DEF 14A: Definitive proxy statements
Published on April 18, 2008
UNITED
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OMEGA
HEALTHCARE INVESTORS, INC.
9690
Deereco Road, Suite 100
Timonium,
Maryland 21093
(410)
427-1700
_______________
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
May
22, 2008
________________
To our
Stockholders:
The Annual Meeting of Stockholders of
Omega Healthcare Investors, Inc. (“Omega” or the “Company”) will be held at the
Crowne Plaza, Baltimore-North, 2004 Greenspring Drive, Timonium, Maryland on
Thursday, May 22, 2008, 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
fiscal year 2008;
3. To
approve an amendment to the Omega Healthcare Investors, Inc. 2004 Stock
Incentive Plan providing for a cap on the maximum number of shares that can be
granted or dollar amount that can be paid to an employee during a year in the
case of qualified performance-based awards; and
4. To
transact such other business as may properly come before the meeting or any
adjournment thereof.
The nominees for election as directors
are Harold J. Kloosterman and C. Taylor Pickett, each of whom presently serves
as a director of Omega.
The Board of Directors has fixed the
close of business on April 14, 2008 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 18,
2008
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
22, 2008
The accompanying proxy is solicited by
the Board of Directors to be voted at the Annual Meeting of Stockholders of
Omega Healthcare Investors, Inc. to be held at the Crowne Plaza,
Baltimore-North, 2004 Greenspring Drive, Timonium, Maryland at 10:00 A.M. EDT on
Thursday, May 22, 2008, and any adjournments of the meeting. It is
anticipated that these proxy materials will be mailed on or about April 18,
2008, to our common stockholders of record on April 14, 2008.
A copy of our Annual Report for the
year ended December 31, 2007, including financial statements, is
enclosed.
Important Notice Regarding the
Availability of Proxy Materials for the Stockholders Meeting to be Held on May
22, 2008. This Proxy Statement, and our Annual Report to
Stockholders and Form 10-K for fiscal 2007 are available electronically at http://www.omegahealthcare.com/annuals.cfm.
Additional copies of our annual report
on Form 10-K will be provided, without charge, upon written request addressed to
Robert O. Stephenson at our principal executive offices at 9690 Deereco Road,
Suite 100, Timonium, Maryland 21093.
VOTING
As of April 14, 2008, the record date,
there were 68,996,852 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.
The presence at the Annual Meeting of
shares representing a majority of 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 all votes cast on the matter will be necessary to approve the
proposal to ratify our independent auditors and the proposal to approve an
amendment to our 2004 Stock Incentive Plan. In addition, the total
number of votes cast on the amendment to the 2004 Stock Incentive Plan must
represent more than at least a majority of the shares entitled to vote on the
proposal.
Brokers holding shares in “street name”
may vote the shares only if the beneficial owner provides instructions on how to
vote. Brokers will provide beneficial owners instructions on how to
direct the brokers to vote the shares. A so-called “broker non-vote”
occurs when a broker, holding stock as nominee, does not receive voting
instructions from the beneficial owner. Abstentions and broker
non-votes will not be counted as votes cast and will have no effect on the
results of the voting on the matters to be considered at the Annual
Meeting.
As of the record date, our directors
and executive officers beneficially owned 1,754,047 shares of our common stock
(representing 2.5% of the votes entitled to be cast at the
meeting).
There are no rights of appraisal or
similar dissenter's rights with respect to any matter to be acted upon pursuant
to this proxy statement.
We urge stockholders to vote promptly
either by signing, dating and returning the enclosed proxy card in the enclosed
envelope, or for stockholders who own their shares in street name through a
broker, in accordance with the telephone or internet voting instructions your
broker may include with this mailing.
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.
-2-
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 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 Harold J. Kloosterman and C.
Taylor Pickett 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
|
Director (age as of April
14)
|
Year
First
Became
a
Director
|
Business Experience During Past 5
Years
|
Term
to Expire in
|
|
Harold
J. Kloosterman (66)
|
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).
|
2011
|
|
C.
Taylor Pickett
(46)
|
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.
|
2011
|
-3-
Continuing
Directors
|
Director (age as of April
14)
|
Year
First
Became
a
Director
|
Business Experience During Past 5
Years
|
Term
to Expire in
|
|
Thomas
F. Franke
(78)
|
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 (76)
|
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
|
|
Edward
Lowenthal (63)
|
1995
|
Mr. Lowenthal is a
Director and has served in this capacity since October 17, 1995. Mr.
Lowenthal also serves as a director of REIS (a provider of real estate
market information and valuation technology), Inc. (NASDAQ:REIS), 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.
|
2010
|
|
Stephen
D. Plavin
(48)
|
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
|
-4/5-
RECOMMENDATION
The Board
of Directors unanimously recommends a vote FOR the election of Messrs.
Kloosterman and Pickett.
The following table sets forth
information regarding beneficial ownership of our capital stock as of April 4,
2008 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.
|
Common
Stock
|
Series
D Preferred
|
|||||||||||||||||||
|
Beneficial
Owner
|
Number
of
Shares
|
Percent
of
Class(1)
|
Number
of
Shares
|
Percent
of
Class(11)
|
||||||||||||||||
|
C.
Taylor Pickett
|
495,841 | 0.7 | % | — | — | |||||||||||||||
|
Daniel
J. Booth
|
162,785 | 0.2 | % | — | — | |||||||||||||||
|
Michael
D. Ritz
|
15,823 | * | — | — | ||||||||||||||||
|
R.
Lee Crabill, Jr.
|
109,530 | 0.2 | % | — | — | |||||||||||||||
|
Robert
O. Stephenson
|
158,536 | 0.2 | % | — | — | |||||||||||||||
|
Thomas
F. Franke
|
83,971 | (2 | ) (3) | 0.1 | % | — | — | |||||||||||||
|
Harold
J. Kloosterman
|
84,692 | (4 | ) (5) | 0.1 | % | — | — | |||||||||||||
|
Bernard
J. Korman
|
566,517 | (6 | ) | 0.8 | % | — | — | |||||||||||||
|
Edward
Lowenthal
|
40,062 | (7 | )(8) | * | — | — | ||||||||||||||
|
Stephen
D. Plavin
|
36,290 | (9 | ) | * | — | — | ||||||||||||||
|
Directors
and executive officers as a group (9 persons)
|
1,754,047 | (10 | ) | 2.5 | % | — | — | |||||||||||||
|
5%
Beneficial Owners:
|
||||||||||||||||||||
|
ING
Groep N.V
|
10,195,051 | (12 | ) | 14.8 | % | |||||||||||||||
|
The
Vanguard Group, Inc.
|
4,224,824 | (13 | ) | 6.1 | % | |||||||||||||||
|
Nomura
Asset Management Co., LTD.
|
4,109,600 | (14 | ) | 6.0 | % | |||||||||||||||
|
Neuberger
Berman, LLC
|
3,690,873 | (15 | ) | 5.3 | % | |||||||||||||||
|
*
Less than 0.1%
|
||||||||||||||||||||
|
(1)
|
Based
on 68,996,852 shares of our common stock outstanding as of April 4,
2008.
|
|
(2)
|
Includes
47,141 shares owned by a family limited liability company (Franke Family
LLC) of which Mr. Franke is a
member.
|
|
(3)
|
Includes
stock options that are exercisable within 60 days to acquire 2,668
shares.
|
|
(4)
|
Includes
shares owned jointly by Mr. Kloosterman and his wife, and 10,827 shares
held solely in Mr. Kloosterman’s wife’s
name.
|
|
(5)
|
Includes
stock options that are exercisable within 60 days to acquire 2,000
shares.
|
|
(6)
|
Includes
stock options that are exercisable within 60 days to acquire 6,001
shares.
|
-6-
|
(7)
|
Includes
1,400 shares owned by his wife through an individual retirement
account.
|
|
(8)
|
Includes
stock options that are exercisable within 60 days to acquire 3,000
shares.
|
|
(9)
|
Includes
stock options that are exercisable within 60 days to acquire 14,000
shares.
|
|
(10)
|
Includes
stock options that are exercisable within 60 days to acquire 27,669
shares.
|
|
(11)
|
Based
on 4,739,500 shares of Series d preferred stock outstanding at April 4,
2008.
