424B3: Prospectus filed pursuant to Rule 424(b)(3)
Published on November 20, 1996
Pursuant to Rule 424B(3)
PROSPECTUS SUPPLEMENT Registration Number 33-73532
(TO PROSPECTUS DATED
MARCH 7, 1994)
1,000,000 SHARES
OMEGA HEALTHCARE INVESTORS, INC.
[OMEGA LOGO]
COMMON STOCK
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Omega Healthcare Investors, Inc. is a real estate investment trust which
invests in income producing healthcare properties, principally long-term care
facilities. See "The Company." All of the 1,000,000 shares of Common Stock are
being sold by the Company.
The Common Stock is listed on the New York Stock Exchange and trades under
the symbol "OHI." The last reported sale price of the Common Stock on the New
York Stock Exchange on November 14, 1996 was $31.625 per share.
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SEE "RISK FACTORS" ON PAGE 3 OF THE ACCOMPANYING PROSPECTUS FOR CERTAIN
FACTORS RELEVANT TO AN INVESTMENT IN THE COMMON STOCK.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED THE
MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE
CONTRARY IS UNLAWFUL.
(1) The Common Stock is being offered by the Company to selected unaffiliated
institutional investors. National Westminster Bank PLC, New York Branch
("NatWest Markets"), 175 Water Street, New York, New York 10038, has been
retained to act for the Company in connection with the arrangement of such
offers and sales on a best efforts, all or none, basis. The Company has
agreed (i) to pay NatWest Markets a fee in connection with the arrangement
of this transaction and (ii) to indemnify NatWest Markets against certain
liabilities including liabilities under the Securities Act of 1933, as
amended (the "Securities Act"). It is anticipated that the Common Stock will
be delivered against payment thereon on November 20, 1996; the Offering will
not continue after such date. See "Plan of Distribution".
(2) Before deducting expenses payable by the Company estimated at $75,000.
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THE DATE OF THIS PROSPECTUS SUPPLEMENT IS NOVEMBER 15, 1996
S-2
THE COMPANY
Omega is a real estate investment trust investing in and providing
financing to the long-term care industry. Its portfolio includes 221 health care
facilities with over 20,000 licensed beds, located in 26 states. Omega is also
an owner of and provides management advisory services to Principal Healthcare
Finance Limited, a company which owns and leases 42 nursing home facilities
located in the United Kingdom. The executive offices of the Company are located
at 905 West Eisenhower Circle, Suite 110, Ann Arbor, Michigan 48103. Its
telephone number is (313) 747-9790.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Common Stock offered
hereby (the "Offering") are estimated to be $30,175,000, after deducting the
estimated expenses of the offering payable by the Company, including the
Placement Agent's fees.
The Company intends to use the entire net proceeds of the Offering to repay
borrowings under its revolving line of credit, of which approximately $62.8
million was outstanding as of September 30, 1996. The maturity date of the
revolving line of credit is June 30, 1999. Interest is at a rate of the lesser
of prime or one hundred twenty five basis points over LIBOR. Borrowings under
the line have been utilized to acquire or make investments in healthcare
facilities and for general corporate purposes.
PLAN OF DISTRIBUTION
The shares of Common Stock are being offered for sale by the Company
principally to selected unaffiliated institutional investors. Some of the shares
of Common Stock may be offered to institutional investors outside of the United
States. NatWest Markets has been retained to act as placement agent for the
Company in connection with the arrangement of such offers and sales on a best
efforts, all or nothing, basis and intends to retain EVEREN Securities, Inc.
("Everen") as sub-placement agent. NatWest Markets will pay Everen a portion of
its placement fees herein. It is anticipated that NatWest Markets will obtain
indications of interest from potential investors for the amount of the Offering
and that no investor funds will be accepted until indications of interest have
been received for the full amount of the Offering. Confirmations and definitive
prospectuses will be distributed to all investors at the time of pricing,
informing investors of the closing date, which will be scheduled for three
business days after the date hereof. Prior to the closing date, all investor
funds will promptly be placed in escrow with Citibank, N.A. or a similar
national banking institution as escrow agent ("Escrow Agent"), in an escrow
account established for the benefit of the investors. Escrow Agent will invest
such funds in accordance with Rule 15c2-4 under the Securities Exchange Act of
1934, as amended. Prior to the closing date, Escrow Agent will advise the
Company that payments for the purchase of the Common Stock have been affirmed by
the investors and that the investors have deposited the requisite funds in the
escrow account. Upon receipt of such notice, the Company will deposit with the
Depository Trust Company ("DTC"), as Depository, the shares of Common Stock to
be credited to the respective accounts of the investors. Investor funds together
with interest thereon, if any, will only be collected by the Company through the
facilities of Escrow Agent on the scheduled closing date. The Offering will not
continue after the closing date. In the event that investor funds are not
received in the full amount necessary to satisfy the requirements of the
Offering, Escrow Agent will return all escrowed investor funds to the respective
investors as promptly as practicable. The Company has agreed (i) to pay NatWest
Markets approximately .81% of the gross proceeds to the Company from the
Offering and (ii) to indemnify NatWest Markets against certain liabilities,
including liabilities under the Securities Act.
LEGAL MATTERS
The legality of the shares of Common Stock offered hereby will be passed
upon for the Company by Argue Pearson Harbison & Myers, Los Angeles, California.
S-3
PROSPECTUS
OMEGA HEALTHCARE INVESTORS, INC.
COMMON STOCK, PREFERRED STOCK,
DEBT SECURITIES AND SECURITIES WARRANTS
Omega Healthcare Investors, Inc. (the "Company") may from time to time offer
in one or more series (i) shares of its common stock, par value $.10 per share
(the "Common Stock"); (ii) shares of its preferred stock, par value $1.00 per
share (the "Preferred Stock"); (iii) its unsecured senior debt securities (the
"Debt Securities"); or (iv) warrants to purchase Common Stock (the "Common Stock
Warrants"), warrants to purchase Debt Securities (the "Debt Securities
Warrants"), and warrants to purchase Preferred Stock (the "Preferred Stock
Warrants"), with an aggregate public offering price of up to $200,000,000, on
terms to be determined at the time of offering. The Common Stock Warrants, the
Debt Securities Warrants and the Preferred Stock Warrants shall be referred to
herein collectively as the "Securities Warrants." The Common Stock, Preferred
Stock, Debt Securities, and Securities Warrants (collectively, the "Securities")
may be offered, separately or together, in separate series amounts, at prices
and on terms to be set forth in a supplement to this Prospectus (a "Prospectus
Supplement").
With respect to the Common Stock, the specific number of shares and issuance
price per share will be set forth in the applicable Prospectus Supplement. The
terms of the Preferred Stock, including specific designation and stated value
per share, any dividend, liquidation, redemption, conversion, voting and other
rights, and all other specific terms of the Preferred Stock will be set forth in
the applicable Prospectus Supplement. In the case of the Debt Securities, the
specific title, aggregate principal amount, form (which may be registered or
bearer, or certified or global), maturity, rate (or manner of calculation
thereof) and time of payment of interest, terms for redemption at the option of
the Company or repayment at the option of the Holder, any sinking fund
provisions and any conversion provisions will be set forth in the applicable
Prospectus Supplement. In the case of the Securities Warrants, the duration,
offering price, exercise price and detachability, if applicable, will be set
forth in the applicable Prospectus Supplement. In addition, such specific terms
may include limitations on direct or beneficial ownership and restrictions on
transfer of the Securities or redemption or conversion terms, in each case as
may be appropriate to preserve the status of the Company as a real estate
investment trust ("REIT") for United States federal income tax purposes. The
applicable Prospectus Supplement will also contain information, where
applicable, about certain United States federal income tax considerations
relating to, and any listing on a securities exchange of, the Offered Securities
covered by such Prospectus Supplement.
In the case of Securities Warrants, the duration, offering price, exercise
price and detachability, if applicable, will be set forth in the applicable
Prospectus Supplement. In addition, such specific terms may include limitations
on direct or beneficial ownership and restrictions on transfer of the
Securities, in each case as may be appropriate to preserve the status of the
Company as a real estate investment trust ("REIT") for United States federal
income tax purposes. The applicable Prospectus Supplement will also contain
information, where applicable, about certain United States federal income tax
considerations relating to, and any listing on a securities exchange of, the
Securities covered by such Prospectus Supplement.
Securities may be offered directly, through agents designated from time to
time by the Company, or to or through underwriters or dealers. If any agents or
underwriters are involved in the sale of any of the Securities, their names, and
any applicable purchase price, fee, commission or discount arrangement between
or among them, will be set forth, or will be calculable from the information set
forth, in the applicable Prospectus Supplement. See "Plan of Distribution." No
Securities may be sold without delivery of the applicable Prospectus Supplement
describing the method and terms of the offering of such series of Securities.
The net proceeds to the Company from the sale of any of the Securities will be
set forth in the applicable Prospectus Supplement.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
-------------------------
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED THE
MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE
CONTRARY IS UNLAWFUL.
-------------------------
This Prospectus may not be used to consummate sales of Securities unless
accompanied by a Prospectus Supplement.
-------------------------
The date of this Prospectus is March 7, 1994
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 and in accordance therewith, files reports, proxy
statements and other information with the Securities and Exchange Commission
(the "Commission"). Such reports, proxy statements and other information can be
inspected and copied at the public reference facilities maintained by the
Commission in Washington, D.C. (Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549), and at the Commission's Regional Offices in Chicago
(500 West Madison Street, Suite 1400, Chicago, Illinois 60665) and New York City
(7 World Trade Center, 13th Floor, New York, New York 10048). Copies of such
material can be obtained from the Commission's Public Reference Section, 450
Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. The common stock
of the Company is listed on the New York Stock Exchange and reports, proxy
statements and other information concerning Omega Healthcare Investors, Inc. can
be inspected at 20 Broad Street, New York, New York. The Company has filed with
the Commission a Registration Statement on Form S-3 with respect to the
securities offered hereby. This Prospectus and any accompanying Prospectus
Supplement do not contain all information set forth in the Registration
Statement, in accordance with the rules and regulations of the Commission, and
exhibits thereto which the Company has filed with the Commission under the
Securities Act of 1933 and to which reference is hereto made.
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DOCUMENTS INCORPORATED BY REFERENCE
The following documents previously filed with the Commission are
incorporated in this Prospectus by reference:
-- Annual Report of the Company on Form 10-K for the year ended December
31, 1992;
-- Quarterly Reports of the Company on Form 10-Q for the quarters ended
March 31, 1993, June 30, 1993, and September 30, 1993, and Form 10Q/A
for the quarter ended June 30, 1993;
-- Current Reports of the Company on Form 8-K dated September 14, 1993,
October 28, 1993, and February 10, 1994; and
-- The description of the Company's Common Stock, $.10 par value,
contained in its Initial Registration Statement on Form 8-A, filed
under Section 12 of the Securities Exchange Act of 1934, and declared
effective by the Commission on August 7, 1992.
All documents filed by Omega Healthcare Investors, Inc. pursuant to Section
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 subsequent to
the date hereof and prior to the termination of the offering made hereby shall
be deemed to be incorporated by reference into this Prospectus and to be a part
hereof from the date of filing such documents. All information appearing in this
Prospectus is qualified in its entirety by the detailed information and
financial statements (including the notes thereto) appearing in the documents
incorporated by reference. Any statement contained in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Prospectus.
Omega Healthcare Investors, Inc. will provide without charge to each person
to whom this Prospectus is delivered, on written or oral request of such person,
a copy (without exhibits other than exhibits specifically incorporated by
reference therein) of any or all documents incorporated by reference into this
Prospectus within the meaning of Section 10(a) of the Securities Act of 1933.
Requests for such copies should be directed to Essel W. Bailey, Jr., President
and Secretary of the Company, at the Company's principal executive offices at
905 West Eisenhower Circle, Suite 110, Ann Arbor, Michigan 48103, telephone
(313) 747-9790.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SHARES OF THE
COMPANY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR OTHERWISE.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
RISK FACTORS
Investment in the Securities involves various risks. In addition to general
investment risks and those factors set forth elsewhere in this Prospectus or in
a Prospectus Supplement, investors should consider the following factors before
making a decision to purchase the Securities offered hereby.
