of employment without cause
or resignation for good reason, or a “change in control” (as defined in the
respective restricted stock agreement). In the event of a termination by
us
without cause or by Mr. Stephenson for good reason, benefits are grossed
up to
cover federal excise taxes. If Mr. Stephenson dies during the term of the
employment agreement, his estate is entitled to a prorated bonus for the
year of
his death.
Mr.
Stephenson 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.
During the period of employment and for one year thereafter, Mr. Stephenson
is
obligated not to provide managerial services or management consulting services
to a competing business. Competing businesses is defined to include a defined
list of competitors and any other business with the primary purpose of leasing
assets to healthcare operators or financing ownership or operation of senior,
retirement or healthcare related real estate. In addition, during the period
of
employment and for one year thereafter, Mr. Stephenson agrees not to solicit
clients or customers with whom he had material contact or to solicit our
management level or key employees. If the term of the employment agreement
expires at December 31, 2007 and as a result no severance is paid, then these
provisions also expire at December 31, 2007.
R.
Lee Crabill, Jr. Employment Agreement
We
entered into an employment agreement with R. Lee Crabill, dated as of September
1, 2004, to be our Senior Vice President of Operations. The term of the
agreement expires on December 31, 2007.
Mr.
Crabill’s current base salary is $253,400 per year, subject to increase by us
and provides that he will be eligible for an annual bonus of up to 60% of
his
base salary based on criteria determined by the Compensation Committee of
our
Board of Directors.
-18-
In
connection with this employment agreement, we issued Mr. Crabill 57,500 shares
of our restricted common stock on September 10, 2004, which vested 33 1/3%
on
each of January 1, 2005, January 1, 2006, and January 1, 2007. Dividends
were
paid on unvested shares and a dividend equivalent per share was paid in an
amount equal to the dividend per share payable to stockholders of record
as of
July 30, 2004. Also in connection with this employment agreement, we issued
Mr.
Crabill 57,500 performance restricted stock units on September 10, 2004,
which
were fully vested as of as of December 31, 2006 because we had attained $0.30
per share of common stock per fiscal quarter in “Adjusted Funds from Operations”
(as defined in the agreement) for two (2) consecutive quarters. Dividend
equivalents on vested performance restricted stock units are paid currently.
Performance restricted stock units that have not become vested as of December
31, 2007 are forfeited. Pursuant to the terms of Mr. Crabill’s performance
restricted stock unit agreement, he will not receive the vested shares
attributable to his performance restricted stock units until the earlier
of
January 1, 2008, he is terminated without cause or quits for good reason
(as
defined in the performance restricted stock unit agreement), or his death
or
disability (as defined in performance restricted stock unit
agreement).
If
we
terminate Mr. Crabill’s employment without “cause” or if he resigns for “good
reason,” he will be entitled to payment of his cash compensation (the sum of his
then current annual base salary plus average annual bonus payable based on
the
three completed fiscal years prior to termination of employment) for a period
of
one and one half (1.5) years. “Cause” is defined in the employment agreement to
include events such as willful refusal to perform duties, willful misconduct
in
performance of duties, unauthorized disclosure of confidential company
information, or fraud or dishonesty against us. “Good reason” is defined in the
employment agreement to include events such as our material breach of the
employment agreement or our relocation of Mr. Crabill’s employment to more than
50 miles away without his consent.
Mr.
Crabill is required to execute a release of claims against us as a condition
to
the payment of severance benefits. Severance is not paid if the term of the
employment agreement expires. Mr. Crabill’s restricted common stock and
performance restricted stock units will become fully vested upon the occurrence
of Mr. Crabill’s death, disability, termination of employment without cause or
resignation for good reason, or a “change in control” (as defined in the
respective restricted stock agreement). In the event of a termination by
us
without cause or by Mr. Crabill for good reason, benefits are grossed up
to
cover federal excise taxes. If Mr. Crabill dies during the term of the
employment agreement, his estate is entitled to a prorated bonus for the
year of
his death.
Mr.
Crabill 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.