|
|
(12)
|
Based
on a Schedule 13G/A filed by ING Groep N.V. on February 14, 2008. ING
Groep N.V. is located at 201 King of Prussia Road, Suite 600, Radnor, PA
19087. Includes 4,943,904 shares of common stock over which ING Groep N.V.
has sole voting power or power to direct the
vote.
|
|
(13)
|
Based
on a Schedule 13G/A filed by The Vanguard Group, Inc. on February 27,
2008. The Vanguard Group, Inc. is located at 100 Vanguard Blvd. Malvern,
PA 19355. Includes 59,851 shares of common stock over which The Vanguard
Group, Inc. has sole voting power or power to direct the
vote.
|
|
(14)
|
Based
on a Schedule 13G/A filed by Nomura Asset Management Co., LTD. on February
08, 2008. Nomura Asset Management Co., LTD. is located at 1-12-1,
Nihonbashi, Chuo-ku, Toyko, Japan 103-8260. Includes 4,109,600 shares of
common stock over which Nomura Asset Management Co., LTD. has sole voting
power or power to direct the vote.
|
|
(15)
|
Based
on a Schedule 13F filed by Neuberger Berman, LLC. on December 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 ten
meetings during 2007. All members of the Board of Directors attended
more than 75% of the Board of Directors or Committee meetings held during
2007. 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 invite our directors to attend our Annual Meeting of Stockholders, we
currently do not have a formal policy regarding director
attendance. No directors attended the 2007 annual meeting last
year.
-7-
Audit
Committee
The Audit Committee met six times in
2007. 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.
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.
Compensation
Committee
The Compensation Committee met eleven
times during 2007 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 six times
during 2007 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 2007 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.
-8-
Conflicts
of Interest Policies and Code of Business Conduct
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.
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 Chief Accounting Officer. 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.
Corporate
Governance Materials
The Corporate Governance Guidelines,
Code of 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.
Compensation
Discussion and Analysis
Our
Compensation Discussion and Analysis (“CD&A”) addresses the following
topics:
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·
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the
members and role of our Compensation Committee (the
“Committee”);
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·
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our
compensation-setting process;
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·
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our
compensation philosophy and policies regarding executive
compensation;
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·
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the
components of our executive compensation program;
and
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·
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our
compensation decisions for fiscal year 2007 and
2008.
|
Thomas F.
Franke, Harold J. Kloosterman, Bernard J. Korman, Edward Lowenthal, and Stephen
D. Plavin are the members of the Committee. Mr. Franke, 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.
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.
-9-
The
Committee is responsible to the Board of Directors for the following
activities:
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·
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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.
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·
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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.
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·
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The
Committee may administer our incentive compensation and equity-based plans
and may approve such awards thereunder as the Committee deems
appropriate.
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·
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The
Committee reviews and monitors succession plans for the Chief Executive
Officer and our other senior
executives.
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·
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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.
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·
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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.
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·
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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.
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·
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The
Committee reports to the Board of Directors as it deems appropriate and as
the Board of Directors may request.
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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.
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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 eleven times during the year ended December
31, 2007. The Chairman of the Committee works, from time to time, with the Chief
Executive Officer and other members of the Committee to establish the agenda.
The Committee frequently 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:
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·
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reports
from compensation consultants or legal
counsel;
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·
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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;
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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;
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reports
on our strategic plan and budgets for future
periods;
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-10-
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information
on the executive officers’ stock ownership and option holdings;
and
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reports
on the levels of achievement of individual and corporate
objectives.
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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 engaged a consulting group in 2004, The Schonbraun McCann Group LLP
(“Schonbraun”), in connection with determining the compensation of our executive
officers for 2005, and the Committee also retained Schonbraun in late 2006 in
connection with evaluating 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 prepare 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:
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·
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Assist
in attracting and retaining talented and well-qualified
executives;
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Reward
performance and initiative;
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Be
competitive with other healthcare real estate investment
trusts;
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Be
significantly related to accomplishments and our short-term and long-term
successes, particularly measured in terms of growth in adjusted funds from
operations on a per share basis;
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Align
the interests of our executive officers with the interests of our
stockholders; and
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-11-
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Encourage
executives to achieve meaningful levels of ownership of our
stock.
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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 in 2004 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.
The
Committee approved a 3.6% increase in executive officer base salaries for 2008
based on increases in the Consumer Price Index.
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. The Committee strives
to award individual annual bonuses for each named executive consistent with
market practices for positions with comparable decision-making responsibilities
and in accordance with the terms of each executive officer’s employment
agreement as discussed below.
For 2007,
the Company’s executive officers were eligible to earn cash bonuses as set forth
below:
|
Bonus
Opportunity
As
Percentage of Base Salary
|
Additional
Cash Bonus
|
||||
|
C.
Taylor Pickett
|
125 | % | |||
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Daniel
J. Booth
|
75 | % | |||
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Robert
O. Stephenson
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60 | % | |||
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R.
Lee Crabill
|
60 | % | |||
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Michael
D. Ritz
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35 | % |
$ 40,000
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||
Fifty
percent of the bonus opportunity is based on the Company’s adjusted funds from
operations, with the remaining fifty percent based on the subjective assessment
of individual performance. The Company achieved the $1.33 per share
adjusted funds from operations target established by the Committee for 2007, and
accordingly the objective bonus component was fully earned and paid for in
2007.
-12-
The Chief Executive Officer provided
the Compensation Committee with an assessment of each executive officer’s
performance in 2007. The Compensation Committee after consultation
with the Chief Executive Officers determined the subjective portion of each
executive officers bonus. The principal factors noted in the
assessment of the executive officers performance included:
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·
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Successful
completion of acquisition
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Favorable
rent resets, lease extensions and
re-leases
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March
2007 stock offering
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Success
in portfolio restructurings and
workouts
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Finalization
of IRS Closing Agreement
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Enhancement
of internal controls and finance
staff
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Increase
in credit facility borrowing base
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Considering
these factors, the Compensation Committee set annual cash bonuses related to
fiscal year 2007 as follows:
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Adjusted
FFO Portion of Bonus
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Subjective
Portion of Bonus
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Additional
Cash Bonus
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Total
Cash Bonus
|
|||||||||||||
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C.
Taylor Pickett
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$ | 331,563 | $ | 331,562 | $ | -- | $ | 663,125 | ||||||||
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Daniel
J. Booth
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$ | 122,438 | $ | 122,437 | $ | -- | $ | 244,875 | ||||||||
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Robert
O. Stephenson
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$ | 78,810 | $ | 78,810 | $ | -- | $ | 157,620 | ||||||||
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R.
Lee Crabill
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$ | 76,020 | $ | 60,820 | $ | -- | $ | 136,840 | ||||||||
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Michael
D. Ritz
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$ | 30,625 | $ | 30,625 | $ | 40,000 | $ | 101,250 | ||||||||
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.
Stock
Incentives
2004
Awards.
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 did not receive
the vested shares attributable to the performance restricted stock units until
January 1, 2008.
-13-
2007
Awards.
Following
its spring 2007 review of executive compensation and the analyses provided by
Schronbaum, the Committee determined to utilize three types of executive
incentives: (1) restricted stock awards for retention purposes and to
encourage meaningful stock ownership, (2) performance restricted stock units
(“PRSUs”) based on annualized performance to motivate and reward short-term
performance, and (3) performance restricted stock units based on cumulative
performance through December 31, 2010 to motivate and reward long-term
performance. The amounts of these awards are shown in the Grants of Plan-Based
Awards table below. As more thoroughly described below, the PRSUs are
designed to align executive compensation with the interests of stockholders by
tying vesting to achievement to an 11% Total Shareholder Return hurdle
rate.
2007 Restricted Stock
Awards.
On May 7,
2007 we granted restricted stock awards to each of our executive
officers. Each restricted stock award vests one-seventh on December
31, 2007 and two-sevenths on each of December 31, 2008, December 31, 2009, and
December 31, 2010, subject to continued employment on the vesting
date. In addition, all restricted stock vests upon the officer’s
death, disability, termination of employment by us without cause (as defined in
the employment agreement), or if the officer voluntary quits for good reason (as
defined in the employment agreement). Dividends are paid currently on
unvested and vested shares. If unvested shares are forfeited,
dividends that are paid after the date of the forfeiture are not paid on these
shares.