GOVERNMENT HEALTH CARE REGULATION
Health care is an area of extensive government regulation and dynamic
regulatory change. The Company's lessees and mortgagors are and will continue to
be subject to extensive federal, state and local regulation, including
licensing, facility inspections, reimbursement policies, and control over
certain expenditures. There are currently under consideration various proposals,
including the proposals submitted by President Clinton to Congress, for national
health care reform, that could further limit payments to health care providers
or otherwise affect the operations of health care providers. Changes in laws or
regulations or new interpretations of existing laws or regulations can have a
dramatic effect on methods of doing business, costs of doing business and
amounts of reimbursement by government and private third party payors. See "--
Possible Reduction of Reimbursement by Third Party Payors."
Laws and regulations are regularly adopted to regulate new and existing
health care services. Federal laws governing the activities of long-term care
operators, such as regulations concerning Medicare and Medicaid programs, which
provide a majority of a Facility's revenues, as well as Federal and State laws
concerning coverage and reimbursement requirements, change frequently, and there
can be no assurance that federal or state governments will not impose additional
restrictions upon all or a portion of the activities of the Company's lessees
and mortgagors, such as the operators of the Company's facilities (the "Facility
Operators"), which might adversely affect operations of such lessees or
mortgagors. Any material adverse effect on the operations of such lessees and
mortgagors (and the Facility Operators in particular) could, and likely would,
adversely affect the Company.
The United States federal government, and the states in which the Facility
Operators operate, separately regulate various aspects of the business of the
Company's lessees and mortgagors (including the Facility Operators). Long-term
care facilities such as nursing homes and retirement centers are subject to
periodic inspection by governmental and other authorities to assure continued
compliance with various standards, including standards relating to the financial
condition of the owners and operators of such facilities and physical condition
of the properties. There can be no assurance that federal, state or local
governments will not change existing standards, or impose additional standards,
relating to all or a portion of the Facility Operator's activities or their
properties. Such governmental action might adversely affect the Facility
Operators' activities, business and financial condition. The failure to maintain
in effect required regulatory approvals or licenses could materially and
adversely affect the Facility Operator's business and financial condition and,
indirectly, the Company's financial condition.
POSSIBLE REDUCTION OF REIMBURSEMENT BY THIRD PARTY PAYORS
Currently, a majority of the revenues of the Company's lessees and
mortgagors (including the Facility Operators) is dependent upon reimbursement
from third party payors, including the Medicaid and Medicare programs,
post-employment benefit plans and private insurers. The levels of revenues and
profitability of such lessees and mortgagors (including the Facility Operators)
are affected by the continuing efforts of third party payors to contain or
reduce the costs of health care by lowering reimbursement rates, increasing case
management review of services, and negotiating reduced contract pricing. Such
efforts are expected to continue. In addition, in an attempt to reduce the
United States' federal budget deficit, there have been, and the Company expects
that there will continue to be, proposals to limit Medicaid and Medicare
reimbursement for health care services. Proposals have also been made to limit
Medicaid reimbursement for health care services in each of the states in which
are located facilities owned and leased by the Company or with respect to which
the Company provides mortgage financing (the "Facilities"). The Company cannot
at this time predict whether any of these proposals will be adopted at the
federal or state level or, if adopted and implemented, what effect, if any, such
proposals will have on the lessees or mortgagors of the Company
3
including the Facility Operators, and, indirectly, the Company. A significant
change in coverage or a reduction in payment rates by third party payors or the
availability of funds for reimbursement, particularly in Michigan or Arkansas,
could have a material adverse effect on the business and financial condition of
the Company's lessees and mortgagors, including the Facility Operators, and,
indirectly, the Company's financial condition.
REAL ESTATE INVESTMENT RISKS
The operating results of the Facilities underlying the Company's
investments will depend on various factors over which the Company will have no
control and which may affect the present or future cash flow of the Company.
Those factors include, without limitation, general economic conditions, changes
in the supply of, or demand for, competing long-term care facilities, changes in
occupancy levels, the ability of the Company's lessees and mortgagors through
rate increases or otherwise to absorb increases in operating expenses, changes
in government regulations and changes in zoning laws.
No assurance can be given that a lessee will exercise any option to renew
its lease upon the expiration of the initial term. In such an instance, the
Company may not be able to locate a qualified purchaser or a qualified
replacement tenant, as a result of which it would lose a source of revenue while
remaining responsible for the payment of its obligations.
Generally, the Company's lease arrangements with a single operator who
operates more than one of the Company's Facilities is pursuant to a single
master lease (a "Master Lease" or collectively, the "Master Leases"). The
failure to renew any of these Master Leases, or the termination of any of these
Master Leases, may have a material adverse effect on the Company.
No assurance can be given that a borrower under any mortgage held by the
Company will be able to refinance any mortgage at the expiration of the term
thereof. In addition, the Company may invest a portion of its portfolio in
mortgages that are subordinated to other mortgages or other payments. Although
these mortgages may present higher returns, the borrower under these mortgages
would be required to repay such senior amounts prior to repayment of the
Company's mortgage. Certain of the Company's mortgages have "equity
participation" or conversion features that permit the Company to realize
increased returns if cash flows of the Facilities increase. The conversion
features also may permit the Company to convert its mortgage interest into a fee
interest to realize on any increase in the value of the real estate. No
assurance can be given that any participating mortgage will permit the Company
to realize any such benefits or that such benefits will continue if presently
realized. No assurance can be given that any conversion rights will be
exercised, or if exercised, will result in the Company realizing any amounts
from the lease or sale of such Facilities in excess of the amounts under the
corresponding mortgage.
The Company believes it has adequate insurance to protect against the risks
typically associated with business of the type it conducts, and requires that
its lessees and mortgagors maintain insurance at levels it believes adequate to
protect against the risks associated with the operations and activities of their
facilities. However, there can be no assurance that such insurance will prove to
be adequate or will continue to be available at reasonable prices.
CERTAIN BANKRUPTCY LIMITATIONS
Although each lease or Master Lease provides that the Company may terminate
the Master Lease upon the bankruptcy or insolvency of the tenant, the Bankruptcy
Reform Act of 1978 ("Bankruptcy Code") provides that a trustee in a bankruptcy
or reorganization proceeding under the Bankruptcy Code (or a debtor-
in-possession in a reorganization under the Bankruptcy Code) has the power and
the option to assume or reject the unexpired lease obligations of a
debtor-lessee. In the event that the unexpired lease is assumed on behalf of the
debtor-lessee, all the rental obligations thereunder generally would be entitled
to a priority over other unsecured claims. However, the court also has the power
to modify a lease if a debtor-lessee in a reorganization were required to
perform certain provisions of a lease that the court determined to be unduly
burdensome. It is not possible to determine at this time whether or not any
lease or Master Lease contains any such provisions. If a lease is rejected, the
lessor has a general unsecured claim limited to any unpaid rent already due plus
an amount equal to the rent reserved under the lease, without acceleration, for
the greater of
4
one year or 15% of the remaining term of such lease, not to exceed three years.
If any lease is rejected, the Company may also lose the benefit of any
participation interest or conversion right.
CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS
The Mortgages are either deeds of trust or mortgages, depending upon the
laws of the state in which the related Facility is located. A mortgage creates a
lien upon the real property encumbered by the mortgage. There are two parties to
each mortgage, the mortgagor, who is the borrower and owner, and the mortgagee,
the lender. Although a deed of trust is similar to a mortgage, a deed of trust
formally has three parties, the borrower-owner, called the trustor (similar to a
mortgagor), the lender, called the beneficiary (similar to a mortgagee), and a
third-party grantee called the trustee. Under a deed of trust, the borrower
grants the property, irrevocably until the debt is paid, in trust, generally
with a power of sale, to the trustee to secure payment of the obligation. The
trustee's authority under a deed of trust and the mortgagee's authority under a
mortgage are governed by law, the express provisions of the deed of trust or
mortgage, and, in some cases, the directions of the beneficiary.
Foreclosure of a deed of trust is generally accomplished by a non-judicial
trustee's sale under a specific provision in the deed of trust which authorizes
the trustee to sell the property to a third party upon any default by the
borrower under the terms of the note or deed of trust. In some states, the
trustee must record a notice of default and send a copy to the borrower-trustor
and to any person who has recorded a request for a copy of a notice of default
and notice of sale. In addition, the trustee must provide notice in some states
to any other individual having an interest in the real property, including any
junior lienholders. The borrower, or any other person having a junior
encumbrance on the real estate, may, during a reinstatement period, cure the
default by paying the entire amount in arrears plus the costs and expenses
incurred in enforcing the obligation. Generally, state law controls the amount
of foreclosure expenses and costs, including limited attorneys' fees, which may
be recovered by a lender. If the deed of trust is not reinstated, a notice of
sale must be posted in a public place and, in most states, published for a
specified period of time in one or more newspapers. In addition, some state laws
require that a copy of the notice of sale be posted on the property and sent to
all parties having an interest therein.
Foreclosure of a mortgage may be accomplished by judicial action or, in
some states, power of sale. Judicial action is initiated by the service of legal
pleadings upon all parties having an interest in the real property. When the
mortgagee's right to foreclose is contested, the legal proceedings necessary to
resolve the issue can be time consuming. After the completion of judicial
foreclosure, the court would issue a judgment of foreclosure and would generally
appoint a referee or other court officer to conduct the sale of the property.
Foreclosure by power of sale requires the posting of notice of sale in a public
place and publication, for a specified period of time, in one or more
newspapers. Upon the expiration of such period the property is sold in
accordance with the mortgage and applicable state law.
A mortgage foreclosure is subject throughout to a court's equitable powers.
A court may exercise equitable powers to relieve a default and deny the
mortgagee foreclosure, such as relieving the mortgagor from an entirely
technical default where such default was not willful. Moreover, a non-collusive,
regularly conducted foreclosure sale may be challenged as a fraudulent
conveyance, regardless of the parties' intent, on the basis that the sale was
for less than fair consideration and such sale occurred while the borrower was
insolvent and within one year (or if controlling, the statutory period provided
by state fraudulent conveyance law) of the filing of bankruptcy. Similarly, a
suit against the debtor on the note may take several years and, generally, is a
remedy alternative to foreclosure, the lender being precluded from pursuing both
at the same time.
In some states, after sale of the property pursuant to a deed of trust or
foreclosure of mortgage, the borrower and foreclosed junior lienors are given a
statutory period in which to redeem the property from the foreclosure sale. In
some states, redemption may occur only upon payment of the entire principal
balance of the loan, accrued interest and expenses of foreclosure. In other
states, redemption may be authorized if the former borrower pays only a portion
of the sums due. The effect of a statutory right of redemption is to diminish
the ability of the lender to sell the foreclosed property. The rights of
redemption would defeat the
5
title of any purchaser from the lender subsequent to sale of the mortgage
property pursuant to a deed of trust or foreclosure of a mortgage. Consequently,
the practical effect of the redemption right is to force the lender to retain
the property and pay the expenses of ownership until the redemption period has
expired.
No assurance can be given that the amounts realized in any such sale will
be sufficient to repay the Mortgage on the Facility sold.
ENVIRONMENTAL RISKS
Various of the Facilities may contain, or their operations may utilize,
certain materials, processes or installations which are regulated pursuant to
environmental statutes and regulations, or may require environmental permits
from regulatory authorities. These items include fuel oil storage tanks, medical
or infectious waste, incinerators, and small amounts of friable
asbestos-containing materials. Environmental studies, prepared for the Company,
reveal no significant environmental risk or failure to comply with such statutes
or rules in connection with such materials, processes or installations. The
Company believes that the materials used at the Facilities and the manner in
which the Facilities are operated present no material adverse risk and will have
no material adverse impact on the Company's financial condition or results of
operations.