During
the period of employment and for one year thereafter, Mr. Crabill is obligated
not to provide managerial services or management consulting services to a
competing business. Competing businesses is defined to include a defined
list of
competitors and any other business with the primary purpose of leasing assets
to
healthcare operators or financing ownership or operation of senior, retirement
or healthcare related real estate. In addition, during the period of employment
and for one year thereafter, Mr. Crabill agrees not to solicit clients or
customers with whom he had material contact or to solicit our management
level
or key employees. If the term of the employment agreement expires at December
31, 2007 and as a result no severance is paid, then these provisions also
expire
at December 31, 2007.
Option
Grants/SAR Grants
No
options or stock appreciation rights (“SARs”), were granted to the named
executive officers during 2006.
Long-Term
Incentive Plan
For
the
period from August 14, 1992, the date of commencement of our operations,
through
December 31, 2006, we have had no long-term incentive plans.
Defined
Benefit or Actuarial Plan
For
the
period from August 14, 1992, the date of commencement of our operations,
through
December 31, 2006, we have had no pension plans.
-19-
Compensation
of Directors
|
Name
(A)
|
Fees
earned or paid in cash
($
(1
(B
|
)
)
)
|
Stock
Awards
($
(C
|
)
)
|
Option
Awards
($
(D
|
)
)
|
Non-Equity
Incentive Plan Compensation
($
(E
|
)
)
|
Change
in Pension Value and Non-Qualified Deferred Compensation
Earnings
(F
|
)
|
All
Other Compensation
($
(G
|
)
)
|
Total
($
(H
|
)
)
|
||||||||
|
Thomas
F. Franke
|
$
|
53,500
|
$
|
27,582
|
$
|
--
|
$
|
--
|
$
|
--
|
$
|
--
|
$
|
81,082
|
||||||||
|
Harold
J. Kloosterman
|
$
|
69,000
|
$
|
27,582
|
$
|
--
|
$
|
--
|
$
|
--
|
$
|
--
|
$
|
96,582
|
||||||||
|
Bernard
J. Korman
|
$
|
75,000
|
$
|
52,762
|
$
|
--
|
$
|
--
|
$
|
--
|
$
|
--
|
$
|
127,762
|
||||||||
|
Edward
Lowenthal
|
$
|
57,500
|
$
|
27,582
|
$
|
--
|
$
|
--
|
$
|
--
|
$
|
--
|
$
|
85,082
|
||||||||
|
Stephen
D. Plavin
|
$
|
67,500
|
$
|
27,582
|
$
|
--
|
$
|
--
|
$
|
--
|
$
|
--
|
$
|
95,082
|
|
(1)
|
This
represents the fees earned in 2006 and includes amounts to be paid
in
2007. The amount excludes amounts paid in 2006 but earned in
2005.
|
2006
Standard Compensation Arrangement for Directors. For
the
year ended December 31, 2006, our standard compensation arrangement for our
Board of Directors provided that each non-employee director would receive
a cash
payment equal to $20,000 per year, payable in quarterly installments of $5,000.
Each non-employee director also is entitled to receive a quarterly grant
of
shares of common stock equal to the number of shares determined by dividing
the
sum of $5,000 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 paid in shares of common stock. In addition, each non-employee director
is
entitled to receive fees equal to $1,500 per meeting for attendance at each
regularly scheduled meeting of the Board of Directors. For each teleconference
or called special meeting of the Board of Directors, each non-employee director
received $1,500 for meeting. In 2006, the Chairman of the Board received
an
annual payment of $25,000 for being Chairman and each Committee Chair received
an annual payment of $5,000. 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.
Under
our
standard compensation arrangement of directors, each non-employee director
of
our company receives options with respect to 10,000 shares at the date the
plan
was adopted or upon their initial election as a director. Our standard
compensation arrangement for directors also provides that each non-employee
director is awarded an additional option grant with respect to 1,000 restricted
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 and
restricted stock vest ratably over a three-year period beginning the date
of
grant.