2007 Performance Restricted Stock
Unit Awards.
On May 7,
2007, we also awarded two types of performance restricted stock units (“PRSUs”)
to our executive officers. The two types of PRSU awards differ in the
manner in which each award vests, as described below in greater
detail.
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·
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Vesting
for both types of Awards Based on Total Shareholder
Return. One-half of the total number of PRSUs
granted to each executive officer are subject to ratable annual vesting
one-third per year based on achievement of “Total Shareholder Return” (as
described below) of 11% annualized through the applicable vesting
date. The other half vests 100% at the end of three years based
on achievement of Total Shareholder Returns of 11% annualized through the
end of the three-year period. Total Shareholder Return is
determined by reference to the total aggregate increase in the stock price
per share over the applicable performance period plus dividends per share
paid during the performance period. In calculating Total
Shareholder Return, the beginning of the performance period stock value
will be based on the twenty day trailing average closing price prior to
May 7, 2007, and the end of the performance period stock value will
normally be based on the twenty day trailing average closing price as of
the last day of the performance
period.
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·
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Mechanics
of Annual PRSU Vesting. The PRSUs with annual vesting vest at
the rate of one-third on each of December 31, 2008, December 31, 2009, and
December 31, 2010, but only if the Company has achieved a Total
Shareholder Return on an annualized basis of at least 11%, compounded as
of each December 31, for the period commencing on May 7, 2007 and ending
on the applicable vesting date. The officer may catch-up on
vesting that does not occur in a given year because of a missed hurdle if
an 11% annualized cumulative Total Shareholder Return is achieved from May
7, 2007 through December 31, 2010.
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·
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Mechanics
of Three Year PRSU Vesting. The Company must achieve Total
Shareholder Return of 11% per year compounded in the same manner as
described above for the PRSUs with annual vesting over the period from May
7, 2007 through December 31, 2010 for the PRSUs to
vest.
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·
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Termination
of Employment. In the event of the officer’s death, disability,
termination of employment by the Company without cause, or voluntary
resignation for good reason, the performance period for measuring Total
Shareholder Return will end. If the Company has achieved a
Total Shareholder Return of 11% per year compounded annually from May 7,
2007 through the date the performance period is so ended, all the
unforfeited PRSUs will then vest. If the Total Shareholder
Return goal has not been satisfied as of such date the PRSUs will be
forfeited.
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·
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Change
of Control. If a change of control occurs before December 31,
2010, then the performance period for determining whether the Total
Shareholder Return hurdle of 11%, annualized, has been achieved will end
on the change in control date. The officer must be employed on
the applicable vesting date for each type of PRSU award set forth above to
vest. If the Company’s stock is bought for cash in the change in control,
the PRSUs will be converted to a cash obligation, which will grow by the
annual dividend yield of the Company for the last four quarters as of the
date of the change in control until the date the shares attributable to
vested PRSUs are distributable.
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·
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Dividend
Equivalents. Dividend equivalents based on dividends paid to
shareholders during the applicable performance period accrue on unvested
and vested PRSUs. Unpaid dividend equivalents accrue interest
at a quarterly rate of interest equal to the Company‘s average borrowing
rate for the preceding quarter. Accrued dividend equivalents
plus interest are paid to the officer at the date the shares attributable
to vested PRSUs are distributable.
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·
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Distribution
of Shares. Shares attributable to vested PRSU’s are
distributable upon the earliest of January 2, 2011, the officer’s death or
disability, or termination of the officer’s employment by that Company
without cause or resignation by the officer for good
reason. However, the distribution of shares attributable to
PRSUs with annual vesting will be delayed for six months after any
termination of the officer’s employment by the Company without cause or
his resignation for good reason to the extent required to comply with 409A
of the Internal Revenue Code.
|
General.
We
account for all stock and option awards in accordance with Statement of
Financial Accounting Standards No. 123R (“FAS 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 (the “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.
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 2007 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. However,
we are seeking stockholder approval of an amendment to our 2004 Stock Incentive
Plan in order to facilitate the ability of the Company to structure and award
performance-based compensation that will qualify for federal income tax
deduction under Section 162(m). See Proposal 3 below.
-15-
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 proxy statement and incorporated by reference
in our Annual Report on Form 10-K for the year ended December 31,
2007.
Compensation
Committee of the Board of Directors
Thomas
F. Franke
Harold
J. Kloosterman
Bernard
J. Korman
Edward
Lowenthal
Stephen D. Plavin
-16-
The following table summarizes the
compensation of our “named executive officers” for the years ended December 31,
2007 and 2006. Our named executive officers are our Chief Executive
Officer, our Chief Financial Officer, and the three other most highly
compensated executive officers. With respect to stock awards,
compensation in the table below includes not only compensation earned for
services in the years indicated, but also compensation earned for services in
prior years but recognized as an expense for financial reporting purposes in the
years indicated.
|
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)
|
|
C.
Taylor Pickett
Chief
Executive Officer
|
2007
|
$530,500
|
$663,125
|
$
525,112
|
$ --
|
$ --
|
$ --
|
$
6,750
|
$1,725,487
|
|
2006
|
$515,000
|
$463,500
|
$1,756,675
|
$ --
|
$ --
|
$ --
|
$30,711
|
$2,765,886
|
|
|
Robert
O. Stephenson
Chief
Financial Officer
|
2007
|
$262,700
|
$157,620
|
$
217,088
|
$ --
|
$ --
|
$ --
|
$
6,750
|
$
644,158
|
|
2006
|
$255,000
|
$114,750
|
$
843,204
|
$ --
|
$ --
|
$ --
|
$18,172
|
$1,231,126
|
|
|
Daniel
J. Booth
Chief
Operating Officer
|
2007
|
$326,500
|
$244,875
|
$
314,534
|
$ --
|
$ --
|
$ --
|
$
6,750
|
$
892,659
|
|
2006
|
$317,000
|
$158,500
|
$1,054,005
|
$ --
|
$ --
|
$ --
|
$21,066
|
$1,550,571
|
|
|
R.
Lee Crabill
Senior
Vice-President of Operations
|
2007
|
$253,400
|
$136,840
|
$
193,831
|
$ --
|
$ --
|
$ --
|
$
6,750
|
$
590,821
|
|
2006
|
$246,000
|
$123,000
|
$
808,071
|
$ --
|
$ --
|
$ --
|
$17,691
|
$1,194,762
|
|
|
Michael
D. Ritz (4) (5)
Chief
Accounting Officer
|
2007
|
$145,833
|
$111,250
|
$
70,048
|
$ --
|
$ --
|
$ --
|
$
5,346
|
$
332,477
|
|
2006
|
$
--
|
$
--
|
$
--
|
$ --
|
$ --
|
$ --
|
$
--
|
$
--
|
|
(1)
|
Bonuses
are reported in the year earned, whether or not paid before year end.
|
|
(2)
|
Represents
the dollar amount expensed for the years indicated with respect to
restricted stock and performance restricted stock unit awards for
financial reporting purposes in accordance with FAS 123R. These
amounts reflect the Company’s accounting expense for these awards in the
year indicated, and do not correspond to actual value reorganized by the
officers. For further information regarding the valuation of
stock awards, see Note 13 to our consolidated financial statements
included in our Form 10-K for the year ended December 31,
2007.
|
|
|
Amounts
shown for 2007 reflect dollar amount expense in 2007 with respect to
restricted stock awards and performance restricted stock units granted in
May 2007. Amounts shown for 2006 reflect dollar amount expensed
in 2006 with respect to (i) restricted stock awards and (ii) performance
restricted stock units awarded 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.
|
|
(3)
|
All
other compensation includes the following amounts over
$10,000:
|
|
Name
|
Year
|
Interest
on Dividends on Stock Awards
|
401(k)
Matching Contribution
|
|||||||||
|
C.
Taylor Pickett
|
2007
2006
|
-- 24,111 |
$
$
|
6,750
6,600
|
||||||||
|
Robert
O. Stephenson
|
2007
2006
|
-- 11,572 |
$
$
|
6,750
6,600
|
||||||||
|
Daniel
J. Booth
|
2007
2006
|
-- 14,466 |
$
$
|
6,750
6,600
|
||||||||
|
R.