In connection with each of the Company's investments in the Facilities, the
Facility Operators caused preliminary environmental studies to be prepared and
delivered to the Company. No assurance can be given, however, that undiscovered
environmental liabilities do not exist, or that any undiscovered environmental
liability will not be material to the Company. Under several state laws and the
federal Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"), a lender may be liable, as an "owner" or "operator", for clean-up
costs on a mortgaged property from which there has been a release or threatened
release of hazardous substances if agents or employees of the lender have become
involved in the operations of the borrower, regardless of whether a previous
owner caused the environmental damage.
Under the terms of the respective acquisition agreement, loan agreements
and participating mortgages, the Company has obtained representations and
warranties respecting any hazardous substances at the Facilities, and the
Company has received indemnities therein respecting the presence of, and
liability for, any such hazardous substances. There can be no assurance that
these indemnities will be sufficient to cover any liability for any or all of
the hazardous substances that may exist at the Facilities.
Finally, under the terms of the Master Leases and the Participating
Mortgages, Facility Operators, as applicable, have agreed to comply with any and
all statutes, laws, ordinances, rules and regulations relating to the use,
storage and disposal of hazardous substances at the Facilities.
COMPETITION
The Company competes for additional health care facility investments with
other health care investors, including other real estate investment trusts. Many
of the Company's competitors possess substantially greater financial resources
than the Company.
The Facilities compete with other regional or local nursing care facilities
for the support of the medical community, including physicians and acute care
hospitals, as well as the general public. Some significant competitive factors
for the placing of patients in skilled and intermediate care nursing facilities
include quality of care, reputation, physical appearance of the facilities,
services offered, family preferences, physician services and price. See "The
Company -- Investment Strategies and Policies."
LIMITED INVESTMENT DIVERSIFICATION
It is the Company's objective to invest in health care facilities.
Accordingly, the Company will not diversify its investment portfolio to reduce
the risks associated with investment in the health care industry. In the future,
the Company plans to make additional health care facility related investments.
Such investments may be made on terms less favorable than the terms applicable
to the Company's present investments.
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CERTAIN RESTRICTIONS ON TRANSFER OF SHARES; BUSINESS COMBINATIONS
Provisions of the Articles of Incorporation of the Company, primarily
intended to enable the Company to maintain its status as a real estate
investment trust, authorize the Company (i) to refuse to transfer Common Stock
to any person who, as a result of such transfer, would beneficially own Common
Stock in excess of 9.9% of the outstanding Common Stock of the Company ("Excess
Shares"); and (ii) to redeem any such Excess Shares. Such provisions may inhibit
market activity and the resulting opportunity for shareholders to receive a
premium for their Common Stock that might otherwise exist if any individual or
entity were attempting to assemble a block of Common Stock in excess of 9.9% of
the outstanding Common Stock. See "Description of Securities -- Common Stock --
Redemption and Business Combination Provisions."
Although the Company does not anticipate that it will redeem or otherwise
reduce the number of shares of outstanding Common Stock, except for Excess
Shares, if the number of shares of outstanding Common Stock were reduced, the
9.9% limitation might be exceeded by a shareholder without any action on his or
her part.
In addition, certain provisions of the Articles of Incorporation regarding
Business Combinations (as defined therein) require approval of the holders of
80% of the outstanding voting shares of the Company. These and the other
provisions described above may have an anti-takeover effect. See "Description of
Securities -- Common Stock -- Redemption and Business Combination Provisions."
POSSIBLE CHANGE OF INVESTMENT STRATEGIES AND POLICIES AND CAPITAL STRUCTURE
The Bylaws of the Company permit the Board of Directors, without the
approval of the shareholders, to alter the Company's investment strategies and
policies if they determine in the future that such a change is in the best
interests of the Company and its shareholders. The methods of implementing the
Company's investment strategies and policies may vary as new investment and
financing techniques are developed or otherwise used. See "The Company --
Investment Strategies and Policies."
CONSEQUENCES OF FAILURE TO QUALIFY AS A REAL ESTATE INVESTMENT TRUST
Commencing with its taxable year ending December 31, 1992, the Company
believes it has been organized and has operated so as to qualify as a real
estate investment trust ("REIT") under the Code, and it intends to continue to
so qualify. A qualified REIT generally is not taxed at the corporate level on
income it currently distributes to its stockholders. Although the Company
believes that it has been organized, has operated, and will continue to operate
in a manner which will allow it to qualify as a REIT under the Code, no
assurance can be given that the Company has qualified or will remain qualified
as a REIT. The Company is relying on the opinion of Argue Pearson Harbison &
Myers, counsel to the Company, with respect to various issues affecting the
Company's ability to qualify and to retain its qualification as a REIT under the
Code. Such opinion, however, is not binding upon the Internal Revenue Service
which may take a contrary position. In addition, such opinion is dependent upon
the interpretation of highly technical and complex Code provisions for which
there are only limited judicial or administrative interpretations. One such
provision of the Code requires that a REIT distribute 95% of its "real estate
investment trust taxable income" to its shareholders each year. Although the
Company and its counsel believe that the Company has complied with the REIT
distribution requirements in each year since its formation in 1992, under
certain interpretations of such rules, the Company might be required to make an
additional one-time distribution of approximately $1,450,000 with respect to the
1992 distribution and $8,750,000 with respect to the 1993 distribution. In
addition, the Company would be required to pay interest and a 4% excise tax to
the IRS based on the amount of the deficiency dividend. The Company believes
that no such additional dividend will be required, but that if required, the
Company will have sufficient liquidity to pay any such dividend, interest and
additional amounts. See "Certain Federal Income Tax Considerations -- Taxation
of the Company -- Annual Distribution Requirements."
If the Company were to fail to qualify as a REIT in any taxable year, as a
result of a determination that it failed to meet the annual distribution
requirements or otherwise, the Company would be subject to Federal income tax
(including any applicable alternative minimum tax) on its taxable income at
regular corporate rates. Moreover, unless entitled to relief under certain
statutory provisions, the Company also would be disqualified from treatment as a
REIT for the four taxable years following the year during which qualification
7
is lost. This treatment would reduce the net earnings of the Company available
for investment or distribution to stockholders because of the additional tax
liability to the Company for the years involved. In addition, distributions to
stockholders would no longer be required to be made. See "Certain Federal Income
Tax Considerations" in the Prospectus Supplement.
THE COMPANY
Omega Healthcare Investors, Inc. (the "Company") was incorporated in the
State of Maryland on March 31, 1992. It is a self administered real estate
investment trust ("REIT") which invests in income producing healthcare
facilities, principally long-term care facilities located primarily in the
United States.
As of January 31, 1994, the Company's current portfolio consists of 73
long-term care facilities. The Company owns and leases 32 long-term healthcare
facilities and provides participating mortgage financing on 41 long-term
healthcare facilities. The facilities are located in 12 states and operated by 7
unaffiliated operators. The Company also owns and leases three medical office
buildings.
The investment objectives of the Company are: To pay regular cash dividends
to shareholders; to provide the opportunity for increased dividends from annual
increases in rental and interest income, from revenue participations and from
portfolio growth; to preserve and protect shareholders' capital; and to provide
the opportunity to realize capital growth resulting from appreciation, if any,
in the value of the Company's investments.
The Company intends to make and manage its investments (including the sale
or disposition of property or other investments) in such a manner as to be
consistent with the requirements of the Code (or regulations thereunder) to
qualify as a real estate investment trust ("REIT"), unless, because of changes
in circumstances or changes in the Code (or regulations thereunder), the Board
of Directors determines that it is no longer in the best interests of the
Company to qualify as a REIT.
The executive offices of the Company are located at 905 West Eisenhower
Circle, Suite 110, Ann Arbor, Michigan 48103. Its telephone number is (313)
747-9791.
INVESTMENT STRATEGIES AND POLICIES
The Company maintains a diversified portfolio of income-producing health
care facilities or mortgages thereon, with a primary focus on long-term care
facilities located primarily in the United States. In evaluating potential
investments, the Company considers such factors as: (i) the quality and
experience of management and the creditworthiness of the operator of the
facility; (ii) the facility's historical, current and forecasted cash flow and
its adequacy to meet operational needs, capital expenditures and lease or debt
service obligations, while providing a competitive return on investment to the
Company; (iii) the construction quality, condition and design of the facility;
(iv) the geographic area and type of facility; (v) the tax, growth, regulatory
and reimbursement environment of the community in which the facility is located;
(vi) the occupancy and demand for similar health care facilities in the same or
nearby communities; and (vii) the payor mix or private, Medicare and Medicaid
patients.
In making investments, the Company generally seeks established,
creditworthy, "middle market" health care operators which meet the Company's
standards for quality and experience of management. Although the Company has
emphasized long-term care investments, it may diversify prudently into other
types of health care investments. The Company actively seeks to diversify its
investments in terms of geographic location, operators and facility types. A
fundamental investment strategy of the Company is to obtain contractual rent
escalations under long-term, non-cancelable "triple net" leases and revenue
participations through participating mortgage loans, and to obtain substantial
security deposits. The Company may participate in mortgage loans through
ownership of collateralized mortgage obligations or other securitization of
mortgages.
There are no limitations on the amount or percentage of the Company's total
assets that may be invested in any one property. Additionally, no limits have
been set on the concentration of investments in any one location, operator or
facility type.
The Company may determine to finance acquisitions through the exchange of
properties or the issuance of shares of its capital stock to others, if such
transactions otherwise satisfy the Company's investment criteria.
8
The Company also has authority to repurchase or otherwise reacquire its Common
Stock or any other securities and may determine to do so in the future.
To the extent that the Company's Board of Directors determines to obtain
additional capital, the Company may raise such capital through additional equity
offerings, debt financings or retention of cash flow (subject to provisions of
the Internal Revenue Code of 1986, as amended concerning the taxability of
undistributed income of "real estate investment trusts"), or a combination of
these methods. See "Borrowing Policies" for further information concerning the
Company's policies regarding debt financing.
The Company does not intend to invest in the securities of others for the
purpose of exercising control.
The Bylaws of the Company permit the Board of Directors, without the
approval of the shareholders, to alter the Company's investment policies if they
determine in the future that such a change is in the best interests of the
Company and its shareholders. The methods of implementing the Company's
investment policies may vary as new investments and financing techniques are
developed or otherwise employed.
BORROWING POLICIES
The Company may incur additional indebtedness, and intends to eventually
attain and then maintain a debt-to-total capital ratio of approximately 50%. The
Company intends to review periodically its policy with respect to its
debt-to-total capital ratio and to adapt such policy as its management deems
prudent in light of prevailing market conditions. It will be a strategy of the
Company generally to match the maturity of its indebtedness with the maturity of
its assets, and to employ long term, fixed rate debt to the extent practicable.
The Company will use the proceeds of any additional indebtedness to make
investments in additional health care facilities. The Company may obtain either
secured or unsecured indebtedness, which may be convertible into capital stock
or accompanied by warrants to purchase capital stock. Where debt financing is
present on terms deemed favorable, the Company may invest in properties subject
to existing loans, secured by mortgages, deeds of trust or similar liens on the
properties.
INVESTMENTS AND FINANCINGS
On August 14, 1992, in an initial public offering, the Company issued
6,100,000 shares of its Common Stock for a cash consideration of $128,100,000
($21.00 per share), and issued 86,500 shares of its common stock to an
underwriter for a cash consideration of $1,816,500 ($21.00 per share). On the
same date the Company issued convertible notes to certain private investors with
a face amount of $3,600,000 for a cash consideration of $3,600,000. The
convertible notes were subsequently exchanged for convertible debentures with
substantially identical terms and conditions. Approximately $12,000,000 of costs
were incurred to raise these funds.