2007
Standard Compensation Arrangement for Directors. Effective
January 1, 2007, we modified our standard compensation arrangement for directors
to provide that each non-employee director would receive (i) a cash payment
of
$25,000, payable in quarterly installments of $6,250, (ii) a quarterly grant
of
shares of common stock equal to the number of shares determined by dividing
the
sum of $6,250 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, and (iii) restricted stock with respect to 1,500 shares on January 1
of each
year they serve as a director (except that the chairman of the board will
be
awarded 2,500 restricted shares on January 1 of each year he serves as
Chairman). In addition, the Chairman of the Board will receive an additional
annual payment of $25,000, the Chairman of the Audit Committee will receive
an
additional $15,000, the Chairman of the Compensation Committee will receive
an
additional $10,000 and all other committee chairmen will receive $7,000.
We
will
continue to pay each non-employee director fees equal to $1,500 per meeting
for
attendance at each regularly scheduled meeting of the Board of Directors.
For
each teleconference or called special meeting of the Board of Directors,
each
non-employee director will continue to receive $1,500 for meeting. In addition,
each new non-employee director of our company will be awarded options with
respect to 10,000 shares upon his or her initial election as a director.
All
stock
grants 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
and
restricted stock vest ratably over a three-year period beginning the date
of
grant.
-20-
Compensation
Committee Interlocks and Insider Participation
Thomas
F.
Franke, Harold J. Kloosterman, Bernard J. Korman, Edward Lowenthal and Stephen
D. Plavin were members of the Compensation Committee for the year ended December
31, 2006 and during such period, there were no Compensation Committee interlocks
or insider participation in compensation decisions.
AUDIT
COMMITTEE MATTERS
The
Audit
Committee’s purpose is to oversee the accounting and financial reporting
processes of our company, the audits of our financial statements, the
qualifications of the public accounting firm engaged as our independent auditor
to prepare and issue an audit report on our financial statements and the
related
internal control over financial reporting, and the performance of our
independent auditors. The Audit Committee has the sole authority and
responsibility to select, determine the compensation of, evaluate and, when
appropriate, replace our company’s independent auditors. The Audit Committee’s
function is more fully described in its revised charter, which the Board
of
Directors adopted on January 16, 2007, a copy of which is attached to this
proxy
statement as Appendix A and is available on our website at www.omegahealthcare.com.
The
Board of Directors reviews the Audit Committee Charter annually.
The
Audit
Committee has three independent directors, and the Board of Directors has
determined that each Audit Committee member is independent under the standards
of director independence established under our corporate governance policies
and
the New York Stock Exchange listing requirements and is also “independent” for
purposes of Section 10A(m)(3) of the Securities Exchange Act of 1934. In
addition, the Board of Directors has determined that Stephen Plavin is an
“audit
committee financial expert,” as defined by SEC rules.
Management
is responsible for the preparation, presentation, and integrity of our financial
statements, accounting and financial reporting principles, internal control
over
financial reporting, and procedures designed to ensure compliance with
accounting standards, applicable laws, and regulations. Our company’s
independent auditor, Ernst & Young LLP, is responsible for auditing and
expressing opinions on the conformity of our company’s consolidated financial
statements to accounting principles generally accepted in the United States,
management’s assessment of our company’s internal control over financial
reporting, and the effectiveness of our company’s internal control over
financial reporting.