Lee Crabill
|
2007
2006
|
-- 11,091 |
$
$
|
6,750
6,600
|
||||||||
|
Michael
Ritz
|
2007
2006
|
-- -- |
$
$
|
5,346
--
|
||||||||
-17-
|
(4)
|
Mr.
Ritz began employment with the Company on February 28,
2007.
|
|
(5)
|
Mr.
Ritz’s bonus number includes a $10,000 sign-on
bonus.
|
GRANTS
OF PLAN-BASED AWARDS IN 2007
|
Name
|
Grant
Date
|
Estimated
Future Payouts Under Non-Equity Incentive Plan Awards
|
Estimated
Future Payouts Under Equity Incentive Plan Awards
|
All
Other Stock Awards: Number of Shares of Stock or Units
(#)
|
All
Other Option Awards: Number of Securities Underlying Options
(#)
|
Exercise
or Base Price of Option Awards ($/Sh)
|
Grant
Date Fair Value of Stock and Option Awards
|
||||
|
Threshold
($)
|
Target
($)
|
Maxi-mum
($)
|
Thresh-old
(#)
|
Target
(#)
|
Maxi-mum
(#)
|
||||||
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(f)
|
(g)
|
(h)
|
(i)
|
(j)
|
(k)
|
(l)
|
|
C.
Taylor Pickett
|
5/7/07
5/7/07
5/7/07
|
49,026(B)
49,026(C)
|
114,394(A)
|
$1,951,562
$
411,328
$
302,490
|
|||||||
|
Robert
O. Stephenson
|
5/7/07
5/7/07
5/7/07
|
20,268(B)
20,268(C)
|
47,292(A)
|
$
806,802
$
170,049
$
125,054
|
|||||||
|
Daniel
J. Booth
|
5/7/07
5/7/07
5/7/07
|
29,366(B)
29,366(C)
|
68,520(A)
|
$1,168,951
$
246,381
$
181,188
|
|||||||
|
R.
Lee Crabill
|
5/7/07
5/7/07
5/7/07
|
18,097(B)
18,097(C)
|
42,225(A)
|
$
720,359
$
151,834
$
111,658
|
|||||||
|
Michael
D.
Ritz
|
5/7/07
5/7/07
5/7/07
|
7,239(B)
7,239(C)
|
14,477(A)
|
$246,978
$ 60,735
$ 44,665
|
|||||||
Notes:
|
(A)
|
Restricted
stock awards vesting one-seventh on December 31, 2007 and two-sevenths on
each of December 31, 2008, December 31, 2009, and December 31, 2010,
subject to continued employment on the vesting date. In addition, all
restricted stock vests upon the officer’s death, disability, termination
of employment by us without cause (as defined in the employment
agreement), or if the officer voluntary quits for good reason (as defined
in the employment agreement). Dividends are paid currently on
unvested and vested shares. If unvested shares are forfeited, dividends
that are paid after the date of the forfeiture are not paid on these
shares.
|
|
(B)
|
PRSUs
vesting one-third on each of December 31, 2008, 2009 and 2010 subject to
achieving Total Shareholder Return of at least 11% annualized from the
date of grant through the vesting date. See “2007 Performance Restricted
stock Unit Awards” under “Compensation Discussion and Analysis” above for
further information.
|
|
(C)
|
PRSUs
vesting December 31, 2010 subject to achieving cumulative Total
Shareholder Return of at least 11% annualized from the date of grant
through the vesting date. See “2007 Performance Restricted Stock Unit
Awards” under “Compensation Discussion and Analysis” above for further
information.
|
-18-
|
|
Outstanding
Equity Awards at Fiscal Year End for
2007
|
|
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)
|
||||||
|
C.
Taylor Pickett
|
98,052
49,026
49,026
|
$
$
$
|
1,573,735
786,867
786,867
|
||||||||||||
|
Robert
O. Stephenson
|
40,536
20,268
20,268
|
$
$
$
|
650,603
325,301
325,301
|
||||||||||||
|
Daniel
J. Booth
|
58,731
29,366
29,366
|
$
$
$
|
942,633
471,324
471,324
|
||||||||||||
|
R.
Lee Crabill
|
36,193
18,097
18,097
|
$
$
$
|
580,898
290,457
290,457
|
||||||||||||
|
Michael
D. Ritz
|
12,408
7,239
7,239
|
$
$
$
|
199,148
116,186
116,186
|
||||||||||||
|
(1)
|
These
balances exclude performance restricted stock units that 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
31, 2007 of $16.05.
|
Option
Exercises and Stock Vested for 2007
|
Option
Awards
|
Stock
Awards
|
|||||||||||||||
|
Name
(A)
|
Number
of Shares Acquired on Exercise
(#)
(B)
|
Value
Realized on Exercise
($)
(1)
(C)
|
Number
of Shares Acquired on Vesting
(#)
(D)
|
Value
Realized on Vesting
($)
(2)
(E)
|
||||||||||||
|
C.
Taylor Pickett
|
-- | $ | -- | 16,342 | $ | 262,289 | ||||||||||
|
Robert
O. Stephenson
|
-- | $ | -- | 6,756 | $ | 108,434 | ||||||||||
|
Daniel
J. Booth
|
-- | $ | -- | 9,789 | $ | 157,113 | ||||||||||
|
R.
Lee Crabill
|
-- | $ | -- | 6,032 | $ | 96,814 | ||||||||||
|
Michael
D. Ritz
|
-- | $ | -- | 2,068 | $ | 33,191 | ||||||||||
|
(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.
|
|
(2)
|
The
market value is based on the closing price of our common stocks on
December 31, 2007 of $16.05.
|
-19-
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. We amended the agreement
with the consent of Mr. Pickett, effective May 7, 2007. The amendment
extended the term of the agreement set
to expire on December 31, 2007 for an additional three-year-period until
December 2010.
Mr.
Pickett’s current base salary is $549,500 per year, subject to increase by us
and his employment provides that he will be eligible for an annual bonus of up
to 100% of his base salary based on criteria determined by the Compensation
Committee of our Board of Directors. However, in a separate letter,
we provided that, for 2007, his percentage bonus opportunity was up to 125% of
his base salary.
If we
terminate Mr. Pickett’s employment without “cause” or if he resigns for “good
reason,” we will pay him severance equal to three times the sum of his then
current annual base salary plus his average annual bonus over the last three
completed calendar years, which amount will be paid in installments over the
36-month-period following his termination. “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.
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. 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 within the states where Omega owns property as of May 7, 2007,
managerial services or management consulting services to a “competing business.”
Competing business is defined to include a list of named 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
employees. If the term of the employment agreement expires at December 31, 2010
and as a result no severance is paid, then these provisions also expire at
December 31, 2010.
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. We amended the agreement
with the consent of Mr. Booth, effective May 7, 2007. The amendment
extended the term of the agreement set to expire on December 31, 2007 for an
additional three-year-period until December 31, 2010.
Mr. Booth’s current base salary is
$338,500 per year, subject to increase by us and his employment agreement
provides that he will be eligible for an annual bonus of up to 50% of his base
salary based on criteria determined by the Compensation Committee of our Board
of Directors. However, in a separate letter, we provided that, for
2007, his percentage bonus opportunity was up to 75% of his base
salary.
If we
terminate Mr. Booth’s employment without “cause” or if he resigns for “good
reason,” we will pay him severance equal to two times the sum of his then
current annual base salary plus his average annual bonus over the last three
completed calendar years, which amount will be paid in installments over the
24-month-period following his termination. “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. 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 within the states where Omega owns property as of May 7, 2007,
managerial services or management consulting services to a “competing
business.” Competing business is defined to include a list of named
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 employees. If the term of the employment agreement expires at December 31,
2010 and as a result no severance is paid, then these provisions also expire at
December 31, 2010.
-20-
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. We amended the
agreement with the consent of Mr. Stephenson, effective May 7,
2007. The amendment extended the term of the agreement set to expire
on December 31, 2007 for an additional three-year-period until December 31,
2010.
Mr. Stephenson’s current base salary is
$272,000 per year, subject to increase by us and his employment agreement
provides that he will be eligible for an annual bonus of up to 50% of his base
salary based on criteria determined by the Compensation Committee of our Board
of Directors. However, in a separate letter, we provided that, for
2007, his percentage bonus opportunity was up to 60% of his base
salary.