Substantially all of the net proceeds from the issuance of common stock and
convertible debentures were used to make the initial investments, comprised of a
total of 39 long-term care facilities with a total of 4,848 licensed beds
located in five states. Nineteen of the facilities with a total of 2,082
licensed beds were acquired for $59,068,750 from, and leased back to,
Diversicare Corporation of America ("Diversicare"), and are managed by a unit of
its 72%-owned public subsidiary, Diversicare, Inc. The lease to Diversicare is a
long-term, "triple net" lease. The Company also made participating mortgage
loans secured by a total of 20 facilities with a total 2,766 licensed beds. One
of the participating mortgage loans, in the principal amount of $58,800,000,
relates to 17 facilities that are owned and operated by entities affiliated with
Professional Health Care Management, Inc. and managed by its subsidiary,
International Health Care Management, Inc. (collectively, "I-Care") and the
other participating mortgage, in the principal amount of $7,031,250, relates to
three facilities owned and operated by Diversicare.
Effective October 1, 1992, I-Care became a wholly-owned subsidiary of
GranCare, Inc. ("GranCare"), which, at December 31, 1992, operated 84 long-term
care facilities with in excess of 11,000 beds.
In December, 1992, the Company financed the acquisition by BritWill
Healthcare Company ("BritWill") of 12 facilities in Indiana. The Company
purchased eight long-term care facilities, which have a
9
total of 634 beds, for a cash consideration of $18,070,000. The eight facilities
were acquired from and leased back to an affiliate of BritWill. The Company also
placed leasehold mortgages on four facilities, which have a total of 408 beds,
to further secure BritWill's lease obligations. The purchase price was funded by
borrowings on the Company's revolving acquisition line of credit. In early 1993,
the Company made additional investments with BritWill, (i) adding one Facility
in Indiana which is subject to the BritWill Master Lease and was purchased for
$1,690,000, and (ii) extending a convertible participating mortgage loan in the
principal amount of $4,560,000 to BritWill Ltd., secured by mortgages on two fee
properties in Center and Waxahachie, Texas containing a total of 240 licensed
beds.
In August, 1993, the Company invested $9,000,000 in Woodbine Associates,
Limited Partnership ("Woodbine Associates") which resulted in ownership of a 300
bed nursing facility and a 60 unit congregate care facility located in Kansas
City, Missouri (the "Missouri Facility"), with a lease of the Missouri Facility
to Woodbine Associates for a 10 year fixed term.
In September, 1993, the Company loaned an aggregate of $26,500,000 for a
10-year term to 4 Maine partnerships to finance 12 nursing homes having a total
of 652 licensed beds. Each of the Partnerships is affiliated with North Country
Associates, Inc. of Lewiston, Maine. The North Country Facilities are located in
Maine ("North Country"), except for one facility which is located in
Massachusetts.
On October 28, 1993, the Company acquired three medical office buildings
and a related parking garage located in Philadelphia, Pennsylvania from
affiliates of Graduate Health System, Inc. ("Graduate Hospital") for
$29,725,000. The Company acquired the buildings and entered into ground leases
having a term of 27 years, for the garage and two medical office buildings, and
a term of 29 years for the ground lease of the third medical office building.
In December, 1993, the Company provided financing to an affiliate of
BritWill for eight nursing home facilities with 959 beds located in the State of
Texas. Of the total $17,000,000 financing, the Company acquired three facilities
for a purchase price of $9,250,000 and entered into leases for the facilities
with a BritWill affiliate. The Company loaned $7,750,000 to another affiliate of
BritWill; the loan was secured by a convertible Deed of Trust on five nursing
home facilities.
In January, 1994, the Company provided mortgage financing of $2,920,000
related to two long-term care facilities located in Texas and California. The
Texas mortgage represents $2,450,000 of the $17,000,000 transaction consummated
in December, 1993 with Britwill Healthcare Company. The California facility will
be operated by Crestwood Properties of Stockton, California.
On February 18, 1994, the Company purchased a 300 bed long-term care
facility in Lakeland, Florida for a purchase price of $8,150,000, and
simultaneously leased the facility to Lakeland Health Care Center, Inc. The
Company has also committed to purchase and leaseback a 175 bed long-term care
facility in Newfane, New York for a purchase price of $3,450,000. The lessee of
that facility, Newfane Health Facility, Inc., is an affiliate of Lakeland Health
Care Center, Inc. The Lakeland, Florida and Newfane, New York facilities will be
managed by Hunter Management Group, Inc., an affiliate of the lessees.
THE NURSING HOME INDUSTRY -- GENERAL
The Company expects that there will be increasing demand for services of
providers of care for the elderly due to the aging of the United States
population. Due to demographic trends and increased life expectancies at age 65,
the number of persons over age 65 is increasing as a percentage of the overall
population, having grown since 1980 from approximately 26 million or 11.1% of
the population, to a 1990 level of approximately 32 million, or 12.3% of the
population.
NURSING INDUSTRY CHARACTERISTICS
Demand and Supply. The Company expects that the size of the population that
will require long-term nursing care is expected to increase. Another factor that
favorably influences demand for nursing facility beds is the earlier discharge
of patients from acute care hospitals as a result of advances in medical
technology and the adoption by government and private health insurers of fixed
rate reimbursement methods that encourage
10
hospitals to shorten patient stays. Many of those patients, the elderly in
particular, require post-discharge supervised care of the type provided by
nursing facilities. However, nursing care facilities compete with alternatives
to long-term nursing care, including professional home care, assisted living
facilities, adult day care and hospital beds converted from acute care use, that
are growing in size and number. Those alternatives may provide long-term care at
lower cost, and can be expected to benefit from efforts by both government and
private insurers to control health care costs.
The supply of nursing beds is regulated by most of the states through
health planning legislation. The most common method of control, which exists in
all states in which Facilities are located and the District of Columbia, is the
requirement that a state authority first make a determination of need, evidenced
by its issuance of a Certificate of Need ("CON"), before a long-term care
provider can establish a new facility, add beds to an existing facility or, in
some states, take certain other actions (for example, acquire major medical
equipment, make major capital expenditures, add services, refinancing long-term
debt, or transfer ownership to a facility). States also regulate nursing bed
supply in other ways. For example, some states have imposed moratoria on the
licensing of new beds, or on the certification of new Medicaid beds, or have
discouraged the construction of new nursing facilities by limiting Medicaid
reimbursements allocable to the cost of new construction and equipment.
Due in part to health planning legislation, growth in the nursing care
industry has not matched increases in the elderly population, and the industry
in general enjoys high occupancy rates. However, several states have repealed
their Certificate of Need legislation, and the legislatures of other states are
considering similar action. Where nursing facility bed supply is deregulated,
increased competition is likely, and that could adversely affect the occupancy
levels, and thus the net operating income, of the Facilities that provide
nursing care in the affected areas.
Nursing Facility Expenses. Labor costs typically account for a large
percentage of a nursing facility's expenses. In the mid to late 1980's, the
long-term care industry experienced a shortage of nurses and nursing assistants,
which required many nursing facilities to use temporary nursing personnel at a
substantial increase in cost. Moreover, wage rates for nurses and other facility
staff positions increased during the period at rates substantially higher than
the rate of inflation. Due in part to delays in Medicaid reimbursement rate
increases to cover those increased costs, the industry experienced declining
financial results during the period. Although there is evidence that conditions
have improved, nursing facility labor costs can be expected to increase in the
future, and there can be no assurance that any such increases will be matched by
timely increases in the reimbursement rates of third party payors. This is more
likely to be a factor in urban areas than in rural areas where most of the
Facilities are located.
Continued increases in nursing facility expenses can be expected to result
from the Omnibus Budget Reconciliation Act of 1987, as amended by the Omnibus
Budget Reconciliation Act of 1990 ("OBRA"), which, effective October 1, 1990,
eliminated the distinction between skilled nursing and intermediate care
facilities under state Medicaid programs and imposed various new quality of care
requirements on all long-term care facilities. Among other things, OBRA requires
nursing facilities to have at least one registered nurse on each shift, imposes
increased training requirements for nurse's aides, requires enhanced screening
and assessment of residents, and imposes other more stringent certification
requirements. Although the legislation also requires states to adjust their
Medicaid reimbursement rates to reflect the increased cost of these new
requirements, there can be no assurance that those rates have increased
sufficiently to cover such additional costs.
Medicaid. Medicaid is a state-administered program, financed by state funds
and matching federal funds, that pays for nursing care and related medical
services to the indigent and certain other eligible persons. Medicaid is the
second largest state spending category overall and is the source of
approximately 45% of industry revenues. All but one of the Facilities are
certified to participate as providers in the Medicaid program; the one other
Facility has all private pay and Medicare revenues.
States have considerable flexibility in establishing their Medicaid
reimbursement systems. Most states use cost-based reimbursement systems, which
generally operate either on a prospective or retrospective basis. Under a
prospective system, which is the more common method, per diem rates are
established based upon
11
historical costs, with adjustments for inflation and additional service
requirements. Facilities that keep their costs below the prospectively set rate
retain the difference; those with costs above the rate provide care for Medicaid
residents at a loss. Retrospective systems make cost-based interim payments to a
nursing facility throughout the year, and reconcile the interim payments with
the provider's actual allowable costs at year-end. Arkansas, Texas and a number
of other states reimburse nursing facilities under their Medicaid programs at
flat daily rates. Unlike retrospective and prospective rate systems, flat rate
systems do not necessarily reimburse on the basis of historical cost and thus
may penalize higher cost providers.
Federal law requires Medicaid programs to pay rates that are reasonable and
adequate to meet the costs which must be incurred by efficiently and
economically operated facilities in order to provide care and services in
conformity with applicable laws. However, budgetary pressures have forced states
to impose stringent cost-containment measures that in many cases result in
Medicaid reimbursement rates that do not adequately cover the actual cost of
care. In addition, some states have in the past exhausted Medicaid funds prior
to fiscal year end, which required them to temporarily withhold Medicaid
reimbursements. For example, Alabama delayed reimbursements for approximately 15
days early in 1993. For these and other reasons, including significant time lags
between cost increases and corresponding rate adjustments, Medicaid is
considered the least profitable source of payment for nursing facility services.
In an effort to generate additional federal Medicaid matching funds for
hospital and long-term care services, many states instituted or expanded
taxation of health care providers, or created voluntary contribution plans for
providers. By the fall of 1991, nearly half the states imposed provider taxes on
nursing facilities. In many cases, those taxes applied only to providers that
accepted Medicaid beneficiaries, and providers were often assured that they
would receive more than their money back. Effective January 1, 1992, federal
funds are available to match revenues raised through provider taxes and
voluntary contribution plans. In general, after the effective date of the
legislation, federal funds are available to match revenues from "health
care-related taxes" only if the tax is broad based, is uniformly imposed on a
class of health care providers, and does not provide for an effective guarantee
of repayment of any portion of the tax to the provider.
Medicare. Medicare, funded and administered by the federal government, is a
health insurance program available primarily to individuals who are age 65 and
older and entitled to Social Security benefits. Generally, Medicare provides not
more than 100 days of inpatient skilled nursing care per spell of illness, in
each case only after the patient has been hospitalized for at least three days.
It is because of those limitations that Medicare typically accounts for a
relatively small percentage of nursing facility revenues.
For reimbursing nursing facility costs, Medicare uses a cost-based
reimbursement system that pays, through private insurance companies acting as
intermediaries, the reasonable direct and indirect costs for services furnished,
subject to maximum payment rates. Under Medicare, a participating facility
receives interim payments during the year for its expected reimbursable costs,
subject to retroactive adjustment to reflect actual allowable costs.
Most of the Facilities are certified to participate in the Medicare
program.
RATIOS OF EARNINGS TO FIXED CHARGES
The historical ratios of earnings to fixed charges are as follows:
For purposes of these ratios, fixed charges consist of interest expense and
amortization of deferred financing costs.
12
USE OF PROCEEDS
Unless otherwise specified in the Prospectus Supplement which accompanies
this Prospectus, the net proceeds from the sale of the Securities offered from
time to time hereby will be used for general corporate purposes, including the
repayment of short term bank lines of credit and investments in health care
related properties.