Audit
Committee Report
The
Audit
Committee, with respect to the audit of Omega’s 2006 audited consolidated
financial statements, reports as follows:
| 1) |
The
Audit Committee has reviewed and discussed our 2006 audited consolidated
financial statements with Omega’s
management;
|
| 2) |
The
Audit Committee has discussed with Ernst & Young LLP the matters
required to be discussed by Statement on Auditing Standards No. 61,
as
amended, “Communication with Audit Committees” and SEC Regulation S-X,
Rule 2-07, which include, among other items, matters related to the
conduct of the audit of Omega’s consolidated financial
statements,
and the PCAOB Auditing Standard No. 2, (“An Audit of Internal Control
Over Financial Reporting Performed in Conjunction with an Audit of
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,
“Independence Discussion with Audit Committees,” (which relates to the
auditor’s independence from Omega and its related entities) and has
discussed with Ernst & Young LLP its independence from Omega;
|
| 4) |
Based
on reviews and discussions of Omega’s 2006 audited consolidated financial
statements with management and discussions with Ernst & Young LLP, the
Audit Committee recommended to the Board of Directors that Omega’s 2006
audited consolidated financial statements be included in our company’s
Annual Report on Form 10-K;
|
| 5) |
The
Audit Committee has policies and procedures that require the pre-approval
by the Audit Committee of all fees paid to, and all service performed
by,
our company’s independent auditor. At the beginning of each year, the
Audit Committee approves the proposed services, including the nature,
type
and scope of service contemplated and the related fees, to be rendered
by
the firm during the year. In addition, Audit Committee pre-approval
is
also required for those engagements that may arise during the course
of
the year that are outside the scope of the initial services and fees
approved by the Audit Committee. For each category of proposed service,
the independent accounting firm is required to confirm that the provision
of such services does not impair its independence. Pursuant to the
Sarbanes-Oxley Act of 2002, the fees and services provided as noted
in the
table below were authorized and approved by the Audit Committee in
compliance with the pre-approval policies and procedures described
herein.
|
-21-
| 6) |
The
Committee has also reviewed the services provided by Ernst & Young LLP
discussed below and has considered whether provision of such services
is
compatible with maintaining auditor
independence.
|
Audit
Committee of the Board of Directors
/s/
Stephen D. Plavin
/s/
Harold J. Kloosterman
/s/
Edward Lowenthal
RELATIONSHIP
WITH INDEPENDENT AUDITORS
Independent
Auditors
Ernst
& Young LLP audited our financial statements for each of the years ended
December 31, 2004, 2005 and 2006. 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; however, the Board considers the selection of
the
independent auditor to be an important matter of stockholder concern and
is
submitting the selection of Ernst & Young LLP for ratification by
stockholders as a matter of good corporate practice.
Fees
The
following table presents fees for professional audit services rendered by
Ernst
& Young LLP for the audit of our company’s annual financial statements for
the fiscal years 2005 and 2006 and fees billed for other services rendered
by
Ernst & Young LLP during those periods, all of which were pre-approved by
the Audit Committee.
|
Year
Ended December 31,
|
2005
|
2006
|
|||||
|
Audit
Fees
|
$
|
629,000
|
$
|
1,475,000
|
|||
|
Audit-Related
Fees
|
—
|
—
|
|||||
|
Tax
Fees
|
—
|
—
|
|||||
|
All
Other Fees
|
6,000
|
6,000
|
|||||
|
Total
|
$
|
635,000
|
$
|
1,481,000
|
|||
Audit
Fees
The
aggregate fees billed by Ernst & Young LLP for professional services
rendered to our company for the audit of our company’s annual financial
statements for fiscal years 2005 and 2006, the audit of the effectiveness
of our
company’s internal control over financial reporting related to Section 404 of
the Sarbanes-Oxley Act of 2002 for fiscal years 2005 and 2006, the reviews
of
the financial statements included in our company’s Forms 10-Q for fiscal years
2005 and 2006, and services relating to securities and other filings with
the
SEC, including comfort letters and consents, were approximately $629,000
and
$1,475,000, respectively. Audit fees in 2006 also included approximately
$800,000 of fees billed by Ernst & Young LLP related to the restatement of
our Form 10-K for the three-year period ended December 31, 2005 and Forms
10-Q
for the periods ended March 31, 2006 and June 30, 2006.
-22-
Audit
Related Fees
Ernst
& Young LLP was not engaged to perform services for our company relating to
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, or consultation
concerning financial accounting and reporting standards for fiscal years
2005
and 2006.
Tax
Fees
Ernst
& Young LLP was not engaged to perform services to our company relating to
tax compliance, tax planning and tax advice for fiscal years 2005 and 2006,
respectively.
All
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 2005 and 2006 were
approximately $6,000 and $6,000, respectively.
Determination
of Auditor Independence
The
Audit
Committee 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.