If we
terminate Mr. Stephenson’s employment without “cause” or if he resigns for “good
reason,” we will pay him severance equal to one and one-half times the sum of
his then current annual base salary plus his average annual bonus over the last
three completed calendar years, which amount will be paid in installments over
the 18-month-period following his termination. “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. 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 within the states where Omega owns property as of May
7, 2007, managerial services or management consulting services to a “competing
business.” Competing business is defined to include a list of named
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 employees. If the term of the employment agreement expires at
December 31, 2010 and as a result no severance is paid, then these provisions
also expire at December 31, 2010.
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. We amended
the agreement with the consent of Mr. Crabill, effective May 7,
2007. Then amendment extended the term of the agreement set to expire
on December 31, 2007, for an additional three-year-period until December 31,
2010.
Mr. Crabill’s current base salary is
$262,500 per year, subject to increase by us and his employment agreement
provides that he will be eligible for an annual bonus of up to 50% of his base
salary based on criteria determined by the Compensation Committee of our Board
of Directors. However, in a separate
letter, we provided that, for 2007, his percentage bonus opportunity was up to
60% of his base salary.
If we
terminate Mr. Crabill’s employment without “cause” or if he resigns for “good
reason,” we will pay him severance equal to one and one-half times the sum of
his then current annual base salary plus his average annual bonus over the last
three completed calendar years, which amount will be paid in installments over
the 18-month-period following his termination. “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.
-21-
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. 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 within the states where Omega owns property as of May 7, 2007,
managerial services or management consulting services to a “competing
business.” Competing business is defined to include a list of named
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 employees. If the term of the employment agreement expires at
December 31, 2010 and as a result no severance is paid, then these provisions
also expire at December 31, 2010.
Michael
Ritz Employment Agreement
We
entered into an employment agreement with Michael Ritz, dated as of May 7, 2007,
to be our Chief Accounting Officer. The term of the agreement expires on
December 31, 2010.
Mr.
Ritz’ current base salary is $181,500 per year, subject to increase by us, and
his employment agreement provides that he will be eligible for an annual bonus
of up to 35% of his base salary based on criteria determined by the Compensation
Committee of our Board of Directors plus, for 2007 only, a guaranteed bonus of
$40,000, subject to his continued employment on the date the bonus is
paid.
If
we terminate Mr. Ritz’ employment without “cause” or if he resigns for “good
reason,” we will pay him severance equal to one times the sum of his then
current annual base salary plus his average annual bonus over the last three
completed calendar years, which amount will be paid in installments over the
12-month-period following his termination. “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. Ritz’ employment to more than 50
miles away without his consent.
Mr.
Ritz 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. If Mr. Ritz dies during the term of the employment
agreement, his estate is entitled to a prorated bonus for the year of his
death.
Mr.
Ritz 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. Ritz is obligated not
to provide, within the states where Omega owns property as of May 7, 2007,
managerial services or management consulting services to a “competing business.”
Competing business is defined to include a list of named 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. Ritz agrees not to solicit clients or customers
with whom he had material contact or to solicit our management level employees.
If the term of the employment agreement expires at December 31, 2010 and as a
result no severance is paid, then these provisions also expire at December 31,
2010.
Potential
Payments Upon Termination or Change of Control
The table
below illustrates the incremental compensation that would have been payable in
the event of termination events identified below, as if they had occurred as of
December 31, 2007.
In
general, the occurrence of a change of control does not increase benefits that
would otherwise be payable upon termination without cause or resignation for
good reason. If a change of control occurs before the end of a
performance period under the outstanding PRSUs, then the performance period for
the applicable PRSU will end on the change in control date. However,
the PRSUs only vest if the officer is employed at the original vesting date, or
the officer is terminated for cause or resigns for good reason. For a
description of the vesting of restricted stock and PRSUs, see “Stock Incentives”
on page 13 above. For a description of circumstances constituting
“cause” and “good reason”, see the discussion of each officer’s employment
agreement above.
-22-
|
Involuntary
Without Cause or
Voluntary
for Good Reason
|
Death
or
Disability
|
|||||||
|
C.
Taylor Pickett:
|
||||||||
|
Severance
|
$ | 3,273,125 | $ | -- | ||||
|
Accelerated
Vesting of Restricted Stock(1)
|
$ | 1,573,735 | $ | 1,573,735 | ||||
|
Accelerated
Vesting of PRSUs(2)
|
$ | -- | $ | -- | ||||
|
Total
Value of Payments:
|
$ | 4,846,860 | $ | 1,573,735 | ||||
|
Robert
O. Stephenson:
|
||||||||
|
Severance
|
$ | 611,485 | $ | -- | ||||
|
Accelerated
Vesting of Restricted Stock(1)
|
$ | 650,603 | $ | 650,603 | ||||
|
Accelerated
Vesting of PRSUs(2)
|
$ | -- | $ | -- | ||||
|
Total
Value of Payments:
|
$ | 1,262,088 | $ | 650,603 | ||||
|
Daniel
J. Booth:
|
||||||||
|
Severance
|
$ | 1,050,250 | $ | -- | ||||
|
Accelerated
Vesting of Restricted Stock(1)
|
$ | 942,633 | $ | 942,633 | ||||
|
Accelerated
Vesting of PRSUs(2)
|
$ | -- | $ | -- | ||||
|
Total
Value of Payments:
|
$ | 1,992,883 | $ | 942,633 | ||||
|
R.
Lee Crabill:
|
||||||||
|
Severance
|
$ | 569,270 | $ | -- | ||||
|
Accelerated
Vesting of Restricted Stock(1)
|
$ | 580,898 | $ | 580,898 | ||||
|
Accelerated
Vesting of PRSUs(2)
|
$ | -- | $ | -- | ||||
|
Total
Value of Payments:
|
$ | 1,150,168 | $ | 580,898 | ||||
|
Michael
Ritz:
|
||||||||
|
Severance
|
$ | 276,250 | $ | -- | ||||
|
Accelerated
Vesting of Restricted Stock(1)
|
$ | 199,148 | $ | 199,148 | ||||
|
Accelerated
Vesting of PRSUs(2)
|
$ | -- | $ | -- | ||||
|
Total
Value of Payments:
|
$ | 475,398 | $ | 199,148 | ||||
|
(1)
|
Based
on closing stock price as of December 31,
2007.
|
|
(2)
|
Based
on Total Shareholder Return through December 31, 2007 and closing stock
price as of such date.
|
-23-
|
Name
(A)
|
Fees
earned or paid in cash
($)
(B)
|
Stock
Awards
($)
(1)
(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
|
$ | 71,000 | $ | 41,641 | $ | -- | $ | -- | $ | -- | $ | -- | $ | 112,641 | ||||||||||||||
|
Harold
J. Kloosterman
|
$ | 84,000 | $ | 41,641 | $ | -- | $ | -- | $ | -- | $ | -- | $ | 125,641 | ||||||||||||||
|
Bernard
J. Korman
|
$ | 96,500 | $ | 63,231 | $ | -- | $ | -- | $ | -- | $ | -- | $ | 159,731 | ||||||||||||||
|
Edward
Lowenthal
|
$ | 67,000 | $ | 41,641 | $ | -- | $ | -- | $ | -- | $ | -- | $ | 108,641 | ||||||||||||||
|
Stephen
D. Plavin
|
$ | 83,500 | $ | 41,641 | $ | -- | $ | -- | $ | -- | $ | -- | $ | 125,141 | ||||||||||||||
|
|
(1)
|
Dollar
amount expensed during fiscal year.
|
|
|
(2)
|
Grants
of plan-based awards table for 2007
|
|
Name
|
Grant
Date
|
Shares
Awarded
|
Value
Awarded
|
||||||
|
Franke
|
1/12/2007
2/15/2007
5/15/2007
8/15/2007
11/15/2007
|
1,500
332
377
447
387
|
$ |
26,295
6,248
6,243
6,254
6,258
|
|||||
|
Kloosterman
|
1/12/2007
2/15/2007
5/15/2007
8/15/2007
11/15/2007
|
1,500
332
377
447
387
|
$ |
26,295
6,248
6,243
6,254
6,258
|
|||||
|
Korman
|
1/12/2007
2/15/2007
5/15/2007
8/15/2007
11/15/2007
|
2,500
332
377
447
387
|
$ |
43,825
6,248
6,243
6,254
6,258
|
|||||
|
Lowenthal
|
1/12/2007
2/15/2007
5/15/2007
8/15/2007
11/15/2007
|
1,500
332
377
447
387
|
$ |
26,295
6,248
6,243
6,254
6,258
|
|||||
|
Plavin
|
1/12/2007
2/15/2007
5/15/2007
8/15/2007
11/15/2007
|
1,500
332
377
447
387
|
$ |
26,295
6,248
6,243
6,254
6,258
|
|||||
2007 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 $25,000 per year, payable in quarterly installments of $6,250. 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.