DESCRIPTION OF SECURITIES
The Company may offer under this Prospectus one or more of the following
categories of its Securities: (i) shares of its Common Stock, par value $0.10
per share; (ii) shares of its Preferred Stock, par value $1.00 per share, in one
or more series; (iii) Debt Securities, in one or more series; (iv) Common Stock
Warrants; (v) Preferred Stock Warrants; (vi) Debt Warrants; and (vii) any
combination of the foregoing, either individually or as units consisting of one
or more of the types of Securities described in clauses (i) through (vi). The
terms of any specific offering of Securities, including the terms of any units
offered, will be set forth in a Prospectus Supplement relating to such offering.
The authorized capital stock of the Company currently consists of
50,000,000 shares of Common Stock, par value $0.10 per share, and 10,000,000
shares of Preferred Stock, par value $1.00 per share. As of December 31, 1993,
the Company had 6,575,188 shares of its Common Stock issued and outstanding. The
Common Stock is listed on the New York Stock Exchange. The Company intends to
list any additional shares of its Common Stock which are issued and sold
hereunder. No shares of the Company's Preferred Stock are outstanding. The
Company may list any Preferred Stock which is offered and sold hereunder, as
described in the Prospectus Supplement relating to such Preferred Stock.
COMMON STOCK
Except for certain restricted securities (see "Common Stock -- Restricted
Securities"), all shares of Common Stock participate equally in dividends
payable to stockholders of Common Stock when and as declared by the Board of
Directors and in net assets available for distribution to stockholders of Common
Stock on liquidation or dissolution, have one vote per share on all matters
submitted to a vote of the stockholders and do not have cumulative voting rights
in the election of directors. All issued and outstanding shares of Common Stock
are, and the Common Stock offered hereby will be upon issuance, validly issued,
fully paid and nonassessable. Holders of the Common Stock do not have
preference, conversion, exchange or preemptive rights. The Common Stock is
listed on the New York Stock Exchange (NYSE Symbol "OHI").
RESTRICTED SECURITIES
In connection with the organization of the Company, an aggregate of 250,000
shares of common stock (the "Founders' Shares") were issued on March 31, 1992
for $250,000 in cash to Essel W. Bailey, Jr., Thomas Franke, Harold J.
Kloosterman, Robert L. Parker, William G. Petty, Jr. and Neill R. Schmeichel,
and/or to family members or entities beneficially owned by them (collectively
the "Founding Shareholders"). The Founders' shares are eligible for sale under
Rule 144 promulgated under the Securities Act after March 31, 1994; however, the
Founding Shareholders entered into an agreement in connection with the initial
public offering of the Company's shares (the "Initial Offering"), restricting
the sale of such shares until August 7, 1994.
In connection with Initial Offering, the Company caused 86,500 shares of
the Company's common stock (the "Bear Stearns Shares") to be issued to Bear,
Stearns & Co. Inc. ("Bear Stearns"). Bear Stearns has entered into an agreement
with the Company restricting the sale of the Bear Stearns Shares until August 7,
1994.
In connection with the acquisition of certain contractual rights to provide
secured loans in the aggregate amount of $26,500,000 and to purchase certain
properties for an aggregate purchase price of $29,725,000, the Company issued
10,000 shares to MEDIQ Incorporated, and 2,500 shares to F. Scott Kellman
(collectively,
13
the "Contractual Rights Shares"). The owners of such shares have entered into an
agreement with the Company restricting the sale of the Contractual Rights Shares
until December 14, 1995.
Holders of the Founders' Shares, the Bear Stearns Shares, and the
Contractual Rights Shares have agreed to subordinate dividends payable with
respect to their respective shares through the quarter ended June 30, 1994, and
to subordinate their rights to participate in proceeds from the liquidation or
dissolution of the Company during that period.
REDEMPTION AND BUSINESS COMBINATION PROVISIONS
If the Board of Directors shall, at any time and in good faith, be of the
opinion that direct or indirect ownership of at least 9.9% or more of the voting
shares of capital stock has or may become concentrated in the hands of one
beneficial owner, the Board of Directors shall have the power (i) by lot or
other means deemed equitable by it to call for the purchase from any stockholder
of the Company a number of voting shares sufficient, in the opinion of the Board
of Directors, to maintain or bring the direct or indirect ownership of voting
shares of capital stock of such beneficial owner to a level of no more than 9.9%
of the outstanding voting shares of the Company's capital stock, and (ii) to
refuse to transfer or issue voting shares of capital stock to any person whose
acquisition of such voting shares would, in the opinion of the Board of
Directors, result in the direct or indirect ownership by that person of more
than 9.9% of the outstanding voting shares of capital stock of the Company.
Further, any transfer of shares, options, warrants, or other securities
convertible into voting shares that would create a beneficial owner of more than
9.9% of the outstanding voting shares shall be deemed void ab initio and the
intended transferee shall be deemed never to have had an interest therein. The
purchase price for any voting shares of capital stock so redeemed shall be equal
to the fair market value of the shares reflected in the closing sales prices for
the shares, if then listed on a national securities exchange, or the average of
the closing sales prices for the shares if then listed on more than one national
securities exchange, or if the shares are not then listed on a national
securities exchange, the latest bid quotation for the shares if then traded
over-the-counter, on the last business day immediately preceding the day on
which notices of such acquisitions are sent by the Company, or, if no such
closing sales prices or quotations are available, then the purchase price shall
be equal to the net asset value of such stock as determined by the Board of
Directors in accordance with the provisions of applicable law. From and after
the date fixed for purchase by the Board of Directors, the holder of any shares
so called for purchase shall cease to be entitled to distributions, voting
rights and other benefits with respect to such shares, except the right to
payment of the purchase price for the shares.
The Articles of Incorporation require that, except in certain
circumstances, Business Combinations (as defined) between the Company and a
beneficial holder of 10% or more of the Company's outstanding voting stock (a
"Related Person") be approved by the affirmative vote of at least 90% of the
outstanding voting shares of the Company.
A Business Combination is defined in the Articles of Incorporation as (a)
any merger or consolidation of the Company with or into a Related Person, (b)
any sale, lease, exchange, transfer or other disposition, including without
limitation a mortgage or any other security device, of all or any "Substantial
Part" (as defined) of the assets of the Company (including without limitation
any voting securities of a subsidiary) to a Related Person, (c) any merger or
consolidation of a Related Person with or into the Company, (d) any sale, lease,
exchange, transfer or other disposition of all or any Substantial Part of the
assets of a Related Person to the Company, (e) the issuance of any securities
(other than by way of pro rata distribution to all stockholders) of the Company
to a Related Person, and (f) any agreement, contract or other arrangement
providing for any of the transactions described in the definition of Business
Combination. The term "Substantial Part" shall mean more than 10% of the book
value of the total assets of the Company as of the end of its most recent fiscal
year ending prior to the time the determination is being made.
Pursuant to the Articles of Incorporation, the Company's Board of Directors
is classified into three classes. Each class of directors serves for a term of
three years, with one class being elected each year. As of the date of this
Prospectus, there are seven directors, two in each of two classes of directors,
and three in one class.
14
The foregoing provisions of the Articles of Incorporation and certain other
matters may not be amended without the affirmative vote of at least 90% of the
outstanding voting shares of the Company.
The foregoing provisions may have the effect of discouraging unilateral
tender offers or other takeover proposals which certain stockholders might deem
in their interests or in which they might receive a substantial premium. The
Board of Directors' authority to issue and establish the terms of currently
authorized Preferred Stock, without stockholder approval, may also have the
effect of discouraging takeover attempts. See "Preferred Stock." The provisions
could also have the effect of insulating current management against the
possibility of removal and could, by possibly reducing temporary fluctuations in
market price caused by accumulation of shares, deprive stockholders of
opportunities to sell at a temporarily higher market price caused by
accumulations of shares, deprive stockholders of opportunities to sell at a
temporarily higher market price. However, the Board of Directors believes that
inclusion of the Business Combination provisions in the Articles of
Incorporation may help assure fair treatment of stockholders and preserve the
assets of the Company.
The foregoing summary of certain provisions of the Articles of
Incorporation does not purport to be complete or to give effect to provisions of
statutory or common law. The foregoing summary is subject to, and qualified in
its entirety by reference to, the provisions of applicable law and the Articles
of Incorporation, a copy of which is incorporated by reference as an exhibit to
the Registration Statement of which this Prospectus is a part.
TRANSFER AGENT AND REGISTRAR
First Interstate Bank of California, Los Angeles, California, is the
transfer agent and registrar of the Common Stock.
PREFERRED STOCK
The following description of the terms of the Preferred Stock sets forth
certain general terms and provisions of the Preferred Stock to which any
Prospectus Supplement may relate. Certain other terms of any series of the
Preferred Stock offered by any Prospectus Supplement will be described in such
Prospectus Supplement. The description of certain provisions of the Preferred
Stock set forth below and in any Prospectus Supplement does not purport to be
complete and is subject to and qualified in its entirety by reference to the
Company's Articles of Incorporation (the "Articles of Incorporation"), and the
Board of Directors' resolution or articles supplementary (the "Articles
Supplementary") relating to each series of the Preferred Stock which will be
filed with the Commission and incorporated by reference as an exhibit to the
Registration Statement of which this Prospectus is a part at or prior to the
time of the issuance of such series of the Preferred Stock.
GENERAL
The authorized capital stock of the Company consists of 50,000,000 shares
of Common Stock, $0.10 par value per share, and 10,000,000 shares of preferred
stock, $1.00 par value per share ("preferred stock of the Company," which term,
as used herein, includes the Preferred Stock offered hereby).
Under the Articles of Incorporation, the Board of Directors of the Company
is authorized without further stockholder action to provide for the issuance of
up to 10,000,000 shares of preferred stock of the Company, in one or more
series, with such designations, preferences, powers and relative participating,
optional or other special rights and qualifications, limitations or restrictions
thereon, including, but not limited to, dividend rights, dividend rate or rates,
conversion rights, voting rights, rights and terms of redemption (including
sinking fund provisions), the redemption price or prices, and the liquidation
preferences as shall be stated in the resolution providing for the issue of a
series of such stock, adopted, at any time or from time to time, by the Board of
Directors of the Company.
The Preferred Stock shall have the dividend, liquidation, redemption and
voting rights set forth below unless otherwise provided in a Prospectus
Supplement relating to a particular series of the Preferred Stock. Reference is
made to the Prospectus Supplement relating to the particular series of the
Preferred Stock offered thereby for specific terms, including: (i) the
designation and stated value per share of such Preferred Stock and the number of
shares offered; (ii) the amount of liquidation preference per share; (iii) the
initial
15
public offering price at which such Preferred Stock will be issued; (iv) the
dividend rate (or method of calculation), the dates on which dividends shall be
payable and the dates from which dividends shall commence to cumulate, if any;
(v) any redemption or sinking fund provisions; (vi) any conversion rights; (vii)
any additional voting, dividend, liquidation, redemption, sinking fund and other
rights, preferences, privileges, limitations and restrictions.
The Preferred Stock will, when issued, be fully paid and nonassessable and
will have no preemptive rights. Unless otherwise stated in a Prospectus
Supplement relating to a particular series of the Preferred Stock, each series
of the Preferred Stock will rank on a parity as to dividends and distributions
of assets with each other series of the Preferred Stock. The rights of the
holders of each series of the Preferred Stock will be subordinate to those of
the Company's general creditors.
CERTAIN PROVISIONS OF THE ARTICLES OF INCORPORATION
See "Common Stock -- Redemption and Business Combination Provisions" for a
description of certain provisions of the Articles of Incorporation, including
provisions relating to redemption rights and provisions which may have certain
anti-takeover effects.
DIVIDEND RIGHTS
Holders of the Preferred Stock of each series will be entitled to receive,
when, as and if declared by the Board of Directors of the Company, out of funds
of the Company legally available therefor, cash dividends on such dates and at
such rates as will be set forth in, or as are determined by the method described
in the Prospectus Supplement relating to such series of the Preferred Stock.
Such rate may be fixed or variable or both. Each such dividend will be payable
to the holders of record as they appear on the stock books of the Company on
such record dates, fixed by the Board of Directors of the Company, as specified
in the Prospectus Supplement relating to such series of Preferred Stock.