PROPOSAL
2 — PROPOSAL TO
RATIFY THE SELECTION OF ERNST & YOUNG LLP AS OUR INDEPENDENT AUDITOR FOR THE
FISCAL YEAR 2007
The
Audit
Committee has selected Ernst & Young LLP as our company’s independent
auditor for the current fiscal year, and the Board of Directors is asking
stockholders to ratify that selection. Although current law, rules, and
regulations, as well as the charter of the Audit Committee, require our
company’s independent auditor to be engaged, retained, and supervised by the
Audit Committee, the Board of Directors considers the selection of the
independent auditor to be an important matter of stockholder concern and
is
submitting the selection of Ernst & Young LLP for ratification by
stockholders as a matter of good corporate governance. However, if the
stockholders do not ratify the selection, the Board of Directors and the
Audit
Committee will reconsider whether or not to retain Ernst & Young LLP but may
retain such independent auditors. Even if the selection is ratified, the
Board
of Directors and the Audit Committee in their discretion may change the
appointment at any time during the year if they determine that such a change
would be in the best interest of us and our stockholders.
Information
concerning the services Ernst & Young provided to us can be found beginning
on page 22. The affirmative vote of holders of a majority of the shares of
common stock represented at the meeting is required to approve the ratification
of the selection of Ernst & Young LLP as our company’s independent auditor
for the current fiscal year. The Board of Directors and the members of the
Audit
Committee recommend a vote FOR
this
proposal.
STOCKHOLDER
PROPOSALS
December
26, 2007 is
the
date by which proposals of stockholders intended to be presented at the 2008
Annual Meeting of Stockholders must be received by us for inclusion in our
proxy
statement and form of proxy relating to that meeting.
-23-
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, 2006 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 our
company personally and by telephone 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.
SECTION
16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section
16(a) of the Securities Exchange Act of 1934, as amended, requires our executive
officers, directors and persons who beneficially own more than 10% of our
company common stock to file initial reports of ownership and reports of
changes
in ownership with the SEC. SEC regulations require these individuals to give
us
copies of all Section 16(a) forms they file.
Based
solely on our review of forms that were furnished to us and written
representations from reporting persons, we believe that the executive officers,
directors and more than 10% stockholders complied with all filing requirements
related to Section 16(a). In making these statements, we have relied on the
representations of the persons involved and on copies of their reports filed
with the SEC.
Code
of Business Conduct and Ethics.
We have
adopted a written Code of Business Conduct and Ethics (“Code of Ethics”) that
applies to all of our directors and employees, including our chief executive
officer, chief financial officer and controller. A copy of our Code of Ethics
is
available on our website at www.omegahealthcare.com
and
print copies are available upon request without charge. You can request print
copies by contacting our Chief Financial Officer in writing at Omega Healthcare
Investors, Inc., 9690 Deereco Road, Suite 100, Timonium, Maryland 21093 or
by
telephone at 410-427-1700. Any amendment to our Code of Ethics or any waiver
of
our Code of Ethics will be disclosed on our website at www.omegahealthcare.com
promptly
following the date of such amendment or waiver.
-24-
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
24,
2007
Timonium,
Maryland
-25-
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
20, 2007 at the Annual Meeting of Stockholders to be held on May 24, 2007
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. |
Ratification
of Independent Auditors
|
Ernst
& Young LLP
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 and Proposal 2.
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. Ratification
of Independent Auditors
[ ] [ ]
[ ]
Ernst
& Young LLP
-------------------------------------------------------------------------------------------------------------
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.
|
--------------------------------------------------------------------------------
--
FOLD
AND DETACH HERE --
Appendix
A
Audit
Committee Charter
Omega
Healthcare Investors, Inc.
Amended
and Restated on January 16, 2007
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 preapproved.
|
| 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:
E.
| 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. |
In
accordance with the terms of the Company’s Related Party Transaction
Policy and Procedures, review and approve all transactions between
the
Company and any related person that are required to be disclosed
pursuant
to the rules and regulations of the Securities and Exchange
Commission.
|
| 5. |
Perform
an evaluation of its performance at least annually to determine whether
it
is functioning effectively.
|
F.
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.
|