-24-
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, our
standard compensation arrangement for directors provided that each non-employee
director is entitled to 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 receives 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 also
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 receives $1,500 per 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. In addition, we reimburse the directors for travel expenses
incurred in connection with their duties as directors. Employee directors
receive no compensation for service as directors.
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, 2007 and
during such period, there were no Compensation Committee interlocks or insider
participation in compensation decisions.
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, 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 with
accounting principles generally accepted in the United States, and the
effectiveness of our company’s internal control over financial reporting based
on criteria established in Internal Control – Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (the COSO
criteria).
-25-
Audit
Committee Report
The Audit Committee, with respect to
the audit of Omega’s 2007 audited consolidated financial statements, reports as
follows:
|
1)
|
The
Audit Committee has reviewed and discussed our 2007 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. 5, (“An Audit of Internal Control Over
Financial Reporting that is integrated 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 2007 audited consolidated financial
statements with management and discussions with Ernst & Young LLP, the
Audit Committee recommended to the Board of Directors that Omega’s 2007
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;
and
|
|
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
Stephen
D. Plavin
Harold
J. Kloosterman
Edward
Lowenthal
-26-
Independent
Auditors
Ernst & Young LLP audited our
financial statements for each of the years ended December 31, 2007, 2006 and
2005. 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 2007 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,
|
||||||||
|
2007
|
2006
|
|||||||
|
Audit
Fees
|
$ | 793,000 | $ | 1,475,000 | ||||
|
Audit-Related
Fees
|
— | — | ||||||
|
Tax
Fees
|
— | — | ||||||
|
All
Other
Fees
|
6,000 | 6,000 | ||||||
|
Total
|
$ | 799,000 | $ | 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 2007 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 2007 and 2006, the reviews of the financial statements included in our
company’s Forms 10-Q for fiscal years 2007 and 2006, and services relating to
securities and other filings with the SEC, including comfort letters and
consents, were approximately $793,000 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.
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 2007 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 2007 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 2007 and 2006 were approximately $6,000 and $6,000, respectively.
-27-
Determination
of Auditor Independence
The Audit Committee considered the
provision of non-audit services by our independent auditor 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.
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 27. The affirmative vote of holders of a majority of all
votes cast on the matter is required to ratify 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.
PROPOSAL
3 – APPROVAL OF AN AMENDMENT TO THE 2004 INCENTIVE PLAN
We
are asking our stockholders to approve an amendment (the “2004 Plan Amendment”)
to the Omega Healthcare Investors, Inc. 2004 Incentive Plan (the “2004 Plan”)
that would facilitate the ability of the Compensation Committee of
our Board of Directors (the “Compensation Committee”) to structure and award
performance-based compensation that will qualify for a federal income tax
deduction under Section 162(m) of the Internal Revenue Code of 1986, as amended
(the “Code”). The 2004 Plan is not being amended to increase the
number of shares reserved for issuance thereunder or in any other material
respect except for changes intended to satisfy Section 162(m) of the
Code. The maximum number of shares reserved for issuance under the
2004 Plan remains at 3,000,000 shares.
As
described below under Federal Income Tax Information – Potential Limitation on
Company Deductions,” Code Section 162(m) denies a tax deduction to public
companies for compensation paid to certain “covered employees” in a taxable year
to the extent the compensation paid to a covered employee exceeds $1,000,000,
unless the plan contains features that enable the compensation to qualify as
“performance-based compensation.” Before the 2004 Plan Amendment, the
2004 Plan already contained features necessary to qualify certain compensation
as performance-based compensation and permitted payment of cash
bonuses. The 2004 Plan Amendment, however, expands the types of
compensation that will qualify as performance-based compensation, including cash
bonuses, adds additional performance goals, and provides a cap on the maximum
number of shares that can be granted or dollar amounts that can be paid to an
employee during a year as qualified performance-based
compensation.
The
Company’s general policy has been to pay certain awards, for example annual
bonuses, to executive officers that are determined in part based on achievement
of pre-established performance goals, such as adjusted Funds From
Operations. However, historically certain of these awards have not
qualified as performance-based within the meaning of Code Section 162(m) because
some of the performance goals used and plan limits on the maximum number of
shares that can be granted during a specified period or the maximum dollar
amount of compensation that can be paid to an employee during a specified period
have not been stockholder approved. If Proposal 3 is
approved, the Company will have an increased ability to structure awards as
performance-based under Code Section 162(m).
-28-
Although
the Company is generally not subject to federal income tax liability so long as
the Company continues to qualify as a real estate investment trust (subject to
certain exceptions), the Company believes that qualifying compensation as
performance-based under Code Section 162(m) is desirable. If the deduction for a
portion of the compensation we pay to our covered executives is limited by the
provisions of Code Section 162(m), our taxable income will increase by the
amount so limited, and we would be required to increase the amount of dividends
we pay in order to avoid paying corporate income tax on the disallowed
amount. While we would not expect the amount of any such disallowance
to be material, our ability to pay dividends at any such point in time could be
limited by any number of factors including insufficient cash flow generated by
operations, limitations contained in existing loan agreements, or other
factors. Accordingly, the Board believes it is in the best interests
of the Company to seek stockholder approval of the 2004 Plan Amendment in order
to structure potential executive compensation that could exceed $1 million as
tax deductible under Code Section 162(m).
If
the 2004 Plan Amendment is not approved by our stockholders, we intend to
continue to grant cash bonuses and other awards, but some of these awards that
would otherwise be deductible if the 2004 Plan Amendment were approved may not
be deductible under Code Section 162(m).
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 3
A
summary of the 2004 Plan, as amended by the 2004 Plan Amendment for which we are
seeking stockholder approval, is set forth below.
General
On
April 20, 2004, our Board of Directors approved the 2004 Plan. The
2004 Plan allows the Compensation Committee to grant equity and other
compensation to certain employees, directors and consultants for the purpose of
giving them a proprietary interest in our company and providing us with a means
to attract and retain key personnel.
If
approved by the stockholders, the 2004 Plan Amendment would provide the
Compensation Committee with greater flexibility to structure awards, including
cash bonuses, to qualify as performance-based awards under Code Section 162(m)
and would expand the criteria available to the Compensation Committee for
setting performance goals. These modifications to the 2004 Plan would
provide greater flexibility to the Compensation Committee in establishing
performance-based compensation that is tax-deductible to
Omega.
Eligibility
Stock
incentives may be granted to our employees, directors, and consultants, or any
of our affiliates; provided, however, that incentive stock options may be
granted only to our employees or employees of our
subsidiaries.
Administration
Awards
under the 2004 Stock Incentive Plan will be granted, and the terms and
conditions of awards will be determined, by the Compensation Committee, the
members of which are selected by our Board of Directors.
Code
Section 162(m) requires that the members of the Compensation Committee must be
“outside directors.” To qualify as an outside director, the director
cannot be a current employee of Omega, a former employee of Omega who receives
compensation for prior services, a current or former officer of Omega, or
receive remuneration from Omega either directly or indirectly in any capacity
other than a director. The members of our Compensation Committee
qualify as outside directors under these regulations.
Awards
The
2004 Plan permits the Compensation Committee to grant a variety of incentives
relating to Omega common stock, including stock awards, restricted stock units,
stock options, stock appreciation rights, performance awards, phantom stock, and
dividend equivalent rights (collectively, “Awards”). Performance
awards, however, may alternatively be tied to a value that is not derivative of
Omega’s equity value.
The
2004 Stock Incentive Plan provides that each non-employee director will receive
an initial grant of an option to purchase 10,000 shares when first elected.