Dividends on any series of Preferred Stock may be cumulative or
noncumulative, as provided in the applicable Prospectus Supplement. If the Board
of Directors of the Company fails to declare a dividend payable on a dividend
payment date on any series of Preferred Stock for which dividends are
noncumulative, then the holders of such series of Preferred Stock will have no
right to receive a dividend in respect of the dividend period ending on such
dividend payment date, and the Company shall have no obligation to pay the
dividend accrued for such period, whether or not dividends on such series are
declared payable on any future dividend payment dates. Dividends on the shares
of each series of Preferred Stock for which dividends are cumulative will accrue
from the date on which the Company initially issues shares of such series.
So long as the shares of any series of the Preferred Stock shall be
outstanding, unless (i) full dividends (including if such Preferred Stock is
cumulative, dividends for prior dividend periods) shall have been paid or
declared and set apart for payment on all outstanding shares of the Preferred
Stock of such series and all other classes and series of preferred stock of the
Company (other than Junior Stock as defined below) and (ii) the Company is not
in default or in arrears with respect to the mandatory or optional redemption or
mandatory repurchase or other mandatory retirement of, or with respect to any
sinking or other analogous fund for, any shares of Preferred Stock of such
series or any shares of any other preferred stock of the Company of any class or
series (other than Junior Stock), the Company may not declare any dividends on
any shares of Common Stock of the Company or any other stock of the Company
ranking as to dividends or distributions of assets junior to such series of
Preferred Stock (the Common Stock and any such other stock being herein referred
to as "Junior Stock"), or make any payment on account of, or set apart money
for, the purchase, redemption or other retirement of, or for a sinking or other
analogous fund for, any shares of Junior Stock or make any distribution in
respect thereof, whether in cash or property or in obligations or stock of the
Company, other than Junior Stock which is neither convertible into, nor
exchangeable or exercisable for, any securities of the Company other than Junior
Stock.
LIQUIDATION PREFERENCE
In the event of any liquidation, dissolution or winding up of the Company,
voluntary or involuntary, the holders of each series of the Preferred Stock will
be entitled to receive out of the assets of the Company
16
available for distribution to stockholders, before any distribution of assets is
made to the holders of Common Stock or any other shares of stock of the Company
ranking junior as to such distribution to such series of Preferred Stock, the
amount set forth in the Prospectus Supplement relating to such series of the
Preferred Stock. If, upon any voluntary or involuntary liquidation, dissolution
or winding up of the Company, the amounts payable with respect to the Preferred
Stock of any series and any other shares of preferred stock of the Company
(including any other series of the Preferred Stock) ranking as to any such
distribution on a parity with such series of the Preferred Stock are not paid in
full, the holders of the Preferred Stock of such series and of such other shares
of preferred stock of the Company will share ratably in any such distribution of
assets of the Company in proportion to the full respective preferential amounts
to which they are entitled. After payment of the holders of the Preferred Stock
of each series of the full preferential amounts of the liquidating distribution
to which they are entitled, the holders of each such series of the Preferred
Stock will be entitled to no further participation in any distribution of assets
by the Company.
If liquidating distributions shall have been made in full to all holders of
shares of Preferred Stock, the remaining assets of the Company shall be
distributed among the holders of Junior Stock, according to their respective
rights and preferences and in each case according to their respective number of
shares. For such purposes, the consolidation or merger of the Company with or
into any other corporation, or the sale, lease or conveyance of all or
substantially all of the property or business of the Company, shall not be
deemed to constitute a liquidation, dissolution or winding up of the Company.
REDEMPTION
A series of the Preferred Stock may be redeemable, in whole or from time to
time in part, at the option of the Company, and may be subject to mandatory
redemption pursuant to a sinking fund or otherwise, in each case upon terms, at
the times and at the redemption prices set forth in the Prospectus Supplement
relating to such series. Shares of the Preferred Stock redeemed by the Company
will be restored to the status of authorized but unissued shares of preferred
stock of the Company.
In the event that fewer than all of the outstanding shares of a series of
the Preferred Stock are to be redeemed, whether by mandatory or optional
redemption, the number of shares to be redeemed will be determined by lot or pro
rata (subject to rounding to avoid fractional shares) as may be determined by
the Company or by any other method as may be determined by the Company in its
sole discretion to be equitable. From and after the redemption date (unless
default shall be made by the Company in providing for the payment of the
redemption price plus accumulated and unpaid dividends, if any), dividends shall
cease to accumulate on the shares of the Preferred Stock called for redemption
and all rights of the holders thereof (except the right to receive the
redemption price plus accumulated and unpaid dividends, if any) shall cease.
So long as any dividends on shares of any series of the Preferred Stock or
any other series of preferred stock of the Company ranking on a parity as to
dividends and distribution of assets with such series of the Preferred Stock are
in arrears, no shares of any such series of the Preferred Stock or such other
series of preferred stock of the Company will be redeemed (whether by mandatory
or optional redemption) unless all such shares are simultaneously redeemed, and
the Company will not purchase or otherwise acquire any such shares; provided,
however, that the foregoing will not prevent the purchase or acquisition of such
shares pursuant to a purchase or exchange offer made on the same terms to
holders of all such shares outstanding.
CONVERSION RIGHTS
The terms and conditions, if any, upon which shares of any series of
Preferred Stock are convertible into Common Stock will be set forth in the
applicable Prospectus Supplement relating thereto. Such terms will include the
number of shares of Common Stock into which the Preferred Stock is convertible,
the conversion price (or manner of calculation thereof), the conversion period,
provisions as to whether conversion will be at the option of the holders of
Preferred Stock or the Company, the events requiring an adjustment of the
conversion price and provisions affecting conversion.
17
VOTING RIGHTS
Except as indicated below or in a Prospectus Supplement relating to a
particular series of the Preferred Stock, or except as required by applicable
law, the holders of the Preferred Stock will not be entitled to vote for any
purpose.
So long as any shares of the Preferred Stock of a series remain
outstanding, the consent or the affirmative vote of the holders of at least 80%
of the votes entitled to be cast with respect to the then outstanding shares of
such series of the Preferred Stock together with any Other Preferred Stock (as
defined below), voting as one class, either expressed in writing or at a meeting
called for that purpose, will be necessary (i) to permit, effect or validate the
authorization, or any increase in the authorized amount, of any class or series
of shares of the Company ranking prior to the Preferred Stock of such series as
to dividends, voting or upon distribution of assets and (ii) to repeal, amend or
otherwise change any of the provisions applicable to the Preferred Stock of such
series in any manner which adversely affects the powers, preferences, voting
power or other rights or privileges of such series of the Preferred Stock. In
case any series of the Preferred Stock would be so affected by any such action
referred to in clause (ii) above in a different manner than one or more series
of the Other Preferred Stock then outstanding, the holders of shares of the
Preferred Stock of such series, together with any series of the Other Preferred
Stock which will be similarly affected, will be entitled to vote as a class, and
the Company will not take such action without the consent or affirmative vote,
as above provided, of at least 80% of the total number of votes entitled to be
cast with respect to each such series of the Preferred Stock and the Other
Preferred Stock, then outstanding, in lieu of the consent or affirmative vote
hereinabove otherwise required.
With respect to any matter as to which the Preferred Stock of any series is
entitled to vote, holders of the Preferred Stock of such series and any other
series of preferred stock of the Company ranking on a parity with such series of
the Preferred Stock as to dividends and distributions of assets and which by its
terms provides for similar voting rights (the "Other Preferred Stock") will be
entitled to cast the number of votes set forth in the Prospectus Supplement with
respect to that series of Preferred Stock. As a result of the provisions
described in the preceding paragraph requiring the holders of shares of a series
of the Preferred Stock to vote together as a class with the holders of shares of
one or more series of Other Preferred Stock, it is possible that the holders of
such shares of Other Preferred Stock could approve action that would adversely
affect such series of Preferred Stock, including the creation of a class of
capital stock ranking prior to such series of Preferred Stock as to dividends,
voting or distributions of assets.
The foregoing voting provisions will not apply if, at or prior to the time
when the act with respect to which such vote would otherwise be required shall
be effected, all outstanding shares of the Preferred Stock shall have been
redeemed or called for redemption and sufficient funds shall have been deposited
in trust to effect such redemption.
TRANSFER AGENT AND REGISTRAR
Unless otherwise indicated in a Prospectus Supplement relating thereto,
First Interstate Bank of California, Los Angeles, California, will be the
transfer agent, dividend and redemption price disbursement agent and registrar
for shares of each series of the Preferred Stock.
DEBT SECURITIES
Debt Securities may be issued from time to time in series under an
Indenture (the "Indenture") dated December 27, 1993, between the Company and
First Interstate Bank of California, as Trustee (the "Trustee"). As used under
this caption, unless the context otherwise requires, Offered Debt Securities
shall mean the Debt Securities offered by this Prospectus and the accompanying
Prospectus Supplement. The statements under this caption are brief summaries of
certain provisions contained in the Indenture, do not purport to be complete and
are qualified in their entirety by reference to the Indenture, including the
definition therein of certain terms, a copy of which is filed as an exhibit to
the Registration Statement of which this
18
Prospectus is a part. The following sets forth certain general terms and
provisions of the Debt Securities. Further terms of the Offered Debt Securities
will be set forth in the Prospectus Supplement.
GENERAL
The Indenture provides for the issuance of Debt Securities in series, and
does not limit the principal amount of Debt Securities which may be issued
thereunder.
Reference is made to the Prospectus Supplement for the following terms of
the Offered Debt Securities: (1) the specific title of the Offered Debt
Securities; (2) the aggregate principal amount of the Offered Debt Securities;
(3) the percentage of their principal amount at which the Offered Debt
Securities will be issued; (4) the date on which the Offered Debt Securities
will mature; (5) the rate or rates per annum or the method for determining such
rate or rates, if any, at which the Offered Debt Securities will bear interest;
(6) the times at which any such interest will be payable; (7) any provisions
relating to optional or mandatory redemption of the Offered Debt Securities at
the option of the Company or pursuant to sinking fund or analogous provisions;
(8) the denominations in which the Offered Debt Securities are authorized to be
issued; (9) any provisions relating to the conversion or exchange of the Offered
Debt Securities into Common Stock Preferred Stock or into Debt Securities of
another series; (10) whether the Offered Debt Securities are to be issued in
fully registered form without coupons or in the bearer form with interest
coupons or both; (11) the place or places at which the Company will make
payments of principal (and premiums, if any) and interest, if any, and the
method of payment; (12) whether the Offered Debt Securities will be issued in
whole or in part in global form; (13) any additional covenants and Events of
Default and the remedies with respect thereto not currently set forth in the
Indenture; and (14) any other specific terms of the Offered Debt Securities.
One or more series of the Debt Securities may be issued as discounted Debt
Securities (bearing no interest or bearing interest at a rate which at the time
of issuance is below market rates) to be sold at a substantial discount below
their stated principal amount. Tax and other special considerations applicable
to any such discounted Debt Securities will be described in the Prospectus
Supplement relating thereto.
STATUS OF DEBT SECURITIES
The Debt Securities will be unsecured and unsubordinated obligations of the
Company and will rank on a parity with all other unsecured and unsubordinated
indebtedness of the Company.
CONVERSION OF RIGHTS
The terms, if any, on which Debt Securities of a series may be exchanged
for or converted into shares of Common Stock, Preferred Stock or Debt Securities
of another series will be set forth in the Prospectus Supplement relating
thereto. To protect the Company's status as a REIT, a Holder may not convert any
Debt Security, and such Debt Security shall not be convertible by any Holder, if
as a result of such conversion any person would then be deemed to beneficially
own, directly or indirectly, 9.9% or more of the Company's shares of Common
Stock.