Annually thereafter, each non-employee director will receive an additional grant
of an option to purchase 1,000 shares. Each option granted to a non-employee
director will vest on a three-year graded vesting schedule.
-29-
The
number of shares of our common stock as to which a stock incentive is granted
and to whom any stock incentive is granted shall be determined by the
Compensation Committee, subject to the provisions of the 2004 Stock Incentive
Plan. Stock incentives issuable may be made exercisable or settled at such
prices and may be made terminable under such terms as are established by the
Compensation Committee, to the extent not otherwise inconsistent with the terms
of the 2004 Stock Incentive Plan.
The
terms of particular Awards may provide that they terminate, among other reasons,
upon the holder's termination of employment or other status with respect to our
company, upon a specified date, upon the holder's death or disability, or upon
the occurrence of a change in control of our company. Awards may also include
exercise, conversion or settlement rights to a holder's estate or personal
representative in the event of the holder's death or disability. At
the Compensation Committee's discretion, Awards that are held by an employee who
terminates employment may be cancelled, accelerated, paid or continued, subject
to the terms of the applicable award agreement and to the provisions of the 2004
Plan.
Limits
on Grants
The
maximum number of shares of common stock with respect to which options, stock
appreciation rights, or other Awards (other than performance awards payable in
cash) that are intended to be performance-based compensation under Code Section
162(m) that can be granted during any year to any employee shall not exceed one
million one hundred thousand (1,100,000). In addition, to the extent
that compensation is granted with the intent that it qualify as
performance-based compensation under Code Section 162(m), the maximum aggregate
dollar amount of performance awards that may be paid in cash in any calendar
year to an employee may not exceed two million ($2,000,000). Before
the 2004 Plan Amendment, the 2004 Plan contained the limit described above for
stock options and stock appreciation rights, but did not contain the other
limits described above. Stockholder approval of these limits will
allow the Compensation Committee the flexibility to structure other forms of
Awards to qualify as performance-based compensation under Code Section
162(m).
Qualified
Performance Goals
The
Compensation Committee may, but is not required to, make the vesting or payment
of an Award contingent upon achievement of performance goals that are intended
to qualify the Award as performance-based compensation within the meaning of
Section 162(m) of the Code. These performance goals, after the 2004
Plan Amendment for which we are seeking stockholder approval, are listed below:
i. earnings
per share;
ii. operating
cash flow;
iii. cash
available;
iv. net
income;
v. revenue;
vi. total
stockholder return;
vii. return on
invested capital;
viii. return on
stockholder equity;
ix. return on
assets; or
x. return on
common book equity;
xi. market
share;
xii. economic
value added;
xiii. operating
margin
xiv. stock
price;
xv. operating
income;
xvi. EBIT or
EBITDA;
xvii. funds
from operations or adjusted funds from operations;
xviii. expenses
or operating expenses;
xix. productivity
of employees as measured by revenues, costs, or earnings per
employee;
xx. cost
reduction goals; and
xxi. any
combination of the foregoing.
The
Compensation Committee may apply any of the foregoing either individually or in
combination, to Omega as a whole or to a business unit or affiliate, and may
measure achievement of the goals either quarterly, annually, or cumulatively
over a period of quarters or years, on an absolute basis or relative to a
pre-established target, to results for previous quarters or years or to a
designated comparison group.
-30-
The
Compensation Committee may adjust any evaluation of performance under a
performance goal to remove the effect of equity compensation expense under FAS
123R; amortization of acquired technology and intangibles; asset write-downs,
litigation or claim judgments or settlements; the effect of changes in or
provisions under tax law, accounting principles or other such laws or provisions
affecting reported results; accruals for reorganization and restructuring
programs; discontinued operations; and any items that are extraordinary, unusual
in nature, non-recurring or infrequent in occurrence, except where such action
would result in the loss of a tax deduction to us pursuant to Section 162(m) of
the Code, if applicable.
Before
the 2004 Plan Amendment, the Plan already contained the performance goals (with
a few minor differences) in items (i) through (x) and gave the Compensation
Committee the ability to make some of the adjustments described
above. The 2004 Plan Amendment expands the categories of performance
goals and the Compensation Committee’s ability to make appropriate
adjustments.
Options
Options
may be made exercisable at a price not less than the fair market value of our
common stock on the date that the option is awarded or the last business day
preceding. The Compensation Committee shall determine the fair market value of
our common stock until such time as our common stock is publicly traded. Except
for adjustments in the event of a recapitalization or similar event, the option
exercise price may not be reduced after the date of grant of an option and no
option may be cancelled or surrendered in exchange for an option with a lower
exercise price.
The
Compensation Committee may permit an option exercise price to be paid in cash or
by the delivery of previously-owned shares of our common stock, or to be
satisfied through a cashless exercise executed through a broker or by having a
number of shares of our common stock otherwise issuable at the time of exercise
withheld. The 2004 Plan permits the grant of both incentive and non-qualified
stock options.
Stock
Appreciation Rights
Stock
appreciation rights may be granted separately or in connection with another
Award, and the Compensation Committee may provide that they are exercisable at
the discretion of the holder or that they will be paid at a time or times
certain or upon the occurrence or non-occurrence of certain events. Stock
appreciation rights may be settled in shares of our common stock or in cash,
according to terms established by the Compensation Committee with respect to any
particular award.
Stock
Awards
The
Compensation Committee may grant shares of our common stock or restricted stock
to a participant, subject to such restrictions and conditions, if any, as the
Compensation Committee shall determine.
Performance
Awards
After
the 2004 Plan Amendment, performance awards entitle the participant to receive
at a specified future date payment of an amount equal to either the value of a
specified or determinable number of units stated in terms of a designated or
determinable dollar amount per unit or a percentage or multiple of a specified
dollar amount determined by the Compensation Committee, and payment will be
subject to such conditions or restrictions as the Compensation Committee shall
determine, including achievement of specified Performance Goals, and shall be
payable in cash or shares of our common stock, as the Compensation Committee may
determine. Before the 2004 Plan Amendment, the Plan permitted the
grant of performance awards (then called “performance unit awards”), but they
were required to be denominated only in “units.” The 2004 Plan
Amendment provides the Compensation Committee with greater flexibility to
structure cash bonuses to qualify as performance-based compensation under Code
Section 162(m).
Other
Awards
Dividend
equivalent rights, restricted stock unit awards and phantom shares may be
granted with respect to such number of shares of our common stock and may be
subject to such conditions or restrictions as the Compensation Committee shall
determine and shall be payable in cash or shares of our common stock, as the
Compensation Committee may determine.
Participation
in the 2004 Plan
Information regarding the grant of
awards under the 2004 Plan to key personnel is subject to the discretion of the
Board and set forth in the Stock Awards Column of the Summary Compensation
Table, the accompanying compensation tables, and the Compensation Discussion and
Analysis above. All Stock Awards described in the compensation tables
were granted under the 2004 Plan.
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Recapitalizations
and Reorganizations
The number of shares of our common
stock reserved for issuance in connection with the grant or settlement of Awards
or to which an Award is subject, as the case may be, and the exercise price of
each option are subject to adjustment in the event of any recapitalization of
our company or similar event effected without receipt of consideration by
us.
In the event of certain corporate
reorganizations, Awards may be substituted, cancelled, accelerated, cashed-out
or otherwise adjusted by the Compensation Committee, provided such adjustment is
not inconsistent with the express terms of the 2004 Plan or the applicable award
agreement.
Amendment
or Termination
Although the amended 2004 Plan may be
further amended by our Board of Directors without stockholder approval, our
Board of Directors also may condition any such amendment upon stockholder
approval if stockholder approval is deemed necessary or appropriate in
consideration of tax, securities or other laws.
Federal
Income Tax Information
The following discussion outlines
generally the federal income tax consequences of participation in the amended
2004 Plan. Individual circumstances may vary and each participant should rely on
his or her own tax counsel for advice regarding federal income tax treatment
under the amended 2004 Plan.
Non-Qualified
Options
A participant will not recognize income
upon the grant of an option or at any time prior to the exercise of the option
or a portion thereof. At the time the participant exercises a non-qualified
option or portion thereof, he or she will recognize compensation taxable as
ordinary income in an amount equal to the excess of the fair market value of our
common stock on the date the option is exercised over the price paid for our
common stock, and we will then be entitled to a corresponding
deduction.
Depending upon the period shares of our
common stock are held after exercise, the sale or other taxable disposition of
shares acquired through the exercise of a non-qualified option generally will
result in a short or long-term capital gain or loss equal to the difference
between the amount realized on such disposition and the fair market value of
such shares when the non-qualified option was exercised.
Incentive
Stock Options
A
participant who exercises an incentive stock option will not be taxed at the
time he or she exercises the option or a portion thereof. Instead, he or she
will be taxed at the time he or she sells our common stock purchased pursuant to
the option. The participant will be taxed on the difference between the price he
or she paid for our common stock and the amount for which he or she sells our
common stock. If the participant does not sell the stock prior to two years from
the date of grant of the option and one year from the date the stock is
transferred to him or her, the participant will be entitled to capital gain or
loss treatment based upon the difference between the amount realized on the
disposition and the aggregate exercise price and we will not get a corresponding
deduction. If the participant sells the stock at a gain prior to that time, the
difference between the amount the participant paid for the stock and the lesser
of the fair market value on the date of exercise or the amount for which the
stock is sold, will be taxed as ordinary income and we will be entitled to a
corresponding deduction; if the stock is sold for an amount in excess of the
fair market value on the date of exercise, the excess amount is taxed as capital
gain. If the participant sells the stock for less than the amount he or she paid
for the stock prior to the one or two year periods indicated, no amount will be
taxed as ordinary income and the loss will be taxed as a capital
loss.
Exercise
of an incentive option may subject a participant to, or increase a participant's
liability for, the alternative minimum tax.
Stock
Awards
A
participant will not be taxed upon the grant of a stock award if such award is
not transferable by the participant or is subject to a "substantial risk of
forfeiture," as defined in the Code. However, when the shares of our common
stock that are subject to the stock award are transferable by the participant
and are no longer subject to a substantial risk of forfeiture, the participant
will recognize compensation taxable as ordinary income in an amount equal to the
fair market value of the stock subject to the stock award, less any amount paid
for such stock, and we will then be entitled to a corresponding deduction.
However, if a participant so elects at the time of receipt of a stock award, he
or she may include the fair market value of the stock subject to the stock
award, less any amount paid for such stock, in income at that time and we also
will be entitled to a corresponding deduction at that time.
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Other
Awards
A
participant will not recognize income upon the grant of certain equity
incentives such as a stock appreciation right, dividend equivalent right,
performance award or phantom share. Generally, at the time a participant
receives payment under any such award, he or she will recognize compensation
taxable as ordinary income in an amount equal to the cash or the fair market
value of our common stock received, and we will then be entitled to a
corresponding deduction.
Potential
Limitation on Company Deductions
Section 162(m) of the Code denies a
deduction to any publicly held corporation for compensation paid to certain
“covered employees” in a taxable year to the extent that compensation to such
covered employee exceeds $1,000,000. It is possible that compensation
attributable to equity compensation, when combined with cash compensation and
all other types of compensation received by a covered employee from the company,
may cause this limitation to be exceeded in any particular
year. Compensation that qualifies under Code Section 162(m) as
“qualified performance-based compensation” is exempt from the deduction
limitation. In accordance with Treasury Regulations issued under
Section 162(m), qualified performance-based compensation is compensation that
meets the following requirements:
|
i.
|
the
compensation is payable only upon attainment of pre-established, objective
performance goals;
|
|
ii.
|
the
performance goals under which the compensation is paid must be established
by a compensation committee comprised solely of two or more outside
directors; and
|
|
iii.
|
the
material terms of the performance goals under which compensation can be
paid are approved by the stockholders of the
corporation.
|
Stock options and stock appreciation
rights are deemed to satisfy the requirement in clause (i) above if the grant is
made by the compensation committee, the plan under which the option or right is
granted states the maximum number of shares subject to options or rights that
may be granted during a specified period to any employee, and the option or
right strike price is set at the fair market value of the underlying stock as of
the date of grant.
The 2004 Plan Amendment that we are
asking you to approve expands the Compensation Committee’s ability to structure
awards that qualify as performance-based compensation under Code Section 162(m),
by expanding the type of cash bonuses that can qualify as performance-based,
expanding the available performance goals as described above, and imposing
limits on the maximum number of shares or dollar amounts that can be paid to an
employee in any year as performance-based compensation. However, even
if the stockholders vote to approve the 2004 Plan Amendment, the Compensation
Committee will have the ability to structure Awards under the Plan that do not
qualify as qualified performance-based compensation, and thus there can be no
assurance that all Awards under the Plan will be treated as qualified
performance-based compensation under Code Section 162(m) and tax-deductible to
the company.
Voting
Required for Approval
For
the 2004 Plan Amendment to be approved, the number of "for" votes cast at the
meeting for this proposal must be at least a majority of all votes cast on the
proposal and the total number of votes cast with respect to this proposal must
represent more than 50% of all of the shares entitled to vote on the proposal.
For purposes of the vote on Proposal 3, abstentions and broker non-votes will
not be counted as shares entitled to vote and will have no effect on the results
of the vote.
Recommendation
of the Board
Accordingly,
our Board of Directors unanimously recommends that the stockholders vote "FOR"
this Proposal 3, the proposal to approve the 2004 Plan
Amendment.
STOCKHOLDER
PROPOSALS
December 19, 2008 is the date by which
proposals of stockholders intended to be presented at the 2009 Annual Meeting of
Stockholders must be received by us for inclusion in our proxy statement and
form of proxy relating to that meeting.
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In addition, our Bylaws provide that in
order for business to be brought before the Annual Meeting, a stockholder must
deliver or mail written notice to our Secretary at our principal executive
office not less than 60 days nor more than 90 days prior to the first
anniversary of the preceding year’s Annual Meeting provided, however, that if
the date of the Annual Meeting is advanced by more than 30 days or delayed by
more than 60 days from such anniversary date, notice must be delivered not more
than 90 days prior to such Annual Meeting nor less than 60 days prior to such
Annual Meeting or if later, not later than the close of business on the tenth
day following the day on which the date of such meeting is publicly
announced. The notice must state the stockholder’s name,
address, class and number of shares of our stock and briefly describe the
business to be brought before the meeting, the reasons for conducting such
business at the meeting and any material interest of the stockholder and of the
beneficial owner, if any, on whose behalf the proposal is made. If
the stockholder intends to nominate a candidate for election as a director, in
addition to the requirements set forth above, the notice should include the name
of the nominee for election as a director, the age of the nominee, the nominee’s
business address and experience during the past five years, the number of shares
of our stock beneficially held by the nominee, and such other information
concerning the nominee as would be required to be included in a proxy statement
soliciting proxies for the election of the nominee. The notice must
also include a description of all arrangements or understandings between such
stockholder and each proposed nominee and any other person pursuant to which the
nominations are to be made by such stockholder, a representation that such
stockholder intends to appear in person or by proxy at the meeting to nominate
the person named in the notice, and the consent of the nominee to serve as a
director.
EXPENSES
OF SOLICITATION
The total cost of this solicitation
will be borne by us. In addition to use of the mails, proxies may be
solicited by our directors, officers and regular employees of 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.
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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 18,
2008
Timonium,
Maryland
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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
14, 2008 at the Annual Meeting of Stockholders to be held on May 22, 2008 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:
Harold J. Kloosterman and C. Taylor
Pickett
|
2.
|
Ratification
of Independent Auditors
|
Ernst
& Young LLP
|
3.
|
Approval
of the amendments to the 2004 Stock Incentive Plan described in Proposal 3
in the accompanying proxy statement
|
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, Proposal 2
and Proposal 3.
VOTE
FOR VOTE WITHELD
1. The
Election of
Directors [ ] [ ]
NOMINEES:
Harold J. Kloosterman and C. Taylor
Pickett
(Instruction: To withhold
authority to vote for any individual nominee,
write that nominee’s name
here.)
FOR AGAINST ABSTAIN
2. Ratification
of Independent
Auditors [ ] [ ] [ ]
Ernst
& Young LLP
3. Approval
of the amendments to the 2004 Stock Incentive Plan described
in Proposal 3 in the accompanying proxy
statement [ ] [ ] [ ]
-------------------------------------------------------------------------------------------------------------
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