ABSENCE OF RESTRICTIVE COVENANTS
Except as noted below under "Dividends, Distributions and Acquisitions of
Capital Stock," the Company is not restricted by the Indenture from paying
dividends or from incurring, assuming or becoming liable for any type of debt or
other obligations or from creating liens on its property for any purpose. The
Indenture does not requite the maintenance of any financial ratios or specified
levels of net worth or liquidity. Except as may be set forth in the Prospectus
Supplement, there are no provisions of the Indenture which afford holders of the
Debt Securities protection in the event of a highly leveraged transaction
involving the Company.
OPTIONAL REDEMPTION
The Debt Securities will be subject to redemption, in whole or from time to
time in part, at any time for certain reasons intended to protect the Company's
status as a REIT, at the option of the Company in the
19
manner specified in the Indenture at a redemption price equal to 100% of the
principal amount, plus interest accrued to the date of redemption. The Indenture
does not contain any provision requiring the Company to repurchase the Debt
Securities at the option of the Holders thereof in the event of a leveraged
buyout, recapitalization or similar restructuring of the Company, even though
the Company's creditworthiness and the market value of the Debt Securities
against any decline in credit quality, whether resulting from any such
transaction or from any other cause.
DIVIDENDS, DISTRIBUTIONS AND ACQUISITIONS OF CAPITAL STOCK
The Indenture provides that the Company will not (i) declare or pay any
dividend or make any distribution on its capital stock or to holders of its
capital stock (other than dividends or distributions payable in its capital
stock or other than as the Company determines is necessary to maintain its
status as a REIT) or (ii) purchase, redeem or otherwise acquire or retire for
value any of its capital stock, or any warrants, rights or options or other
securities to purchase or acquire any shares of its capital stock (other than
the Debt Securities) or permit any subsidiary to do so, if at the time of such
action an Event of Default (as defined in the Indenture) has occurred and is
continuing or would exist immediately after giving effect to such action.
EVENTS OF DEFAULT
An Event of Default with respect to Debt Securities of any series is
defined in the Indenture as being (a) failure to pay principal of or any premium
on any Debt Security of that series when due; (b) failure to pay any interest on
any Debt Security of that series when due, continued for 30 days; (c) failure to
deposit any sinking fund payment when due, in respect of any Debt Security of
that series; (d) failure to perform any other covenant of the Company in the
Indenture (other than a covenant included in the Indenture solely for the
benefit of one or more series of Debt Securities other than that series),
continued for 60 days after written notice as provided in the Indenture; (e)
certain events of bankruptcy, insolvency, conservatorship, receivership or
reorganization; (f) a default under any mortgage, indenture or instrument
evidencing any indebtedness for borrowed money by the Company (including the
Indenture) resulting in an aggregate principal amount exceeding $10,000,000
becoming or being declared due and payable prior to its maturity date or
constituting a failure to pay at maturity an aggregate principal amount
exceeding $10,000,000, unless such acceleration has been rescinded or annulled
or such indebtedness has been discharged within 10 days after written notice to
the Company by the Trustee or Holders of at least 25% in aggregate principal
amount of the outstanding Debt Securities declaring a default or the Company is
contesting the validity of such default in good faith by appropriate
proceedings; and (g) any other Event of Default provided with respect to the
Debt Securities of that series.
If an Event of Default with respect to the outstanding Debt Securities of
any series occurs and is continuing, either the Trustee or the Holders of at
least 25% in aggregate principal amount of the outstanding Debt Securities of
that series may declare the principal amount (or, if the Debt Securities of that
series are original issue discount Debt Securities, such portion of the
principal amount as may be specified in the terms of that series) of all the
outstanding Debt Securities of that series to be due and payable immediately. At
any time after the declaration of acceleration with respect to the Debt
Securities of any series has been made, but before a judgment or decree based on
acceleration has been obtained, the Holders of a majority in aggregate principal
amount of the outstanding Debt Securities of that series may, under certain
circumstances, rescind and annul such acceleration.
The Indenture provides that, subject to the duty of the Trustee during
default to act with the required standard of care, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request or direction of any of the Holders, unless such Holders shall have
offered to the Trustee reasonable indemnity. Subject to such provisions for the
indemnification of the Trustee and subject to certain limitations, the Holders
of a majority in aggregate principal amount of the outstanding Debt Securities
of any series will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred on the Trustee, with respect to the Debt Securities
of that series.
20
The Company is required to furnish to the Trustee annually a statement as
to the performance by the Company of certain of its obligations under the
Indenture and as to any default in such performance.
MODIFICATIONS AND WAIVER
Modifications and amendments of the Indenture may be made by the Company
and the Trustee without the consent of any Holders to, among other things, (a)
evidence the succession of another corporation to the Company, (b) add to the
covenants of the Company or surrender any right or power conferred upon the
Company, (c) cure any ambiguity, correct or supplement any provision which may
be defective or inconsistent or make any other provisions with respect to
matters or questions arising under the Indenture, provided that such action does
not adversely affect the interests of the Holders of Debt Securities of any
series in any material respect, or (d) evidence and provide for a successor
Trustee.
Modifications and amendments of the Indenture may be made by the Company
and the Trustee with the consent of the Holders of a majority in aggregate
principal amount of the outstanding Debt Securities of each series affected by
such modification or amendment; provided, however, that no such modification or
amendment may, without the consent of the Holder of each outstanding Debt
Security affected thereby, (a) change the stated maturity date of the principal
of, or any installment of principal of or interest , if any, on any Debt
Security , (b) reduce the principal amount of, or premium or interest if any, on
any Debt Security, (c) reduce the amount of principal of an original issue
discount Debt Security payable upon acceleration of the maturity thereof, (d)
change the currency of payment of the principal of, or premium or interest, if
any, on any Debt Security, (e) impair the right to institute suit for the
enforcement of any payment on or with respect to any Debt Security, (f) modify
the conversion provisions, if any, of any Debt Security in a manner adverse to
the Holder of that Debt Security, or (g) reduce the percentage in principal
amount of the outstanding Debt Security of any series, the consent of whose
Holders is required for modification or amendment of that Indenture or for
waiver of compliance with certain provisions of that Indenture or for waiver of
certain defaults.
The Holders of a majority in aggregate principal amount of the outstanding
Debt Security of each series may, on behalf of all Holders of the Debt
Securities of that series, waive, insofar as that series is concerned,
compliance by the Company with certain restrictive provisions of the Indenture.
The Holders of a majority in aggregate principal amount of the outstanding Debt
Securities of each series may, on behalf of all Holders of the Debt Securities
of that series, waive any past default under the Indenture with respect to the
Debt Securities of that series, except a default in the payment of principal or
premium or interest, if any, or a default in respect of a covenant or provision
which under the terms of the Indenture cannot be modified or amended without the
consent of the Holder of each outstanding Debt Security of the series affected.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Indenture provides that the Company, without the consent of the Holders
of any of the Debt Securities, may consolidate or merge with or into or transfer
its assets substantially as an entirety to, any corporation organized under the
laws of the United States or any state, provided that the successor corporation
assumes the Company's obligations under the Indenture, that after giving effect
to the transaction no Event of Default, and no event which, after notice or
lapse of time, would become an Event of Default, shall have occurred and be
continuing, and that certain other conditions are met.
GLOBAL SECURITIES
The Debt Securities of a series may be issued in whole or in part in global
form (the "Global Securities"). The Global Securities will be deposited with a
depositary (the "Depositary"), or with a nominee for a Depositary, identified in
the Prospectus Supplement. In such case, one or more Global Securities will be
issued in a denomination or aggregate denominations equal to the portion of the
aggregate principal amount of outstanding Debt Securities of the series to be
represented by such Global Security or Securities. Unless and until it is
exchanged in whole or in part for Debt Securities in definitive form, a Global
Security may not be transferred except as a whole by the Depositary for such
Global Security to a nominee of such Depositary or
21
by a nominee of such Depositary to such Depositary or another nominee of such
Depositary or by such Depositary or any such nominee to a successor of such
Depositary or a nominee of such successor.
The specific material terms of the depositary arrangement with respect to
any portion of a series of Debt Securities to be represented by a Global
Security will be described in the Prospectus Supplement. The Company anticipates
that the following provisions will apply to all depositary arrangements.
Upon the issuance of a Global Security, the Depositary for such Global
Security will credit, on its book-entry registration and transfer system, the
respective principal amounts of the Debt Securities represented by such Global
Security to the accounts of persons that have accounts with such Depositary
("participants"). The accounts to be credited shall be designated by any
underwriters or agents participating in the distribution of such Debt
Securities. Ownership of beneficial interests in a Global Security will be
limited to participants or persons that may hold interests through participants.
Ownership of beneficial interests in a Global Security will be limited to
participants or persons that may hold interests through participants. Ownership
of beneficial interests in such Global Security will be shown on, and the
transfer of that ownership will be effected only through, records maintained by
the Depositary for such Global Security (with respect to interests of
participants) or by participants or persons that hold through participants (with
respect to interests of persons other than participant). So long as the
Depositary for a Global Security, or its nominee, is the registered owner of
such Global Security, such Depositary or such nominee, as the case may be, will
be considered the sole owner or Holder of the Debt Securities represented by
such Global Security for all purposes under the Indenture; provided, however,
that the purposes of obtaining any consents or directions required to be given
by the Holders of the Debt Securities, the Company, the Trustee and its agents
will treat a person as the holder of such principal amount of Debt Securities as
specified in a written statement of the Depositary. Except as set forth herein
or otherwise provided in the Prospectus Supplement, owners of beneficial
interests in a Global Security will not be entitled to have the Debt Securities
represented by such Global Security registered in their names, will not receive
physical delivery of such Debt Securities in definitive form and will not be
considered the owners or Holders thereof under the Indenture.
Principal, premium, if any, and interest payments on Debt Securities
represented by a Global Security registered in the name of a Depositary or its
nominee will be made to such Depositary or its nominee, as the case may be, as
the registered owner of such Global Security. None of the Company, the Trustee
or any Paying Agent for such Debt Securities will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests in such Global Security or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
The Company expects that the Depositary for any Debt Securities represented
by a Global Security, upon receipt of any payment of principal, premium, if any,
or interest will immediately credit participants' accounts with payments in
amounts proportionate to their respective beneficial interests in the principal
amount of such Global Security as shown on the records of such Depositary. The
Company also expects that payments by participants will be governed by standing
instructions and customary practices, as is now the case with the securities
held for the accounts of customers registered in "street names" and will be the
responsibility of such participants.
If the Depositary for any Debt Securities represented by a Global Security
is at any time unwilling or unable to continue as Depositary and a successor
Depositary is not appointed by the Company within 90 days, the Company will
issue such Debt Securities in definitive form in exchange for such Global
Security. In addition, the Company may at any time and in its sole discretion
determine not to have any of the Debt Securities of a series represented by one
or more Global Securities and, in such event, will issue Debt Securities of such
series in definitive form in exchange for all of the Global Security or
Securities representing such Debt Securities.
The laws of some states require that certain purchasers of securities take
physical delivery of such securities in definitive form. Such laws may impair
the ability to transfer beneficial interests in Debt Securities represented by
Global Securities.
22
SECURITIES WARRANTS
The Company may issue Securities Warrants for the purchase of Common Stock,
Preferred Stock or Debt Securities. Securities Warrants may be issued
independently or together with Common Stock, Preferred Stock or Debt Securities
offered by any Prospectus Supplement and may be attached to or separate from
such Common Stock, Preferred Stock, or Debt Securities. Each series of
Securities Warrants will be issued under a separate warrant agreement (a
"Securities Warrant Agreement") to be entered into between the Company and a
bank or trust company, as Securities Warrant agent, all as set forth in the
Prospectus Supplement relating to the particular issue of offered Securities
Warrants. The Securities Warrant agent will act solely as an agent of the
Company in connection with the Securities Warrants of such series and will not
assume any obligation or relationship of agency or trust for or with any holders
or beneficial owners of Securities Warrants. The following summaries of certain
provisions of the Securities Warrant Agreement and Securities Warrants do not
purport to be complete and are subject to, and are qualified in their entirety
by reference to, all the provisions of the Securities Warrant Agreement and the
Securities Warrants relating to each series of Securities Warrants which will be
filed with the Commission and incorporated by reference as an exhibit to the
Registration Statement of which this Prospectus is a part at or prior to the
time of the issuance of such series of Securities Warrants.
In the case of Securities Warrants for the purchase of Common Stock or
Preferred Stock, the applicable Prospectus Supplement will describe the terms of
such Securities Warrants, including the following where applicable: (i) the
offering price; (ii) the aggregate number of shares purchasable upon exercise of
such Securities Warrants, the exercise price, and in the case of Securities
Warrants for Preferred Stock the designation, aggregate number and terms of the
series of Preferred Stock purchasable upon exercise of such Securities Warrants,
(iii) the designation and terms of any series of Preferred Stock with which such
Securities Warrants are being offered and the number of such Securities Warrants
being offered with such Preferred Stock, (iv) the date, if any, on and after
which such Securities Warrants and the related series of Preferred Stock or
Common Stock will be transferable separately; (v) the date on which the right to
exercise such Securities Warrants shall commence and the Expiration Date; (vi)
any special United States Federal income tax consequences; and (vii) any other
terms of such Securities Warrants.
If Securities Warrants are offered, the applicable Prospectus Supplement
will describe the terms of such Securities Warrants, including, in the case of
Securities Warrants for the purchase of Debt Securities, the following where
applicable: (i) the offering price; (ii) the denominations and terms of the
series of Debt Securities purchasable upon exercise of such Securities Warrants;
(iii) the designation and terms of any series of Debt Securities, with which
such Securities Warrants being offered with each such Debt Securities; (iv) the
date, if any, on and after which such Securities Warrants and the related series
of Debt Securities will be transferable separately; (v) the principal amount of
the series of Debt Securities purchasable upon exercise of each such Securities
Warrant and the price at which such principal amount of Debt Securities of such
series may be purchased upon such exercise; (vi) the date on which the right
shall expire (the "Expiration Date"); (vii) whether the Securities Warrants will
be issued in registered or bearer form; (viii) any special United States Federal
income tax consequences; (ix) the terms, if any, on which the Company may
accelerate the date by which the Securities Warrants must be exercised; and (x)
any other terms of such Securities Warrants.
Securities Warrant certificates may be exchanged for new Securities Warrant
certificates of different denominations, may (if in registered form) be
presented for registration of transfer, and may be exercised at the corporate
trust office of the Securities Warrant agent or any other office indicated in
the applicable Prospectus Supplement. Prior to the exercise of any Securities
Warrant to purchase Debt Securities, holders of such Securities Warrants will
not have any of the rights of holders of the Debt Securities purchasable upon
such exercise, including the right to receive payments of principal of premium,
if any, or interest, if any, on such Debt Securities or to enforce covenants in
the applicable indenture. Prior to the exercise of any Securities Warrants to
purchase Common Stock or Preferred Stock, holders of such Securities Warrants
will not have any rights of holders of such Common Stock or Preferred Stock,
including the right to receive payments of dividends, if any, on such Common
Stock or Preferred Stock, or to exercise any applicable right to vote.
23
EXERCISE OF SECURITIES WARRANTS
Each Securities Warrants will entitle the holder thereof to purchase number
of shares of Common Stock, Preferred Stock or such principal amount of Debt
Securities, as the case may be, at such exercise price as shall in each case be
set forth in, or calculable from, the Prospectus Supplement relating to the
offered Securities Warrants. After the close of business on the Expiration Date
(or such later date to which such Expiration Date may be extended by the
Company), unexercised Securities Warrants will become void.
Securities Warrants may be exercised by delivering to the Securities
Warrant agent payment as provided in the applicable Prospectus Supplement of the
amount required to purchase the Common Stock, Preferred Stock or Debt
Securities, as the case may be, purchasable upon such exercise together with
certain information set forth on the reverse side of the Securities Warrant
certificate. Securities Warrants will be deemed to have been exercised upon
receipt of payment of the exercise price, subject to the receipt within five (5)
business days, of the Securities Warrant certificate evidencing such Securities
Warrants. Upon receipt of such payment and the Securities Warrant certificate
properly completed and duly executed at the corporate trust office of the
Securities Warrant agent or any other office indicated in the applicable
Prospectus Supplement, the Company will, as soon as practicable, issue and
deliver the Common Stock, Preferred Stock or Debt Securities, as the case may
be, purchasable upon such exercise. If fewer than all of the Securities Warrants
represented by such Securities Warrant certificate are exercised, a new
Securities Warrant certificate will be issued for the remaining amount of
Securities Warrants.
AMENDMENTS AND SUPPLEMENTS TO SECURITIES WARRANT AGREEMENT
The Securities Warrant Agreements may be amended or supplemented without
the consent of the holders of the Securities Warrants issued thereunder to
effect changes that are not inconsistent with the provisions of the Securities
Warrants and that do not adversely affect the interests of the holders of the
Securities Warrants.
COMMON STOCK WARRANT ADJUSTMENTS
Unless otherwise indicated in the applicable Prospectus Supplement, the
exercise price of, and the number of shares of Common Stock covered by a Common
Stock Warrant are subject to adjustment in certain events, including (i) payment
of a dividend on the Common Stock payable in capital stock and stock splits,
combinations or reclassifications of the Common Stock, (ii) issuance to all
holders of Common Stock of rights or warrants to subscribe for or purchase
shares of Common Stock at less than their current market price (as defined in
the Securities Warrant Agreement for such series of Common Stock Warrants), and
(iii) certain distributions of evidences of indebtedness or assets (including
cash dividends or distributions paid out of consolidated earnings or retained
earnings or dividends payable in Common Stock) or of subscription rights and
warrants (excluding those referred to above).
No adjustment in the exercise price of, and the number of shares of Common
Stock covered by a Common Stock Warrant will be made for regular quarterly or
other periods or recurring cash dividends or distributions or for cash dividends
or distributions to the extend paid from consolidated earnings or retained
earnings. No adjustment will be required unless such adjustment would require a
change of at least 1% in the exercise price then in effect. Except as stated
above, the exercise price of, and the number of shares of Common Stock covered
by, a Common Stock Warrant will not be adjusted for the issuance of Common Stock
or any securities convertible into or exchangeable for Common Stock, or carrying
the right or option to purchase or otherwise acquire the foregoing in exchange
for cash, other property or services.
In the event of any (i) consolidation or merger of the Company with or into
any entity (other than a consolidation or a merger that does not result in any
reclassification, conversion, exchange or cancellation of outstanding shares of
Common Stock), (ii) sale, transfer, lease or conveyance of all or substantially
all of the assets of the Company or (iii) reclassification, capital
reorganization or change of the Common Stock (other than solely a change in par
value or from par value to no par value), then any holder of a Common Stock
Warrant will be entitled, on or after the occurrence of any such event, to
receive on exercise of such Common Stock Warrant the kind and amount of shares
of stock or other securities, cash or other property (or any
24
combination thereof) that the holder would have received had such holder
exercised such holder's Common Stock Warrant immediately prior to the occurrence
of such event. If the consideration to be received upon exercise of the Common
Stock Warrant following any such event consists of common stock of the surviving
entity, then from and after the occurrence of such event, the exercise price of
such Common Stock Warrant will be subject to the same anti-dilution and other
adjustments described in the second preceding paragraph, applied as if such
common stock were Common Stock.
PLAN OF DISTRIBUTION
The Company may sell the Securities to one or more underwriters for public
offering and sale by them or may sell the Securities to investors directly or
through agents. Any such underwriter or agent involved in the offer and sale of
Securities will be named in the applicable Prospectus Supplement. The Company
has reserved the right to sell Securities directly to investors on its own
behalf in those jurisdictions where and in such manner as it is authorized to do
so.
Underwriters may offer and sell Securities at a fixed price or prices,
which may be changed, at market prices prevailing at the time of sale, at prices
related to such prevailing market prices or at negotiated prices. The Company
also may, from time to time, authorize underwriters, acting as the Company's
agents, to offer and sell Securities upon the terms and conditions as are set
forth in the applicable Prospectus Supplement. In connection with the sale of
Securities, underwriters may be deemed to have received compensation from the
Company in the form of underwriting discounts or commissions and may also
receive commissions from purchasers of the Securities for whom they may act as
agent. Underwriters may sell Securities to or through dealers, and such dealers
may receive compensation in the form of discounts, concessions or commissions
from the underwriters and/or commissions from the purchasers for whom they may
act as agent.
Any underwriting compensation paid by the Company to underwriters or agents
in connection with the offering of Securities, and any discounts, concessions or
commissions allowed by underwriters to participating dealers, will be set forth
in the applicable Prospectus Supplement. Dealers and agents participating in the
distribution of Securities may be deemed to be underwriters, and any discounts
and commissions received by them and any profit realized by them on resale of
the Securities may be deemed to be underwriting discounts and commissions.
Underwriters, dealers and agents may be entitled, under agreements entered into
with the Company, to indemnification against and contribution toward certain
civil liabilities, including liabilities under the Securities Act.
The net proceeds to the Company from the sale of the Securities will be the
purchase price of the Securities less any such discounts or commissions and the
other attributable expenses of issuance and distribution.
Certain of the underwriters and their affiliates may be customers of,
engage in transactions with and perform services for the Company and its
subsidiaries in the ordinary course of business.
LEGAL MATTERS
The legality of the shares of Common Stock offered hereby will be passed
upon for the Company by Argue Pearson Harbison & Myers, Los Angeles, California.
In addition, Argue Pearson Harbison & Myers has passed upon certain federal
income tax matters relating to the Company.
EXPERTS
The financial statements of Omega Healthcare Investors, Inc. (the Company)
for the year ended December 31, 1993, incorporated by reference in the Company's
current report (form 8-K dated February 10, 1994), have been audited by Ernst &
Young, independent auditors, as set forth in their report thereon included
therein and incorporated herein by reference. Such financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
25
The financial statements of the Diversicare Corporation of America
Facilities as of December 31, 1990, 1991 and 1992 incorporated by reference in
the Company's annual report (form 10-K for the period ended December 31, 1992)
have been audited by Arthur Andersen & Co., independent public accountants, and
are included therein and incorporated herein by reference in reliance upon the
authority of said firm as experts in giving said reports.
The consolidated balance sheets of Professional Health Care Management,
Inc. as of September 30, 1992 and 1991, and the related consolidated statements
of earnings, equity (deficit), and cash flows for the three years ended
September 30, 1992, incorporated by reference in the Company's annual report
(form 10-K for the period ended December 31, 1992), have been examined by Grant
Thornton, certified public accountants, as set forth in their report included
therein and incorporated herein by reference.
The combined balance sheet of North Country Affiliated Entities as of
December 31, 1992, and the related statements of income, retained earnings, and
cash flows for the year then ended incorporated by reference in the Company's
current report (form 8-K dated September 14, 1993 as amended by Amendment No. 1
dated October 20, 1993 on Form 8 thereto), have been audited by Berry, Dunn,
McNeil & Parker, independent auditors, as set forth in their report thereon, and
are included herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
The balance sheets of The Graduate Hospital (an affiliate of Graduate
Health System, Inc.) as of June 30, 1993 and 1992, and the related statements of
revenues and expenses, changes in fund balances, and cash flows of general funds
for the years then ended, incorporated by reference in the Company's current
report (form 8-K dated October 28, 1993), have been audited by Deloitte &
Touche, independent auditors, as set forth in their report thereon, and are
included herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
26
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED HEREIN, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS AND RELATED PROSPECTUS SUPPLEMENT DOES NOT
CONSTITUTE AN OFFER TO SELL, OR THE SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES OR ANY OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN
WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS
PROSPECTUS AND RELATED PROSPECTUS SUPPLEMENT NOR ANY SALE MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
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TABLE OF CONTENTS
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1,000,000 SHARES
OMEGA HEALTHCARE
INVESTORS, INC.
COMMON STOCK
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PROSPECTUS
SUPPLEMENT
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NOVEMBER 15, 1996
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